MARKETING MANAGEMENT

SESSION V-VI

SEGMENTATION, TARGETING, POSITIONING

Markets are not homogeneous.

A company needs to identify which market segments it can serve effectively.

All marketing strategy is built on STPSegmentation, Targeting, and Positioning.

- A company discovers different needs and groups in the marketplace, targets those needs and groups that it can satisfy
in a superior way, and then positions its offering so that the target market recognizes the companys distinctive offering
and image.

Target marketing requires marketers to take three major steps:

1. Market segmentation:
Identify and profile distinct groups of buyers who differ in their needs and preferences (market segmentation).

2. Market targeting:
Select one or more market segments to enter (market targeting).

3. Market positioning:
For each target segment, establish and communicate the key distinctive benefit(s) of the companys market offering in
the mind of the customers (market positioning).

MARKET SEGMENTATION

LEVELS OF MARKET SEGMENTATION:

a) mass marketing:
In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one product
for all buyers.

The argument for mass marketing is that it creates the largest potential market, which leads, to the lowest costs that in
turn can lead to lower prices or higher margins.

b)segment marketing
A market segment consists of a group of customers who share a similar set of needs and wants.
The marketer does not create the segments.
The marketers task is to identify the segments and decide which one(s) to target.

Fords Model T all in Black, Followed a Mass Market Approach

Alfred Sloan of GM invented the segmentation strategy offering a different car for every income level, family size, etc.
(Chevrolet, Buick, Oldsmobile, Cadillac)

A (different ) car for every purse and purpose

Possible Levels of Segmentation

BENEFITS OF SEGMENT MARKETING:

-As compared to mass marketing, segment marketing offers the following benefits.

The company can:

- often better design, price, disclose, and deliver the product or service, and also can more fine-tune the marketing
program and activities to better deflect competitors marketing.

- can select the best distribution & communication channels

- can have a clear picture of the competitors in that segment; gain competitive edge

- can gain competitive edge.

SEGMENT MARKETING:
-Targeting a group of customers who share a similar set of needs and wants.

Four levels
a) Segments:
- Large identifiable groups within a market: homogenous within

b) Niches:
- A more narrowly defined customer group seeking a distinctive mix of benefits.

-Marketers usually identify niches by dividing a segment into sub-segments.

- A niche is attractive when its customers have a distinct set of needs; it is fairly small but has size, profit and growth
potential, and is unlikely to attract many other competitors.

-Niche marketers presumably understand their customers needs so well that the customers willingly pay a
premium. Nicher gains certain economies because of specialization.
- Benetton, Designers, Cartier, Gucci

c) Local areas:

- Tailored to the needs and wants of local customer groups.

-Marketers appeal to local markets through grassroots marketing for trading areas, neighborhoods, and even
individual stores.

-McDonalds local adaptation, Movies dubbed in vernaculars (Spiderman, Titanic)

d) Individuals:

Individual Marketing:

- ultimate level of segmentation leads to segments of one, customized marketing, or one-to-one

marketing

- Customerization combines operationally driven mass customization with customized marketing in a way
that empowers consumers to design the product and service offering of their choice.

-Segments: Individuals
 - Rediff, Amazon, Dell

-Customization is certainly not for every company.

SEGMENTING CONSUMER MARKETS:

-Bases for Segmenting Consumer Markets:

Two broad groups of variables are used to segment consumer markets.

A)Descriptive characteristics:
Geographic, demographics, and psychographic.

B) Behavioral considerations:
Benefits, use occasions, etc.

These variables can be used singly or in combination.

(PLEASE LOOK UP KOTLER)

A)Descriptive characteristics:

a)Geographic segmentation:
-calls for dividing the market into different geographical units, such as nations, states, regions, countries, cities or
neighborhoods.

b)Demographic segmentation:
- the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income,
occupation, education, religion, race, generation, nationality, and social class.

c)Psychographic Segmentation:
- In psychographic segmentation, buyers are divided into different groups on the basis of lifestyle or personality or
values.

B)Behavioral Segmentation:
In behavioral segmentation, buyers are divided into groups on the basis of their knowledge, attitude, toward, use of, or
response to a product.
Many marketers believe that behavioral variables are the best starting points for constructing market segments.

A)Occasions:
-We can distinguish buyers according to the occasions when they develop a need and purchase or use a product.
-Occasions can be defined in terms of the time of day, week, month, year or in terms of other well-defined temporal
aspects of a consumers life.

B)Benefits:
-Buyers can be classified according to the benefits they seek.

C)User Status:
-Markets can be segmented into non-users, ex-users, potential users, first-time users, and regular users of a product.

