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L3 segmentation bho1171


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  • 1. Consumer Segmentation and Targeting Lecture 3 Chapter 6 (Sharp, 2013)
  • 2. BHO1171 – Lecture 3 Slide 2 Segmentation-based targeting Marketers often assume buyers differ from one another in their buying behaviour  Marketer’s can choose to cater for these differences. Market segmentation is the process of dividing up the market into distinct sub-groups  These target segments should react differently to different marketing. Targeting is the practice of creating differences in the marketing mix to cater for these different segments  or choosing not to serve some segments.
  • 3. BHO1171 – Lecture 3 Slide 3 Segmentation-based targeting  Segmentation of the market needs to meet a number of criteria in order to be useful to the marketer. Marketers need to be able to answer the following questions in relation to the segment:  Who are the buyers?  How can we reach them? How are the segment customers different from others?  Where are they located? Where do they purchase?  What are their interests and behaviours? What do they buy and/or like?  The segments worthy or being targeted must be of a certain size and targetable.
  • 4. BHO1171 – Lecture 3 Slide 4 Segmentation-based targeting .
  • 5. BHO1171 – Lecture 3 Slide 5 The logic and appeal of narrow targeting How targeted should a brand try to be? Is it wrong to try to sell to all category brands?
  • 6. BHO1171 – Lecture 3 Slide 6 3 phases in marketing strategy Identify segmentation bases 1. Market Segmentation 2. Market Targeting 3. Market Positioning Develop profiles of segments Develop positioning for segments Develop marketing mix for segments Measure segment attractiveness Select target segments
  • 7. BHO1171 – Lecture 3 Slide 7 Why Segment the Market? (1)  Mass Marketing  Offering the same product and marketing mix to all consumers  Mass Marketing Issues • Appropriate if all consumers respond to a similar marketing mix • Benefits are that it is a low cost marketing strategy – one advertising and promotional strategy targeted to a single market for a generic product.
  • 8. BHO1171 – Lecture 3 Slide 8 Why Segment the Market? (2) Market Segmentation Issues  Allows producers to avoid head on confrontation • By differentiating by price, styling, packaging, promotional appeal, usage, and distribution.  Increased costs of segmentation • i.e. Shorter production runs, different promotional campaigns, consumer research
  • 9. BHO1171 – Lecture 3 Slide 9 + e.g. of product tailored to different segments Melb to London $8,400Melb to London $1400
  • 10. BHO1171 – Lecture 3 Slide 10 Segmentation Variables Psychographic Segmentation Geographic Segmentation Behaviour/Usage Segmentation Demographic Segmentation
  • 11. BHO1171 – Lecture 3 Slide 11 + Family Income Level EthnicityEducation Demographic Segmentation Age
  • 12. BHO1171 – Lecture 3 Slide 12 Demographic Segmentation  Other ideas:  Age and life-cycle stage • Wants and needs vary with stage  Gender • Buying patterns frequently follow gender  Income  Race and culture  „Generation‟  Risk of stereotyped assumptions For example the profile of mX readers: “a bright, energetic must read for the busy city worker targeting the young and affluent – a generation driven by aspiration” (p.1, MX, 2012).
  • 13. BHO1171 – Lecture 3 Slide 13 Geographic Segmentation Divide market into separate geographic units Nations, regions provinces, cities etc. Develop regional marketing programmes Quite likely in Global marketing programmes
  • 14. BHO1171 – Lecture 3 Slide 14 Psychographic Segmentation Grouping customers together based on social class, lifestyles and psychological characteristics  Attitudes, interests and opinions Adds richness of behavioural and social sciences to demographics Socio-economic, status, values, attitudes and lifestyle groupings, personality
  • 15. BHO1171 – Lecture 3 Slide 15 Upper class  10% of population Middle class  60% Lower class  30%  *Source: ABS Social class in Australia*
  • 16. BHO1171 – Lecture 3 Slide 16 Social standing and behaviour
  • 17. BHO1171 – Lecture 3 Slide 17 Magazine covers for different social class segments?
  • 18. BHO1171 – Lecture 3 Slide 18 + Vals survey example
  • 19. BHO1171 – Lecture 3 Slide 19 Behavioural Segmentation  Decision Roles  Initiator  Influencer  Decider  Buyer  User  Behavioural Variables  Occasions  Benefits  User Status  Usage Rate  Buyer-Readiness  Loyalty Status  Attitude
  • 20. BHO1171 – Lecture 3 Slide 20 Apparent benefits of segmentation  Products/services fit more closely what customers want  Customers can feel more responsive and loyal to organisations that speak directly to them and tailor their products accordingly  Enables organisations to target its marketing mix
  • 21. BHO1171 – Lecture 3 Slide 21 Dangers of segmentation Risk of poor definition and implementation of segmentation. Knowing where to stop. Assumption that customers only fit into one segment Assumption that it is profitable to tailor products to each segment
  • 22. BHO1171 – Lecture 3 Slide 22 Criteria For Effective Targeting of Market Segments Identification  Relevant characteristics (eg: demographics, lifestyle, benefits sought) Sufficiency  Sufficient number of people Stability  Stable and likely to grow Accessibility  Economical to reach
  • 23. BHO1171 – Lecture 3 Slide 23 3 phases in marketing strategy 2. Market Targeting Measure segment attractiveness Select target segments 3. Market Positioning Develop positioning for segments Develop marketing mix for segments Identify segmentation bases 1. Market Segmentation Develop profiles of segments
  • 24. BHO1171 – Lecture 3 Slide 24 Marketing Mix Whole Market Segment 2 Segment 1 Segment 3 Marketing Mix 1 Marketing Mix 2 Marketing Mix 3 Mass Marketing/ Undifferentiated Marketing Target marketing Concentrated/Focused Marketing Targeting strategies Segment 2 Segment 1 Segment 3 Marketing Mix
  • 25. BHO1171 – Lecture 3 Slide 25 Targeting high value customers Many businesses use profitability segmentation to target profitable consumers  Airlines • E.g. Business travellers get priority check in & baggage  Banks • High value customers get their own 1800 number or are recognised by input of client number
  • 26. BHO1171 – Lecture 3 Slide 26 Two High-End Watches for Different Lifestyle Segments?
