Segmentation, Targeting and Positioning PDF

Segmentation, Targeting and Positioning Dr. Kanu Raheja Segmentation  Segmentation involves dividing a diverse market into a number of smaller, similar, sub-markets. Assume you are the person running a grocery store. You could segment your market into two segments:  F...

Segmentation, Targeting and Positioning Dr. Kanu Raheja Segmentation  Segmentation involves dividing a diverse market into a number of smaller, similar, sub-markets. Assume you are the person running a grocery store. You could segment your market into two segments:  Family feeders who come to store on behalf of their whole family and who make regular purchases.  And On the go customers: those who have a busy lifestyles due to jobs or studies etc. and tend to buy ready to eat foods, snacks and other convenience foods.  For instance, you will keep ready-to-eat products in the front of the store to increase their visibility to on-to-go customers. And you can update your inventory on the basis of the number of family feeders and the frequency of their visits.  Thus market segmentation facilitates consumer-oriented marketing. It helps in optimising your marketing program and making best use of the resources at your disposal. And this, in turn, leads to higher sales and profits for the firm. Stages of Market Segmentation  Deciding the basis of segmentation  Determining important characteristics of each market segment.  Basis of Segmentation Geographic  Nations  States  Regions  Cities  Neighbourhood Example: Fast food giant McDonalds. In response to different preferences in the different countries, it serves McAloo Tikki in India, McArabia in the Middle East and banana pie in Brazil. And it serves beer in its German outlets but not in its U.S. outlets.  Demographic Segmentation  Age  Gender  Family size  Income  Occupation  Education  Religion  Ethnicity  Online furniture selling company Pepperfry. It uses age and life stages as a basis for forming segments with possible segments including unmarried adults, married adults with no kids, married with young kids, married adults with grown up kids and so on. Psychographic Segmentation  Lifestyle  Personality traits “Harley Davidson bikers”. These people are typically men who wish to experience the freedom and lifestyle that go with owning and riding large, heavy motorcycles in the countryside, often with other bikers like them. Harley Davidson segments the market for motorcycles based on such personality traits of customers in the marketplace. Behavioural Segmentation  Usage occasions  Usage rate  Loyalty status  Buyer-readiness  Attitude Hallmark, the company that sells greeting cards for all occasions. The primary target segment for Hallmark is people buying cards for different occasions. Usage occasions are also often correlated with consumer needs and buying behaviour. Targeting  Targeting involves evaluating the various segments and deciding how many and which ones to target. Thus, targeting follows segmentation Target Marketing Strategies  Full Market Coverage With full market coverage, a firm attempts to serve all customer groups with all the products they might need. Firms such as Microsoft and Coca-Cola undertake full market coverage. Undifferentiated or mass-marketing In an undifferentiated or mass marketing strategy, the whole population is treated as a single market and the same marketing mix is used to reach everyone in the market. It is appropriate when all consumers have same preferences and the market shows no natural segments Companies offering mass-market commodities such as petrol, milk, gas, etc. usually practise this strategy. Differentiated strategy Here the population is divided into several segments and a different marketing mix is used to reach two or more of the segments. Most car companies like General Motors, Hyundai, Toyota now offers cars specifically designed to cater to many different segments of customers varying from high-income family to low-income individual segments.  Multiple segment specialization: with selective specialization, a firm selects a subset of all possible segments, each objectively appropriate and attractive. There maybe little or no synergy among the segments, but each promises to be a moneymaker. Product specialization: the firm sells certain products to several different market segments. For example: A microscope manufacturer sells to university, government and commercial laboratories. Market specialization: The firm concentrates on serving many needs of particular customer group, such as selling an assortment of products only to university laboratories. Single segment concentration or Concentrated or niche strategy  Here the population is divided into several segments but the company develops one specific marketing mix specially for one market segment only. Mercedes offers premium cars for the upper-income segment of the market only. It does not offer cars for the middle and lower income segments. Individual/ customized or one to one Marketing: It refers to the ability of the company to meet each customer’s requirements- to prepare on a mass basis individually designed products, services, programs and communications. For example : Mini Cooper’s online configurator allows prospective buyers to virtually select ad try out many options for new MINI. Framework for one to one marketing  1. Identify your prospects and customers.  