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2/17/2013
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Segmentation,
Targeting,
Differentiation &
Positioning
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What Are Markets?
Requirements of a Market
Must need or desire a particular product
Must have the ability to purchase the product
Must be willing to use their
buying power
Must have the authority to
buy specific products
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What Are Markets? (cont’d)
Types of Markets Consumer markets
Purchasers and individuals in households
Purchases are for personal consumption, not profit
Business markets
Individuals and groups that purchase products for resale, direct use to produce other products, or use in daily business operations
Purchasers classed as producers, resellers, government, and institutional markets
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The right relationship with the right
customer
To build a marketing strategy we need the next
steps to be done :
Segmentation
Targeting
Differentiation
Positioning
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Why Segmentation, targeting,
differentiation and positioning?
Companies today recognize that they cannot appeal to
all buyers in the same way because Buyers are too
numerous and too varied in their needs
Moreover, the companies themselves vary widely in their
abilities to serve different segments of the market.
Rather than trying to compete in an entire market each
company must identify the parts (segments) of the
market that it can serve best and most profitably.
Steps in Market STP
Market Segmentation
Identify bases (variables) for segmenting the market
Develop segment profiles
Target Marketing Develop measure of segment attractiveness
Select target segments
Market Positioning
Develop positioning for target segments
Develop a marketing mix for each segment
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Has also identified different niches within certain segments (ex. Pampers extra size
for obese babies)
Product modifications are useful Tide offers seven different
product formulations to serve different niches’ needs
Case Study
Procter & Gamble
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MARKET SEGMENTATION
Step.1
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Step.1 What is Market Segmentation?
Subdividing the large
market into smaller
groups (Segments) of
customers.
Each group (segment)
has similar needs and
wants & can be reached
with a different
marketing mix
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Which Segmentation Variables
to Use?
Segmentation Variables
Characteristics of individuals, groups, or
organizations used to divide a market into
segments
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Segmentation Variables for
Consumer Markets
FIGURE 8.3
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1) Demographic
dividing the market into groups based on variables such as
age, gender, family size, family life cycle, income, occupation,
education, religion, race, generation.
2) Geographic
dividing a market into different geographical units such as
nations, states, regions, countries, cities.
Sometimes, Marketers mix 2 variables with each
other…ex ( Geodemographic segmentation)
Variables of Market Segmentation
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Family Life Cycle Stages as a
Percentage of All Households
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3) Psychographic
dividing a market into different groups based on social class,
lifestyle, or personalities, norms, values
4) Behavioral
dividing a market into different groups based on
Consumption rate
Occasion
Benefits
User status (1st time user , ex-user, regular user …etc)
Brand loyalty
Variables of Market Segmentation
Principles of Marketing A.U.C - Amira EL-Deeb
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Behavioral Segmentation
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Which Segmentation Variables
to Use?
Variables for Segmenting Business Markets
Geographic location
Location affects the level of product demand.
Type of organization
Variations in firms’ characteristics leads to segmentation by
type.
Customer size
Larger customers strongly influence how they are treated in
the marketplace.
Product use
Firms use basic inputs in ways different from one another.
•Steps of segmentation
4)Evaluate
Segments
3) Describe each segment
2) Grouping customers with similar needs
1) Identifying all product-related needs
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Levels of Market Segmentation
Mass marketing (undifferentiated) :
The seller engages in the mass production,
distribution & promotion of one product for all
buyers.
It focuses on what is common in the needs of
consumers rather than what is different.
Because it’s one offer it keeps down production,
inventory, transportation & advertising costs.
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Levels of Market Segmentation
Segmented marketing (Differentiated) :
A market segment consists of a group of
customers who share similar needs.
The marketer’s task is to identify the
segments & decide which ones to target.
By offering different products to different
segments, companies hope for higher sales
and a strong position within each market
segment more than mass marketing
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Niche marketing (concentrated) :
A niche is a more narrowly defined customers group seeking
a distinctive mix of benefits.
Marketers usually identify niches by dividing a segment into
sub-segments with distinctive set of traits who may seek a
special combination of benefits.
This strategy is used when company resources are limited.
Levels of Market Segmentation
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Mass customization
(micromarketing /individual):
The ultimate level of
segmentation leads to:
“segments of one”
“customized marketing,”
or “one-to-one marketing.”
Levels of Market Segmentation
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Effective Segmentation Criteria Each segment must be…
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
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The more you define your customers, the more satisfied
they will be, the more profit you will get.
A firm can allocate limited resources more efficiently to selected
customers.
A firm can seek growth by reaching new segments
A firm can gain a strong positions in different market segments as
No company can win if its products and offerings resemble every
other product by offering a distinctive big idea in the mind of the
target market = creating the product’s competitive advantage
Importance of Market Segmentation
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MARKET TARGETING
Step.2
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Step.2 Targeting
Once the firm has identified its market-
segment opportunities, it decides:
How many segments to target?
Which Segments to target ?
Marketers are increasingly combining
several variables in an effort to identify
smaller, better-defined target groups.
Like aiming at a dart board…
Aiming the product or service at a specific segment is 'targeting'.
