Segmenting the market and finding your niche

Dr. Stephanie J. Morgan Lecture 3: Segmentation, targeting and positioning. Marketing Principles and Practice The full series will be available for download at: www.bizface.co.uk

Objectives of Lecture 3 Segmentation
Describe concepts and methods used in market segmentation and target marketing.
Outline factors that can be used to evaluate market segments
Explain the advantages of market segmentation and clear positioning.
Determine issues that arise from positioning and repositioning strategies.

Defining segmentation
The identification of individuals or organizations with similar characteristics that have significant implications for the determination of marketing strategy. (Jobber, p.185)
A company needs to identify the market segments it can serve effectively . (Kotler, p.278)

2 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The advantages of market segmentation Understand The customer! Opportunities and threats Target market selection Market segmentation Tailored marketing mix Differentiation

Is segmentation always applicable?
Some mass marketing does not require segmentation.
To be useful, market segments should be:
Measurable
Substantial
Accessible
Differentiable
Actionable
Consider ethics, vulnerable or disadvantaged groups – possible backlash.
Consider also the impact of the Internet…

3 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill The process of market segmentation and target marketing The disaggregated market The segmented market The target market The characteristics of individual customers are understood Customers are grouped into segments on the basis of having similar characteristics Segment 3 is judged to be most attractive and a marketing mix strategy is designed for that target market 1 2 3 1 2 3 Marketing mix targeted at segment 3 c 1 c 5 c 7 c 2 c 6 c 3 c 4 c 8 c 1 c 5 c 7 c 2 c 6 c 3 c 4 c 8 c 1 c 5 c 7 c 2 c 6 c 3 c 4 c 8

4 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Segmenting consumer markets Consumer segmentation Behavioural Benefits sought Purchase occasion Purchase behaviour Usage Perceptions and beliefs Lifestyle Personality Demographic Socio-economic Geographic Psychographic Profile

Benefit Segmentation Causal not Descriptive factors Identify each Segment by benefits sought Total Configuration Of benefits differentiates Continue segmentation within Has practical marketing implications, provides fresh insight Into markets, requires extensive research or insight

Other Behavioural bases
Purchase occasion – emergency, routine, special, gifts…
Purchase behaviour – brand loyalty, innovators,
Usage – heavy, light, none,
Perceptions, beliefs and values.
Interrelated – need to combine segmentation variables.

Psychographic Lifestyle Young sophisticates, Traditional working class etc. Personality Extroverts, Introverts… More likely to be useful when brand choice is a reflection of self expression – symbolic, linked to identity

13 D Jobber, Principles and Practice of Marketing, © 1998 McGraw-Hill Life cycle stages At home single Young couple no children Young parents Middle-aged parents Empty nester married working Empty nester married retired Solitary retired Young divorced no children On own young Young divorced with children M-aged divorced no dep’nt children M-aged divorced with children Middle-aged married no children Middle-aged divorced no children On own middle-aged

6 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Macro and micro segmentation of organizational markets Macrosegment 2 (medium-sized companies) Macrosegment 2 (prime choice criterion: convenience) Macrosegment 3 (small companies) Macrosegment 3 (prime choice criterion: price) Macrosegment 1 (large companies) Macrosegment 1 (prime choice criterion: reliability) Organizational market

7 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Segmenting organizational markets Organizational size Industry Geographic location Macrosegmentation Organizational segmentation Microsegmentation Decision-making process Buy class Purchasing organization Organizational innovativeness Decision-making unit structure Choice

Alternative bases for segmenting Demographic: Industry, size, location Operating Variables: Technology, user status (heavy, light etc.,) customer capabilities Purchasing Approaches: Highly centralized/de-cent; Power structure (Eng/finance) Quality/service/price? Situational Factors: Need quick/sudden delivery Specific applications? Large/small orders? Personal Characteristics: Buyer-seller similarity? Risk Attitudes? Loyalty?

