Session 2_Hard_Segmentation, Targeting, Positioning

Course Framework

• Marketing strategy includes segmentation, targeting, and positioning.
• Marketing strategy relies on marketing research and consumer behavior as prerequisites
• Marketing Plan includes product, price, promotion, and place

Developing a Marketing Strategy

• Segmentation involves "slicing" the market by identifying segmentation variables; profiles of resulting segments are developed.
• Targeting follows segmentation.
• Positioning follows targeting.

Segmentation Insight

• There is no perfect Pepsi because customer preference varies between 8% and 12% aspartame
• Campbell created 45 different Prego tomato sauce variants and asked consumers to rate them
• Clustering consumers based on data revealed that ⅓ liked spicy sauce, ⅓ liked natural sauce, and ⅓ liked extra chunky sauce
• An extra chunky sauce was not found in the US, yet had $600 million in sales after being introduced

What is Segmentation?

• Segmentation identifies relatively homogeneous groups of customers with respect to perceptions, evaluations, needs, and wants.

Why Segmentation?

• Insufficient segmentation is a reason for new product failure

Customer Needs

• Segmentation helps understanding customer needs

Segmentation Issues

• It can be difficult or costly to satisfy the entire market with one product/service.
• There may be limited resources to attract all customers.
• There can be less opportunities to profit or stay competitive.

Segmentation Strategies

• Segmentation should be based on customer needs and factors driving purchase decisions instead of peripheral characteristics.
• Techniques like cluster analysis can create mutually exclusive and collectively exhaustive groups.
• Demographics should make each need-based segment become distinct and identifiable.

Bases for Segmenting Consumer Markets

• Consumer markets can be segmented geographically, demographically, psychographically, and behaviorally.
• Geographic segmentation includes segmenting by nations, states, regions, counties, cities, and neighborhoods.
• Demographic segmentation includes age, gender, family lifecycle, life stage, income, generation, and social class.
• Psychographic segmentation relies on traits, values, or lifestyles (activities, interests, opinions).
• Behavioral segmentation examines benefits sought, user status, user rate, and loyalty status.

Geographic Implementation

• Geographic segmentation examples
• Ford offers different car fleets in the USA versus Germany.
• Starbucks tailors its operations depending on the country
• Mc Donalds offers geographic variations of their menu

Demographic segmentation

• Demographic segmentation includes Age, Income, Gender, Education, Family size, Religion and Occupation
• Lego sets are segmented into Duplo (preschool), Lego (early mid-schoolers), and Lego Technic (older kids).
• Clothes and shoes are often segmented by gender
• Products such as the Fortune at the Bottom of the Pyramid are designed for lower income people
• Products such as the Elite Superyachts magazine are designed for high income people

Psychographic segmentation

• Quidel a company making pregnancy tests, uses segmentation tactics
• It segments the early pregnancy test market based on demographics such as age and income.
• It also segments the market based on why a woman might take a pregnancy test.
• This results in 2 segments -Hopefuls -Fearfuls
• The hopefulls and fearfuls have varying characteristcs
• The brand names of pregnancy test kits differ based on whether the segment is a hopeful one or a fearful one

Behavioral Segmentation

• Includes occasions, user status, usage rate, adoption status, loyalty status, and attitude
• Behavior can be segmented by online behavior with criteria such as abandoned carts or social network usage

Social Technographics

• Segmentation on online behavior includes creators, conversationalists, critics, collectors, joiners, spectators and inactives

Predictive Analysis

• Data identifies segments through predictive analysis
• Orbitz found Apple users typically spend 30% more a night on hotels
• Target used predictive analysis to figure out if teen girls were pregnant

Characteristics of Usable Market Segments

• Market segments must:
  • Be Measurable
  • Be Substantial
  • Be Accessible
  • Be Differentiable
  • Be Actionable

Key Takeaways

• Segmentation separates customers into groups to maximize within-group homogeneity and between-group heterogeneity.
• Segments differ based on what consumers want and on how the 4Ps react.
• Segmentation should be identified and actionable through segmentation variables and underlying needs.
• Understanding why customers buy products also plays into consumer analyses and insight.

Targeting

• Key question: Which market segments will the firm invest its resources in?
• The ideal segment wants the firm and is generally attractive
• Attractiveness can be defined by metrics like segment size and growth, capacity utilization, impacts on other segments, pricing, cost to serve, and acquisition cost.

Patterns of Target Market Selection

• Firms must consider the risk of going after just one segment.

Positioning

• Positioning decides on a unique "position" in the minds of consumers
• Must select, develop, signal and maintain the chosen positioning concept

Defining Associations in Positioning

• Points-of-difference (PODs) are attributes/benefits consumers strongly associate with a brand and can't find elsewhere.
• Points-of-parity (POPs) are associations that are present in other brands.
• Category POPs are essential for offerings within a product category.
• Competitive POPs negate competitors' PODs by matching or neutralizing features and benefits.
• Focus on Points of Difference depends on maturity of market, positioning of company, price vs. sensitive metrics and growing markets
• Positioning results thanks to successful creation of a customer-focused value proposition
• You must convince customers in the target segment to choose you

Positioning Maps

• Used to understand the competitive structure of markets
• They portray:
  • How customers view the brand
  • Which brands are closest competitors
  • Relevant perceived differences

Criteria for Successful Positioning

• A successful positioning concept:
  • Is important and meaningful
  • Is credibly superior
  • Is pioneering
  • Distinctive, Sustainable, Communicable
  • And is feasible at reasonable cost

Negatively Correlated Attributes

• In order to convince customers you may need to manage tradeoffs, as some attributes may be negatively correlated

Types of Positioning Concepts

• Positioning can be based on:
  • Features and benefits
  • Price/quality, product user
  • Competitor, product class
  • Symbol and imagery