1. MARKET SEGMENTATION, TARGETING AND POSITIONING
LECTURE 4 : BHO1171 INTRODUCTION TO MARKETING
This lecture will explain:
• what constitutes a market
• market aggregation / mass market concepts using examples
• what market segmentation means and the reasons for segmenting markets
• What criteria (bases) can be used for segmenting markets (main focus of lecture)
• Bases for segmenting B2B markets
• What criteria can be used to determine if the segmentation is effective
• How to evaluate different segments – which segment to target?
• Once a target segment is chosen, marketing program can be developed
• Concept of positioning and why there is a need to position a product in the market
• Selecting the right competitive advantage – what criteria can be used to select the right differences to promote
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2. What are Markets?
• In Economics and Marketing - the term "market"
denotes an aggregate of people who, as individuals or
as organisations;
• have needs for products in a product class;
• have the ability, willingness and authority to
purchase such products;
• eg: Students are part of the market for textbooks,
calculators, paper, etc.
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3. TYPES OF MARKETS
• Markets can be divided into two categories:
• Consumer market - buy products for consumption - not for
making profit.
• Organisational or industrial market -
purchase a specific kind of product for resale
use in producing other products
use in general daily operations.
eg: producers, resellers, government and institutions
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4. REQUIREMENTS FOR A MARKET
For a group of people to be a market - it must meet the
following four requirements:
• must need or want a particular product
• have the ability to purchase the product.
• must be willing to use their buying power.
• must have the authority to buy the specific products.
eg: Under 18s not allowed to buy alcohol in most
States.
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5. Stages in Market Orientation
Mass
Mass
Marketing
Marketing
Product-Variety
Product-Variety
Marketing
Marketing
Target
Target
Marketing
Marketing
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6. HISTORICAL APPROACHES TO
MARKETS
• Mass Marketing: In mass marketing the seller mass produces,
mass distributes, and mass promotes one product to all buyers.
• Product-Variety Marketing: Here the seller produces two or
more products that have different features, styles, quality, sizes,
and so on.
• Target Marketing: Here the seller identifies market segments,
selects one or more of them, and develops products and
marketing mixes tailored to each.
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7. MASS MARKETING
• Also known as mass marketing or undifferentiated marketing
• A single marketing program is used to offer the same product to
all consumers.
• This approach will not satisfy the needs and wants of every
buyer completely.
• Used by marketers of standardised goods like sugar, salt, petrol,
paint
• This approach is used when consumers perceive little or no
difference between the products of different firms - when
competing products seem virtually the same.
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8. MARKET AGGREGATION: THE
STRATEGY FOR MASS MARKETING
• a large number of people must have the same basic
need or want.
• a single marketing mix must satisfy various potential
customers.
• Consumers are expected to compromise by accepting a
product that may not suit their needs perfectly.
• Market is vulnerable to competitors.
• Promotion and marketing activities create perception
of uniqueness and superiority - product differentiation.
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9. MARKET SEGMENTATION - STRATEGY
OF SUBDIVIDING THE MARKET
• Why segment markets? - because markets consist of
buyers and buyers differ in one or more respects.
• They differ in their: wants & resources
geographic locations
buying attitude & practices
Any of these may be used to segment a market.
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10. WHAT IS MARKET
SEGMENTATION?
• Divide a market into distinct groups of buyers (each
with relatively similar product needs).
• Segments are made up of groups of people with
different needs, characteristics or behaviour
• Each segment may require separate products or
marketing mixes
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11. EXAMPLE:
GMH
Sellers look for broad classes of buyers who differ in
their product needs or buying responses
• GMH has found that high and low-income groups
differ in their car-buying needs and wants
• Young consumers’ needs and wants differ from those
of older consumers
• Hence GMH has designed specific models for different
income and age groups
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12. SEGMENTATION BENEFITS
• Firms segment the market to better service
customers.
• Allows firms to compete more effectively.
• With a segmented market firm can tailor a
marketing mix to a well defined target market.
• What marketers look for are distinctive groups of
consumers within the total- segmentation allows them
to meet needs more efficiently.
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13. EFFECTIVE USE OF MARKET
SEGMENTATION
• can the market be identified and
measured?
