Slide 10.1 Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1 st Edition © Pearson...

Kotler, Keller, Brady, Goodman and Hansen, Marketing Management, 1st Edition © Pearson Education Limited 2009

The Value of Segmentation and Targeting

LECTURE WEEK 5

Lecture questions

1. What are the different levels of market segmentation?

2. How can a company divide a market into segments?

3. How should a company choose the most attractive target markets?

4. What are the requirements for effective segmentation?

Lecture questions (continued)

5. How can a firm create, develop and communicate a successful positioning strategy in the market?

6. Why is the concept of positioning so important to marketing practitioners?

7. How can companies seek to positively differentiate their offerings in today’s market conditions?

8. When might companies need to reposition theirmarket offerings and what are the main inherent risks of such a strategy?

Morgan cars serve a niche market

Morgan Cars: have a long order book and continue to serve a niche market for handbuilt traditional sports cars for baby boomersSource: Steve Sant/Alamy

Effective targeting requires…

• Identify and profile distinct groups of buyers who differ in their needs and preferences.

• Select one or more market segments to enter.

• Establish and communicate the distinctive benefits of the market offering.

Four levels of micromarketing

Segments

Local areas Individuals

Niches

What is a market segment?

A market segment consists of a group of customers who share a similar set of

needs ad wants.

For a discussion of market analysis and market segmentation, view the following video:

www.youtube.com/watch?v=llJNwdV-G88

Flexible marketing offerings

solution:

Product and service elements that all segment members value.

Discretionary options:

Some segment members value options but not all.

Preference segments

• Homogeneous preferences exist when consumers want the same things.

• Diffused preferences exist when consumers want very different things.

• Clustered preferences reveal natural segments from groups with shared preferences.

This delicatessen focuses on local marketing

A Polish food shop opens to provide a taste of home for the large local Polish community in Darlington in the north of EnglandSource: Gregory Wrona/Alamy

The long tail

Chris Anderson explains the long tail equation:

• The lower the cost of distribution, the more you can economically offer without having to predict demand.

• The more you can offer, the greater the chance that you will be able to tap latent demand for minority tastes.

• Aggregate enough minority taste, and you may find a new market.

See a video clip featuring Chris Anderson at www.youtube.com/watch?v=0Yku0GTrcuw

What is customerisation?

Customerisation combines operationally driven mass customisation with customised

marketing in a way that empowers consumers to design the product and

service offering of their choice.

Segmenting consumer markets

GeographicGeographic

DemographicDemographic

PsychographicPsychographic

BehaviouralBehavioural

Claritas’ PRIZM

For a discussion on how to maximise revenue using PRIZM, watch this video clip:

www.youtube.com/watch?v=LtFHyaJvkiw

• Education and affluence

• Family life cycle

• Urbanisation

• Race and ethnicity

• Mobility

Demographic segmentation

Age and life cycleAge and life cycle

Life StageLife Stage

GenderGender

IncomeIncome

GenerationGeneration

Social classSocial class

Mini cooper: generation targeting

Memories for baby boomers and a cool car for 20 year oldsSource: Sandro Campardo/AP/PA Photos

Psychographic segmentation

For a discussion on demographic vs psychographic segmentation view this video:www.youtube.com/watch?v=4A-1qfiz4EQ

Psychographic segmentation divides buyers into different groups on the basis of traits, lifestyles or values.

Forces shaping social change

Table 10.4 The forces shaping social changeSource: L. Hasson (1995) Monitoring social change, International Journal of Market Research, 37(1), 69–80. Copyright © 1995 Market Research Society (www.ijmr.com). Reproduced with permission

SINUS typology

Table 10.5 SINUS typology

The VALS system

Behavioural segmentation: decision roles

Initiator

Influencer

Decider

Behavioural segmentation: behavioural variables

• Occasions• Benefits• User status• Usage rate• Buyer-readiness• Loyalty status• Attitude

John Kelly makes the case for behavioural segementation in this video clip:

www.youtube.com/watch?v=5gNus1ePAdg

The brand funnel illustrates variationsin the buyer-readiness stage

• Aware• Ever tried• Recent trial• Occasional user• Regular user• Most often used

