Topic 5 STPD Lect Ppt

PILLARS OF MARKETING -STPD

SEGMENTATION AND TARGETING

Topic 5a

Market Segmentation

Market

MarketSegment

MarketSegmentation

People or organizations with needs or wants and the ability and

willingness to buy

A subgroup of people or organizations sharing one or more characteristics

that cause them to have similar product needs.

The process of dividing a market into meaningful, relatively similar,

identifiable segments or groups.

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Why Segmentation?

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Levels Of Segmentation

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Macro segmentation

Mass marketing (Undifferentiated

Marketing)

Micro segmentation

Segment marketing

(Differentiated

Marketing)

Niche Marketing

(Concentrated Marketing)

Local Marketing

Individual Marketing

Mass Marketing

Mass marketing engage in the mass production, distribution, and promotion of one

product for all buyers.

Henry Ford epitomized this

strategy when he offered the Model T

Ford “in any colour, as long as it

is black.”

Coca-Cola also used mass marketing when it sold only

one kind of Coke in a 6.5-ounce bottle.

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Mass Marketing

The argument for mass marketing is that :

it creates the largest

potential market,

which leads to the lowest

costs,

which in turn can lead to lower prices or higher margins.

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6-7

Mass Marketing Strategy


Micro-segmentationSlide 8 in Chapter 9

Segment marketing

Niche marketing

Local marketing

Individual marketing


1. Segment Marketing

Targeting a group of customers

who share a similar set of

needs and wants.

For example, an automaker may identify four broad segments in the car market:

buyers who are primarily seeking

(1) basic transportation,

(2) high performance,

(3) luxury, or

(4) safety.

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1. Multisegment Strategy


1. Segment Marketing……..

Because the needs, preferences, and behaviour of segment members are similar but not identical, marketers should present

flexible market offerings instead of one standard offering to all members of a segment.

• For example, Delta Airlines offers all economy passengers a seat, food, and soft drinks, but it charges extra for alcoholic beverages and earphones.

A flexible market offering consists of the product and

service elements that all segment members value, plus

options (for an additional charge) that some segment

members value.

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2. Niche Marketing

A niche is a more narrowly defined group, typically a small market whose needs are not being well served.

Marketers usually identify niches by dividing a segment into sub-segments or by defining a group seeking a distinctive mix of benefits.

• For example, a tobacco company might identify two sub segments of heavy smokers: those who are trying to stop smoking, and those who don’t care.

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2. Niche Marketing

In an attractive niche,

• customers have a distinct set of needs; • they will pay a premium to the firm that best satisfies their

needs; • the niche is not likely to attract other competitors; • the nicher gains certain economies through specialization;

and • the niche has size, profit, and growth potential.

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Niche Marketing Strategy

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3. Local Marketing

Local marketing is tailored to the needs and wants of local customer

groups

(trading areas, neighbourhoods, even individual

stores).

• Citibank, for instance, adjusts its banking services

in each branch depending on neighbourhood

demographics;

• Newspapers – Times Of India - Mumbai mirror -

Thane Plus.

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4. Individual Marketing

Much business to-business marketing today is customized, in that a manufacturer will customize the offer, logistics, communications, and

financial terms for each major account.

For centuries, consumers were served as individuals:

The tailor made the suit and the cobbler designed shoes for the individual.

The ultimate level of segmentation leads to

“segments of one,” “customized marketing,” or “one-to-one marketing.”

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4. Mass Customization

Mass customization is the ability to prepare individually designed products and communications on a mass basis to

meet each customer’s requirements.

Mattel’s Barbie.com site invites girls to log on and design their own Barbie Pal doll by specifying skin tone, eye color, hairdo and hair color, clothes, accessories, and name.

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Patterns of Market Segmentation

Three patterns of preference segments are typically identified:

Homogeneous preferences

consumers have roughly the same

preference.

Diffused preferences

indicating great variance in consumer

preferences.

Clustered preferences

The market might reveal distinct

preference clusters.

