Market Segmentation, Targeting & Positioning (STP)

Market

What is a Market?
Group of Consumers / Customers or Organizations That is interested in the Product Has the resources to purchase the Product Permitted to acquire the Product

MARKET TYPES

Marketing Strategy Decisions

How to divide up markets into meaningful customer groups - Market Segmentation Choose which customer groups to serve - Target Marketing Create marketing offers that best serve targeted customers -Positioning

Market Segmentation

What is Market Segmentation?

The breaking down or building up of potential buyers into groups called Market Segments

WILL THEY BE DIFFERENT MARKET SEGMENTS?

Market Segmentation Variables

Socioeconomic

Behavioral

Demographic

Psychographic

Geographic

Market Segmentation Variables

Income Distribution
Occupation

Employment
Socio-economic Education Environment

Health

Market Segmentation Variables

Usage Rate
Readiness for Buying

Attitude Towards Buying

Behavioral Brand Loyalty Occasions on which product used Benefits sought

Market Segmentation Variables

Life style
Active lifestyle

Psychographic

Country lifestyle Late-nighters

Personality
Traits Attitudes, Values

Market Segmentation Variables

Nations / States / Regions / Cities

Geographic

Rural / Urban Climate

Neighbourhood

Market Segmentation Variables

Family Size
Family Life Cycle

Demographic

Gender Religion / Race Nationality

Generation
Social Class

Market Segmentation Variables

Geo-Clustering Multi-Attributes

Socio-economic + Lifestyle

Demographic + Geographic

Fundamental-Buyer Related Questions

Who are they? What do they want to buy?

How do they want to buy?

When do they want to buy?

Where do they want to buy?

Why do they want to buy?

Each Market Segment should be

Differentiable
-The segments must be able to respond differently to different marketing mix variable and attribute mix of the product

Measurable
-The size and
purchasing power of the segments have to be measurable

Substantial
The segments have to be large enough to serve them with a separate market mix profitably.

Accessible
-The segments must be accessible to the Marketer.

Actionable
-Able to create marketing programs for the segments

Benefits of Market Segmentation

Identifies opportunities for new product development Helps design marketing programs most effective for reaching homogenous groups of buyers

Improves allocation of marketing resources

Benefits of Market Segmentation

Helps distinguish one customer group from another within a given market

Facilitates proper choice of target market and effective tapping of the market

Helps crystallize the needs of the target buyers and elicit more predictable responses from them

Example of General Motors -GM has identified about 40 different customer needs and correspondingly, 40 different market segments in which it would present with its vehicles.
The Oldsmobile at affluent families

The Buick at older, conservative couples

more

The Pontiac for active, sportsoriented, young couples

The Chevrolet for price - conscious young families

Need for Segmentation

Different customers have different needs Can you satisfy them if you treat them alike?

NO

Target Marketing

2 Concepts
One Product for All Tailoring a Marketing Mix for the Identified Segments

Single Product for Entire Market

Mass Marketing
Treatment of the market as a homogenous group and offering the same marketing mix to all customers Allows economies of scale mass production, mass distribution, mass communication Aims at Quantity Example Coke, McDonalds Disadvantage Generic message thus less effective

Targeting a Select audience

Target Marketing -Recognizes the diversity of customers -Does not try to please all of them with the same offering -Can narrowly customize their message thus more effective -Aims at high quality audience -Disadvantage have to pay more attention, less economies of scale

What is Target Marketing?

Involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments It makes the promotion, pricing and distribution of products or services easier and more cost-effective Target marketing provides a focus to all of marketing activities

Selecting the Target Market Audience

2 Factors to consider Attractiveness of a Market Segment Suitability of Market Segments to the firm

Attractiveness of Market Segment

Size of the Segment Growth rate of the Segment Competition in the segment Brand Loyalty of existing customers in the segment Attainable Market Share given promotional budget and competitors expenditures Required market share to break-even Sales potential for the firm in the segment Expected profit margins in the segment

Suitability of Market Segments to the Firm

The Market segments should be according to the firms objectives, resources, capabilities Whether firm can offer superior value to the customers in the segment Impact of serving the segment on the firms image Access to distribution channels required to serve the segment The firms resources vs. capital investment required to serve the segment

Target Market Strategies

Single-segment strategy - Also known as a concentrated strategy. One market segment (not the entire market) is served with one marketing mix. A single-segment approach often is the strategy of choice for smaller companies with limited resources. Selective specialization - This is a multiple-segment strategy, also known as a differentiated strategy. Different marketing mixes are offered to different segments. The product itself may or may not be different in many cases only the promotional message or distribution channels vary.

Target Market Strategies

Product specialization - The firm specializes in a particular product and tailors it to different market segments. Market specialization - The firm specializes in serving a particular market segment and offers that segment an array of different products. Full market coverage - The firm attempts to serve the entire market. This coverage can be achieved by means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment.

