marketing mgmt Topic 4


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  • marketing mgmt Topic 4

    1. 1. Topic 4: Market Segmentation, Targeting and Positioning
    2. 2. Objectives <ul><li>After this lecture you should be able to : </li></ul><ul><li>Define the three steps of target marketing: </li></ul><ul><li>- market segmentation </li></ul><ul><li>- market targeting </li></ul><ul><li>- market positioning </li></ul><ul><li>List and discuss the major levels of market segmentation and bases for segmenting consumer and business markets </li></ul><ul><li>Explain how companies identify attractive market segments and choose a market coverage strategy </li></ul><ul><li>Explain how companies can position their products for maximum competitive advantage in the market. </li></ul>
    3. 3. Topic Overview <ul><li>Market is a physical place where buyers and sellers gather to exchange goods and services. </li></ul><ul><li>To a marketer, market is the set of all actual and potential buyers of a product or service. </li></ul><ul><li>Organizations that sell to consumer and business markets recognize that they cannot appeal to all buyers in those markets , or at least not to all buyers in the same way. </li></ul><ul><li>Buyers are too numerous and widely scattered , and too varied in their needs and buying practices. </li></ul><ul><li>Different companies vary widely in their abilities to serve different segments of the market. </li></ul><ul><li>Rather than trying to compete in an entire market , sometimes against superior competitors, each company must identify the parts of the market that it can serve best. </li></ul>
    4. 4. Topic Overview –cont’d <ul><li>Sellers have not always practiced this philosophy. Their thinking has passed through three stages: </li></ul><ul><li>Mass marketing – the seller mass produces, mass distributes and mass promotes one product to all buyers. Eg Coco-Cola produced only ‘Coke’ for the whole market. </li></ul><ul><li>Product – variety marketing – seller produces 2 or more products that have different features, styles, quality, sizes and so on.. Eg Coco-Cola later produced different flavors, sizes and containers. </li></ul><ul><li>Target marketing – seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to each. Eg: Coco-Cola now produces soft drinks for sugared-cola segment, the diet segment… </li></ul>
    5. 5. Topic Overview –cont’d <ul><li>Today, most companies are moving away from mass marketing and practicing target marketing – identifying market segments, selecting one or more of them, and developing products and marketing mixes tailored to each. </li></ul>
    6. 6. Market Segmentation <ul><li>Dividing a market into distinct group of buyers with different needs, characteristics, or behaviour,who might require separate products or marketing mixes </li></ul>
    7. 7. Market Targeting <ul><li>The process of evaluating each market segments attractiveness and selecting one or more segments to enter. </li></ul>
    8. 8. Market Positioning <ul><li>Formulating competitive positioning for a product and a detailed marketing mix </li></ul>
    9. 9. Steps in Market Segmentation, Targeting, and Positioning 1.Identify bases for segmenting the market 2. Develop profiles of resulting segments 3. Develop measures of Segment attractiveness 4 . Select the target segments 5. Develop positioning for each Target segment 6. Develop marketing mix for each target segment Market Segmentation Market Targeting Market Positioning
    10. 10. MARKET SEGMENTATION <ul><li>Markets consists of buyers, and buyers differ in one or more ways. </li></ul><ul><li>They may differ in their wants, resources, locations, buying attitudes and buying practices. </li></ul><ul><li>Through market segmentation, companies divide large , heterogeneous markets into smaller segments that can be reached more efficiently with products and services that match their unique needs </li></ul><ul><li>Will discuss five (5) important segmentation topics: levels of market segmentation , segmenting consumer markets , business markets , and international markets , and requirements for effective segmentation. </li></ul>