D) Usage Rates:
-Markets can be segmented into light, medium, and heavy product users.
-Heavy users often account for a small percentage of the market but a high percentage of total consumption.

E) Buyer-Readiness Stage:
A market consists of people in different stages of readiness to buy a product.
-Some are unaware of the product.
-Some are aware.
-Some are informed.
-Some are interested.
-Some desire.
-Some intend to buy.
Brand Funnel:
Brand Loyals : Aware, Ever tried, Recent trial, Occasional user, Regular user, Most often used

F) Loyalty Status:
-Buyers can be divided into four groups according to brand loyalty status; Hard core (always buy one brand), split loyal
(loyal to two or three brands), shifting loyals (shift from one brand to another), and switchers (no loyalty to any brand).

G) Attitude:
-Five attitudes about products: enthusiastic, positive, indifferent, negative and hostile.

SEGMENTING FOR BUSINESS MARKETS:

-Bases for Segmenting Business Markets:

- Business markets can be segmented with some of the same variables used in consumer market segmentation such as
geography, benefits sought and usage rate.

- Yet business markets can also use several other variables.

A) Demographic

B) Operating Variable

C) Purchasing Approaches

D) Situational Factors

E) Personal Characteristics
MAJOR SEGMENTATION VARIABLES FOR BUSINESS MARKETS

Demographic:

1. Industry: Which industries should we serve?

2. Company size: What size companies should we serve?

3. Location: What geographical areas should we serve?

Operating Variables:

4. Technology: What customer technologies should we focus on?

5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?

6. Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches:

7. Purchasing-function organization: Should we serve companies with highly centralized or decentralized

purchasing organizations?

8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?

9. Nature of existing relationship: Should we serve companies with which we have strong relationship or simply go
after the most desirable companies?

10. General purchasing policies: Should we serve companies that prefer leasing? Service contract? Systems
purchases? Sealed bidding?

11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

Situational Factors:

12. Urgency: Should we serve companies that need quick and sudden delivery or service?

13. Specific application: Should we focus on certain application of our product rather than all applications?

14. Size or order: Should we focus on large or small orders?

Personal Characteristics

15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours?

16. Attitude toward risk: Should we serve risk-taking or risk-avoiding customers?

17. Loyalty: Should we serve companies that show high loyalty to their suppliers?
 Description

1. Needs-Based Segmentation Group customers into segments based on similar needs and
benefits sought by customer in solving a particular consumption
problem.

2. Segment Identification For each needs-based segment, determine which demographics,

lifestyles, and usage behaviors make the segment distinct and
identifiable (actionable).

3. Segment Attractiveness Using predetermined segment attractiveness criteria (such as

market growth, competitive intensity, and market access),
determine the overall attractiveness of each segment.

4. Segment Profitability Determine segment profitability.

5. Segment Positioning For each segment, create a value proposition and product-price
positioning strategy based on that segments unique customer
needs and characteristics.
MARKET TARGETING

-Once the firm has identified its market-segment opportunities, it has to decide how many and which ones to target.

-Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups.

I. Effective Segmentation Criteria:

To be useful, market segments must rate favorable on five key criteria:
-Measurable.
-Substantial.
-Accessible.
-Differentiable. -Actionable.

II. Evaluating and Selecting the Market Segments:

In evaluating different market segments, the firm must look at two factors: The segments overall attractiveness and
the companys objectives and resources.

After evaluating different segments the company can consider five patterns of target market selection:
A) Single-segment concentration
B) Selective specialization.
C) Product specialization.
D) Market Specialization.
E) Full market coverage: Undifferentiated marketing, Differentiated marketing.

I. Effective Segmentation Criteria:

Measurable: must be able to quantify segment characteristics; the size, purchasing power & characteristics of
the segments can be measured.

Substantial: must be large and profitable enough to serve.

Accessible: must be effectively reached and served.

Differentiable: must have different needs and respond to marketing efforts differently; the segments are
conceptually distinguishable and respond differently to different marketing-mix elements. Fuel efficiency and
style.

Actionable: effective marketing programs can be formulated for attracting and serving the segments.

A firm has to evaluate the various segments and decide how many and which ones to target: a single segment,
several segments, a specific product, a specific market, or the full market. Segmentation must be done periodically
because segments change with time.

II. Evaluating and Selecting the Market Segments:

A) Single-segment concentration.
-Through concentrated marketing, the firm gains a strong knowledge of the segments needs and achieves a strong
market presence.
-The firm enjoys operating economies through specialization in its production, distribution and promotion.
-If it gains leadership, it can earn a high return on investment.
-However, there are risks, a market segment can turn sour because of changes in buying patterns or a new competitor
may invade the segment.
-For these reasons, many companies prefer to operate in more than one segment.
-small car (Volkswagen), sports car (Porche), Merc (upper income). Can focus but fail.