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Basic Market-Preference Patterns

(a) Homogeneouspreferences

Sweetness

Cre

am

ine

ss

(c) Clusteredpreferences

Cre

am

iness

Sweetness

(b) Diffusedpreferences

Cre

am

iness

Sweetness

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Bases for Segmenting Markets

Psychographics

Behavioral

Demographics

Geography

Bases Used toSegmentConsumerMarkets


Geographic Segmentation

World region or country - North America, Western Europe, Middle East, Pacific Rim, China, India, Canada, Mexico

Country region -Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England

City or metro size - Under 5,000; 5,000–20,000; 20,000–50,000; 50,000–100,000; 100,000–250,000; 250,000–500,000; 500,000–1,000,000; 1,000,000–4,000,000; over 4,000,000

Density - Urban, suburban, rural

Climate – Hot, Humid, Dry, Cold

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Geographic Segmentation - Examples

Many companies today are

localizing their products,

advertising, promotion, and

sales efforts to fit the needs of individual

regions, cities, and even

neighborhoods.

For example, one consumer products company shipped

additional cases of its low-calorie

snack foods to stores in

neighborhoods near Weight

Watchers clinics.

Coca-Cola developed four ready-to-drink canned coffees

for the Japanese market, each targeted to a

specific geographic

region.

Procter & Gamble

introduced Curry Pringles in

England and Funky Soy Sauce Pringles in Asia.


Examples – Tata Motors – Rural / Urban


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Tata Ace - Rural Market Tata World Truck – Urban Market

Demographic Segmentation

Age :

Under 6, 6–11, 12–19, 20–34, 35–49, 50–

64, 65

Gender :

Male, female

Family size :

1–2, 3–4, 5

Family life cycle :

Young, single; young, married, no children; young, married with children; older, married with children; older, married, no

children; under 18; older, single; other

Income :

Under $10,000; $10,000–$20,000; $20,000–$30,000; $30,000–$50,000; $50,000–$100,000; $100,000 and over

Occupation:

Professional and technical; managers, officials, and

proprietors; clerical; sales; craftspeople; supervisors;

operatives; farmers; retired; students; homemakers;

unemployed

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Demographic Segmentation- Examples

AGE AND LIFE-CYCLE STAGE

• For example, ads for Olay Pro-Vital—designed to improve the elasticity and appearance of the ―maturing skin‖ of women over 50 feature attractive older spokeswomen and uplifting messages.

INCOME

• Income segmentation has long been used by the marketers of products and services such as • automobiles, clothing, cosmetics,

financial services, real estates and travel.

• (Lodha Luxuria and Lodha Casa Royal)

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Gender segmentation: Nike has recently stepped up its efforts to capture thewomen’s sports apparel market by overhauling its women’s apparel lines, revamping

the Nikewomen.com Web site, and opening Nike women stores in several major cities.

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Demographic Segmentation……

Education :

Grade school or less; some high school; high school graduate; some

college; college graduate

Religion:

Catholic, Protestant, Jewish, Muslim, Hindu,

other

Race:

Asian, Hispanic, Black, White

Generation :

Baby boomer, Generation X, Generation Y

Nationality:

North American, South American, British,

French, German, Italian, Japanese

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Psychographic Segmentation

Social class:

Lower lowers, upper lowers, working class,

middle class, upper middles, lower uppers,

upper uppers

Lifestyle :

Achievers, strivers, survivors

Personality :

Compulsive, gregarious, authoritarian, ambitious

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Examples : Marketers also have used personality variables to segment markets.


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Behavioural Segmentation

Occasions :

Regular occasion; special occasion

Benefits:

Quality, service, economy,

convenience, speed

User status :

Nonuser, ex-user, potential user, first-

time user, regular user

User rates:

Light user, medium user, heavy user

Loyalty status :

None, medium, strong, absolute

Readiness stage :

Unaware, aware, informed, interested, desirous, intending to

buy

Attitude toward product :

Enthusiastic, positive, indifferent, negative, hostile

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Examples

• Some holidays, such as Mother’s Day and Father’s Day, were originally promoted partly to increase the sale of candy, flowers, cards, and other gifts.