• is the segment large enough to be
profitable?
• is the market reachable?
• is the segment responsive?
• the segment must be stable
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14. Bases for Segmenting Consumer Markets
C 3. Behavioural
H
1. Demographic
A
R
A
C
T
E
R 4. Psychographic
I 2. Geographic
S
T
I
C
S
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15. Segmenting Bases
• Refer Table 7.1 pp219
• Geographic
– region, city size, urban,rural,climate
• Demographic
– income,age, gender, family life cycle,
– social class, education, occupation, ethnicity
• Psychographic
– personality, lifestyle, values
• Behavioural
– benefits desired, usage rate
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16. EXAMPLE:
GEOGRAPHIC SEGMENTATION
• Dividing the market into different zones -
• Regions, States, Cities
• ICI’s fertiliser arm segments by geography -
emphasising the right product in the right areas
• Can localise products, advertising, promotion and sales
efforts to fit needs of individual areas
• People in different areas have different need and wants
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17. Segmenting by Demographics
Examples:
• Cars designed to appeal to women – Holden Barina, Suzuki
Jimmy(what about the ute!) – gender segments
• CBA Visa card has ads in Cosmopolitan & Cleo
Pepsi targets different demographic segments in different ways:
(age-life cycle stage)
• Ads to teens (dance-beat music, adventure, rapid scene
movements)
• Ads to seniors (softer and more sentimental – closing the
generation gap by sharing a common soft drink - Pepsi
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18. Segmenting by Psychographics
• Socioeconomic status has strong effect on
preferences for cars, clothing,home furnishings,
leisure, store choice
• Lifestyle: frozen dinners, low fat yoghurts,
Solo soft drink
• Personality – creating products that correspond
to consumer personalities – cosmetics,
insurance, liquor, online share trades
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19. Segmenting by Behaviour
• Occasions: Valentine’s Day, Mother’s Day, marketing
of greeting cards, Kodak single use cameras
• Benefit sought: eg tooth decay prevention,
whiteness,tartar control, fluorigard
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20. BASES FOR SEGMENTATION
BUSINESS MARKETS
• Demographics
• Operating Variables
• Purchasing Approaches
• Situational Factors
• Personal FactorsBHO1171 -4- School of HTM 20
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21. MARKET TARGETING
• Market targeting is the process of evaluating
each market segment’s attractiveness and
selecting one or more segments to enter.
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22. Market Targeting: Evaluating Market
Segments
Size and
Size and Structural
Structural
Growth
Growth Attractiveness
Attractiveness
Company
Company
Objectives and
Objectives and
Resources
Resources
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23. Requirements for Effective Segmentation
Measurable
Requirements
Actionable for Accessible
Effective
Segmentation
Substantial
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24. Choosing a Market-Coverage Strategy
Competitors’ Company
Strategies Resources
Factors
Factors
Affecting
Affecting
Market Strategy
Strategy Product
Variability Decisions
Decisions Variability
Stage in
Life Cycle
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25. Market Coverage Strategy
Remember that a market may consist of a number of
segments: Do we need to cover all segments?
The market coverage strategy that works best will depend
on:
• the company’s resources
• how different the product is
• the competitors’ marketing strategies
• the nature of the market
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26. STRATEGIC POSITIONING
EXAMPLE: Shampoo Market
• Shampoo market is highly fragmented - overflowing with
brands that promise: - body and control
- renewed life for dull hair
- elimination of split ends
- avoidance of dandruff.
• Effective marketers understand the value of establishing a solid
position in the minds of consumers.
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27. Product Positioning Strategies
Product
Product Product
Product
Class
Class Attributes
Attributes
Away from
Away from Benefits
Benefits
Competitors
Competitors HH
GG
C
Offered
Offered
C
AA
Against a Usage
D
Against a Usage
D
EE
BB
Competitor
Competitor
FF
Occasions
Occasions
Users
Users
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28. PROCEDURE FOR IDENTIFYING AN
APPROPRIATE POSITION
• (1) Determine the relevant product / market
• (2) Identify competitors.
