- 1. Market Segmentation, Selecting Target Market &
Developing Product Positioning
2. MARKET SEGMENTATION: Strategic & Tactical Marketing
Decisions Define a continuing basis for determining how an
organization interacts with the market place to achieve its broad
objectives Short duration actions adapted to specific situations to
achieve limited objectives in line with the general strategy
Marketing Strategy Marketing Tactics 3. MARKET SEGMENTATION:
Strategic Marketing Decisions Characteristics Defining the scope
and nature of an organizations market place by segmenting the
market into customer groups: How can customers be grouped according
to their needs and buying Patterns? Matching the activities of an
organization to the market in which it operates by TARGETING
selected customer groups: What benefits do these particular group
of customers look for and how can we provide them? Matching the
strengths of an organization to the needs of a customer group by
adopting an appropriate market POSITION: What do we have to offer
this customer group that is special in some way? 4. MARKET
SEGMENTATION: Levels of Segmentation Mass Marketing One
standardized product for all. Market Segments Homogenous groups
having similar characteristics Market sub-segments Narrower groups
within segments Niche Marketing Group of buyers who require very
specialized products or services Customized Marketing Segment of
one. 5. MARKET SEGMENTATION: Levels of Segmentation: Example- Book
Market Recreational Buyers Display Buyers Knowledge Buyers Students
ParentsHobbyistsStamp Collectors NICHE SEGMENTS SUB-SEGMENTS 6.
MARKET SEGMENTATION: Advantages Of Segmentation Closer matching
between what is offered by the organization and customer needs
Concentration of resources on areas of greatest advantage e.g. Body
Shop more natural & less synthetic Market leadership through
domination of a narrowly defined market Key to profitability in
competitive markets. 7. MARKET SEGMENTATION: Criteria for Effective
Segmentation Measurability Degree to which size and purchasing
power of segments can be assessed, examples: age, income
Accessibility Degree to which a firm can reach intended target
segments efficiently through unique communication &
distribution strategies Substantialness Degree to which identified
target segments are large enough or have sufficient sales and
profit potential to warrant unique or separate marketing programs.
8. MARKET SEGMENTATION: Criteria for Effective Segmentation
Durability Stability of the segments Differential Responsiveness
Extent to which market segments exhibit different responses to
different marketing mixes 9. Developing Market Segmentation
Strategy Define overall product market Identify bases for
segmentation Describe segments Analyze segments for potential &
likely success Select Target Markets Determine positioning &
develop marketing mix 10. Define overall product market A companys
market Focus on customers Generic vs. Product market Generic is a
market with broadly similar needs and sellers offering various,
often diverse ways of satisfying those needs. Product market has
very similar needs and sellers offer various close substitutes
Example, entertainment seekers buy a digital camcorder or plasma
screen TV, sign up for a cruise or reserve tickets for a concert.
11. Relationship between Generic & Product- Market Definitions
Generic market definition Product - market definition Customer
(user) needs Customer types Geographic area Product type (good and/
or service) 12. Narrowing down to target markets Narrowing down to
specific product-market All Customer needs Some generic market One
broad Product- market Homogeneous (narrow) product- markets
Segmenting into possible target markets 13. Geography National
Regional Urban/ rural Psychographics Lifestyle Personality Bases
for Segmentation Benefits Sought Low price Reliability Safety
Convenience Status Buyer Behavior Purchase rates Loyalty Payment
methods Media usage Demographics Age Gender Culture Family
Lifecycle Company size End Use Applications Product Types 14.
Principal benefit sought Demographic strengths Special behavioral
characteristics Brands disproportionately favored Lifestyle
characteristics Example: Toothpaste Market Benefit Segments Sensory
Segment Flavor & product appearance Children Users of
spearmint- flavored toothpaste Colgate Hedonistic Sociable Segment
Brightness of teeth Teens, young people Smokers Macleans, Ultra
Brite Active Worrier Segment Decay prevention Large families Heavy
users Crest Conservative Independent Segment Price Men Heavy users
Cheapest brand Value-oriented 15. Example: Market segments for
High- Tech Products Less Affluent More affluent Sidelined citizens
Not interested in technology Hand-Shakers Old consumers typically
Managers who dont touch their computers at work. They leave that to
younger Assistants. Traditionalists Willing to use technology but
slow to upgrade. not convinced upgrades and other add-ons are worth
paying for. Media junkies Seek entertainment And cant find much Of
it on-line. Prefer TV And other media. EntertainmentBusiness Family
THE PESSIMISTS Based on 131,000 people poll about their
motivations, buying habits and financial ability to purchase
high-tech products 16. Example: Market segments for High- Tech
Products (contd..) Less Affluent More affluent Fast Forwards These
customers are the biggest spenders, and they are early adopters of
new technology for individual use. New age nurturers Also big
spenders, but focused on technology for home uses such as family
PC. Mouse potatoes They like the on-line world for entertainment
and are willing to spend for the latest technotainment.