OCCASIONS

• One study of travellers uncovered three benefit segments: those who travel to be with family, those who travel for adventure or education, and those who enjoy the ―gambling‖ and ―fun‖ aspects of travel.

BENEFITS SOUGHT

• For example, blood banks cannot rely only on regular donors. They must also recruit new first-time donors and remind ex-donors—each will require different marketing appeals.

USER STATUS.

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Examples…. Behavioural Segmentation

USAGE RATE.

• For example, fast-feeder Burger King targets what it

calls “Super Fans,” young (age 18 to 34), Whopper-

wolfing males who make up 18 percent of the chain’s

customers but account for almost half of all customer

visits. They eat at Burger King an average of 16 times a

month.

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Examples….. Behavioural Segmentation

• Five attitude groups can be found in a market: • (1) enthusiastic, • (2) positive,• (3) indifferent, • (4) negative, and • (5) hostile.

➤ Attitude.

So, for example, workers in a political campaign use the voter’s attitude to determine how much time to spend with that voter. They may:

thank enthusiastic voters and remind them to vote,

reinforce those who are positively disposed,

try to win the votes of indifferent voters, and

spend no time trying to change the attitudes of negative and hostile voters.

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Examples…. Behavioural Segmentation

LOYALTY STATUS

Buyers can be divided into four groups according to brand loyalty status:

• hard-core loyals (who always buy one brand),

• split loyals (who are loyal to two or three brands),

• shifting loyals (who shift from one brand to another, and

• switchers (who show no loyalty to any brand).

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Examples – Behavioural Segmentation

■ Consumer loyalty: ―Macolytes‖—fanatically loyal Apple users—helped keepApple afloat during the lean years, and they are now at the forefront of Apple’sburgeoning iPod and iTunes empire.

■ Occasion segmentation: Peeps creates different shaped marshmallow treats forspecial holidays when it captures most of its sales but advertises that Peeps are―Always in Season‖ to increase the demand for non-holiday occasions.

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Major Groups of Segmentation Variables

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Effective Segmentation

To be useful, market segments must be:

• The size, purchasing power, and characteristics of the segments can be measured.

Measurable:

• Large enough to be profitableSubstantial:

• The segments can be effectively reached and served.Accessible:

• The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs.

Differentiable:

• Effective programs can be formulated for attracting and serving the segments.

Actionable:

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Evaluating Market Segments

• segment size and growth, • segment structural

attractiveness, and • company objectives and

resources.

In evaluating different market

segments, a firm must

look at three factors:

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Target Marketing

• identifying market segments,

• selecting one or more of them,

and

• developing products and

marketing programs tailored to

each.

Instead of scattering their marketing efforts

(the “shotgun” approach),

firms are focusing on the buyers who have greater

interest in the values they create best

(the “rifle” approach).

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Selecting Target Market Segments

• Single segment concentration• Selective specialization• Product specialization• Market specialization• Full market coverage

• Undifferentiated marketing• Differentiated marketing

Having evaluated different

segments, the company can consider five patterns of

target market selection :

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Basic Target Marketing Strategies


Product Specialization

An example would be a microscope manufacturer that sells microscopes to university laboratories,

government laboratories, and commercial

laboratories.

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Market Specialization

An example would be a firm that sells an assortment of products only to university

laboratories, including microscopes, oscilloscopes,

and chemical flasks.

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Full Market Coverage

Examples include

IBM (computer market),

General Motors (vehicle market), and

Coca-Cola (drink market).

Large firms can cover a whole market in two broad ways:

• through undifferentiated marketing or

• differentiated marketing.

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Undifferentiated Marketing / Mass Marketing

In undifferentiated marketing, the firm

ignores market-segment differences and goes

after the whole market with one market offer.