    11. 11. MARKET SEGMENTATION – CONT’D <ul><li>1.0 Levels of Market Segmentation </li></ul><ul><li>Because buyers have a unique needs and wants , each buyer is potentially a separate market. </li></ul><ul><li>Ideally a seller might design a separate marketing program each buyer </li></ul><ul><li>Some companies attempt to serve buyers individually others face large numbers or look for broader classes of buyers who differ in their product needs or buying responses. </li></ul><ul><li>Thus, marketing segmentation can be carried out in many different levels : no segmentation (mass marketing, complete segmentation (micromarketing), or something in between (segment marketing or niche marketing). </li></ul>
    12. 12. MARKET SEGMENTATION – CONT’D <ul><li>Levels Of Marketing Segmentation </li></ul>Segment marketing Niche Marketing Micro-marketing Mass Marketing No Segmentation Complete segmentation
    13. 13. MARKET SEGMENTATION – CONT’D <ul><li>1.1 Mass Marketing </li></ul><ul><li>For most of the twentieth century, major consumer product companies held fast to mass marketing , mass distributing, and mass promoting about the same product, in about the same way to all consumers. e.g. Henry Ford characterize this strategy when he offered the Model T Ford to all buyers. </li></ul><ul><li>Similarly, Coca cola at one time produced only one drink for the whole market , hoping it would appeal to everyone. </li></ul><ul><li>Traditional argument - mass marketing creates the largest potential market, which leads to lowest cost, which in turn can translate into either lower prices or higher margins. </li></ul><ul><li></li></ul>
    14. 14. MARKET SEGMENTATION – CONT’D <ul><li>Today, marketers find it very hard to create a single product or program that appeals to all of these diverse groups. Some have claimed that mass marketing is dying and many companies are shifting from mass marketing to segmented marketing </li></ul>
    15. 15. MARKET SEGMENTATION – CONT’D <ul><li>1.2 Segment Marketing </li></ul><ul><li>Companies that practices segment marketing recognizes that buyers differs in their needs, perceptions and buying behaviors . </li></ul><ul><li>The companies tries to isolate broad segments that make up a market and adapt it offers to more closely match the needs or more segments. e.g. </li></ul><ul><li>-General Motors has designed specific models for different income and age groups. </li></ul><ul><li>- Marriott Hotel markets to a variety of segments: business travelers, families, and others </li></ul><ul><li>Segment marketing offers several benefits over mass marketing. </li></ul>
    16. 16. MARKET SEGMENTATION – CONT’D <ul><li>1.2 Segment Marketing – cont’d </li></ul><ul><li>The benefit of segment marketing – that company can market more efficiently, targeting its products or services , choosing the best channels , and communication programs , towards only to consumers that it can serve best. </li></ul><ul><li>Company may face fewer competitors if fewer competitors are focusing on this market segment . </li></ul>
    17. 17. MARKET SEGMENTATION – CONT’D <ul><li>1.3 Niche Marketing </li></ul><ul><li>Markets segments are normally large identifiable groups within a market. </li></ul><ul><li>Niche Marketing (or niching) focuses on sub-groups within these segments, a more narrowly defined group, usually identified by dividing a segment into subsegments or by defining a group within a distinctive set of traits who may seek a special combination of benefits. </li></ul><ul><li>Niches are smaller and normally attract only one or few competitors. </li></ul><ul><li>Niching offers small companies an opportunity to compete by focusing their limited resources on serving niches that may be unimportant to or overlooked by larger competitors </li></ul><ul><li>In many markets today, niches are the norm </li></ul>
    18. 18. MARKET SEGMENTATION – CONT’D <ul><li>1.4 Micromarketing </li></ul><ul><li>Definition- the practice of tailoring products and marketing program to suit the tastes of specific individuals and locations- includes, local marketing and individual marketing . </li></ul><ul><li>Segmenting marketing and niche marketing – fall between the extremes of mass marketing and micromarketing </li></ul><ul><li>Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals aand locations. </li></ul><ul><li>Micromarketing includes : local marketing and individual marketing. </li></ul>
