Market Segmentation Targeting and Positioning for Competitive Advantage

Market Segmentation, Targeting, and Positioning for Competitive Advantage Deciding Who We Want to Mean What to

Marketing Focuses on Customers l Target Market ú A specific group of customers on whom an organization focuses its marketing efforts ú ú Large or small customer groups Single or multiple product markets Single or multiple products Local to global markets

Components of Strategic Marketing FIGURE 1. 1

Marketing Deals with Products, Distribution, Promotion, and Price l The Marketing Mix ú Four marketing activities—product, distribution, promotion, and pricing—that a firm can control to meet the needs of customers within its target market Product Distribution Promotion Pricing Target Market

Marketing Mix Variables The “ 4 P’s” Product Distribution Goods, services, or ideas that satisfy customer needs The ready, convenient, and timely availability of products Promotion Activities that inform customers about the organization and its products Pricing Decisions and actions that establish pricing objectives and policies and set product prices

Some Definitions u u Market Segmentation – is the process of dividing a total market into groups, or segments, consisting of people or organizations with relatively similar product needs. – The purpose is to enable a marketer to design a marketing mix (mm) that more precisely matches the needs of customers in the selected market segments. A Market Segment - consists of individuals, groups, or organizations with one or more similar characteristics that cause them to have relatively similar product needs.

Target Market Selection Process FIGURE 7. 1

Market Segmentation Levels of Market Segmentation Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs Mass Marketing Same marketing mix (mm) directed at all consumers (no segmentation, i. e. , Ford Model T ) Segment Marketing Different marketing mix (mm) to one or more segments (some segmentation, i. e. GM)

Today, Mass Marketers Rarely Practice Mass Marketing u u In other words Mass Marketers do target almost everyone, but they do not do it with one marketing strategy They develop unique marketing strategies for each major target market Product strategy does not equal marketing mix strategy As we will see you can target the same product to different segments using different promotion, pricing, or distribution strategies

Mass Marketing One mm for all Segment Marketing One or more mm targeted to one or more segments Niche Marketing One or more mm targeted to one or more sub-segments Micro Marketing (1 -1) One or more mm targeted to specific individuals or communities

The Classic Segmentation Variables for Consumer Markets FIGURE 7. 3

Demographic Variables u Perhaps the most widely used and most widely available u “Objective” u Often a proxy for harder to obtain Psychographics – College student and interest in education – 50 year old and interest in retirement funds

Psychographics Variables l Personality characteristics ú Marketers appeal to positive/favorable personal characteristics to influence the purchase decision. l Motives ú Marketers use individuals’ differing purchase motives to segment a product market. l Lifestyles ú Marketers segment markets according to how individuals choose to spend their time in various activities, their income, their interest and opinions, and their education.

Behaviorist u Behaviorist often called “usage” u Very straightforward - target your users u May be hard to get (surprisingly) u 80/20 rule (80% sales are to 20% of your customers u Ethical? – Vodka targeting alcoholics?

Geographic u If you are a regional firm then Geo targeting is also self evident u Some firms have regional product mix (grocery stores and “ethnic” foods. u Even national firms may target regionally. – Product may mean different things in different parts of the country – Coke or Pop or Soda and is it a breakfast drink?

We Slice and Dice Segments u u Typically using more then one variable or type of segmentation variable – Use multiple Demographic Variables such as age, gender, income & – Use various Demographic, Psychographic, Geographic, and Behaviorist Variables Art as much as science – So can come up with different segments using different variables and different analytical/statistical techniques

Geodemographic Segmentation u Marketing segmentation that clusters people in pim code areas and smaller neighborhood units based on lifestyle (psychographic) and demographic information – (Combines Geographic and Demographic info) u Example are PRIZM and Micro. Vision

Psychographics and Demographics Variables u VALS & VALS 2 u Based on values, lifestyles, and demographic u Therefore, combines Psychographic and Demographic variables

VALS 2 Percentage of Adults, Classified by VALS 2 Type, Who Participated in Selected Sports in 1996 FIGURE 7. 6