2. Differentiate customers in terms of : I) Their needs II) Their value to your company 3. Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships 4. Customize products, services and messages to each customer. 3Cs framework Customers  Competition  Company  Sports shoe company Daily comfort High-end fashion Fitness freaks Positioning  Positioning is the process of occupying a meaningful and distinctive space in the mind of your target consumers relative to competition.  Brand substitution Test: A measure of effectiveness of organization’s positioning  Take the case of Ola Cabs. They target busy urban professionals who prefer the convenience and relative luxury of cabs over public transport. For these consumers time is precious so they want a reliable and fast way to travel.  The value proposition of Ola Cabs might include benefits such as accessibility, availability, reliability and speed of booking etc.  However, in order to differentiate themselves from competition Ola Cabs need to focus on those benefits that are distinctive in nature, and occupy a key space in consumers’ minds relative to the competitors. And so, Ola may decide to position itself as the : Fastest and most reliable way to book cabs. Pre-requisites of Positioning  1. Choosing a frame of reference by identifying the target market and relevant competition.  2. Identifying the optimal points of parity and points of difference brand associations given that frame of reference.  Creating a Brand Mantra summarizing the positioning and essence of brand.  Choosing a Competitive frame of reference: defines which other brands a brand competes with. It Includes:  Identifying competitors Category Membership: The set of products with which a brand competes and that functions as close substitutes.  Analysing competitors: a company needs to gather information about each competitor’s real and perceived strength and weeknesses.  Identifying Potential Points of Difference and Points of Parity POINTS OF DIFFERENCE & POINTS OF PARITY  POINTS OF DIFFERENCE  POINTS OF PARITY  Attributes or benefits that  Associations that are not consumer strongly associates unique to a brand but may be with a brand. shared with other brands.  Believe they could not find the  Two Forms: same with competitive brand  Category POP  Competitive POP Levels to anchor POD  Desirable to consumer  Deliverable by company  Differentiating from competitors Points of Parity  Category POP  Correlational POP  Competitive POP  Multiple frames of Reference: refers to identifying more than one actual or potential competitive frame of reference, in case the competition widens and a firm plans to expand.  Straddle positioning: Mc Donalds Case Mc Donalds Case The Problem Statement Promote Weekly offers Mc Delivery App  Given Indian consumer habbits,  As one of the largest food with a majority of Indians still chains, Mc Donalds wants to maintaining a fasting day reduce their dependency on either on Tuesdays or third party aggregators and Thrusdays, they designed leverage their large number of special discounted deals to retail chains to do direct promote for specific days, they delivery want to now use digital channels to ensure people are aware of the Price drops on specific weekdays.  Facebook adopted a four-phase approach to these problem  statements Phase 1: Campaign Planning In this phase, it is crucial to clearly outline the objectives and the goals of the campaign.  Phase 2: Content Planning - Identifying the Type of Content In this phase, you should create content that aligns with your campaign objectives. Moreover, the content must resonate with the target audience.  Phase 3: Media Planning - Campaign Set Up - Creating a Social Media Calendar and Setting Up the Campaign. In this phase, you set up the campaign, define the duration and select the placement options for your ad creatives.  Phase 4: Campaign Measurement - Define the Metrics to be Tracked In this phase, you define the metrics that will be measured and tracked constantly to evaluate the success of the campaign.  Phase-1 Campaign Planning  Define campaign a) Well aligned to Problem statement Objective  a) Facebook ads manager offers various objectives  Set Goals and b) Example for awareness campaign you can choose metrics like website views, Metrics number of clicks, for performance campaigns you can use metrics such as cost per  install  a) Facebook builts smaller cohorts of audience  Define Target b) Targeted Tier-1 and Tier-2 cities  audience-PS-1 c) Also included Interest based and behaviour segments to the cohort  a) Targeted users on the basis of devices  b) Targeted People with WiFi connections instead of people with mobile data Define Target  c) Get various audience insights from facebook IQ website and audience insights Audience PS_2 website Phase -2 Content Planning  1. Identify the content format you want to use. These can be videos, Images, Poll questions.  