Figure 10.3 Brand funnel

Loyalty status

Switchers

Shifting loyals

Split loyals

Hard-core

Attitudes about product purchases

• Enthusiastic

• Positive

• Indifferent

• Negative

• Hostile

Behavioural segmentation breakdown

Figure 10.4 Behavioural segmentation breakdown

The conversion model

Convertible Shallow Average Entrenched

Strongly

unavailableAmbivalent Available

Weakly

unavailable

Users Nonusers

Segmenting for business markets

DemographicDemographic

Operating variableOperating variable

Purchasing approachesPurchasing approaches

Situational factorsSituational factors

Personalcharacteristics

Steps in segmentation process

Needs-based segmentation

Segment identification

Segment attractiveness

Segment profitability

Segment positioning

Segment acid test

Marketing-mix

strategy

Effective segmentation criteria

MeasurableMeasurable

SubstantialSubstantial

AccessibleAccessible

DifferentiableDifferentiable

ActionableActionable

Patterns of target market selection

Figure 10.5 Five patterns of target market selectionSource: Adapted from D. F. Abell (1980) Defining the Business: The Starting Point of Strategic Planning, Upper Saddle River, NJ: Prentice Hall, Chapter 8, pp. 192–6.Copyright © 1980. Reproduced with permission from Pearson Education, Inc.

Patterns of target market selection (continued)

Figure 10.5 Five patterns of target market selection (continued)Source: Adapted from D. F. Abell (1980) Defining the Business: The Starting Point of Strategic Planning, Upper Saddle River, NJ: Prentice Hall, Chapter 8, pp. 192–6.Copyright © 1980. Reproduced with permission from Pearson Education, Inc.

Patterns of target market selection (continued)

Figure 10.6 Segment-by-segment invasion plan

What is positioning?

Positioning is the act of designing the company’s offering and image to occupy

a distinctive place in the mind of the target market.

For an interesting bookmercial for Ries and Trout watch this video: www.youtube.com/watch?v=EE4YAIuccIs

Examples of Value propositions

Table 10.8 Examples of value propositionsSource : M. R. V. Goodman, Durham University

Defining associations

Points-of-difference (PODs)

Attributes or benefits consumers strongly

associate with a brand, positively evaluate and believe they could not find to the same extent

with a competitive brand.

Points-of-parity

(POPs)

Associations that are not necessarily unique to the brand but may be

shared with other brands.

Establishing category membership

• Announcing category benefits

• Comparing to exemplars

• Relying on the product descriptors

Consumer desirability criteria for PODs

RelevanceRelevance

DistinctivenessDistinctiveness

BelievabilityBelievability

Deliverability criteria for PODs

FeasibilityFeasibility

CommunicabilityCommunicability

SustainabilitySustainability

Negatively correlated attributes and benefits

Table 10.10 Examples of negatively correlated attributes and benefits

Addressing negatively correlated PODs and POPs

• Present separately

• Leverage equity of another entity

• Redefine the relationship

Understanding competitive structure of a market

• How do customers view the brand?

• Which competitive brands do customers perceive to be their closest competitors?

• What market offering and company attributes are most responsible for these perceived differences?

What is perceptual mapping?

Perceptual(or positioning) mappingis a marketing tool that enables marketers to plot the position of theiroffering against thoseof the competition?

Figure 10.7 Example positioning map of the UK chocolate block sector marketSource : M. R. V. Goodman, Durham University

For advice on how to do a perceptual map go to the following video clip: www.youtube.com/watch?v=wphoXc0qANE

Differentiation strategies

Product

Channel Image

Personnel

Product differentiation

• Product form• Features• Performance• Conformance• Durability• Reliability• Reparability

• Style• Design• Ordering ease• Delivery• Installation• Customer training• Customer consulting• Maintenance

Recap: can you explain?

• How can a company divide a market into segments?

• How should a company choose the most attractive target markets?

• What are the requirements for effective segmentation?

Recap: can you explain? (continued)

• How can a firm create, develop and communicate a successful positioning strategy?

• How can companies seek to positively differentiate their offerings in today’s market conditions?

• When might companies need to reposition their market offerings and what are the main inherent risks of such a strategy?

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