Chapter 7 Segmenting, Targeting, and Positioning PDF

Chapter 7 Segmenting, Targeting, and Positioning Adapted for the fifth Canadian edition by Janice M. Shearer, Consultant Learning Objectives 7-1 Discuss markets, market segments and the importance of market segmentation 7-2 Describe the bases commonly used to segment consumer and business market...

Chapter 7 Segmenting, Targeting, and Positioning Adapted for the fifth Canadian edition by Janice M. Shearer, Consultant Learning Objectives 7-1 Discuss markets, market segments and the importance of market segmentation 7-2 Describe the bases commonly used to segment consumer and business markets 7-3 Discuss the criteria for successful market segmentation 7-4 List the steps involved in segmenting markets 7-5 Discuss the alternative strategies for selecting target markets 7-6 Explain how and why companies implement positioning strategies and how product differentiation plays a role REVIEW: WHAT IS A MARKET? First, they are composed of people (consumer markets) or organizations (business markets). Second, these people or organizations have wants and needs that can be satisfied by particular product categories. Third, they have the ability to buy the products they seek. Fourth, they are willing to exchange their resources, usually money or credit, for desired products. In sum, a market is NOT A MARKET A group of people or an organization that lacks any one of these characteristics is not a market. (1)people or organizations with (2)needs or wants and with (3)the ability and (4)the willingness to buy Market Segment Segment Segment Segment A market segment is a subgroup of people or organizations sharing one or more characteristics that cause them to have similar product needs. Market segmentation is the process of dividing a market into meaningful, relatively smaller and identifiable segments or groups. The purpose of market segmentation is to enable the marketer to tailor marketing mixes to meet the needs of one or more specific segments. Segmenting exercise • Geographic (region, country, market size/density, climate, population) • Demographic (age, gender, income, ethic background, occupation, family life cycle) • Psychographic (personality, motives, lifestyle, geodemographic) • Behavioural (purchasing habits, brand interactions, spending habits) The Importance of Market Segmentation Identify groups of customers with similar needs and study them. Information to design appropriate marketing mixes is uncovered. More accuracy in defining marketing objectives and allocating resources Consistent with the marketing concept Bases for Segmenting Markets • Use bases that will create segments that are • substantial • measurable • accessible • respond uniquely SEGMENTATION BASES, OR VARIABLES • Marketers use segmentation bases, or variables, which are characteristics of individuals, groups, or organizations, to divide a total market into segments. • Choice of segmentation bases is crucial because an inappropriate segmentation strategy = lost sales and missed profit opportunities. • The key is to identify bases that will produce substantial, measurable, and accessible segments that exhibit different response patterns to marketing mixes. HOW? • Markets can be segmented by using a single variable, such as age group, • or by using several variables, such as age group, gender, and education. • Although a single-variable segmentation is less precise, it has the advantage of being simpler and easier to use than multiple-variable segmentation. • The disadvantages of multiple-variable segmentation are that it is often more difficult to use than single-variable segmentation; usable secondary data are less likely to be available; and, as the number of segmentation bases increases, the size of the resulting segments decreases. • The current trend is toward using more rather than fewer variables to segment most markets. Multiplevariable segmentation is clearly more precise than singlevariable segmentation. EXAMPLE: ARC’TERYX • Environics Analytics helps with multiple variable segmentation • Utilizes data-driven research to help organizations better understand their customer segments to create marketing campaigns that maximize return on investment. • As an example, Arc’teryx, an outdoor equipment and sports clothing manufacturer headquartered in Vancouver was seeking to expand its branded stores beyond its single location in Montreal but wasn’t sure which geographic areas would be most profitable. • Environics analysts identified geographic concentrations of customers then used a proprietary database to create target groups of core customers based on demographics, lifestyles, and social values. • In calculating where to open a branded store, Environics researchers completed an analysis that identified demographics and lifestyles that predicted sales. They then mapped the results to ensure that a new location would not compete with the current distributor network. • The result was 12 prospective branded store locations in Canada and the United States described by sales potential, new and current customers, and competition. BASES FOR SEGMENTING MARKETS GEOGRAPHIC SEGMENTATION • Region of the world • Region of the country • Market size • Market density • Climate DEMOGRAPHIC SEGMENTATION Age Ethnic Background Gender Income Occupation Family Life Cycle DEMOGRAPHIC SEGMENTATION CONTINUED Age • Tweens: 2 million—direct spending power and influence over family spending • Teenagers: >2 million— substantial purchasing power; concerned about social and environmental issues, forcing brands to be responsible; social media savvy; highly influential in family spending Demographic Segmentation • Age • Generation Y/Millennials: 10 million; 27 percent of population and 35 percent living at home; purchasing influenced by whether at home; not big shoppers but big spenders each time • Baby boomer: 27 percent of population; retirement age; active, healthy; can afford to buy. Nineteen percent are seniors with time, money, youthfulness, and increasingly comfortable with technology Gender Simple GENDER, INCOME, ETHNIC SUBGROUP SEGMENTATION Being challenged; gender boundaries blurring Income Ethnicity Influences consumer wants and determines buying power Multicultural country Can create unique approaches to sizeable ethnic markets (GenderPro, 2018) INCOME SEGMENTATION EXAMPLE (FasterCapital, n.d.) COCA-COLA & CULTURAL DIVERSITY VISIT THIS LINK HERE (Business Insider) OCCUPATION AND FAMILY LIFE CYCLE SEGMENTATION • Occupation • Purchases influenced by occupation—welder, nurse • Family life cycle • Series of stages determined by age, marital status, and presence of children; influences what you buy FAMILY LIFE CYCLE INCOME BASED SEGMENTATION PSYCHOGRAPHIC SEGMENTATION Personality Motives Lifestyles Geodemographic BENEFIT AND USAGE-RATE SEGMENTATION Groups potential customers on the basis of their needs or wants • Sobey’s developed a program aimed at those with autism. Usage rate • Based on amount bought or consumed—former users, potential users, first-time users; light, medium, or heavy • Pareto Principle BASES FOR SEGMENTING BUSINESS MARKETS Company Characteristics • Geographic location • Type and size of company • Product use • Type of customer • Usage rate • Buying organization’s structure • How product is used Buying Processes • Purchase criteria • Purchasing strategies ‒ Satisfiers ‒ Optimizers • Buyer’s personal characteristics CRITERIA FOR EFFECTIVE SEGMENTATION Criteria Substantiality Identifiable Accessibility Responsiveness STEPS IN SEGMENTING A MARKET Select a market or product category. Design, implement, and maintain an appropriate mix. Choose a basis or bases. Select segmentation descriptors. Select targets. Profile and analyze the segments. STRATEGIES FOR SELECTING TARGET MARKETS • Target market • A group of people or organizations for which an organization designs, implements, and maintains a marketing mix • Meet the needs of that group. • Mutually satisfying exchanges STRATEGIES CONTINUED Undifferentiated Concentrated • Mass-market philosophy • One marketing mix for the entire market • A market niche to target— single segment • Highly specialized marketing mix Multisegment • Two or more segments • With a distinct marketing mix for each One-to-one • Sell more products to single customer • Loyalty and retention Strategies for Selecting Target Markets POSITIONING Position: The place the product, brand, or service occupies in the consumer’s mind • Effective positioning requires • assessing the positions occupied by competing products • determining the important dimensions underlying these positions • choosing a position in the market where the organization’s marketing efforts will have the greatest impact POSITIONING CONTINUED • Product differentiation • Positioning based on what distinguishes the product from the competition Positioning Positioning Bases BASES EXPLANATION Attribute A product feature, a product benefit Price and quality High price as a symbol of quality Use or application Product user Stress uses or applications Product class Associated with a particular category of products Competitor Against competition Emotion How the product makes you feel Focus is on a personality type Repositioning • Changing the consumer’s perception of a brand in relation to competing brands Developing a Positioning Statement Targeted consumers Frame of reference Positioning Statement Point of difference Reason to believe REFERENCES • Class Textbook • De Luce, I. (n.d.). Coca-Cola is sold in all but 2 countries on Earth. here’s what their ads look like around the world. Business Insider. https://www.businessinsider.com/what-coca-cola-ads-looklike-around-the-world-2019-8#this-ad-appeared-in-beijing-china-in-2004-1 • Environics Analytics: Canada’s premier data and analytics company. Environicsanalytics. (n.d.). https://environicsanalytics.com/en-ca • FasterCapital. (n.d.). Ethnography: Embracing cultural diversity through qualitative analysis. FasterCapital. https://fastercapital.com/content/Ethnography--Embracing-Cultural-Diversitythrough-Qualitative-Analysis.html • How to benefit your business and consumers from Gender Marketing. NameGenderPro. (2018). https://www.namegenderpro.com/how-to-benefit-your-business-and-consumers-from-thehidden-power-of-gender-marketing/ • What is generational marketing? (examples included). 3 tier logic. (2022). https://www.3tl.com/blog/what-is-generational-marketing-examples-included