2. Mc Donalds choose to create static ads, carousel ads and short video ads.  3. Also considered playable ads and poll questions  4. Considered the content placement options across the facebook family of apps  5. Select at least four placement options for your content as a best practice Phase-3 Campaign Setup Awareness campaign  Reach and frequency- 10 Lakh people daily Performance Campaign  Auction based Bidding  Set up campaign Duration (Live or Day parting)  Phase-4 Campaign Measurement Awareness Performance campaign campaign  Video Views Numbers of Installs  Video Watch time Cost per install Phase 2: Content Planning  First, you should identify the content format that you want to use. For example, you can use carousel ads for effective storytelling and for driving traffic to the McDelivery app, and video ads to help the brand resonate with the target audience.  The content in the posts has to be accurate, concise and informative. While developing content, it is highly recommended to focus on the objectives and goals of the company. You should select at least four placement options for your ads.  You should create content pieces that can be repurposed in different formats across different placement options.  Phase 3: Media Planning  Media planning is done in terms of how to set up and structure these campaigns for success.  Fix the metrics to be tracked based on the campaign objectives: For the awareness campaign (weekly offers), you can select ‘brand awareness’ as the objective and ‘video views’ as the metric. Similarly, for the performance campaign, you can choose ‘website visit’ as the objective, and you can measure app installs and app engagement as a metric.  Deciding the right bid amount: Decide the starting bid first and then decide the highest bid that you can place for an ad. This will fix the range for the bids.  Decide the duration for and the frequency at which your audience will see the ads: For example, to promote the weekly offers of McDonald’s, you can start running the campaign 2-3 days in advance depending on the historical engagement data.  Make sure each user can see the ad only once, by limiting the audience for each ad. The goal here is to create an impression on the user without spamming them.  Ensure proper and sufficient ad placement: The dimensions of the ads should suit the format and placement. Choose at least four placement options across the Facebook family of apps. Phase 4: Measurement Assess and track the key metrics that you have defined for each of the problem statements. Regular monitoring and tracking helps the campaigns perform efficiently. Do not make multiple changes to the campaign on an hourly basis. This will affect the performance of the campaign. Consumer Buying Behaviour Consumer Behavior  Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants. Marketers must fully understand both the theory and the reality of consumer behavior. Factors affecting consumer’s buying behaviour are:  Cultural  Social  Personal Factors  Factors Influencing consumer’s buying behavior  Cultural: Culture is the fundamental determinant of a person’s wants and behavior. Through family and other key institutions, a child growing up in the United States is exposed to values such as achievement and success, activity, efficiency and practicality, progress, material comfort, individualism, freedom, external comfort, humanitarianism, and youthfulness. A child growing up in another country might have a different view of self, relationship to others and rituals  Social : such as reference groups, family, and social roles and statuses affect our buying behavior. 1. Reference groups are all the groups that have a direct (face-to-face) or indirect influence on their attitudes or behavior. a) Membership Groups: Groups having a direct influence are called membership groups. It includes: i)Primary groups with whom the person interacts fairly continuously and informally, such as family, friends, neighbors, and coworkers. ii) Secondary groups, such as religious, professional, and trade-union groups, which tend to be more formal and require less continuous interaction. Reference groups influence members in at least three ways: Aspirational groups are those a person hopes to join, Dissociative groups are those whose values or behavior an individual rejects. Opinion leader is the person who offers informal advice or information about a specific product or product category, such as which of several brands is best or how a particular product may be used.  2. Cliques: Communication researchers propose a social-structure view of interpersonal communication. They see society as consisting of cliques, small groups whose members interact frequently. Clique members are similar, and their closeness facilitates effective communication but also insulates the clique from new ideas. The challenge is to create more openness so cliques exchange information with others in society. This openness is helped along by people who function as liaisons and connect two or more cliques without belonging to either and by bridges, people who belong to one clique and are linked to a person in another.  3. Family: The family of orientation consists of parents and siblings. From parents a person acquires an orientation toward religion, politics, and economics and a sense of personal ambition, self-worth, and love. Family of procreation—namely, the person’s spouse and children. In the United States, in a traditional husband–wife relationship, engagement in purchases has varied widely by product category. The wife has usually acted as the family’s main purchasing agent, especially for food, sundries, and staple clothing items. Now traditional purchasing roles are changing, and marketers would be wise to see both men and women as possible targets.  