Specifying segments to pursue

Market Targeting

Organization Concentrated Marketing The organization focuses on a single market segment

Market

Specifying segments to pursue

Market Targeting

Organization Differentiated Marketing The organization pursues several different market segments simultaneously

Market

Target Marketing

Process of Choosing the Target Market

Evaluating the worth of each segment (sales/profit potential) Evaluating whether the segment is: Distinguishable / Measurable / Sizable / Accessible / Growing / Profitable / Compatible with the firms resources Examining whether it is better to choose the whole market, or only a few segments, & deciding which ones should be chosen - relatively less satisfied by the current offers in the market from competing brands Checking out if the firm has the differential advantage / distinctive capability for serving the selected segments Evaluating the firms resources and checking whether it is possible to put in the marketing programmes required for capturing the spotted segments with those resources Finally selecting those segments that are most appropriate for the firm

Positioning

Stand Out in the Crowd

Positioned for Safety

Positioned as a Luxury Car

Small Budget Cars

Volvo (Station Wagon)

Target customer-Safety conscious upscale families Benefit-Durability and Safety Price-20% premium Value proposition-The safest, most durable wagon in which your family can ride

Lux Lux stands for the promise of beauty and glamour as one of India's most trusted personal care brands

Lux Strawberry & Cream Lux Peach & Cream Lux Festive Glow with Honey
Lux Creamy White

Basics of Positioning
It's where your product or service fits into the marketplace Effective positioning puts you first in line in the minds of potential customers As individuals, we continually position ourselves
-the responsible older sibling, the class clown, a number cruncher, a super genius are all examples of positioning -these identifiers help us define ourselves and distinguish our abilities as unique and different from other people

Positioning is a powerful tool that allows you to create an image

-An image is the outward representation of being who you want to be, doing what you want to do, and having what you want to have

Different Positioning Strategies

Attribute positioning: The message highlights one or two of the attributes of the product

Amul The Taste of India

Different Positioning Strategies

Benefit positioning: The message highlights one or two of the benefits to the customer

Safest Most Durable

Different Positioning Strategies

Use/application positioning: Claim the product as best for some application

iPod - The best MP3 player

Different Positioning Strategies

User positioning: Claim the product as best for a group of users - Children, women, working women

Kelloggs Cereals for Kids

Different Positioning Strategies

Competitor positioning: Claim that the product is better than a competitor

Different Positioning Strategies

Product category positioning: Claim as the best in a product category

Nobody got fired for buying from IBM

Different Positioning Strategies

Quality/Price positioning: Claim best value for price

Elements of Positioning
Pricing. Is your product a luxury item, somewhere in the middle, or cheap? Quality. Total quality is a much used and abused phrase. But is your product well produced? What controls are in place to assure consistency? Do you back your quality claim with customer-friendly guarantees, warranties, and return policies? Service. Do you offer the added value of customer service and support? Is your product customized and personalized? Distribution. How do customers obtain your product? The channel or distribution is part of positioning. Packaging. Packaging makes a strong statement. Make sure it's delivering the message you intend.

Positioning as a Competitive Strategy

What's the one thing you do best?
What's unique about your product or service? What is your strongest strength and use it to position your product.

The act of designing the company's offering and identity so that they occupy a meaningful and distinct competitive position in the target customer's minds.

Positioning Errors
Under-positioning: Market only has a vague idea of the product. For eg: Magnavox brand of TVs from Philips in US does
not promote a strong reason to buy it instead of Sonys Vega TVs

Over-positioning: Only a narrow group of customers identify with the product. For Eg: the web based grocery
retailer - Peapod.com targeted the busy professional and ignored the mass market

Confused positioning: Buyers have a confused image of the product as it claims too many benefits or it changes the claim too often. For Eg: Highest Quality and Lowest Price Doubtful positioning: Buyers find it difficult to believe the brands claims in view of the products features, price, or manufacturer. For Eg: A mutual fund offers 100% returns on
investment; Oxyrich - which claims to clean better than all the leading brands, Ashvini hair oil - which promises to stop hair loss, Weight loss pills etc

SUMMARY

MARKET SEGMENTATION
- IDENTIFICATION OF CUSTOMERS NEEDS AND MARKET SEGMENTS - DEVELOP PROFILING OF RESULTING MARKET SEGMENTS

IDENTIFICATION OF TARGET MARKETS

-EVALUATION OF ATTRACTIVITY OF EACH SEGMENT -SELECTION OF TARGET SEGMENT

POSITIONING
-IDENTIFICATION OF DIFFERENTIAL ADVANTAGES IN EACH SEGMENT -DEVELOPING AND SELECTION OF POSITIONING CONCEPTS

MARKET PLANNING
-DEVELOPMENT OF A MARKETING MIX FOR EACH SEGMENT ACCORDING TO CHOSEN POSITION