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Lecture 7- slide 1
Master in Marketing and Communication
Module 7
Segmentation, Targeting,
Differentiation and Positioning.
Lecture 7- slide 2
Customer-Driven Marketing Strategy:Creating Value for Target Customers
• Market Segmentation
• Market Targeting
• Differentiation and Positioning
Topic Outline
Lecture 7- slide 3
Creating Value for Targeted Customers
Lecture 7- slide 4
Market segmentation is the process that
companies use to divide large
heterogeneous markets into small markets
that can be reached more efficiently and
effectively with products and services that
match their unique needs
Market Segmentation
Lecture 7- slide 5
• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
• Requirements for effective segmentation
Market Segmentation
Lecture 7- slide 6
Segmenting consumer markets
Geographic
Demographic
Psychographic
Behavioral
Lecture 7- slide 7
Market Segmentation
• Geographic segmentation divides the
market into different geographical units
such as nations, regions, states, counties,
or cities
Segmenting Consumer Markets
Lecture 7- slide 8
Geographic segmentationConsumer Markets
Lecture 7- slide 9
Geographic segmentationConsumer Markets
• Tesco Metro
• Tesco Express
• One Stop
Lecture 7- slide 10
Market Segmentation
Demographic segmentation
divides the market into
groups based on variables
such as age, gender, family
size, family life cycle, income,
occupation, education,
religion, race, generation,
and nationality
Segmenting Consumer Markets
Lecture 7- slide 11
Market Segmentation
Age and life-cycle stage segmentation is the
process of offering different products or using
different marketing approaches for different age
and life-cycle groups
Gender segmentation divides the market based on
sex (male or female)
Income segmentation divides the market into
affluent or low-income consumers
Demographic segmentation
http://www.gurl.com/
Lecture 7- slide 12
Demographic Segmentation
Lecture 7- slide 13
Market Segmentation
Psychographic segmentation
divides buyers into different
groups based on social class,
lifestyle, or personality traits
Segmenting Consumer Markets
Lecture 7- slide 14
Market Segmentation
Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product
• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status
Segmenting Consumer Markets
Lecture 7- slide 15
Occasion Segmentation
Lecture 7- slide 16
Psycographic and Behavioural segmentation
Lecture 7- slide 17
Market Segmentation
Multiple segmentation is used to identify smaller,
better-defined target groups
Geodemographic segmentation is an example of
multivariable segmentation that divides groups
into consumer lifestyle patterns
Using Multiple Segmentation Bases
Lecture 7- slide 18
Market Segmentation
PRIZM NE classifies every American
household into 66 unique
segments organized into 14
different social groups.
• These groups segment people and
locations into marketable groups of
like-minded consumers that exhibit
unique characteristics and buying
behavior based on a host of
demographic factors
Using Multiple Segmentation Bases
Lecture 7- slide 19
Calvin Klein uses several layers of segmentation
Lecture 7- slide 20
Primary segmentation variables for business markets
• Demographics: industry, company, location.
• Operating variables: technology, user/non user status.
• Purchasing approaches: purchasing function organisation, power structure, nature of existing relationships, general purchase policies, purchasing criteria.
• Situational factors: urgency, specific application, size of order.
• Personal characteristics: buyer-seller similarity, attitudes towards risk, loyalty.
Lecture 7- slide 21
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market(Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation Marketing: New methods for capturing business (New York: Harper Business, 1992).
Primary segmentation variables for business markets
Lecture 7- slide 22
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market(Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation Marketing: New methods for capturing business (New York: Harper Business, 1992).
Primary segmentation variables for business markets
Lecture 7- slide 23
Market Segmentation
Geographic location
Economic factors
Political-legal factors
Cultural factors
Segmenting International markets
Lecture 7- slide 24
Market Segmentation
Intermarket segmentation divides
consumers into groups with similar needs
and buying behaviors even though they are
located in different countries
Segmenting Business Markets
Lecture 7- slide 25
Developing market segments
• Research based exercise that incorporates several stages:
– Qualitative research: Exploratory techniques to determine motivations and attitudes.
– Quantitative research: Structured questionnaire to gain information.
– Analysis: Factor and cluster analysis. Automatic Interaction Detection and conjoint analysis.
– Validation: Statistical validation.
– Profiling: Distinguishing attitudes and behaviours.
Lecture 7- slide 26
Market Segmentation
• To be useful, market segments must be:
Requirements for Effective Segmentation
Measurable Accessible
Substantial Differentiable
Actionable
Lecture 7- slide 27
Requirements for effective segmentation
• Measurability
– Degree to which size, purchasing power and profits of a market segment can be measured.