4. Roles and Status: role consists of the activities a person is expected to perform. Each role in turn connotes a status. A senior vice president of marketing may have more status than a sales manager, and a sales manager may have more status than an office clerk. People choose products that reflect and communicate their role and their actual or desired status in society. Marketers must be aware of the status-symbol potential of products and brands.  Personal Factors Personal characteristics that influence a buyer’s decision include age and stage in the life cycle, occupation and economic circumstances, personality and self- concept, and lifestyle and values. 1. Age and Stage in the Life Cycle: Our taste in food, clothes, furniture, and recreation is often related to our age. Consumption is also shaped by the family life cycle and the number, age, and gender of people in the household at any point in time.  2. Occupation and Economic Circumstances Occupation also influences consumption patterns. Marketers try to identify the occupational groups that have above-average interest in their products and services and even tailor products for certain occupational groups: Computer software companies, for example, design different products for brand managers, engineers, lawyers, and physicians.  3.Personality and Self-Concept By personality, we mean a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli including buying behavior. We often describe personality in terms of such traits as self-confidence, dominance, autonomy, deference, sociability, defensiveness, and adaptability. Brand personality Traits: 1. Sincerity (down to earth, honest, wholesome, and cheerful) 2. Excitement (daring, spirited, imaginative, and up to date) 3. Competence (reliable, intelligent, and successful) 4. Sophistication (upper-class and charming) 5. Ruggedness (outdoorsy and tough)  4. Lifestyle and Values People from the same subculture, social class, and occupation may adopt quite different lifestyles. A lifestyle is a person’s pattern of living in the world as expressed in activities, interests, and opinions. It portrays the “whole person” interacting with his or her environment. Marketers search for relationships between their products and lifestyle groups. A computer manufacturer might find that most computer buyers are achievement- oriented and then aim the brand more clearly at the achiever lifestyle. The Buying Decision Process: The Five-Stage Model Problem Recognition  The buying process starts when the buyer recognizes a problem or need triggered by internal or external stimuli. With an internal stimulus, one of the person’s normal needs—hunger, thirst— rises to a threshold level and becomes a drive. A need can also be aroused by an external stimulus. Information Search  Consumers often search for only limited information. Surveys have shown that for durables, half of all consumers look at only one store, and only 30 percent look at more than one brand of appliances. We can distinguish between two levels of engagement in the search.  The milder search state is called heightened attention : At this level a person simply becomes more receptive to information about a product.  At the next level, the person may enter an active information search: looking for reading material, phoning friends, going online, and visiting stores to learn about the product.  1. Information Sources Personal. Family, friends, neighbors, acquaintances Commercial. Advertising, Web sites, e-mails, salespersons, dealers, packaging, displays Public. Mass media, social media, consumer-rating organizations Experiential. Handling, examining, using the product 2. Search Dynamics  Market Partitioning: Brand dominant hierarchy Nation dominant hierarchy Evaluation of Alternatives  First, the consumer is trying to satisfy a need. Second, the consumer is looking for certain benefits from the product solution. Third, the consumer sees each product as a bundle of attributes with varying abilities to deliver the benefits. The attributes of interest to buyers vary by product—for example: 1. Hotels—Location, cleanliness, atmosphere, price 2. Mouthwash—Color, effectiveness, germ-killing capacity, taste/flavor, price 3. Tires—Safety, tread life, ride quality, price  We can often segment the market for a product according to attributes and benefits important to different consumer groups. Beliefs and Attitudes Through experience and learning, people acquire beliefs and attitudes. These in turn influence buying behavior. A belief is a descriptive thought that a person holds about something. Just as important are attitudes, a person’s enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. People have attitudes toward almost everything: religion, politics, clothes, music, or food.  