EntertainmentBusiness Family THE OPTIMISTS Techno-strivers Use
technology from cell phones and pagers to on-line services
primarily to gain career edge. Digital Hopefuls Families with a
limited budget but still interested in new technology. Good
candidates for the under $1000 PC. Gadget-Grabbers They also favor
on-line entertainment but have less cash to spend on it. 17.
Innovators Highest income, self esteem & abundant resources;
can indulge in any or all self-orientations Thinkers High resource
motivated by ideals; mature, responsible, well-educated
professionals; practical consumers & rational decision makers
Believers Low resource group; conservative & predictable
consumers; prefer established brands; life centered around family,
church, community & nation Survivors Lowest income, too few
resources to be included in any self-orientation; oldest of all
segments with limited means, who tend to be brand loyal Achievers
Successful, work-oriented & get satisfaction from job &
family; politically conservative & respect authority; Favor
established products that show off their success to peers Strivers
Values similar to achievers but few economic, social &
psychological resources; style is important Experiencers Youngest
of all the segments; Lot of energy; physical exercise & social
activities; heavy spenders on clothing, fast food, music; emphasis
new products Makers Practical people who value self-sufficiency;
focused on family, work, physical recreation appreciate practical
& functional products Example: VALS Values & Lifestyle 18.
Market Targeting 19. Narrowing down to target markets Narrowing
down to specific product-market All Customer needs Some generic
market One broad Product- market Homogeneous (narrow) product-
markets Single Target Market approach Multiple target Market
approach Combined Target Market approach Segmenting into possible
target markets Selecting target marketing approach 20. Market
Targeting - Strategies Marketing Mix Market Marketing Mix 1
Marketing Mix Marketing Mix 2 Marketing Mix 3 Segment 1 Segment 2
Segment 3 Segment 1 Segment 2 Segment 3 Undifferentiated Strategy
Differentiated Strategy Concentrated Strategy 21. Market Targeting
- Strategies Undifferentiated Strategy Differentiated Strategy
Little diversity - applies the same marketing effort to the whole
market Lower costs Vulnerable to competition e.g. Coca Cola, brass
& silver polish, Ford etc. Targets distinct customer groups
with appropriate marketing efforts for each segment Developing
different products or offering different mixes of pricing,
promotion or distribution arrangements. e.g. Marriott: Residence
Inns, Marriott Courtyards, Fairfield Inns, Marriott Hotels,
Marriott Resort Hotels. 22. Market Targeting - Strategies
Differentiated Strategy e.g. Clairol hair coloring market Men with
gray hair Young men with gray hair Young women Middle aged women
with gray hair Glamour oriented middle aged women Young and middle
aged women (who perceive risks) Brand loyal, long time users
Clairol Option for Men Clairol Mens Choice Clairol frost & tip
Clairol Quiet Touch Clairol Loving Care Clairol Ultress Clairol
Nice n Easy Miss Clairol 23. Market Targeting - Strategies
Concentrated Strategy Usually one specialized segment; could be a
combination of two Effective use of resources 80/20 principle e.g.
jewelers, clothes, radio stations etc. e.g. Chain saw manufacturer
Professional lumberjackFarmCasual or occasional user 24. Market
Targeting - Strategies Manufacturer of gasoline-powered lawn mowers
Farm Professionals Maker of electric tools Electric chain saws, can
target segment/s that provide a match between company goals &
abilities and customer needs. Concentrated approach can be
Employed. 25. Market Targeting Higher costs using differentiated
marketing include: Product modification cost Manufacturing cost
Administrative cost Inventory cost Promotion cost 26. Sales
Forecast Level of sales a single organization expects to achieve
based on a chosen market strategy and an assumed competitive
environment. Market Targeting Estimating Potential 27. Sales
Forecasting Methods Qualitative Survey of buyers intentions Expert
Opinion Composite of sales force estimates Quantitative Trend
Analysis Market Tests Statistical Demand Analysis Sales Forecast
28. Sales Forecast = f (M, T, C, U, P) M = Market potential T =
Proportion of market you are Targeting C = Extent of market
Coverage U = Number of Units expected to sell per customer during
the year P = Average Price per unit (P) Therefore, Sales Forecast =
M x T x C x U x P Making A Sales Forecast 29. Making A Sales
Forecast - Example Total number of potential buyers = 1 Million
Target Market (25%) = x 0.25 Market Coverage (75%) = x 0.75 Units
purchased per year (20) = x 20 Average Price ($10)= x $10
Forecasted Sales = $ 37.5 Million 30. Important Factors for
Selecting Target Segments Segments Potential Sales Competition
currently selling to the segments Firms objectives &
distinctive competence A number of variables can be selected
simultaneously for targeting a market place e.g. Burton Group
Selecting Target Markets 31. Positioning 32. Image of a product or
a firm in the eyes of the customer in relation to the competitors
products and/or products offered by the same firm Positioning (for