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Target Marketing
Evaluating Market Segments
Company objectives and resources
Segment size and growth
Indicator for profitability
Large size segment with high growth rate is not suitable for
small companies
Sales estimate
Cost estimate
Segment attractiveness through assessing
porter’s five forces
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POTENTIAL
ENTRANTS
SUBSTITUTES
SUPPLIERS BUYERS COMPETITIVE
challenge
Porter’s five forces analysis
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Identify the Appropriate
Targeting Strategy
Undifferentiated Strategy
Defining an entire market for a particular product
as the target market (homogeneous market)
Designing a single marketing mix for and directing
it at the total market
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Targeting Strategies
FIGURE 8.2
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Identify the Appropriate Targeting
Strategy (cont’d)
Concentrated Strategy Through Market
Segmentation
Segmenting (dividing) the total market into groups
with similar product needs (heterogeneous
markets) to design marketing mixes that match
those needs
Concentrated targeting strategy focuses on a
single market segment using one marketing mix
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Targeting Strategies
FIGURE 8.2
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Identify the Appropriate Targeting
Strategy (cont’d)
Differentiated Strategy Through Market
Segmentation
Targeting two or more segments by developing a
marketing mix for each
Competitive advantage is that a firm may gain a
larger total market share by aiming multiple
marketing mixes at multiple segments
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Targeting Strategies
FIGURE 8.2
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Targeting strategies
Exercise
Select the right strategy in the following cases:
1. New company with limited resources
2. New company while the competitors are targeting
concentrated market
3. Well established company with full resources
4. Well established company offers new product
5. Well established company in a market with limited
customers’ needs
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- A company discovers different needs and groups
in the marketplace, = Segmentation
- Targets those needs and groups that it can satisfy
in a superior way, = Targeting
- Then, implanting the product’s unique benefits and
differentiation in customer’s minds
= Differentiation & Positioning Ex:-
Panadol …… Best Treatment for headache.
Vodafone … Best Coverage
DIFFERENTIATION
Step.3
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Step.3 Differentiation
Differentiation is the act
of designing a set of
meaningful differences
to distinguish the
company’s offering from
competitor’s offering =
“Creating the product’s
competitive advantage”
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Differentiation tools
Image Channel Personnel Services Product
Symbol Coverage Competence Ordering ease Form
Media Expertise Communication Delivery Features
Atmosphere Performance Credibility Installation Performance
Events Reliability Training Design
Responsiveness Consulting Durability
courtesy Maintenance Reliability
Style
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Personnel Differentiation
Companies can gain a strong competitive advantage through having better-trained people. McDonald’s people are courteous
IBM people are professional and knowledgeable
Disney people are friendly
Even the personnel outfits could be a symbol for differentiating the company
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Image Differentiation
Buyers respond differently to
company and brand images.
Identity and image need to be
distinguished,
Identity is the way a company aims to
identify or position itself or its product.
some companies become associated with
colors, such as Etisalat (Green), Kodak
(Red and Yellow).
Image is the way the public perceives
the company or its products.
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It takes three to tango!
Getting into the minds of customers
TARGET
POSITION
SEGMENT
POSITIONING
Step.4
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A.U.C - Amira EL-Deeb
The key to wining and keeping target customers is
to understand their needs better than competitors
do and to deliver more value.
Thus, after deciding which segment to be served ,
the company must position itself as providing
superior value, it gains competitive advantage,
which refers to the advantage over competitors
gained by offering consumers greater value, (ex. lower prices or providing more benefits that justify higher prices)
Step.4 Positioning
A product’s position is:
the way the product is defined by consumers on important
attributes or its unique competitive advantages .
It’s the place the product occupies in consumers’ minds
relative to competing products.
It’s implanting the brand’s unique benefits and differentiation
in customer’s minds.
A good brand positioning is clarifying the brand’s essence,
benefits and how it does so in a unique way ( customer-
focused POD).
Positioning
= Perception of differentiation
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For example, in automobile market: Toyota, Ford Focus and Suburu are positioned on
economy
Mercedes and Cadillac on luxury
Porch and BMW on performance
Volvo on safety
Positioning
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The easiest way of getting into someone's mind is to be first
The top three brands in a product category occupy market share in a ratio of 4:2:1
But if you can’t be, you should be the first to claim that position Head & Shoulders brand is not the first anti-dandruff shampoo but it
came out on top because P&G had an aggressive advertising campaigns to capture the public's attention and claim that position in the mind of the consumer.
Positioning
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Identifying possible
competitive advantages
Choosing the right
competitive advantage
Choosing a positioning
strategy
Differentiation can be based on
Products
Services
Channels
People
Image
Topics
Choosing a Positioning Strategy
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What is the competitive advantage ?
Which differences to promote? Criteria include:
Important
Distinctive
Superior
Communicable
Affordable
Profitable
Topics
Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Choosing a Positioning Strategy
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Brand’s Value propositions
represent the full positioning of
the brand = full mix of benefits
upon which the brand is
positioned.
It is the answer to the
customer’s question ‘why
should I buy your brand?’.
Volvo’s value proposition
concentrate on safety but also
includes reliability and styling
for a price that is higher than
average but seems fair for this
mix of benefits.
Topics
Identifying possible
competitive advantages
Choosing the right
competitive advantage
Choosing a positioning
strategy
Choosing a Positioning Strategy
Positioning statement
- The statement should follow the form: “To (target
segment and need) our (brand) is (concept) that
(point of difference)
For example: “To busy professionals who need to stay
organized, Palm is an electronic organizer that allows you to
backup files on your PC more easily than competitive
products.”
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Communicating the Positioning
Companies must deliver their unique value
propositions not only a product.
Positions must be monitored and adapted over time.
Designing the marketing mix ( product, price, place,
and promotion) should reflect that positioning strategy
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