• Accessibility
– Degree to which a market segment can be reached and served.
• Substantiality
– Degree to which a market segment is sufficiently large or profitable.
• Actionability
– Degree to which effective programmes can be designed for attracting and serving the given market segment.
Lecture 7- slide 28
What is market targeting?
Market targeting involves evaluating
the various segments identified
during the segmentation process
and deciding how many and which
segments it can serve best.
Lecture 7- slide 29
Market Targeting
• Target market consists of a set of buyers
who share common needs or characteristics
that the company decides to serve
Selecting Target Market Segments
Lecture 7- slide 30
Market TargetingEvaluating Market Segments
• Segment Size and Growth– Analyze sales, growth rates and expected profitability.
• Segment Structural Attractiveness– Consider effects of: Competitors, Availability of
Substitute Products and the Power of Buyers & Suppliers.
• Company Objectives and Resources– Company skills & resources relative to the segment(s).– Look for Competitive Advantages.
Lecture 7- slide 31
Undifferentiated (or Mass) marketing
Differentiated (or Segment) marketing
Concentrated (or Niche) marketing
Micromarketing
Target marketing strategies
Lecture 7- slide 32
Target marketing strategies
• Undifferentiated (or Mass) marketing: Assumes market is homogenous and uses the same product, promotion and distribution to all consumers.
• Differentiated (or Segment) marketing: Adapting a company’s offerings so they more closely match the needs of one or more segments.
• Concentrated (or Niche) marketing: Adapting a company’s offerings to match the needs of one or more sub-segments more closely where there is little competition.
• Micromarketing: Marketing programmes tailored to narrowly defined geographic, demographic, psychographic behavioural segments.
Lecture 7- slide 33
Micro marketing
• Local Marketing
– Tailoring brands and promotions to the needs and wants of local customer groups.
• Individual marketing
– Tailoring products and marketing programmes to the needs and preferences of individual customers.
• Mass customisation
– Preparing individually designed products and communication on a large scale.
Lecture 7- slide 34
Marketing Differenziato – Colgate identifica diversi segmenti-
target offrendo loro diversi tipi di dentifricio
Lecture 7- slide 35
Marketing Concentrato (o di Nicchia)
Morgan Cars serve una nicchia di mercato, producendo macchine
sportive tradizionali fatte a mano per baby boomers
Lecture 7- slide 36
Marketing individuale
Lecture 7- slide 37
Market Targeting
Undifferentiated marketing targets the
whole market with one offer
– Mass marketing
– Focuses on common needs rather than what’s
different
Target Marketing Strategies
Lecture 7- slide 38
Market Targeting
Differentiated marketing targets several
different market segments and designs
separate offers for each
• Goal is to achieve higher sales and stronger
position
• More expensive than undifferentiated
marketing
Target Marketing Strategies
Lecture 7- slide 39
Market Targeting
• Concentrated marketing
targets a small share of a
large market
• Limited company resources
• Knowledge of the market
• More effective and efficient
Target Market Strategies
Lecture 7- slide 40
Marketing Targeting
Micromarketing is the practice of tailoring
products and marketing programs to suit
the tastes of specific individuals and
locations
– Local marketing
– Individual marketing
Target Market Strategies
Lecture 7- slide 41
Market Targeting
Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups
• Cities
• Neighborhoods
• Stores
Target Market Strategies
Lecture 7- slide 42
Market Targeting
Individual marketing involves
tailoring products and
marketing programs to the
needs and preferences of
individual customers
• Also known as:
– One-to-one marketing
– Mass customization
– Markets-of-one marketing
Target Market Strategies
Lecture 7- slide 43
Market Targeting
Depends on:
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies
Choosing a Target Market
Lecture 7- slide 44
Market Targeting
• Benefits customers with
specific needs
• Concern for vulnerable
segments
• Children
– Alcohol
– Cigarettes
– Internet abuses
Socially Responsible Target Marketing
Lecture 7- slide 45
Differentiation
• The company must also decide how it will serve
targeted customers - how it will differentiate itself
in the marketplace.
• The company must decide on a value
proposition, the set of benefits or values it
promises to deliver to consumers to satisfy their
needs.
• Value propositions differentiate one brand from
another and answer the question, “Why should I
buy your brand rather than a competitor’s?”