  • 27. BHO1171 – Lecture 3 Slide 27 3 phases in marketing strategy Identify segmentation bases 1. Market Segmentation 3. Market Positioning Develop profiles of segments Develop positioning for segments Develop marketing mix for segments 2. Market Targeting Measure segment attractiveness Select target segments
  • 28. BHO1171 – Lecture 3 Slide 28 Brand positioning First appeared in the Advertising Age  Reis and Trout (1972) Now in every marketing textbook  Seen as a fundamental aim of marketing  Yet not empirically tested Position brand in consumers’ minds  Make it the preferred brand for your brand’s target market
  • 29. BHO1171 – Lecture 3 Slide 29 Positioning The final objective is to position a product in the mind of the consumer  Differentiated from competition  „own‟ an image  “Positioning is…how you differentiate yourself in the mind of the prospect” ” • (Reis & Trout, 2001)
  • 30. BHO1171 – Lecture 3 Slide 30 Developing and maintaining 1. Consider which positions are held by competitors 2. Which position is currently held by your brand? 3. What is the desired position for your brand? 4. Can you sustain that position? 5. Implement a programme to establish the desired position 6. Monitor the perception held by consumers
  • 31. BHO1171 – Lecture 3 Slide 31 Positioning Strategy – Differentiation Through:  Price/quality  emphasize value in terms of quality, price, or both  E.g. Stella Artois “Reassuringly Expensive”  Product attributes  Characteristics as a positioning base  e.g., Volvo brand is positioned on „Safety‟While the BMW brand is positioned on „Driving‟.  Product usage  Positioning based on a products typical use  E.g. Nutri-Grain Bars replacing cereal  Against a competitor,  e.g. Avis tries harder because it’s in 2nd place
  • 32. BHO1171 – Lecture 3 Slide 32 Perceptual Mapping PERCEPTUAL MAPPING CAN BE USED TO:  Show how (potential) customers view a firm's current or potential offering.  Show how customers view competitors' offerings.  See what kind of offering different segments see as ideal.  See what offerings are likely to appeal to which segments.  Help with combining and segmenting - by revealing which segments view the market in similar (or dissimilar) ways.
  • 33. BHO1171 – Lecture 3 Slide 33 + Identifying a Positional Direction
  • 34. BHO1171 – Lecture 3 Slide 34 Product Differentiation In a competitive, price driven market, firms try to differentiate their products from competitive offerings.  Adding new features  Promotional campaign This is a product oriented view of the world and usually occurs before segmentation of the market. Some companies instigate product differentiation after segmentation  e.g. Coke, Qantas – Premium Economy
  • 35. The problem with segmentation, targeting and positioning…
  • 36. BHO1171 – Lecture 3 Slide 36 Brand user profiles seldom differ Emprical evidence shows competing brands do not really have different sorts of customer bases. The results demonstrate that brand-specific segments generally do not exist  Interchangeable brands usually compete in what for them is a single, unsegmented mass market. There is no support for the idea that competing brands each appeal to a unique sub-set of users that look different from the customer bases of competitors.
  • 37. BHO1171 – Lecture 3 Slide 37 Segmentation does not necessarily maximise returns Segmentation and targeting does not guarantee maximum return from marketing expenditure. It is not suggested that the segmentation targeting approach is not always inferior to mass marketing—simply segmentation is not always superior to mass marketing. There are and will always be conditions under which segmentation is not the best, most profitable course of action.
  • 38. BHO1171 – Lecture 3 Slide 38 Talking to everyone is possible There are some reasons why marketers may want to limit who they talk to. Reasons include:  The expense involved in talking to everyone  Difficulty to appealing to all types of buyers in a market  Different companies vary in their abilities to serve different segments of the market.  There is some counter-evidence to these ideas: • Mass marketing can be more cost-effective than targeted approaches • Brands should be as inclusive as possible
  • 39. BHO1171 – Lecture 3 Slide 39 Yorkie Bar – great positioning?
  • 40. BHO1171 – Lecture 3 Slide 40 Yorkie Bar – great positioning? Yorkie Bar ad Gender Total Brand Yorkie – egg Yorkie – Honeycomb Yorkie – Milk Yorkie – Raisin & Buscuit Yorkie Roast Almond Yorkie- The Nutter Male 56 26 73 57 46 0 40 Female 44 74 27 43 54 100 60 • Observations? Source: TNS – pg 64 Sharp (2010)
  • 41. BHO1171 – Lecture 3 Slide 41 Smart targeting in practice  Smart marketers take a number of steps to ensure they do not over-target. They:  Make sure they understand and document who buys the category  Always check real numbers instead of relying only on indices  Quantify any skews in brands and media  Realise that adding a brand, SKU or focusing on a specific occasion is typically about selling more to the same people.  Know that heavy buyers are not the key to growth  Use overall profit contribution rather than campaign ROI to assess marketing performance  Look to maximise overall sales and margins, not just response from the target market.