To reach the market, the firm uses mass

distribution backed by mass advertising to

create a superior product image in people’s minds.

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Differentiated Marketing/ Segment Marketing

Intel does this with chips and programs for consumer, business, small business, networking, digital imaging, and video markets.

General Motors does this with its various vehicle brands and models;

In differentiated marketing, the firm operates in several market segments and designs different programs for each segment.

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Example - Differentiated marketing:

Procter & Gamble markets six different laundry detergents, including Tide—each with multiple forms and formulations—that compete with each other on store shelves.Yet together, these multiple brands capture four times the market share of nearest rival Unilever.

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Example

Differentiated marketing: Estée Lauder offers hundreds of different products aimed at carefully defined segments, from its original Estée Lauder brand appealing to age 50 baby

boomers to Aveda, with earthy origins that appeal to younger new age types.

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Counter-segmentation

• those seeking fresh breath, • whiter teeth, and • cavity protection.

Smith Kline Beecham introduced Aqua-

fresh toothpaste to attract three benefit

segments simultaneously:

Next, the company moved deeper into counter segmentation by launching flavoured toothpastes for children, toothpaste for people with sensitive teeth, and other toothpaste products.

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DIFFERENTIATION AND

POSITIONING

Topic 5 b

If the three keys to selling real estate are location, location, location,

then the three keys of selling consumer products are

differentiation, differentiation, differentiation.

—Robert Goizueta, former Chairman,

Coca-Cola Company

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Introduction

Differentiation helps the firm fight on non-price plank

(can claim a premium in the market).

In their search for market leadership, companies take to either of the two routes;:

They try to achieve either a low-cost position/ cost leadership; (price

route) or

A differentiated position through which they can offer superior value to the consumer (differentiation route).

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INTRODUCTION

• competitors “when it provides something unique that is valuable to buyers beyond simply offering a low price.”

A firm differentiates itself from its

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Examples

Garden Silks has differentiated through its

emphasis on design

L&T, the engineering firm, recruits engineers

with excellent qualifications and claims superiority in executing

projects.

Caterpillar Tractor, the leader in earthmoving

equipment, made a mark through its distribution

channel and service.

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EXAMPLES


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IBM differentiated along technology and service,

Coke and Pepsi differentiated through brand power and Rolls Royce through superior

engineering.

Eureka Forbes, the leader in vacuum

cleaners in India, has used personal selling as the sole means of

reaching the customer and built up a

distinction through its feature.

A difference is worth establishing to the extent that it satisfiesthe following criteria:

➤ Important: The difference delivers a highly valued benefit to a sufficient number of buyers.

➤ Distinctive: The difference is delivered in a distinctive way.

➤ Superior: The difference is superior to other ways of obtaining the benefit.

➤ Preemptive: The difference cannot be copied easily by competitors.

➤ Affordable: The buyer can afford to pay for the difference.

➤ Profitable: The company will find it profitable to introduce the difference.

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Differentiation Variables

Product Services Personnel Channel Image

Form Ordering ease Competence Coverage Symbols

Features Delivery Courtesy Expertise Media

Performance Installation Credibility Performance Atmosphere

Conformance Customer training

Reliability Events

Durability Customerconsulting

Responsiveness

Reliability Maintenanceand repair

Communication

Reparability Miscellaneous

Style

Design

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1. Product Differentiation

At the other extreme are products that are capable of high differentiation, such as automobiles and furniture.

Yet even here, some differentiation is possible:

Starbucks brands its coffee, and P&G offers several brands of laundry detergent,

each with a separate brand identity.

At one extreme we find products that allow little variation: chicken, steel, aspirin.

Physical products vary in their potential for differentiation.

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1. Product Differentiation

Form —the size, shape, or physical structure of a product.Consider the many possible forms taken by products such asaspirin. Although aspirin is essentially a commodity, it can be differentiated by dosage size, shape, coating, and action time.