• (3) Determine how consumers evaluate options
• (4) Learn how competitors are perceived
• (5) Identify gaps in positions held
• (6) Plan and carry out the positioning strategy
• (7) Monitor the position
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29. DEFINING A POSITIONING
STRATEGY
• Identifying a Positional Direction
• Identifying Possible Competitive Advantage
• Selecting the Right Competitive Advantage
• Differences to Promote
• Communicating the Chosen Position
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30. IDENTIFYING A POSITIONAL
DIRECTION
• See Pages 234-235 Kotler
• Brand position of department stores
• Brand repositioning strategies
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31. SOURCES OF COMPETITIVE
ADVANTAGES
• Product Differentiation can be based upon features or
performance.
• Services Differentiation may come from delivery, installation,
repair, or training advantages.
• Personnel Differentiation is derived from a superior work
force.
• Image Differentiation can be generated from effective use of
symbols in association with product consumption.
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32. Promoting Differences
Important
Important
Profitable Criteria Distinctive
Profitable for Distinctive
Determining
Which
Differences
Affordable
Affordable to Superior
Superior
Promote
Commun-
Commun-
Preemptive
Preemptive icable
icable
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33. EXAMPLE:
FORD MOTOR COMPANY
• A company that has evolved from a mass-marketer to a
market-targeter.
• Ford originally made one car for the entire — didn’t
even have a choice of colours.
• “You can have any colour car you want so long as it’s
black” Henry Ford
• Over time, Ford added other cars to its line (product-
variety marketing), and eventually developed cars for
nearly every market segment (target marketing).
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34. EXAMPLE:
PROCTER & GAMBLE
• Most companies that have been around for a long time have
shown a similar evolution.
• Procter & Gamble, had been in existence more than 80 years
when it introduced Ivory Flakes to supplement Ivory Soap
(product variety)
• Was almost 90 years old when it first developed a product
(Camay) to compete with an existing P&G product (Ivory)
(“150 Years of P&G”, Advertising Age, August 20, 1987, p. 10).
• Today, P&G is one of the pre-eminent market targeting
companies in the world.
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35. EXAMPLE:
SEGMENTS IN THE BEER MARKET
• The beer market is segmented in many ways:
• region (through regional brewers and brands),
• income and social class (premium beers and imports versus
budget beers),
• life style (“The original party animal”),
• purchase occasion (“Here’s to good friends”), and
• usage rate (“The one beer to have when you’re having more
than one”).
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36. EXAMPLE:
BENEFIT SEGMENTATION IN INDUSTRIAL
MARKETS
• Service, selection, and reliability can all be used in benefit
segmentation of industrial markets.
• Suppliers who want to emphasise these characteristics must
identify firms that need these benefits.
• By better satisfying these firms’ needs, the supplier is able to
charge higher prices than competitors who offer fewer services
or less selection.
• Other suppliers can find market segments that do not need
these benefits, and sacrifice service, selection, and reliability to
reduce costs and be able to sell at a lower price.
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37. Steps in Segmentation, Targeting, and
Positioning (fig 7.1)
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38. Segmenting Business Markets
Personal Demographics
Characteristics
Bases
Bases
for Segmenting
for Segmenting
Situational Business
Business Operating
Factors Markets
Markets Variables
Purchasing
Approaches
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39. BHO1171 -4- School of HTM 39
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40. Selecting Market Segments
Company
Company
Marketing
Marketing Market
Mix Market
Mix
A. Undifferentiated Marketing
Company Mix 1
Company Mix 1 Segment 1
Segment 1
Company Mix 2
Company Mix 2 Segment 2
Segment 2
Company Mix 3
Company Mix 3 Segment 3
Segment 3
B. Differentiated Marketing
Company Segment 1
Segment 1
Company
Marketing
Marketing Segment 2
Segment 2
Mix
Mix
Segment 3
Segment 3
C. Concentrated Marketing
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41. Identifying a Positional Direction
(fig 7.4)
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42. Identifying a Re-Positioning Direction
(fig 7.5)
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43. Identifying Possible Competitive
Advantage
Product
Product Service
Service
Areas for Competitive
Areas for Competitive
Differentiation
Differentiation
Personnel
Personnel Image
Image
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