Market Segmentation, Targeting and Positioning

Chapter 5 Market Segmentation, Targeting and Positioning FOUNDATIONS OF MARKETING Fifth Edition John Fahy & David Jobber  A Definition of Market Segmentation The identification of individuals or organizations with similar characteristics that have significant...

Chapter 5 Market Segmentation, Targeting and Positioning FOUNDATIONS OF MARKETING Fifth Edition John Fahy & David Jobber  A Definition of Market Segmentation The identification of individuals or organizations with similar characteristics that have significant implications for the determination of marketing strategy.  Market Segmentation Involves the division of a diverse market into a number of smaller submarkets that have common features The objective is to identify groups of potential customers with similar requirements Market segmentation provides a commercially viable method of serving customer needs Segmentation is at the heart of strategic marketing The Benefits of Market Segmentation Segmenting Consumer Markets  No best way of segmenting a market – more than one way can be used Key to remember that consumers can move between segments over time: Behavioural – possibly the ultimate basis for segmentation as the purpose of segmentation is to identify differences in behaviour that have implications for marketing decisions Psychographic – used when researchers believe purchasing behaviour is correlated with the personality or lifestyle of consumers Profile segmentation – used to describe the people within the segment e.g. socio economic group, geographic location Consumer Segmentation Methods  Behavioural Benefits sought – identifies why people buy – fundamental because object of marketing is to provide consumers with benefits they value Purchase behaviour – degree of brand loyalty – loyalty cards can be used to link purchase behaviour with individuals (biographics) Usage – heavy, light or non-users of a product Psychographic Lifestyle – how people live their lives (e.g. enjoyment of outdoor activities) Profile Age (e.g. children’s segment worth $1 trillion pa) Social class – based on occupation (e.g. having central heating, media consumption) Geography – can be combined with demographics (geodemographics)  Benefits Sought Patek Philippe uses powerful emotional appeal to convey the benefits of ownership of a luxury watch The ACORN Targeting Classification  Segmenting Organizational Markets Organizational markets, in contrast to consumer markets, tend to be characterized by relatively small number of buyers. Some of the most useful bases for segmenting organizational markets are: – Organizational size – Industry – Geographic location – Choice criteria (key purchasing criteria) – Purchasing organization (centralised or decentralised) Segmenting Organizational Markets  Five Criteria for Successful Segmentation Effective – consisting of consumers with homogeneous needs Measurable – possible to identify customers in the segment and understand their characteristics and behaviour patterns) Accessible – firm must clearly be able to identify effective marketing programmes for the segment Actionable – firm must have resources to action the marketing programmes Profitable – segment must be large enough to be profitable to serve  Target Marketing Target marketing refers to the choice of specific segments to serve, and is a key element in marketing strategy An organizations needs to evaluate the segments to decide which ones to serve using the five criteria for successful segmentation (i.e. which segments to target) Target Marketing Strategies  Target Marketing Strategies Undifferentiated marketing: a company develops a single marketing mix for the whole market Differentiated marketing: a company develops specific marketing mixes to appeal to all or some of the segments (e.g. cars, fashion retailing) Focused marketing: a company develops a single marketing mix aimed at one target (niche) market Customized marketing: a company develops a discrete marketing mix for each customer (e.g. advertising agencies, solicitors) Target Market  Positioning The act of designing the company’s offering so that it occupies a meaningful and distinct position in the target consumers mind. A reminder: – Market segmentation – examining different needs and preferences in a market – Market targeting – deciding which segment or segments firm will serve Effective positioning: – Linking products and services to the solutions that consumers seek Positioning: Coca-Cola  Developing a Positioning Strategy Deciding what position to occupy in the market requires consideration of three variables: – The customers – what attributes matter to them – The competitors – a differential advantage that ideally cannot be easily matched – The company – unique sustainable attributes Keys to Successful Positioning  Clarity – idea must be perfectly clear in terms of target market and differential advantage (e.g. ‘L’Oreal – because I’m worth it’, ‘BMW – the ultimate driving machine’ Consistency – needed to break through ‘noise’ in communication process Credibility – differential advantage must be credible in minds of target consumers (e.g. failure to re-position roll-your-own cigarette tobacco as upmarket exclusive produce) Competitiveness – differential advantage must have a competitive edge – offering something to the customer that the competition is failing to supply  The Perceptual Map The perceptual map is a useful tool for determining the position of a brand in the marketplace. The key steps in producing a perceptual map are: – Identify a set of competing brands – Identify the important attributes consumers use when choosing between brands – Conduct quantitative marketing research where consumers score each brand on all key attributes – Plot brands on a two-dimensional map A Perceptual Map of Supermarkets  Repositioning Products sometimes need to be repositioned due to changing consumer tastes or poor sales performance Repositioning involves changing: – the target markets – the differential advantage – or both Alternative Repositioning Strategies