Expectancy-Value Model The expectancy-value model of attitude formation posits that consumers evaluate products and services by combining their brand beliefs—the positives and negatives— according to importance. Suppose Linda has narrowed her choice set to four laptops (A, B, C, and D). Assume she’s interested in four attributes: memory capacity, graphics capability, size and weight, and price. Suppose she assigned 40 percent of the importance to the laptop’s memory capacity, 30 percent to graphics capability, 20 percent to size and weight, and 10 percent to price. To find Linda’s perceived value for each laptop according to the expectancy-value model, we multiply her weights by her beliefs about each computer’s attributes. This computation leads to the following perceived values:  Laptop A = 0.4182 + 0.3192 + 0.2162 + 0.1192 = 8.0  Laptop B = 0.4172 + 0.3172 + 0.2172 + 0.1172 = 7.0  Laptop C = 0.41102 + 0.3142 + 0.2132 + 0.1122 = 6.0  Laptop D = 0.4152 + 0.3132 + 0.2182 + 0.1152 = 5.0  An expectancy-model formulation predicts that Linda will favor laptop A, which (at 8.0) has the highest perceived value  Purchase Decision  In the evaluation stage, the consumer forms preferences among the brands in the choice set and may also form an intention to buy the most preferred brand. In executing a purchase intention, the consumer may make as many as five subdecisions: brand (brand A), dealer (dealer 2), quantity (one computer), timing (weekend), and payment method (credit card).  Non-compensatory Models of Consumer Choice: With non-compensatory models of consumer choice, positive and negative attribute considerations don’t necessarily net out. Three choice heuristics are as follows:  1. Using the conjunctive heuristic, the consumer sets a minimum acceptable cutoff level for each attribute and chooses the first alternative that meets the minimum standard for all attributes. For example, if Linda decided all attributes had to rate at least 5, she would choose laptop B.  2. With the lexicographic heuristic, the consumer chooses the best brand on the basis of its perceived most important attribute. With this decision rule, Linda would choose laptop C.  3. Using the elimination-by-aspects heuristic, the consumer compares brands on an attribute selected probabilistically— where the probability of choosing an attribute is positively related to its importance—and eliminates brands that do not meet minimum acceptable cutoffs. Intervening Factors Postpurchase Behavior  Postpurchase Satisfaction: Satisfaction is a function of the closeness between expectations and the product’s perceived performance. If performance falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is delighted. These feelings make a difference in whether the customer buys the product again and talks favorably or unfavorably about it to others. The larger the gap between expectations and performance, the greater the dissatisfaction. Here the consumer’s coping style comes into play. Some consumers magnify the gap when the product isn’t perfect and are highly dissatisfied; others minimize it and are less dissatisfied.  Postpurchase Actions: A satisfied consumer is more likely to purchase the product again and will also tend to say good things about the brand to others. Dissatisfied consumers may abandon or return the product. They may seek information that confirms its high value. They may take public action by complaining to the company, going to a lawyer, or complaining directly to other groups (such as business, private, or government agencies) or to many others online. Private actions include deciding to stop buying the product (exit option) or warning friends (voice option).  Postpurchase Uses and Disposal: Marketers should also monitor how buyers use and dispose of the product. A key driver of sales frequency is product consumption rate—the more quickly buyers consume a product, the sooner they may be back in the market to repurchase it. Consumers may fail to replace some products soon enough because they overestimate product life. One strategy to speed replacement is to tie the act of replacing the product to a certain holiday, event, or time of year.  Another strategy is to provide consumers with better information about either (1) the time they first used the product or need to replace it or (2) its current level of performance. Batteries have built-in gauges that show how much power they have left; razors have color in their lubricating strips to indicate when blades may be worn; and so on. Perhaps the simplest way to increase usage is to learn when actual usage is lower than recommended and persuade customers that more regular usage has benefits, overcoming potential hurdles.  Key Psychological Processes  Four key psychological processes—motivation, perception, learning, and memory— fundamentally influence consumer responses Motivation  We all have many needs at any given time. Some needs are biogenic; they arise from physiological states of tension such as hunger, thirst, or discomfort. Other needs are psychogenic; they arise from psychological states of tension such as the need for recognition, esteem, or belonging.  