Evaluating Segments Market Attractiveness Market Factors: Growth, size, price sensitivity, barriers Competitive Factors : Type of competition, New entrants, differentiation Political, Social and Environmental Factors : Issues, Social Trends, public Concerns. Organizational Capability: Exploitable assets, Cost advantages, Technological edge, Managerial capabilities Balance

8 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Target marketing strategies
Undifferentiated marketing
Differentiated marketing
Focused marketing
Customized marketing

Undifferentiated Strategy Example Post Office?
Product
Price
Promotion
Distribution
Everybody ORGANISATION MARKETING MIX TARGET MARKET 10 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill

Utilitarian Customer Trendy- Casual Price shopper Mainstream Tradition- alist LEVI’s Marketing Mix 1 Marketing Mix 2 Marketing Mix 3 Marketing Mix 4 Marketing Mix 5 Example of Differentiated Strategy 12 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill

Example of Focused Strategy
Product
Price
Promotion
Distribution
Cement Manufacturer Builders Merchants Independent DIY Shops National DIY Chains Unserved Unserved ORGANISATION MARKETING MIX 14 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill

Example of Customized Strategy Marketing Mix 1 Marketing Mix 2 Marketing Mix 3 Marketing Mix 4 Nissan Birdseye Heinz Levis Industrial Electronic Systems Supplier INDIVIDUAL MIXES ORGANISATION INDIVIDUAL CUSTOMERS 16 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill

21 D Jobber, Principles and Practice of Marketing, © 2001 McGraw-Hill Repositioning strategies Image repositioning Product repositioning Intangible repositioning Tangible repositioning Same Different Same Different Target market Product

Issues in Positioning and Repositioning
If four ‘keys’ are not taken into account can lose customers/clients:
Confused Positioning : too complicated, frequently changing, inconsistent/vague messaging.
Doubtful Positioning : low credibility.
Overpositioning : Buyers have too narrow an image of brand.
Underpositioning : No clear benefit/no competitive edge.
Gaining a differential advantage can be difficult…
If re-positioning poorly managed, can be worse off than before.

Services and Public Sector
Services even within a product based organization can be a key to positioning and differentiation – how do you want your target customers to view your services, how can you best create loyalty?
Some suggest positioning is more important for the service sector as it places the intangible into a more tangible frame of reference.
Targeting and positioning in the public sector can be just as important – the public may have different needs and respond to different messages (e.g. age, education, ethnicity).

Additional considerations? Ethics – social responsibility Unfair advantage of vulnerable or disadvantaged groups Segment interrelationships Segment by segment invasion plans Inter-segment co-operation

Objectives
Describe concepts and methods used in market segmentation and target marketing.
Outline factors that can be used to evaluate market segments
Explain the advantages of market segmentation and clear positioning.
Determine issues that arise from positioning and repositioning strategies.

Workshop on Segmentation
What are the advantages and disadvantages of market segmentation?
Carry out a benefit segmentation for the car manufacturing industry.
List the likely profiles of the resulting segments.
What ethical considerations relevant if sweet market targeting children?

Workshop aims and objectives
Aims:
Allow time to discuss and analyse ideas on market and benefit segmentation
Alert to ethical issues and concepts of civic positioning
Objectives:
Evaluate the market segmentation process
Apply and illustrate benefit segmentation
Assess the ethical implications of target marketing.

Workshop segmentation
Advantages of market segmentation?
Identification of a target market Tailoring of marketing mix Develop differential marketing strategies between segments Creation of differential advantage

Disadvantages of targeting and segmentation?
Mostly to do with doing it badly!
Confused, doubtful, under-positioning, or over-positioning can all lead to loss of business.
Poor targeting and positioning of one product may impact upon another.

Car Industry Possible Examples ? ? Other? Morgan High Individualists Distinctiveness Catalytic Converters Environmental Compactness, good for Env. Mondeo Large family Space Sports cars Young males Performance BMW High income Status Punto Thrifty Economy Example Profile Benefits

Ethical Considerations
Special rules regarding targeting children.
Children susceptible to advertising, parents badgered…
Some backlash around tooth decay, obesity etc.
This Presentation is at: www.bizface.co.uk for download

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Segmenting the market and finding your niche

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