Session 2_Easy_Segmentation, Targeting, Positioning

• VO Management I - Marketing (MA) is the focus
• Week 2 covers Segmentation, Targeting, and Positioning
• Univ.-Prof. Dr. Christoph Fuchs is the Chair of Marketing
• Contact: [email protected]
• Website: http://marketing.univie.ac.at
• Office hours are offered upon request

Course Framework Basics

• Course Framework is a marketing plan
• Marketing Plan includes: Product, Price, Promotion and Place
• Consumer Behavior and Marketing Research are prerequisites for Marketing Strategy

Developing a Marketing Strategy

• Marketing Strategy includes Segmentation, Targeting, and Positioning
• Segmentation involves "slicing" the market by identifying segmentation variables
• Profiles of resulting segments must be developed

Dr. Howard Markowitz and Pepsi Example

• Dr. Howard Markowitz was the first to research the concept of segmentation
• Task: Find the perfect sweetness (aspartame) of a Diet Pepsi
• Result: There is no perfect Pepsi as sweetness acceptance varied within a range of 8% to 12%
• Insight: There is no perfect Pepsi, there are only Pepsis

Campbell's and Prego Example

• Goal: Make the best tomato sauce

• Tested different variants including:

• Chunky

• Spicy

• Garlic

• Sweet

• Sour

• He created 45 different variants of tomato sauces and asked consumers to rate them.

• Insight: Not all customers are equal

• Some preferred:

• Spicy sauce with lots of garlic

• Natural sauce (fine)

• Extra chunky sauce, but this kind of sauce was not on the current market

• Result: Extra chunky sauce was not found in the US (600 million sales)

What is Segmentation

• Segmentation involves identifying relatively homogeneous groups of customers based on their:
• Perceptions
• Evaluations
• Needs
• Wants

Why Segmentation

• Insufficient segmentation is a main reason for new product failure
• Necessary due to the fact that:
• It is difficult or costly to satisfy the market with one product/service
• Limited resources exist to attract all customers
• Few opportunities exist to make profit (and be competitive; otherwise winner takes it all)
• Segmentation is important for understanding customer needs

Segmentation Based on Customer Needs

• Segment customers on needs and factors that drive purchase decisions (not on superfluous characteristics)
• Create mutually exclusive, collectively exhaustive groups using statistical techniques like cluster analysis

Bases for Segmenting Consumer Markets

• Segmentation can be divided into four markets
• Geographic
• Nations and States
• Regions and Counties
• Cities and Neighborhoods
• Demographic
• Age and Gender
• Family Lifecycle and Life Stage
• Income and Generation
• Social Class
• Psychographic
• Segmentation is based traits, values, or lifestyles AIO factors that describe lifestyles
• Activities, Interests and Opinions
• Behavioural
• Benefits sought and User Status
• User Rate
• Loyalty Status

Geographic Segmentation

• It is possible to segment internationally
• Starbucks’s revenue in the US is driven by the speed and frequency of transactions
• The typical US consumer wants to grab a coffee and perhaps a sandwich and leave
• In China, coffee is more of a social event than a daily necessity
• Starbucks is more of a destination restaurant than a take-out coffee place as people come to meet

Demographic Segmentation

• Includes: Age, Gender, Income, Education, Religion, Occupation, Marital Status and Family Size

Quidel - Segmentation Tactics

• Segment the market for early pregnancy tests based on:
• Demographics, such as age and income
• Consumers' price sensitivity
• Why would a woman want to take a pregnancy test and are these reasons the same for everyone?
• Two key groups
• Hopefuls, those who want to be pregnant
• Fearfuls, those who are afraid that they might be pregnant
• The Hopefuls
• Possibly pregnant women, age 16-42, whose income ranges from unemployed to $100k
• They are trying to become pregnant and hoping for a positive result
• They are extremely nervous about the test and its implications, and they see the test as something that may mark the start of a new phase in their lives
• The Fearfuls:
• Possibly pregnant women, age 16-42, whose income ranges from unemployed to $100k
• They do not want to become pregnant and hoping for a negative result
• They are extremely nervous about the test but view it as something that they must endure in order to relieve their uncertainty

Behavioral Segmentation

• Includes:
• Occasions
• User Status
• Usage Rate
• Adoption Status
• Loyalty Status
• Attitude
• Online behavior can be segmented by:
• Word search
• Sites/pages visited
• Purchases
• Abandoned carts
• Online engagement level
• Social Network
• Internet Usage

The Role of Predictive Analysis

• Retailers study consumption patterns to figure out what you need
• Stores like Target assign every customer a Guest ID number
• Tied to their credit card, name, or email address
• Stores a history of everything they've bought
• Stores demographic information and data bought from other sources

Useful Market Segments Must Be

• Measurable
• Substantial
• Accessible
• Differentiable
• Actionable

Key Takeaways

• Segmentation involves separating customers into groups so as to maximize within-group homogeneity, and between-group heterogeneity
• Segments usually differ in terms of their reactions (the 4 P’s )and in terms of consumer needs / benefits sought
• Use segmentation variables that allow segments to be identified and actionable.
• Choose variables that lead to good differentiation on underlying needs.
• Put yourself in consumers’ shoes (why do customers buy products)- Based on data, analyses, & insight

Targeting

• Evaluate the attractiveness of each segment and select the target segment(s)
• Decide which segment(s) you will invest your scarce resources in
• Find out whether they want you (Importance-Performance)
• Decide whether you want them too (General segment attractiveness)
• Segment size & growth
• Capacity utilization
• Effects on other segments
• Pricing, cost to serve, acquisition cost

Patterns of Target Market Selection

• P = product
• M = Market
• What are some risks of going after one segment?

Positioning as a Marketing Strategy

• Decide on a unique "position" in the minds of consumers in the target segment(s)
• Select, develop, signal, and maintain the chosen positioning concept
• Positioning results in the creation of a successful customer-focused value proposition
• Convince consumers in the target segment to choose offerings (and not somebody else's offering)

Defining Associations

• Points-of-difference (PODs)
• Attributes or benefits consumers strongly associate with a brand they could not find to the same extent with a competitive brand
• Points-of-parity (POPs)
• Associations that are not necessarily unique to the brand but may be shared with other brands
  • Category POPs are viewed as essential
  • Competitive POPs negate competitors' PODs

Question: When to focus on Points of Difference and When on PoP?

• Consider:
• Maturity of the market
• Positioning of the company
• Whether the market is highly price-sensitive or fast growing

Positioning Maps

• Understand the competitive structure of a market
• Determine customer view of the brand
• Determine which brands customers perceive to be the closest competitors
• Determine which attributes are responsible for these perceived differences

Criteria for a Successful Positioning Concept

• It must be:
• Important and meaningful to the segment
• Credibly superior
• Pioneering with a first mover advantage
• Distinctive
• Sustainable
• Communicable
• Feasible

Types of Positioning Concepts

• Can be based on:
• Features and benefits
• Price/Quality
• Product user
• Competitor
• Product class
• Symbol and imagery
• Companies need to manage the tradeoff (to convince customers)

Explore essential marketing strategies that are taught in business school. This session discusses segmentation and its importance. It also covers positioning strategy focusing on points of difference.