Features --are the characteristics that supplement the product’s basic function. Mobile Phones- sleek, camera, large memory, long battery life, touch screen, radio…..

Performance quality.

- is the level at which the product’s primary characteristics operate.Whirlpool designs its dishwasher to run more quietly; Mercedes Benz

Conformance quality.

-is the degree to which all of the produced units are identical and meet the promised specifications.-Porche 911 is designed to accelerate to 60 miles per hour within 10 seconds)

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1. Product Differentiation……

Durability a measure of the product’s expected operating life undernatural or stressful conditions, is important for products such as vehicles and kitchen appliances, Duracell battery, Nokia

Reliability a measure of the probability that a product will not malfunction or fail within a specified time period.Maytag, which manufactures major home appliances, has an outstanding reputation for creating reliable appliances.

Reparability -measure of the ease of fixing a product when it malfunctions or fails. An automobile made with standard parts that are easily replaced has high reparability. Ideal reparability would exist if users could fix the product themselves with little cost or time.

Style -the product’s look and feel to the buyer.Aesthetics have played a key role in such brands as Absolut vodka, Apple computers, Montblanc pens, Godiva chocolate, and Harley-Davidson motorcycles.

Design -incorporates all of the qualities (form, feature development, performance, conformance, durability, reliability, repairability, and style.) 11/26/2010

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1. Product Differentiation……Designs -Examples


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Certain countries are winning on design:

Italian design in apparel and furniture;

Scandinavian design for functionality, aesthetics and environmental consciousness;

Titan Ultra Slim, with a thickness of 3.6mm, is said to be the slimmest watch in the universe.

Braun, a German division of Gillette, has elevated design to a high art in its electric shavers, coffeemakers, hairdryers and food processors.

2. Services Differentiation

Ordering ease consumers can now order and receive groceries without going to the supermarket by using Web-based services.

Delivery refers to how well the product or service is delivered to the customer, covering speed, accuracy, and customer care.Domino's Pizza promises delivery in less to 30 minutes or reduces the price. Cemex Cement promises to deliver concrete faster than pizza.

Installation Buyers of heavy equipment expect good installation service.IBM, for example, is known for its quality installation service.

Customer training

General Electric not only sells and installs expensive X-ray equipment in hospitals, but also gives extensive training tousers of this equipment.

Customer consulting

refers to data, information systems, and advising services that the seller offers to buyers.

Maintenance and repair

describes the service program for helping customers keeppurchased products in good working order.Water Purifier, Air conditioner……

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2. Services Differentiation….

• Fast food is now common on the world's high streets and malls.

• In the car market Toyota's two-day policy means that it can supply a well-equipped Lexus within two days, while many other luxury car makers expect prospects to wait several weeks for custom-built cars.

• The success of courier services like FedEx and DHL shows that many people are willing to pay extra for a quick, secure service.

Speed - Speed of service is a competitive advantage used by many firms.

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3. Personnel differentiation

Companies can gain a strong competitive advantage through people differentiation—hiring and training better people than their competitors do.

Well-trained personnel exhibit six characteristics: competence, courtesy, credibility, reliability, responsiveness, and communication

• Disney people are known to be friendly and upbeat.

• For example, Disney trains its theme park people thoroughly to ensure that they are competent, courteous, and friendly—from the hotel check-in agents, to the monorail drivers, to the ride attendants, to the people who sweep Main Street USA. Each employee is carefully trained to understand customers and to ―make people happy.‖

• Singapore Airlines enjoys an excellent reputation, largely because of the grace of its flight attendants.

• The McDonald’s people are courteous,

• The IBM people are professional.

People differentiation requires that a company select its customer-contact people carefully and train them well.

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People differentiation: Singapore Airlines enjoys an excellent reputation, largely because of the grace of its flight attendants.

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4. Channel Differentiation

Firms that practice channel differentiation gain competitive advantage through the way they design their channel’s coverage, expertise, and performance.

