Chapter 4. segmentation, targeting, positioning

STP

Market Segmentation

Market segmentation is the subdividing of market into homogenous sub sections of customers, where any sub section may conceivably be selected as a market target to be reached with a distinct marketing mix.

Requirements for Effective Segmentation

Requirements for Effective Segmentation

• Size, purchasing power, profiles of segments can be measured.

• Segments can be effectively reached and served.

• Segments are large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• Segments must respond differently to different marketing mix elements & programs.

• Effective programs can be designed to attract and serve

the segments.

Bases for Segmentation

Geographic Segmentation

Region North, South, East, West

City size Major metropolitan areas, small cities, towns

Density of area Urban, suburban, (semi urban) rural

Climate Hot, Cold, warm

Demographic Segmentation

Age Under 11, 12-17, 18-34 and so on

Sex Male, Female

Marital Status Single, married, divorced, living together, widowed

Family size Up to 2 children, 3 to 4 children, 5 & above

Income Under RS.10,000, Rs. 20,000, Rs. 30,000 and so on

Education Illiterate, able to read and write, high school, graduate, post graduate or illiterate, semiliterate, literate

Occupation Professional, blue collar, white collar, agricultural

Race Brahmin, Bania, Kayastha, Rajput, Bhumihar

Language Hindi, Tamil, Telugu, Punjabi

Psychographic Segmentation

Needs- motivation Shelter, safety, security, affection

Personality Extrovert, introvert, aggressive, complaints

Attitudes Positive attitude, negative attitude

Psychographic lifestyle Straight, conservatives, status seekers

Socio-cultural Segmentation

Culture Indian, Chinese, Japanese, English

Religion Hindu, Muslim, Christian

Social Class Lower, middle, upper

Family lifestyle Bachelors, young married

Use related Segmentation buyer behavior

Usage rate Heavy users, medium users, light users, nonusers

Awareness status Unaware, aware, interested to try (enthusiastic), regular buyer

Brand loyalty None, some, strong

Use situational segmentation

Time Leisure, work, rush, morning, night

Objective Personal use, gift, fun, achievement

Location Home, work, friend’s home, in-store

Person Self, friends, boss

Benefit segmentation Convenience, prestige, economy, value for the money

Hybrid Segmentation

Demographic/Psychographic profiles Combination of demographic and psychographic characteristics

VALS Actualizer, fulfilled, believe, achieve, striver, experiencer,

maker, struggler

Principle Oriented Status Oriented

FULFILLED

BELIEVERS

ACTUALIZERS

ACHIEVERS

STRIVERS

STRUGGLERS

Abundant Resources

Minimal Resources

Action Oriented

EXPERIENCERS

MAKERS

VALS 2 - Network

What type of demographic segmentation is reflected by this?

RefrigeratorsThe refrigerator market can be segmented on the following basis of:i) Geographicala) North India b) South India c) East India d) West India

ii) Size of refrigeratorsa) 65 litres b) 90 litres c) 165 litres d) 286 litres e) 300 litres

iii) Nature of consumersa) Households b) Industrial

Washing machines

a) Density : Urban and Suburbanb) Economy : Middle and upper income groupc) Benefits : Automatic, Semi automatic

Segmentation, Targeting, and Positioning

Develop profiles ofresulting segments

MarketSegmentation

Develop measures ofsegment attractiveness

Select thetarget segment(s)

Develop positioningfor each segment

Develop marketing mixfor each segment

Identify bases forsegmenting market

MarketTargeting

MarketPositioning

TargetingIt involves making

decision about which

part of the market an

organization wishes

to focus on.

Evaluating a segment for targeting

• Has sufficient current and potential sales and profits

• Has the potential for sufficient future growth• Is not over-competitive• Does not have excessive barriers or costs to

entry or exit• Has some relatively unsatisfied needs that the

company can serve particularly well.

Evaluating Market Segments

1) Segment Size and Growth– Collect and analyze data on segment size– Growth rates– Expected profitability (ROI)

2) Segment Structural Attractiveness

– Consider effects of competitors– Existence of substitute products– Bargaining power of buyers– Bargaining power of suppliers

3) Company Objectives and Resources

– Company’s attention and energies are not diverted from the main goal – while serving that segment eg gaming business

– Examine company resources needed to succeed in that segment e.g.: McDonald’s in biscuits

– Offer superior value and gain advantage over competitors (Differentiation)

Market TargetingMarket Coverage Strategies


Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing Mix 1






MarketMarket

A. Undifferentiated Marketing

B. Differentiated Marketing



Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

C. Concentrated Marketing

• Undifferentiated marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix– Sometimes called mass marketing– Much more common in the past

• Differentiated marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments– Tends to raise costs– Firms may be forced to practice

differentiated marketing to remain competitive

• Concentrated marketing (niche marketing): when a firm commits all of its marketing resources to serve a single market segment– Attractive to small firms with limited resources

and to firms offering highly specialized goods and services

Positioning

Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.

The process of creating an image for a product in the mind of target customers.

The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.

Identify positioning bases

AttributeAttribute

Price and QualityPrice and Quality

Use or ApplicationUse or Application

Product UserProduct User

Product ClassProduct Class

CompetitorCompetitor

Positioning Bases

Positioning Bases

Benefits or needsBenefits or needs

Choosing and Implementing a positioning Strategy

1) Identifying possible competitive advantages

• Company can position itself as providing superior value either by low price or by providing more benefits to justify higher prices

• Deliver the promised quality and service

2. Selecting the right competitive advantages

• How many differences to promote ? • Best quality, best services, lowest price

advance technology• Which differences to promote?

3. Communicating and delivering the chosen position

1) Differentiation It is the act of designing a set of meaningful

differences to distinguish the company’s offering from competitors’ offering

a) Product differentiation i) Features ii) Performance – level at which characteristics of

products operateiii) Conformance-degree to which product meet

promised target specifications iv) Durability –expected operating life v) Reparability- ease of fixing a product vi) Style- looks and feels to the buyer vii) Design- totality of features that effect how a product

looks and functions

b) Service differentiation – differentiating in services.

i) Ordering ease- how easy it is for the cr customer to place an order

ii) delivery- how well product is delivered.iii) Installation- work done to make a product

operational.iv) Customer trainingv) Customer consulting- data, information that the

sellers offers free vi) Maintenance and repair- Company’s service

programme for helping customers.

c) Personnel Differentiation – Competitive advantage through hiring and training people.

i) Competence- employees possess the required knowledge and skill

ii) Courtesy- employees are helpful, friendlyiii) Responsiveness - respond to customer

requests and problemsiv) Communication- employees make an effort to

understand customer and communicate clearly v) Credibility- employees are trust worthy vi) Reliability- employees perform the service

consistently and accurately

d) Channel differentiation – Companies can make differentiation through distribution channel. Channel’s coverage, expertise and performance .

e) Image differentiation- how companies differentiate their personnel or brand image

2) Market Segmentation – It can help the management in achieving following benefits

a) Concentrating on most profitable market b) Designing product that really match the market

demand c) Determining promotional mix which will be most

effective.d) Choosing advertising media effectively and

determining how to allocate better budget among the various media.

Repositioning

Changing consumers’ perceptions of a brand

in relation to competing brands.

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Chapter 4. segmentation, targeting, positioning