Chapter 8 Segmentation Targeting and Positioning Building the

Chapter 8 Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers Copyright © 2008 Pearson Education Canada Principles of Marketing, Seventh Canadian Edition

Learning Goals 1. Define three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive market segments and choose a target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace Copyright © 2008 Pearson Education Canada 2 Principles of Marketing, Seventh Canadian Edition

Case Study Art Gallery of Ontario - AGO • Targeting critical segments is critical for the AGO to survive. • The 30 to 40 -year old urban professionals may be one of the few segments with enough money to support cultural institutions. • However, this Me Generation is unphilantropic relative to their wealth. • They want cars, houses, big jewellery. Copyright © 2008 Pearson Education Canada • Potential donors in this cohort have a desire for interaction, involvement, and meaningful comment on art as well on the AGO’s tactics. • Create a distinct position to attract these younger donors. • New program: “New Founders initiative” • In return for their support, donors would be invited to small dinner parties and exclusive tours of exhibitions. • The program has been a resounding success. 3 Principles of Marketing, Seventh Canadian Edition

Learning Goals 1. Define three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive market segments and choose a target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace Copyright © 2008 Pearson Education Canada 4 Principles of Marketing, Seventh Canadian Edition

Segmentation, Targeting, and Positioning • Market segmentation: dividing market into distinct groups with distinct needs, characteristics, or behaviours, who might require separate products or marketing mixes • Target marketing: choosing which group(s) to appeal to • Market positioning: creating a clear, distinctive, and desirable position in the target consumer’s mind, relative to competition Copyright © 2008 Pearson Education Canada 5 Principles of Marketing, Seventh Canadian Edition

Learning Goals 1. Define three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive market segments and choose a target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace Copyright © 2008 Pearson Education Canada 6 Principles of Marketing, Seventh Canadian Edition

Segmenting Consumer Markets • Geographical segmentation • Demographic segmentation – Most popular bases for segmenting consumer markets • Psychographic segmentation – Lifestyle, social class, and personality-based segmentation • Behavioural segmentation – Occasions, benefits sought, user status, usage rate, loyalty status. • Using multiple segmentation bases Copyright © 2008 Pearson Education Canada 7 Principles of Marketing, Seventh Canadian Edition

Geographic Segmentation Variables • World region or country • U. S. region • State • City Copyright © 2008 Pearson Education Canada • Neighborhood • City or metro size • Density • Climate 8 Principles of Marketing, Seventh Canadian Edition

Demographic Segmentation Variables • • • Age Gender Family size Family life cycle Income Copyright © 2008 Pearson Education Canada 9 Occupation Education Religion Race Generation Nationality Principles of Marketing, Seventh Canadian Edition

Behavioural Segmentation Variables • Occasions • Benefits • User status Copyright © 2008 Pearson Education Canada • • 10 User rates Loyalty status Readiness stage Attitude toward the product Principles of Marketing, Seventh Canadian Edition

Discussion Question ? • Based on the car examples on the following slide, how do car manufacturers use the following segments when marketing products? – – Geographic Demographic Psychographic behavioural Copyright © 2008 Pearson Education Canada 11 Principles of Marketing, Seventh Canadian Edition

Segmenting Business Markets • Geographic segmentation • Demographic segmentation – Industry, company size, location • Operating characteristics – Technology, usage status, customer capabilities • Purchasing approaches • Situational factors – Urgency, specific application, size of order • Personal characteristics – Buyer-seller similarity, attitudes toward risk, loyalty Copyright © 2008 Pearson Education Canada 12 Principles of Marketing, Seventh Canadian Edition

Segmenting International Markets • Geographic segmentation – Location or region • Economic factors – Population income or level of economic development • Political and legal factors – Type/stability of government, monetary regulations, amount of bureaucracy, etc. • Cultural factors – Language, religion, values, attitudes, customs, behavioural patterns Copyright © 2008 Pearson Education Canada 13 Principles of Marketing, Seventh Canadian Edition

Segmenting International Markets • Intermarket segmentation – Forming segments of consumers who have similar needs, even though they live in different countries Copyright © 2008 Pearson Education Canada 14 Principles of Marketing, Seventh Canadian Edition

Segmenting Markets Effectively • Measurable – Size, purchasing power, and profile of segment • Accessible – Can be reached and served • Substantial – Large and profitable enough to serve • Differentiable – Respond differently • Actionable – Effective programs can be developed Copyright © 2008 Pearson Education Canada 15 Principles of Marketing, Seventh Canadian Edition

Learning Goals 1. Define three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive market segments and choose a target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace Copyright © 2008 Pearson Education Canada 16 Principles of Marketing, Seventh Canadian Edition