    19. 19. MARKET SEGMENTATION – CONT’D <ul><li>1.4.1 Local Marketing </li></ul><ul><li>Local marketing involves tailoring brands and promotions to the needs and wants of local consumer groups – cities, neighborhoods, and even specific stores. e.g </li></ul><ul><li>- retailers: Walmart & Sears – routinely customize each stores merchandise and promotions to match its consumers. </li></ul><ul><li>- Citibank –provide different mixes of banking services in its branches depend on neighborhood demographics </li></ul><ul><li>Local marketing helps a company to market more effectively in the face of pronounced regional and local differences in community demographics and lifestyles. </li></ul>
    20. 20. MARKET SEGMENTATION – CONT’D <ul><li>1.4.2 Individual Marketing </li></ul><ul><li>Tailoring products and marketing programs to the needs and preferences of individual customers - also labeled ‘ markets –of –one marketing ’ ‘ customized marketing ’ and ‘ one-to-one marketing’ </li></ul><ul><li>Consumer marketers are now providing custom-made products in areas ranging from hotel stays and furniture to clothing and bicycles. </li></ul>
    21. 21. MARKET SEGMENTATION – CONT’D <ul><li>2.0 Bases for Segmenting Consumer Markets </li></ul><ul><li>There is no single way to segment a market. </li></ul><ul><li>A marketer has to try different segmentation variables , alone and in combination , to find the best way to view the market structure. </li></ul><ul><li>The following are the variables that might be used in marketing consumer markets: geographic , demographic , psychographic , and behaviorable variables. </li></ul>
    22. 22. 2.0 Bases for Segmenting Consumer Markets –cont’d <ul><li>2.1 Geographic Segmentation </li></ul><ul><li>Geographic segmentation - calls for dividing the market into different geographical units such as : nations, states, regions, counties, cities or neighborhoods. </li></ul><ul><li>A company may decide to operate in one or a few geographical areas , or to operate in all areas but pay attention to geographical differences in needs and wants. </li></ul>
    23. 23. MARKET SEGMENTATION – CONT’D <ul><li>2.2 Demographic Segmentation </li></ul><ul><li>Dividing the market into groups based on demographic variables such as : age,sex,family size, family life- cycle, income, occupation,educaton, religion, race, and nationality. </li></ul><ul><li>Demographic factors are the most popular bases for segmenting customer groups , largely because consumer needs, wants, and usage rates often very closely with demographic variables. </li></ul><ul><li>- Age – life-cycle segmentation – dividing a market into a different age and li-cycle groups. Consumer needs and wants change with age. Some companies use and life-cycle segmentation , offering different products or using different market approaches for different age and life-cycle groups. </li></ul><ul><li>- Gender segmentation – dividing a marketer into different groups based on sex. Has long being used in clothing, cosmetics, toiletries, and magazines. </li></ul>
    24. 24. MARKET SEGMENTATION – CONT’D <ul><li>2.2 Demographic Segmentation-cont’d </li></ul><ul><li>- Income Segmentation – has long being used by the marketers of products and services such as automobiles, boats, clothing, cosmetics, financial services, and travel. </li></ul><ul><li>Many companies target affluent (wealthy) consumers with luxury goods and convenience services. </li></ul>
    25. 25. MARKET SEGMENTATION – CONT’D <ul><li>2.3 Psychographic Segmentation – divides buyers into different groups based on social class, lifestyle, or personality characteristics. </li></ul><ul><li>People in the same demographic group can have very different psychographic makeups.e.g </li></ul><ul><li>- social class – have a strong effect on preferences in cars, clothes, </li></ul><ul><li>and etc. </li></ul><ul><li>- lifestyles, personality </li></ul>
    26. 26. MARKET SEGMENTATION – CONT’D <ul><li>2.4 Behavioral Segmentation </li></ul><ul><li>Behavioral segmentation – divides buyers into groups based on their knowledge , attitudes, uses, or responses to a product. </li></ul><ul><li>2.4.1. Occasions Segmentation – dividing the market into groups according to occasions when buyers get the idea to buy, actually make their purchase, or use the purchased item. e.g christmas cakes during Christmas. </li></ul><ul><li>- Some holiday’s such as mother’s day & father’s day, Valentines day were originally promoted partly to increase the sale of candy, flowers, cards, and other cards </li></ul>