Lecture 7- slide 46
Differentiation and Positioning
Value proposition
is the full mix of
benefits upon
which a brand is
positioned
Selecting an Overall Positioning Strategy
Lecture 7- slide 47
Differentiation and Positioning
Product position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products
– Perceptions
– Impressions
– Feelings
Lecture 7- slide 48
Differentiation and Positioning
• Positioning means arranging for a product to
occupy a clear, distinctive and desirable
place in customers’ minds, relative to
competition.
Lecture 7- slide 49
Differentiation and Positioning
• Identifying a set of possible competitive
advantages to build a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy
• Developing a positioning statement
Choosing a Differentiation and Positioning
Strategy
Lecture 7- slide 50
Differentiation and Positioning
Competitive advantage is an advantage over
competitors gained by offering consumers
greater value, either through lower prices
or by providing more benefits that justify
higher prices
Identifying Possible Value Differences and
Competitive Advantages
Lecture 7- slide 51
Sources of differentiation
Product
Services
Channels
People
Image
Lecture 7- slide 52
Differentiating markets (1)
• Product differentiation
– Features and benefits
– Quality
– Performance
– Innovation
– Consistency
– Reliability
– Style and design
– Durability
– Repairability
Lecture 7- slide 53
Differentiating markets (2)
• Services differentiation
– Delivery
– Installation
– Repair services
– Customer training services
– Consulting services
– Speed of service
Lecture 7- slide 54
Differentiating markets (3)
• People differentiation
– Hiring
– Training
– Customer focused
• Image differentiation
– Images that reflect the ‘soul’ or ethos of the
company
Lecture 7- slide 55
Positioning strategies (1)
• Product attributes– Nokia’s 6600 ‘Zoom in’.
• Technical items– BMW breathable fresh air filters.
• Benefits offered– Crest toothpaste reduces cavities.
• Usage occasions– Kit Kat, ‘have a break’.
• Users– Johnson & Johnson changing focus to incorporate adults as
frequent users of their gentle Baby Shampoo.
• Activities– Omega, the ‘first and only watch on the moon’.
• Personalities– Tiger Woods for Nike
Lecture 7- slide 56
Positioning strategies (2)
• Cult positioning
– Harry Potter books.
• Origin
– Perrier ‘bottled at source’.
• Positioned with synergistic products and brands
– Bentley and Breitling.
• Positioned against competitors
– Dell and Compaq versus IBM
• Positioned away from competitors
– 7-Up the number 1 ‘Un-cola’.
• Product class membership
– ‘I can’t believe it’s not butter’, the vegetable fat spread, is clearly positioned against butter.
Lecture 7- slide 57
Differentiation and Positioning
Difference to promote should be:
Choosing the Right Competitive Advantage
Important Distinctive Superior
Communicable Preemptive Affordable
Profitable
Lecture 7- slide 58
Criteria for choosing which differences to promote
• Features and benefits must be important to the consumer.
• Must be distinctive from the competition.
• Must deliver superior quality or service.
• Difference must be communicable and visible to buyers.
• Pre-emptive and competitors unable to replicate.
• Affordable: buyers can afford to pay for the difference.
• Profitable: the company can introduce the difference profitably.
Lecture 7- slide 59
USP
ESP
Choosing and implementing a positioning strategy
Lecture 7- slide 60
Choosing and implementing a positioning strategy
• Ad man Rosser Reeves states that every company
should have a unique selling proposition (USP).
– The USP is the unique product benefit that a firm
aggressively promotes in a consistent manner to its target
market. The benefit usually reflects functional superiority:
best quality, best services, lowest price, most advanced
technology.
• Difficulty of maintaining functional superiority forces
firms to attempt a more emotional influence by
developing an emotional selling proposition (ESP).
Lecture 7- slide 61
Factual approach
Lecture 7- slide 62
Emotional approach
Lecture 7- slide 63
Positioning Map
Positioning maps
show consumer
perceptions of
their brands
versus competing
products on
important buying
dimensions
Lecture 7- slide 64
Positioning map Chocolate Market in the UK
Lecture 7- slide 65
Positioning map - car brands
Lecture 7- slide 66
Positioning Statement
• To (target segment and need) our (brand) is
(concept) that (point of difference)
Web link
Lecture 7- slide 67
Mountain Dew’s positioning statement
To young, active soft-drink
consumers who have little
time to sleep, Mountain
Dew is the soft drink that
gives you more energy than
any other brand because it
has the highest level of
caffeine.
Lecture 7- slide 68
Communication and Delivering the Chosen Position
Choosing the
positioning is
often easier than
implementing the
position.