Theories of human motivation—those of Sigmund Freud, Abraham Maslow, and Frederick Herzberg Freud’s Theory  Sigmund Freud assumed the psychological forces shaping people’s behavior are largely unconscious and that a person cannot fully understand his or her own motivations. Someone who examines specific brands will react not only to their stated capabilities but also to other, less conscious cues such as shape, size, weight, material, color, and brand name. A technique called laddering lets us trace a person’s motivations from the stated instrumental ones to the more terminal ones. Then the marketer can decide at what level to develop the message and appeal Maslow Theory Herzberg’s Theory  Frederick Herzberg developed a two-factor theory that distinguishes dissatisfiers (factors that cause dissatisfaction) from satisfiers (factors that cause satisfaction). The absence of dissatisfiers is not enough to motivate a purchase; satisfiers must be present. For example, a computer that does not come with a warranty is a dissatisfier. Yet the presence of a product warranty does not act as a satisfier or motivator of a purchase because it is not a source of intrinsic satisfaction. Ease of use is a satisfier. Herzberg’s theory has two implications. First, sellers should do their best to avoid dissatisfiers (for example, a poor training manual or a poor service policy). Although these things will not sell a product, they might easily unsell it. Second, the seller should identify the major satisfiers or motivators of purchase in the market and then supply them. Perception  Perception is the process by which we select, organize, and interpret information inputs to create a meaningful picture of the world. Perception depends not only on physical stimuli but also on the stimuli’s relationship to the surrounding environment and on conditions within each of us. People emerge with different perceptions of the same object because of three perceptual processes: selective attention, selective distortion, and selective retention.  Selective Attention Attention is the allocation of processing capacity to some stimulus. Voluntary attention is something purposeful; involuntary attention is grabbed by someone or something. It’s estimated that the average person may be exposed to more than 1,500 ads or brand communications a day. Because we cannot possibly attend to all these, we screen most stimuli out—a process called selective attention.  Selective distortion is the tendency to interpret information in a way that fits our preconceptions. Consumers will often distort information to be consistent with prior brand and product beliefs and expectations. For a stark demonstration of the power of consumer brand beliefs, consider that in blind taste tests, one group of consumers samples a product without knowing which brand it is while another group knows. Invariably, the groups have different opinions, despite consuming exactly the same product.  Selective Retention Most of us don’t remember much of the information to which we’re exposed, but we do retain information that supports our attitudes and beliefs. Because of selective retention, we’re likely to remember good points about a product we like and forget good points about competing products. Selective retention again works to the advantage of strong brands. It also explains why marketers need to use repetition—to make sure their message is not overlooked.  Subliminal Perception The selective perception mechanisms require consumers’ active engagement and thought. Subliminal perception has long fascinated armchair marketers, who argue that marketers embed covert, subliminal messages in ads or packaging. Consumers are not consciously aware of them, yet they affect behavior. Although it’s clear that mental processes include many subtle subconscious effects, no evidence supports the notion that marketers can systematically control consumers at that level, especially enough to change strongly held or even moderately important beliefs Learning  Learning induces changes in our behavior arising from experience. Most human behavior is learned, though much learning is incidental. Learning theorists believe learning is produced through the interplay of drives, stimuli, cues, responses, and reinforcement.  A drive is a strong internal stimulus impelling action. Cues are minor stimuli that determine when, where, and how a person responds. Suppose you buy an HP laptop computer. If your experience is rewarding, your response  The size and shape of the glass and the color and smell of the liquid are all cues which may affect consumer perceptions and evaluations when drinking a glass of orange juice. Emotions  Consumer response is not all cognitive and rational; much may be emotional and invoke different kinds of feelings. A brand or product may make a consumer feel proud, excited, or confident. An ad may create feelings of amusement, disgust, or wonder. Brands like Hallmark, McDonald’s, and Coca-Cola have made an emotional connection with loyal customers for years. Marketers are increasingly recognizing the power of emotional appeals—especially if these are rooted in some functional or rational aspects of the brand. Memory  Cognitive psychologists distinguish between short-term memory (STM)—a temporary and limited repository of information—and long-term memory (LTM)—a more permanent, essentially unlimited repository. All the information and experiences we encounter as we go through life can end up in our long-term memory. Most widely accepted views of long-term memory structure assume we form some kind of associative model.  For example, the associative network memory model views LTM as a set of nodes and links. Nodes are stored information connected by links that vary in strength. Any type of information can be stored in the memory network, including verbal, visual, abstract, and contextual