    27. 27. MARKET SEGMENTATION – CONT’D <ul><li>2..4.2. Benefit Segmentation – A powerful form of segmentation is to group buyers according to the different benefits that they seek from the product. </li></ul><ul><li>That is, dividing the market into groups according to the different benefits that consumers seek from the product. </li></ul><ul><li>Benefit segmentation requires finding the major benefits people look for in the product class , the kinds of people who look for each benefit , and the major brands that deliver each benefit e.g in the toothpaste market. </li></ul><ul><li>Benefits are : economy (low price), medicinal ( decay prevention), cosmetic (bright teeth), taste ( good tasting). </li></ul><ul><li>Demographics : men, Large families, teens , young adults, children and etc. </li></ul>
    28. 28. MARKET SEGMNTATION – CONT’D <ul><li>3.0 Segmenting Business Markets . </li></ul><ul><li>Consumer and business marketers use many of the same variables to segment their markets. </li></ul><ul><li>Business buyers can be segmented geographically or by benefits sought, user status, usage rate, and loyalty status. </li></ul><ul><li>Within the chosen industry , a company can further segment by customer size or geographic location e.g. </li></ul><ul><li>- Steelcase company , a major producer of office furniture; first segments its customers into ten (10) industries: including banking, insurance & electronics </li></ul><ul><li>- Again, company salespeople work with independent Steelcase dealers to handle smaller, local or regional Steelcase customers in each segment. </li></ul><ul><li>Within a given target industry and customer size, the company can segment by purchase approaches and criteria. </li></ul><ul><li>As in consumer segmentation, many marketers believe that buying behavior and benefits provide the best basis for segmenting business markets. </li></ul>
    29. 29. MARKET SEGMENTATION – CONT’D <ul><li>4.0 Segmenting International Markets </li></ul><ul><li>Few companies have either the resources or the will to operate in all or even most of the countries that dot the globe. </li></ul><ul><li>Operating in many countries presents new challenges. </li></ul><ul><li>Countries in the world vary dramatically in their economic cultural, and political makeup. </li></ul><ul><li>Marketers, as they do within their domestic markets, need to group their world markets into segments within distinct buying needs and behavior. </li></ul><ul><li>It can be grouped by geographical locations, or by regions such as :Western Europe, The Pacific Rim, Middle East, Africa. </li></ul><ul><li>Some countries have organized geographically into market groups or ‘free trade zones’ such as the ‘European Union’ European Free Trade Association and the North American free Trade Association. </li></ul>
    30. 30. MARKET SEGMENTATION – CONT’D <ul><li>4.0 Segmenting International Markets –cont’d </li></ul><ul><li>These association reduce trade barriers between member countries, creating larger and more homogenous markets. </li></ul><ul><li>Geographic segmentation assumes that nations close to one another will have many common traits and behaviors e.g </li></ul><ul><li>- although United states and Canada have many common traits and behavior both differ culturally and economically from neighboring Mexico. </li></ul>
    31. 31. MARKET SEGMENTATION – CONT’D <ul><li>5.0 Requirements for Effective Segmentation </li></ul><ul><li>There are many ways to segment a market, but not all segments are effective. To be useful market segments: </li></ul><ul><li>Measurable –the size, purchasing power, and profiles of the segments can be measured but certain segmentation variables can not be measured e.g. left-handed people </li></ul><ul><li>Accessible – the market segment can be effectively reached and served. </li></ul><ul><li>Substantial – the market segments are large or profitable enough to serve. </li></ul>
    32. 32. MARKET SEGMENTATION – CONT’D <ul><li>5.0 Requirements for Effective Segmentation cont’d </li></ul><ul><li>Differentiable – the segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. </li></ul><ul><li>Actionable – Effective programs can be designed for attracting and serving the segments. </li></ul>
    33. 33. MARKET TARGETING <ul><li>Whilst segmenting the market , this has revealed the firms market segment opportunities </li></ul><ul><li>The firm now has to evaluate the various segments and decide how many and which ones to target. </li></ul><ul><li>Evaluating Market Segments </li></ul><ul><li>The firms look at three factors : </li></ul><ul><li>- segment size and growth </li></ul><ul><li>- segment structural attractiveness </li></ul><ul><li>- company objectives and resources </li></ul>