Competitive Advantage) 3 Steps in a Positioning Strategy: 1. Select
the positioning concept 2. Design the dimension or feature that
most effectively conveys the position 3. Coordinate the Marketing
Mix to convey a consistent position 33. Positioning for Competitive
Advantage: Strategies Products can be positioned on the basis of:
Superiority to competitors Use or application Users Product Class
Directly against competitors 34. Positioning Map/ Perceptual
Mapping Brands of soaps High moisturising Nondeodorant Deodorant
Low moisturising Tone Dove Lux Lever 2000 Lifebuoy Dial Zest
Mercury Safeguard 35. Positioning Map/ Perceptual Mapping
Automobiles Luxurious Traditional Sporty Functional Lincoln
Cadillac Mercedes Oldsmobile Chrysler Buick BMW Infiniti Lexus
Porsche Chevrolet Nissan Toyota Saturn VW Ford Dodge Acura Mercury
36. Positioning Map/ Perceptual Mapping Mobile Phone Service
Provider Innovative Coverage High High Low Low Mobilink Paktel
Warid Ufone Telenor 37. Winds classification for segmentation
Single basis for segmentation for all marketing decisions may
result in incorrect marketing decisions as well as a waste of
resources. For general understanding of a market Benefits sought
Product purchase and usage patterns Needs Brand Loyalty and
switching pattern A Hybrid of the variables above For positioning
studies Product usage Product preference Benefits sought A hybrid
of the above variables Strategic Market Segmentation 38. For new
product concepts Reactions to new concepts (intention to buy,
preference over current brand etc.) Benefits sought For pricing
decisions Price sensitivity Deal proneness Price sensitivity by
purchase/ usage pattern For advertising decisions Benefits sought
Media usage Psychographic/ lifestyle For distribution decisions
Store loyalty and patronage Benefits sought in store selection
Strategic Market Segmentation 39. Basic Patterns/ Procedures of
Segmentation An a priori segmentation management decides on a basis
for segmentation e.g. product purchase, loyalty etc. OR grouping
customers using descriptive characteristics and then comparing
response differences across the groups Clustering segments
determined on the basis of a clustering of respondents on a set of
relevant variables. The only significant difference is that the
segments are determined after the data have been collected on the
basis of perceived groupings or clusters within the data. OR
Forming groups based on response differences (e.g. frequency of
purchase etc.) and determining if groups can be identified based on
differences in their characteristics. Strategic Market Segmentation
40. Hooleys review of multivariate techniques which he dichotomizes
as being either predictive or descriptive in nature. Predictive
Techniques Multiple Regression Multiple Discriminant Analysis
Conjoint Analysis Descriptive techniques Factor Analysis Cluster
analysis Multidimensional scaling Strategic Market Segmentation 41.
Multiple Regression develops a model of the relatonship between a
dependent variable such as sales and 2 or more independent
variables such as price, promotional expenditure etc. so that
variations in the former may be explained and predicted in terms of
changes in the latter. Strategic Market Segmentation 42. Multiple
Discriminant Analysis also uses a set of independent variables to
predict one or more dependent variables. It is useful in marketing
as a means of discriminating between market segments in terms of
member characteristics. Example. Strategic Market Segmentation 43.
Conjoint Analysis identifies the relative importance of each
product attribute in creating an overall desirability for the
product. Example. Strategic Market Segmentation 44. Conjoint
Analysis Industrial cleanser 3 attributes important for customers
Cleansing ingredient Form Brand Name To operationalize attributes,
certain levels for each attribute needs to be determined; in this
case 2 levels were determined L E V E L S Ingredients Phosphate
free Phosphate based Forms Liquid Powder Brand Name A B 45.
Conjoint Analysis Next step: Evaluations from respondents regarding
their preferences across 8 combinations of the two different levels
for each of the three attributes. (1=most preferred and 8=least
preferred) Ranking Liquid Phosphate free A 1 1 Liquid Phosphate
free B 2 2 Liquid Phosphate based A 5 3 Liquid Phosphate based B 6
4 Powder Phosphate free A 3 7 Powder Phosphate free B 4 5 Powder
Phosphate based A 7 8 Powder Phosphate based B 8 6 46. Cluster
Analysis groups people according to the similarity of their answers
to questions such as brand preferences or product attributes. OR It
classifies objects (e.g. respondents, products etc.) so that each
object is similar to others in the cluster based on a set of
selected characteristics. The resulting clusters should exhibit
high internal homogeneity and high external heterogeneity.
Strategic Market Segmentation 47. Multidimensional Scaling also
known as perceptual mapping, is a procedure that determines the
perceived relative image of a set of objects (firms, products,
ideas etc.). The purpose is to transform consumer judgments of
overall similarity or preference into distances represented in
multidimensional space. Strategic Market Segmentation
