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1
Segmentation, Targeting & Positioning for Competitive Advantage
Nathan George, M.S., J.D.
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Marketing Process Involves
• Market orientation as philosophy
• Market segmentation
• Targeting market
• Positioning
• Marketing mix
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Marketing Strategy
• Select base for segmentation and identify appropriate market segments.
• Evaluate and appraise the market segments resulting from the first step.
• Select an overall market targeting strategy and specific target segments.
• Tailoring a distinct position in selected markets• Developing marketing mixes that serve desired
positioning strategy in the marketplace• Auditing marketing environments and efforts
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Importance of Segmentation and Targeting
• The focus of a successful marketing program is the customer. Effectively marketing must fully understand the needs.
• Customers with decent life and individualism have Heterogeneous demands, This has given rise to need segmenting.
• The process of understanding the customer and choosing a group of customer you can serve best is targeting.
• So target a segmentation is core of the marketing process.
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Identify the Total Market
Objective 3
Identify Total MarketIdentify Total Market
Effective SegmentationEffective Segmentation
Bases for SegmentationBases for Segmentation
Select Target SegmentSelect Target Segment
Positioning StrategyPositioning Strategy
Marketing MixMarketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
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Identify the Total Market
• The first step in the target market selection process is to specifically define the total market of all potential customers for a product category.
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Segmentation and Effectiveness
Objective 3
Identify Total MarketIdentify Total Market
Effective Effective SegmentationSegmentation
Bases for SegmentationBases for Segmentation
Select Target SegmentSelect Target Segment
Positioning StrategyPositioning Strategy
Marketing MixMarketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
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Segmentation
• Segmenting means dividing a heterogeneous demanding markets into homogenous groups based on similar characteristics or traits
• Heterogeneous demand- different groups of customers have differing needs from specific products.
• Homogeneous segment- the separation of markets into distinctive groups based on homogeneous characteristics.
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Criteria for successful segmentation
Distinctive
Measurable Identifiable
Substantia
l
Actionable
Accessible
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Criteria for successful segmentation
Distinctive•Clear differences in consumer preferences for a product must exist.
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Criteria for successful segmentation
•Difference preferences for a product must be identifiable and capable of being related to measurable variables.
Measurable Identifiable
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•The proposed market segment must have enough size and purchasing power to be profitable.
Substantial
Criteria for successful segmentation
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•Companies must be able to respond to difference preferences with an appropriate marketing mix.
Actionable
Criteria for successful segmentation
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•The proposed market segment must be readily accessible and reachable with market programs.
Accessible
Criteria for successful segmentation
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Determine Bases for Segmentation
Objective 3
Identify Total MarketIdentify Total Market
Effective Effective SegmentationSegmentation
Bases for SegmentationBases for Segmentation
Select Target SegmentSelect Target Segment
Positioning StrategyPositioning Strategy
Marketing MixMarketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
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Bases for Segmentation
• To divide a market into segments, firms use segmenting criterion that describe the characteristics of each part of the market.
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Segmentation BaseSegmentation Base
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
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Social classSocial classSocial classSocial class
Income LevelIncome LevelIncome LevelIncome Level
EthnicEthnicEthnicEthnicEducationEducationEducationEducation
Life-cycleLife-cycle
Segmentation Base
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Segmentation BaseSegmentation BaseSegmentation BaseSegmentation Base
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
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Segmentation Base
• Localizes its marketing efforts to specific geographic regions
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Segmentation BaseSegmentation BaseSegmentation BaseSegmentation Base
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
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Segmentation Base
• Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions)
• Useful but more difficult to identify and measure compared to demographic variables
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Segmentation BaseSegmentation BaseSegmentation BaseSegmentation Base
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
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Segmentation Base
• Markets can be segmented based on the benefits that consumers desire from using a specific product
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Segmentation BaseSegmentation BaseSegmentation BaseSegmentation Base
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
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Segmentation Base
• Purchase situation or occasion
– Physical surroundings
– Social surroundings
– Temporal perspective
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Segmentation BaseSegmentation BaseSegmentation BaseSegmentation Base
Situation Situation SegmentationSegmentation
Psychographic Psychographic
SegmentationSegmentation
Geographic Geographic SegmentationSegmentation
Behavior/UsageBehavior/Usage SegmentationSegmentation
Demographic Demographic SegmentationSegmentation
Benefits-SoughtBenefits-Sought SegmentationSegmentation
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Light Users
80%
Light Users
80%Heavy Users
20%
Heavy Users
20%
Segmentation Base
• Markets can be segmented by how often or how heavily consumers use a specific product– Pareto’s Principle or 80/20 Principle - 80% of revenue
generated by 20% of customers
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Segmentation Base
• Information for segmenting markets may be obtained from database such as Census, State Statistics, ACORN
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Segmenting Business Markets
• While the steps in the target market selection process are essentially the same for business markets, there are three major differences:
– The purchasing process, which differs greatly from the household consumer market.