B) Selective specialization.
-The firm selects a number of segments, each objectively attractive and appropriate.
-There may be little or no synergy among the segments, but ecah segment promises to be a money maker.
-This multi-segment strategy has the advantage of diversifying the firms risk.
-Chevrolet
Minimize risk of failing.

C) Product specialization.
-The firm makes a certain product that it sells to several different market segments.
-It specializes in making a certain product for several segments.
- A microscopic manufacturer sells to university, government, and commercial labs.
- If competitor breaks through, you fail.
-Also the product may be supplanted b y an entirely new technology.

D) Market Specialization.
-The firm concentrates on serving many needs of a particular customer group.
- Defence market.
- If market fails, you fail; for example, the customer group may suffer budget cuts or shrink in size.
E) Full market coverage.

-The firm attempts to serve all customer groups with all the products they might need.

- IBM, CocaCola, General Motors, HP.

-Large firms can cover a whole market through undifferentiated marketing or differentiated marketing.

-In undifferentiated marketing, the firm ignores segment differences and goes after the whole market with one offer.(
lower cost & economies of scale )

-In differentiated marketing, the firm operates in several market segments and designs different products for each
segment.( different product for each segment)

Segment-by-segment invasion plans:

- A company would be wise to enter one segment at a time.

A companys invasion plans can be thwarted when it confronts blocked markets.

- The problem of entering blocked markets calls for a megamarketing approach.

- Megamarketing is the strategic coordination of economic, psychological, political, and public-relations skills, to gain
the cooperation of a number of parties in order to enter or operate in a given market.

Segment-by-segment invasion plans:

a) PepsiCo: attacked Coco-Cola in the grocery market, then in the vending machine market, then in the fast food market.
B) Toyota: Starts with small cars( Tercel Corolla), then moves to mid-size cars (Camry, avalon), and finally into luxury
(Lexus)
Segment-by-segment invasion plans:

POSITIONING

No company can win if its products and offerings resemble every other product and offering.

Companies must pursue relevant positioning and differentiation.

Each company and offering must represent a distinctive big idea in the mind of the target market.

POSITIONING: Act of designing the companys offering and image to occupy distinctive place in the mind of the target
market.

Dominos: Deliver, Speed, Good quality

A good hot pizza, delivered to your door within 30 minutes of ordering, at a moderate price.

Value Propositions:
- customer-focused value proposition

Perdue Chicken

More tender golden chicken at a moderate premium price

Dominos

A good hot pizza, delivered to your door within 30 minutes of ordering, at a moderate price

Relevance, Distinctiveness, Believability, Feasibility, Communicability, Sustainability of the FEATURE

DEFINING ASSOCIATIONS:

1. Points-of-Difference

2. Points-of-Parity
DEFINING ASSOCIATIONS:

1. Points-of-difference are those associations unique to the brand that are also strongly held and favorably evaluated
by consumers.

- are attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe that they could
not find the same extent with a competitive brand.

Examples: - LG Golden Eye, Energizer Long lasting battery.

Three criteria determine whether a brand association can function as a point-of-difference:

a) Desirable to consumer
b) Deliverable by the company
c) Differentiating from competitors

2. Points-of-parity are those associations not necessarily unique to the brand but perhaps shared with other brands.

Two basic forms:

- Category point-of-parity associations are associations consumers view as being necessary to a legitimate and credible
product offering within a certain category, although perhaps not sufficient for brand choice.
-Tingling toothpaste, fluoride.

- Competitive point-of-parity associations are those associations designed to negate competitors points-of-difference.

EXAMPLE: (Antiseptic: Dettol vs Savlon; Listerine vs Scope; Tylenol vs. Asprin)

Examples of Negatively Correlated Attributes and Benefits

-Low-price vs. High quality
-Taste vs. Low calories
-Nutritious vs. Good tasting
-Efficacious vs. Mild
-Powerful vs. Safe
-Strong vs. Refined
-Ubiquitous vs. Exclusive
-Varied vs. Simple
The key to competitive advantage is product differentiation.

DIFFERENTIATION STRATEGIES:

A market offering can be differentiated along five dimensions:

-product (form, features, performance quality, conformance quality, durability, reliability, reparability, style, design);

-services (order ease, delivery, installations, customer training, customer consulting, maintenance and repair, returns,
miscellaneous services);

-personnel (better-trained people)

-channel ( channels coverage, expertise, and performance).

-image (symbols, media, atmosphere, and events).