Amazon.com, Dell, and Amway set themselves apart with their smooth-functioning direct channels.

Caterpillar’s success in the construction-equipment industry is based on superior channels. Its dealers worldwide are renowned for their first-rate service.

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5. Image Differentiation

Developing a strong and distinctive image calls for creativity and hard work.

A company cannot implant an image in the public's mind overnight using only a few advertisements.

• If 'IBM means service', this image must be supported by everything the company says and does.

Symbols can provide strong company or brand recognition and image differentiation.

• Companies design signs and logos that provide instant recognition - such as the Mercedes star, Kodak (yellow).

Thus a bank that wants to distinguish itself as the 'friendly bank' must choose the right building and interior design - layout,colours, materials and furnishings - to reflect these qualities.

A company can also create an image through the types of event it sponsors.-

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POSITIONING


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Positioning

Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the target market’s mind.

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Value Proposition


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The end result of positioning is the successful creation of a market-focused value proposition, a cogent reason why the target market should buy the product.

Examples of Value Propositions


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Brand, Product and Company

Target Customers

Benefits Value Proposition

Scorpio, SUV, M&M

Life-style oriented consumers

Ruggedness, luxury and comfort

A vehicle that provides the luxury and comfort of a car and the adventure and thrill of an SUV

Indica, Car, Tata Motors

Small-carconsumers who want a more spacious vehicle

Spaciousness A spacious, small car without extra costs

Domino’s, Pizza Convenience minded pizza lovers

Delivery, speed and good quality

A good, hot pizza delivered to your door within 30 minutes of odering.

Examples

Tide is positioned as a powerful, all-purpose family

detergent;

In the automobile market, the Maruti, Alto, Santra, are positioned on economy,

Mercedes and Cadillac on luxury, and

Porsche and BMW on performance.

Volvo positions powerfully on safety.

Toyota positions its fuel-efficient, hybrid Prius as a high-tech solution to the

energy shortage.

―How far will you go to save the planet?‖ it asks.

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Some examples of positioning statements

AVIS

―For business people who rent cars, Avis is the company who will provide the best service, because the employees own the company. ‖

BODY SHOP

―For people seeking wellness, the Body Shop offers the most natural bath and cosmetic products, because we are the most environmentally friendly cosmetics company.‖

SOUTHWEST AIRLINES

―For short-route travelers, Southwest Airlines offers the best prices with reasonable and dependable service, because we operate point-to-point service and don’t charge more for last minute bookings.‖

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Mountain Dew’s positioning statement

To young, active soft-drink consumers who have little time to sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

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Positioning Maps

Perceptual positioning maps shows consumer perceptions of their brands versus competing products on important buying dimensions.

• the brand’s perceived positioning on two dimensions—price and orientation

The position of each circle on the map indicates

The size of each circle indicates the brand’s relative market share.

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Perceptual Mapping--Levi’s

High Price

Low Price

Cla

ssicD

esign

er

Old product

New product

Vintage

Red Line

Silver Tab

Slates

DockersPremium

DockersClassics

501

Red TabBasics

Red TabDry Goods

L2

Red TabElesco


Positioning strategies

Sl. no.


Definition Advertising claims

1. Customer benefits

Associate a brand or product with customer benefits

Benefit(s)

2. Price and quality A product is highlighted in terms of service features or performance. Manufacturer charges high price

Value for money

3. Application Associating a product or service with a use or application

Use or application of a product or services.

4. Product user Associating a product or service with a user or class of users.

Cine stars or sports heroes using the product

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Sl. no.

Positioning strategy

Definition Advertising claims

5 Product class Associating a product or service in a particular product class

World class products

6 Cultural symbols

Associating cultural symbols with a product or service to differentiate from competitors product

Royal

7 Competitors Associating with competitor’s product or service by comparison

Compares with competitors brand


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Repositioning

Changing consumers’

perceptions of a brand

in relation to

competing brands.

8


Thank You!!!

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Topic 5 STPD Lect Ppt