Once We Have Our Segments We Need to Target Them With a Marketing Mix u Three options: – Undifferentiated – Differentiated – Concentrated

Targeting Strategies • • The classic mass marketing, all things to all people approach Ignore segments One mm Rarely used today – Name an undifferentiated product? FIGURE 7. 2

FIGURE 7. 2

Differentiated Strategy (cont. ) • The firm decides to target several separate segments and designs separate marketing strategies for each • GM’s “a car for every purpose, purse, and personality” vs. Fords one car for every purpose for every purse for every personality” • Typically, for most firms, this means you go for a small share of the larger, total aggregate market (one or two mm for one or two segments (out of maybe six or seven)

Concentrated Marketing • The firm goes for a large share of a single (or very few) segments. • Scorpio vs. Scoda • Can be niched or larger FIGURE 7. 2

IT IS CRITICAL TO UNDERSTAND THAT u Mass marketers do not often practice mass marketing today u They practice differentiated marketing u They likely do not change the product to appeal to different segments u They change price, place, and promotion

Stereotyping vs. Marketing Does marketing “discriminate? ”

Target Market Selection Process Focus of Sept. 27 Focus for today FIGURE 7. 1

Recall: Market Segmentation Levels of Market Segmentation Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs Mass Marketing Same marketing mix (mm) directed at all consumers (no segmentation, i. e. , Ford Model T ) Segment Marketing Different marketing mix (mm) to one or more segments (some segmentation, i. e. GM)

And That Today, Mass Marketers Rarely Practice Mass Marketing u u In other words Mass Marketers do target almost everyone, but they do not do it with one marketing strategy They develop unique marketing strategies for each major target market Product strategy does not equal marketing mix strategy As we will see you can target the same product to different segments using different promotion, pricing, or distribution strategies

Mass Marketing One mm for all Segment Marketing One or more mm targeted to one or more segments Niche Marketing One or more mm targeted to one or more sub-segments Micro Marketing (1 -1) One or more mm targeted to specific individuals or communities

The Classic Segmentation Variables for Consumer Markets FIGURE 7. 3

Some Definitions Market Segmentation – dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products OR marketing mixes (mm). l Market Targeting – evaluating each segments attractiveness and selecting one or more to enter. l Market Positioning – setting the competitive positioning for the product and creating a detailed mm. - Terms often used often interchangeably, esp. targeting and positioning l

Step 1: Identify The Appropriate Targeting Strategy Three Basic Targeting Strategies: – Undifferentiated – Differentiated – Concentrated

Targeting Strategies u u Classic mass marketing, all things to all people approach Ignore segments One mm for all customers Rarely used today – Name an undifferentiated product?

Differentiated Strategy (cont. ) u The firm targets several separate segments and designs separate marketing strategies for each – GM’s “a car for every purpose, purse, and personality” – vs. Fords one car for every purpose for every purse for every personality” For most firms, this means they go for a small share of the larger, total aggregate market (one or two mm for one or two segments (out of maybe six or seven)

Concentrated Marketing u The firm goes for a large share of a single (or very few) segments – Jeep vs. GM u Can be niched or larger

IT IS CRITICAL TO UNDERSTAND THAT u Mass marketers do not often practice mass marketing today u They practice differentiated marketing u Often they do not change the product to appeal to different segments u They change price, place, and promotion

Having ID’ed the Targeting Strategy and Determined Segmentation Variables u u u We develop different segment profiles Evaluate these for profitability And select the target markets we want to enter

Finally We Position Market Segmentation (ID) 2. Determine which segmentation variables to use 3. Develop market segment profiles Market Targeting (Evaluate) 4. Evaluate relevant market segments 5. Select target markets Having Finished the Target Market Selection Process We Act! Market Positioning (Enter) • Develop positioning for target segments • Develop a marketing mix for each segment

How Does Mc. Donald’s Practice Market Positioning? l l Product essentially same (no Indian Big Mac) Promotion (specific promotion campaigns aimed at the Indian market Place (urban stores, suburban stores, express stores, etc. ) Price (junior discounts)