Market Segmentation, Targeting, and Positioning PDF

Market segmentation, Targeting and Positioning BY DR. JJULIET MUTIKI  Learning objectives By the end of this lecture, the learner should be able to: Describe the concept of market...

Market segmentation, Targeting and Positioning BY DR. JJULIET MUTIKI  Learning objectives By the end of this lecture, the learner should be able to: Describe the concept of market segmentation and explain its rationale Discuss the linkage between market segmentation, targeting and positioning Carry out market segmentation, targeting and positioning for the pharma industry Determine positioning strategies for specific sectors in the pharma industry  Market Segmentation Market segmentation is the process of dividing a total heterogeneous market for a good or service into several segments. It may be defined as a process of splitting or dividing potential customers into certain groups or segments sharing similar levels of needs It is creating sub-sets of a market based on similar characteristics of consumers with similar demands. It involves aggregating prospective buyers into groups that have common needs  Why segment markets? ❖It enables a business to change its marketing strategy and target different market segments with its advertising. ❖By adopting segmentation, a business can focus on the needs and preferences of the customers most likely to buy its products. ❖It also helps a business identify and comprehend its competitors. ❖The ratio of marketing expenses to returns to the business may also be larger. Some of the factors that have made organizations opt for segmentation include: globalization, increased numbers of competitors, more diversity among customers, technology  Factors to consider when segmenting Size: Determine the segment's size to determine whether it is actual, potential, or large enough to warrant the development of a differentiated marketing approach. Incremental cost :The increased costs to be incurred in order to fulfill a certain market segment, as well as whether they will be offset by higher profits than would have been possible had the market not already been segmented. Size of intersegment differences: There is more reason for segmentation and treating segments as independent marketplaces the larger the intersegment disparities. Durability of disparities: The higher the basis for separating the segments, the longer the differences persist between them. Cyclical volatility: a segment should be as steady as possible. Compatibility with other segments: Rather than defining segments in opposition to one another, it should focus on their compatibility. Degree of fit: The business should work to capitalize on its advantages Competition intensity: The best portions are ones where there is no direct competition.  Steps in the Segmentation Process 1. Determine market parameters (based on factors that may include or exclude clients from a group) by defining and analyzing the market. 2. Decide on the most helpful dimensions or criteria for choosing members of potential market segments, then identify and define them. Next, organize customers into homogeneous groups and create a profile of their traits. 3. Choose the segment(s) to be served by ranking them based on the organization's capacity to do so profitably and satisfactorily. Segments are chosen by evaluating them against preset criteria. 4. Determine the product positioning strategy—determine the best “fit” between a product and a market according to features most desired by customers; consider competitors’ positioning strategies, organizational goals, and the market situation. 5. Design and implement the marketing program—develop a tactical plan (marketing mix) and determine objectives for the marketing program; all elements of the marketing mix must be consistent with the selected positioning strategy  Bases for Segmenting Markets Geographic Segmentation A market may be segmented into sub-markets on the basis of geographic location division are nations, states, regions, provinces, districts, counties, cities or even neighbourhoods. An international firm may divide its market on the basis of nations and then move further down to the level of cities and neighbourhoods  Demographic Segmentation A market split into sub-segments on the basis of variables such as: religion age, culture, gender, occupation, family, profession, income, ethnicity education Age: One of the most effective ways of demographic segmentation. Modern firms use this as a very useful marketing tactic to create and retain their customers’ right from cradle to the grave  Ethnic Segments: Although the potential customers from multi-cultural civilizations may all live in the same region, their requirements, wants, and means of satisfying those needs and wants are all quite unique. Another strong and effective segmentation is based on gender, and it is used in a variety of industries, including apparel, cosmetics, beauty goods, hairstyles, careers, cars, insurance, and now education.  Psychographic Segmentation Lifestyle, socioeconomic status, and personality may serve as the foundation for market segmentation using psychographics. People who consume coffee or tea, weight watchers, and those looking for less-fattening foods are a few examples of lifestyle sectors. Highly personalized products that cater to specific lifestyles are possible.  Although the customer in psychographic segmentation may be of the same gender and socioeconomic status, they may have varied preferences and a unique way of life.  Behavioral Segmentation Factors pertaining to the consumer's real behavior serve as the foundation for behavioral segmentation. One could categorize some people as heavy users and others as light users. Some may simply be first-time customers, while others may only use the service occasionally. In summary, the behavioral segment could have the following elements: User status, usage volume, desired advantages, scenarios, and brand loyalty Multi-attribute segmentation combines multiple segmentation techniques, for instance, combining demographic and geographic segmentation  Effective Market Segmentation measurable, actionable, accessible, substantial and differential.  Measurable : A market segment must be measurable in terms of its size, purchasing power and profiles. Actionable :In order for effective segmentation to occur a market segment must also be actionable. This means that effective programs can be designed for serving and attracting the segments. Accessible :They should be easy to reach and serve. Substantial : For effective segmentation, a market segment should be large or profitable enough to serve. They should be the largest possible homogeneous group that is worth pursuing with a marketing program that has been tailored. Differential :Market segments need to be distinguishable conceptually and must respond in different ways to the different marketing mix programs and elements.  To make the process as efficient as possible, the needs can be divided into various categories so that they can be examined and handled separately.