Unit 5: Segmentation and Positioning PDF

Strategic Marketing Sofía Alonso Ibáñez 2ºCYM UNIT 5: SEGMENTATION AND POSITIONING It´s difficult to serve a whole market. To be able to do that, buyers may be: - Too numerous. - Too widely scattered. -...

Strategic Marketing Sofía Alonso Ibáñez 2ºCYM UNIT 5: SEGMENTATION AND POSITIONING It´s difficult to serve a whole market. To be able to do that, buyers may be: - Too numerous. - Too widely scattered. - Too varied in their needs and buying practice. So, companies must identify the parts of the market that it can serve best and most profitably. - They do that through: 1. SEGMENTATION Segmentation consists of dividing a market into smaller segments with distinct needs, characteristics, or behavior that might require separate marketing strategies or mixes. So, consumers differ in: - Wants, resources, locations, buying attitudes and buying practices. o Different segmentation basis. Different ways to segment a market. - And market segmentation divides large and heterogeneous markets into smaller segments that can be reached more efficiently and effectively. Segmenting consumer markets: - There is no single way to segment a market. There are several variables: o Geographic. o Demographic. o Psychographic. o Behavioral. Variables to segment a market. - Geographic segmentation. o Dividing the market into different geographical units (nations, regions, cities or neighbourhoods). ▪ Example: tesco (a supermarket) has different types of markets. Tesco metro, located in city centres or high streets; tesco express, with everyday essentials… - Demographic segmentation. o Dividing the market into groups based on age, gender, family size, family life cycle, income, occupation, education, religion, race, generation and nationality. ▪ Oral b divides into age and life-cycle stage (frozen or spiderman tooth brushes). ▪ L´Oreal divides into gender. ▪ American Express divides into income. - Psychographic segmentation. o Dividing buyers into different groups based on: ▪ Social class. ▪ Lifestyle. ▪ Personality characteristics. Strategic Marketing Sofía Alonso Ibáñez 2ºCYM - Behavioral segmentation. o Dividing buyers into groups based on their knowledge, attitudes, uses or responses to a product. ▪ User status: non-users, ex-users, first time users, regular users. Sometimes brands offer better products to non-users than to users (example: telecommunications) ▪ Usage rate: light users, medium users, heavy users. Printers. ▪ Loyalty status: high loyalty users, medium loyalty users, no loyalty. Only giving you access to certain products when you have already bought a quantity of bottles (loyalty program), point cards… Relationship market. Primary segmentation variables for business markets. - Demographics. o Industry, company size, location. - Operating variables. o Technology, user/non user status, customer capabilities. - Purchasing approaches. o Nature of existing relationships (with other suppliers). o General purchase policies (leasing – purchase - rent). o Purchasing criteria: quality, price, service. - Personal characteristics. o Loyalty to their suppliers. o Buyer seller similarities. o Attitudes toward risk. - Situational factors. o Urgency of demand. o Size of order. Requirements for effective segmentation. - There are some characteristics that the segment must have to be effective. - Measurable. - Accessible. o Segments have to be effectively reached and served. - Substantial. o This should be large enough to be profitable (enough people in ovd willing to pay 200€ for a lunch?). - Differentiable. o Different segments must have different behavior. o When you create a segment, you create more value for people in this segment. o We capture value through the price. ▪ Selling less but at a higher margin or selling more at a smaller price. - Actionable. o Effective programs can be designed to serve the segments. Strategic Marketing Sofía Alonso Ibáñez 2ºCYM 2. MARKET TARGETING Target market. - The target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. Evaluating market segments. - Points to look at to know if a market segment is interesting. - Segment size and growth. o Maybe it is not very important today, but it will be in the future. o Big companies can target larger and fastest growing segments. ▪ They have the size and the resources. o Smaller companies may be more interested in smaller segments which are easier to serve. - Segment structural attractiveness. o Number of competitors (some markets are very crowded). o Power of customers in the segment (can they dictate the terms of the exchange?). o Power of suppliers needed to serve the segment. - Company objectives and