    34. 34. MARKET TARGETING –CONT’D <ul><li>2.0 Selecting Market Segments </li></ul><ul><li>After evaluating the market the firm must now decide which and how many segments to serve. </li></ul><ul><li>A target market consists of set of buyers who share common needs or characteristics that the company decides to serve. </li></ul><ul><li>And there are three types of market –coverage strategies: undifferentiated marketing , differentiated marketing , and concentrated marketing . </li></ul><ul><li>2.1 Undifferentiated Marketing </li></ul><ul><li>A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. </li></ul><ul><li>The company designs product and marketing program that will appeal to the largest number of buyers. </li></ul>
    35. 35. MARKET TARGETING –CONT’D <ul><li>2.0 Selecting Market Segments -cont’d </li></ul><ul><li>2.1 Undifferentiated Marketing </li></ul><ul><li>It relies on mass distribution and mass advertising </li></ul><ul><li>Undifferentiated marketing provides cost economies </li></ul><ul><li>The narrow product line the company has , keeps down production, inventories, and transportation costs. </li></ul><ul><li>The advertising costs is also minimal </li></ul><ul><li>The absence of segmenting marketing research and planning lowers the costs of marketing research and product management. </li></ul>
    36. 36. MARKET TARGETING –CONT’D <ul><li>2.2 Differentiated Marketing </li></ul><ul><li>A market-coverage strategy in which a firm decides to target several market segments or niches and design separate offers for each e.g. </li></ul><ul><li>- General Motors –designs car for ‘prize, purpose, and personality’. </li></ul><ul><li>- Nike design shoes for different sports –running, fencing, aerobics, bicycling, and baseball </li></ul><ul><li>2.3 Concentrated Marketing </li></ul><ul><li>A market-coverage strategy in which firms goes after a large share of one or a few submarkets. </li></ul><ul><li>Is especially appealing when company resources are limited. </li></ul><ul><li>It provides an excellent way for small new business to get a foothold against larger, more resourceful competitors </li></ul><ul><li>This particular market segment can turn sour, when large competitors decide to enter the same segment. </li></ul>
    37. 37. POSITIONING FOR COMPETITIVE ADVANTAGE <ul><li>Once a company has decided which segments of the market it will enter, it must decide what positions it wants to occupy in those segments. </li></ul><ul><li>Product Positioning - the way the product is defined by consumers on important attributes – the place the product occupies in the consumers mind relative to competing products.e.g </li></ul><ul><li>- Tide (washing Powder) is positioned as a </li></ul><ul><li>powerful, all purpose family detergent </li></ul><ul><li>- Toyota, tercel, Subaru – positioned on economy </li></ul><ul><li>- mercedes , cardilac – positioned on performance </li></ul><ul><li>- BMW,Volvo – positioned on safety </li></ul>
    38. 38. POSITIONING AND COMPETITIVE ADVANTAGE -CONT’D <ul><li>Positioning Strategies </li></ul><ul><li>Marketers can follow several positioning strategies. </li></ul><ul><li>Can position products on specific –product attributes e.g. in the case of tide, Toyota, BMW and Volvo </li></ul><ul><li>A product can also be positioned directly against a competitor e.g. in the banks between VISA cards and American Express </li></ul><ul><li>A product can also be positioned for different product classes e.g. </li></ul><ul><li>- margarine: some are positioned against butter, others against cooking oil. </li></ul>
    39. 39. POSITIONING FOR COMPETITIVE ADVANTAGE -CONT’D <ul><li>Competitive Advantage – </li></ul><ul><li>An advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. </li></ul><ul><li>Consumers typically choose products and services that give them the greater value </li></ul><ul><li>The key to keep and winning customers is to understand their needs and buying processes better than competitors do and to deliver more value. </li></ul><ul><li>If company positions its product as offering the best quality and service, it must than deliver the promised quality and service. </li></ul><ul><li>Note: that solid positions can not be built on empty promises. </li></ul>
    40. 40. THE END - TOPIC 6