– The use of different segment variables– Standard Industrial classification is often
employed
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Segmenting Business Markets
• Segmentation variables used to segment business markets:
– Size– Industry– Purchasing approaches– Product usage– Situational factors (seasonal trend)– Geographic
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Select Segments for Targeting
Objective 3
Identify Total MarketIdentify Total Market
Determine Need for Determine Need for SegmentationSegmentation
Determine Bases for Determine Bases for SegmentationSegmentation
Select Target SegmentSelect Target Segment
Positioning StrategyPositioning Strategy
Marketing MixMarketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
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Targeting
• Targeting: choose the specific segment toward which a firm directs its market efforts.
• Niche Marketing: the process of targeting a small market segment with a specific, specialized marketing mix.
• Micromarketing- the process of targeting smaller, more narrowly defined market segments.
• On the individual consumer end of the continuum, a firm may decide to target individual consumers and personalize marketing efforts toward each.
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Target the Mass Market versus the Individual Consumer
Mass Market
Niche Micro-marketing The
Individual
Personal-izationMicro-
marketingNicheStandardized Marketing
Mix
Continuum of Market Segmentation Size
Continuum of Market Segmentation Size
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Advantage of Targeting Efforts
• Cannot effectively serve all the segments, must target marketing efforts to a segment or segments.
• Marketing opportunities and unfilled ‘gaps ’ are more accurately identified
• Marketing mix is created strategically to meet potential customer’s needs
• Offers the greatest potential to achieve profit or relationship goals
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Targeting Strategy
1.Undifferentiated marketing
2.Differentiated marketing
3.Concentrated marketing
4.Custom marketing
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Targeting Strategy
Undifferentiated targeting Undifferentiated targeting strategystrategy
Concentrated strategy
Differentiated strategy
• Companies might develop one marketing mix strategy that is appropriate for all members of the total market.
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Targeting Strategy
Undifferentiated targeting strategy
Concentrated strategyConcentrated strategy
Differentiated strategy
• Only one marketing mix is developed and directed toward a few, or perhaps one, profitable market segments.
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Targeting Strategy
Undifferentiated targeting strategy
Concentrated strategy
Differentiated strategyDifferentiated strategy
• Exists when a firm develops different marketing mix plans specially tailored for each of two or more market segments.
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Alternative of Targeting Strategy
1. Single segment
2. Multi segment
3. Product specialized
4. Market specialized
5. Full market coverage
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Select Positioning Strategy
Objective 3
Identify Total MarketIdentify Total Market
Effective Effective SegmentationSegmentation
Determine Bases for Determine Bases for SegmentationSegmentation
Targeting SegmentTargeting Segment
Positioning StrategyPositioning Strategy
Marketing MixMarketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
43
Positioning
Positioning
• Kotler defined: “designing an offer so that it occupies a distinct and valued place in the minds of the target customer.”
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Positioning
Positioning
Image that customers have about a product in relation to the product’s competitors
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Positioning Strategy
• Key to developing the appropriate marketing mix is the positioning strategy of the product.
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Presumptions of Positioning
• All products have object and subject attributes
• Recognizable
• Comparable
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Select Positioning Strategy
• Effective positioning
– What consumers currently think about the product, especially in relation to competing products
– What the marketer wants consumers to think about the product
– Which positioning strategy will elevate the consumers’ current product image to the desired product image.
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Select Positioning Strategy
• Position Mapping- creating a visual description about consumer perceptions of a product on two or more dimensions in relation to competitors.
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Select Positioning Strategy
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Select Positioning Strategy
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Select Positioning Strategy
• The positioning strategy must determine where a company wants to go
• And how to get there by positioning the product according to any of the following ways:
– Price/Quality– Product Attributes– Product User– Product Usage– Product Class– Competition– Symbol
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Marketing Mix
Objective 3
Identify Total MarketIdentify Total Market
SegmentationSegmentation
Bases for SegmentationBases for Segmentation
Select Target SegmentSelect Target Segment
Positioning StrategyPositioning Strategy
Marketing MixMarketing Mix
Monitor, Evaluate and Monitor, Evaluate and ControlControl
53
Marketing Mix
• The final steps are to develop and a marketing mix matched to the needs of the target market
• This must support the chosen positional strategy in the selected target markets
• Therefore determine the ‘4Ps ’ or “7Ps” of its marketing mix as a tool to achieve the desired position
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Recognize 4Ps and the 7Ps
• Productcustomer value
• Pricecost
• Placeconvenience
• Promotioncommunication
• Peopleconsideration
• Processesco-ordination
• Physical evidenceconfirmation
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Marketing Strategy and the Marketing Mix
Objective 4
ProductPlace
(Distribution)
Promotion Price
Marketing Mix
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• Refers to goods, services, people, places and ideas
– Household consumers– Business-to-business customers
Product
Marketing Strategy and the Marketing Mix
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• Marketing channel is the network of organizations that create time, place and ownership utilities for household consumers and business customers.
Place
(Distribution)
Marketing Strategy and the Marketing Mix
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• Integrated Marketing Communication (IMC)• System of management and integration of
marketing communication elements– Advertising, publicity, sales promotion,
personal selling, sponsorship marketing, and point-of-purchase communications
Promotion
Marketing Strategy and the Marketing Mix
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• Pricing decisions are complex and are driven by a variety of considerations including:
– Customer demand, costs, information availability, competition, profit motives, product considerations, and legal considerations
Price
Marketing Strategy and the Marketing Mix