resources. o Segments of the right size and structural attractive can be beyond a company´s long-term strategy. ▪ A company needs to find the right segment for it (it´s not the same for every company). Selecting market segments: - Why don´t we view every buyer as a separate target? The trade-off (punto de equilibrio): o Economies of scale (covering every customer makes you lose economies of scale, and you become less competitive). o Value creation (segmenting and targeting´s aim is creating value). - There are different strategies. Undifferentiated marketing (mass marketing). - This consists of centering on what is in common amongst consumers. o So, targeting the whole market with one offer (1 marketing mix for a big segment). ▪ Trying to solve basic needs. - The problem is that it is difficult to compete with more focused firms. Differentiated marketing (segmented marketing). - This consists of centering on different needs and wants of several segments. - This means several marketing plans, marketing research, advertising programs and brand building. Strategic Marketing Sofía Alonso Ibáñez 2ºCYM Concentrated marketing (Niche marketing). - When the segment is small. - This consists of centering on needs and wants. - This is useful when company resources are limited. - Internet has opened a door for niche marketing companies targeting longtailers. Micromarketing. - Tailoring offers to meet the needs of specific individuals and locations. - Local marketing: Eroski Hypermatkets and local food products. - Individual marketing: one – to - one marketing. o Relationship marketing taken to the extreme. How to choose a targeting strategy. - Company resources. o If they are low, it makes sense concentrated marketing. - Product variability. o If there are uniform products, undifferentiated marketing. - Product´s life cycle. o Undifferentiation on introduction. o Differentiation and micromarketing on maturity. - Market variability. o If consumers are alike, there is undifferentiation. - Competitor´s strategy. o If competition is differentiated, undifferentiation can be suicidal. 3. DIFFERENTIATION AND POSITIONING Brands exist to differentiate. - Worst situation for a brand: perfect competition because there are infinite numbers of buyers and sellers, no entry bounders, homogeneous products (no differences). o When the products are not perceived different, you go for the cheapest. Product position. - This is the way the product is defined by consumers at important attributes. - The place the product occupies in consumers´ minds is relative to competing products. o “Products are created in the factory. Brands are created in the mind”. ▪ A brand is only what it means to consumers, compared to competition. There are three steps on differentiation. Strategic Marketing Sofía Alonso Ibáñez 2ºCYM - Identify sources of differentiation. o Product, services, channels, people and image. - Choose the right competitive advantages. o How many: ▪ The Unique Selling Proposition (identify one thing that makes your brand special). ▪ Successful examples of several competitive advantages: El Corte Inglés. o Which ones? Those that are: ▪ Important, distinctive, superior, communicable, not easy to copy, affordable and profitable. ▪ Choose the best one. If there’s already a brand there: attack the brand, or go for second, third… ▪ Position in an attribute than no one positions into, and then upload it. - Select an overall positioning strategy. - Less for much less: low cost. Basic product, very affordable price. difficult to be profitable. Only if you are very cost effective. - The same for less: AMD manufacturer of microprocessors. If you are able to do the same performance, why charge cheaper? Contrary to nature of marketing. - More for less: so difficult. Hacendado. Not about the status. That is the success of mercadona. - More for the same: lexus (luxury division of Toyota). Lexus will have all the equipment, not as BMW of instance. Depends on how you define the competition. Lexus is premium compared to the rest of the brands, and more for the same compared to the premium category. - More for more: premium. ≠ luxury. Luxury doesn’t invent, you need a tradition, a heritage, a craftmanship… you become a luxury brand over time. - Think in competition to choose. Developing a positioning statement. - To (target segment and need) our (brand) is (concept) that (point of difference). - e.g., to busy, mobile professionals who need to always be in the loop, BlackBerry is a wireless connectivity solution that allows you to stay connected to data, people, and resources while on the go, easily and reliably, more so than competing technologies.