Target Marketing • Target Market – Consists of a set of buyers who share common needs or characteristics that the company decides to serve Copyright © 2008 Pearson Education Canada 17 Principles of Marketing, Seventh Canadian Edition

Target Marketing • Evaluating Market Segments – Segment size and growth – Segment structural attractiveness • • Level of competition Substitute products Power of buyers Powerful suppliers – Company objectives and resources Copyright © 2008 Pearson Education Canada 18 Principles of Marketing, Seventh Canadian Edition

Target Marketing Strategies • Undifferentiated (mass) marketing: – Market coverage strategy that ignores market segment differences and targets the whole market with one offer • Differentiated (segmented) marketing: – Market coverage strategy that targets several market segments and designs separate offers for each • Concentrated (niche) marketing: – Market coverage strategy in which a company pursues a large share of one or a few submarkets • Micromarketing: – The practice of tailoring products and marketing programs to the needs/wants of specific individuals and local customer groups – Includes: local marketing and individual marketing Copyright © 2008 Pearson Education Canada 19 Principles of Marketing, Seventh Canadian Edition

Choosing a Target Marketing Strategy • Considerations include: – Company resources – The degree of product variability – Product’s life-cycle stage – Market variability – Competitors’ marketing strategies Copyright © 2008 Pearson Education Canada 20 Principles of Marketing, Seventh Canadian Edition

Target Marketing • Socially Responsible Targeting – Some segments, especially children, are at special risk – Spillover from adult to children markets – Many potential abuses on the Internet, including fraud Internet shoppers – Products of questionable benefit – Controversy occurs when the methods used are questionable Copyright © 2008 Pearson Education Canada 21 Principles of Marketing, Seventh Canadian Edition

Learning Goals 1. Define three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive market segments and choose a target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace Copyright © 2008 Pearson Education Canada 22 Principles of Marketing, Seventh Canadian Edition

Positioning • The way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products • Involves implanting the brand’s unique benefits and differentiation in the customer mind • Perceptual positioning maps show perceptions of brands on important buying dimensions Copyright © 2008 Pearson Education Canada 23 Principles of Marketing, Seventh Canadian Edition

Choosing a Positioning Strategy • Identifying Possible • Differentiation can be Competitive Advantages based on: – Products • Choosing the right – Services competitive advantage – Channels • Selecting an Overall – People Positioning Strategy – Image Copyright © 2008 Pearson Education Canada 24 Principles of Marketing, Seventh Canadian Edition

Choosing a Positioning Strategy • How many differences to promote? • Identifying Possible Competitive Advantages • Choosing the right competitive advantages • Selecting an Overall Positioning Strategy Copyright © 2008 Pearson Education Canada – Unique selling proposition – Several benefits • Which differences to promote? Criteria include: – – – – 25 Important Distinctive Superior Communicable Preemptive Affordable Profitable Principles of Marketing, Seventh Canadian Edition

Choosing a Positioning Strategy • Value propositions • Identifying Possible represent the full Competitive Advantages positioning of the • Choosing the right brand competitive advantages • Possible value • Selecting an Overall propositions: Positioning Strategy – More for more – – Copyright © 2008 Pearson Education Canada 26 More for the same More for less The same for less Less for much less Principles of Marketing, Seventh Canadian Edition

West. Jet’s Value Proposition: “Less for Much Less” • Founded in 1996 to provide low-fare air travel across western Canada • Specializes in serving the VFR market (people visiting friends and relatives). • Main competitor: the family car • People would choose to fly rather than drive if offered low fares • One type of plane, offers basic in-flight service (no meals, no movies), single class service, no baggage transfer services with other airlines, etc. • However: “less service for less money” is defined as fewer amenities for a lower fare, not less customer service. • Generates $1 billion in revenues Copyright © 2008 Pearson Education Canada 27 Principles of Marketing, Seventh Canadian Edition

Developing a Positioning Statement • A positioning statement summarizes the company or brand positioning • EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference) Copyright © 2008 Pearson Education Canada 28 Principles of Marketing, Seventh Canadian Edition

Communicating and Delivering the Chosen Position • Companies must take strong steps to deliver and communicate the desired position to target consumers • The marketing mix efforts must support the positioning strategy • Positions must be monitored and adapted over time to match changes in consumer needs and competitor’s strategies Copyright © 2008 Pearson Education Canada 29 Principles of Marketing, Seventh Canadian Edition

Learning Goals 1. Define three steps of target marketing: market segmentation, target marketing, and market positioning 2. List and discuss the major bases for segmenting consumer and business markets 3. Explain how companies identify attractive market segments and choose a target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace Copyright © 2008 Pearson Education Canada 30 Principles of Marketing, Seventh Canadian Edition