Unit2 market segmentation


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  • It helps organize certain types of information in such a way that other strategies such as segmentation and differentiation can be combined into a more effective mktg prog. A pos. strategy can be applied to an individual consumer (eg buyer of a Rolls Royce); or to conventional market segments (eg the shampoo mkt); or to an entire country (eg M&M hawking its RTV and UVs in select African countries) ------ Before pdct position can be determined, the mktr must identify key attitudes and perceptions of the consumer towards the key attributes of a particular product type, class, or brand, relative to compttn.
  • These meanings are not inherent in the object itself but are given to it by the culture, by society, by communicators such as advertisers, and by consumers.
  • Unit2 market segmentation

    1. 1. Unit 2 Principles of Marketing Segments,targets and positioning Subhajit Sanyal 8 –
    2. 2. What Are Markets? <ul><li>Requirements of a Market </li></ul><ul><ul><li>Must need or desire a particular product </li></ul></ul><ul><ul><li>Must have the ability to purchase the product </li></ul></ul><ul><ul><li>Must be willing to use their buying power </li></ul></ul><ul><ul><li>Must have the authority to buy specific products </li></ul></ul>8 –
    3. 3. What Are Markets? (cont’d) <ul><li>Types of Markets </li></ul><ul><ul><li>Consumer markets </li></ul></ul><ul><ul><ul><li>Purchasers and individuals in households </li></ul></ul></ul><ul><ul><ul><li>Purchases are for personal consumption, not profit </li></ul></ul></ul><ul><ul><li>Business markets </li></ul></ul><ul><ul><ul><li>Individuals and groups that purchase products for resale, direct use to produce other products, or use in daily business operations </li></ul></ul></ul><ul><ul><ul><li>Purchasers classed as producers, resellers, government, and institutional markets </li></ul></ul></ul>8 –
    4. 4. Target Market Selection Process 8 – FIGURE 7.1
    5. 5. Targeting Strategies 8 – FIGURE 7.2
    6. 6. Targeting Strategies 8 – FIGURE 7.2
    7. 7. Targeting Strategies 8 – FIGURE 7.2
    8. 8. Step 1: Identify the Appropriate Targeting Strategy <ul><li>Undifferentiated Strategy </li></ul><ul><ul><li>Defining an entire market for a particular product as the target market (homogeneous market) </li></ul></ul><ul><ul><li>Designing a single market mix for, and directing it at the total market </li></ul></ul>8 –
    9. 9. Step 1: Identify the Appropriate Targeting Strategy (cont’d) <ul><li>Concentrated Strategy Through Market Segmentation </li></ul><ul><ul><li>Segmenting (dividing) the total market into groups with similar product needs (heterogeneous markets) to design marketing mixes that match those needs </li></ul></ul><ul><ul><li>Concentrated targeting strategy focuses on a single market segment using one marketing mix </li></ul></ul>8 –
    10. 10. Step 1: Identify the Appropriate Targeting Strategy (cont’d) <ul><li>Differentiated Strategy Through Market Segmentation </li></ul><ul><ul><li>Targeting two or more segments by developing a marketing mix for each </li></ul></ul><ul><ul><li>Competitive advantage is marketing mixes are aimed at more people </li></ul></ul>8 –
    11. 11. Step 2: Determine Which Segmentation Variables to Use <ul><li>Segmentation Variables </li></ul><ul><ul><li>Characteristics of individuals, groups, or organizations used to divide a market into segments </li></ul></ul>8 –
    12. 12. Segmentation Variables for Consumer Markets 8 – FIGURE 7.3
    13. 13. Step 2: Determine Which Segmentation Variables to Use (cont’d) <ul><li>Demographic Variables </li></ul><ul><ul><li>Population characteristics such as age, gender, race, ethnicity, income, education </li></ul></ul><ul><li>Geographic Variables </li></ul><ul><ul><li>Customer product needs are influenced by climate, terrain, city size, population density, and urban/rural areas </li></ul></ul><ul><li>Market Density </li></ul><ul><ul><li>The number of potential customers within a unit of land area </li></ul></ul>8 –
    14. 14. Step 2: Determine Which Segmentation Variables to Use (cont’d) <ul><li>Geodemographic Segmentation </li></ul><ul><ul><li>Marketing segmentation that clusters people in zip code areas and smaller neighborhood units based on lifestyle and demographic information </li></ul></ul><ul><li>Micromarketing </li></ul><ul><ul><li>An approach to market segmentation in which organizations focus precise marketing efforts on very small geographic markets </li></ul></ul>8 –
    15. 15. Step 2: Determine Which Segmentation Variables to Use (cont’d) <ul><li>Psychographic Variables </li></ul><ul><ul><li>Personality characteristics </li></ul></ul><ul><ul><ul><li>Marketers appeal to positive/favorable personal characteristics to influence the purchase decision. </li></ul></ul></ul><ul><ul><li>Motives </li></ul></ul><ul><ul><ul><li>Marketers use individuals’ differing purchase motives to segment a product market. </li></ul></ul></ul><ul><ul><li>Lifestyles </li></ul></ul><ul><ul><ul><li>Marketers segment markets according to how individuals choose to spend their time in various activities, their income, their interest and opinions, and their education. </li></ul></ul></ul>8 –
    16. 16. Step 2: Determine Which Segmentation Variables to Use (cont’d) <ul><li>Behavioristic Variables </li></ul><ul><ul><li>Benefit segmentation </li></ul></ul><ul><ul><ul><li>The division of a market according to benefits that customers want from the product </li></ul></ul></ul><ul><ul><ul><li>Individuals purchase and use products that provide them with benefits that meet their needs. </li></ul></ul></ul><ul><ul><li>Effective segmentation requires: </li></ul></ul><ul><ul><ul><li>Benefits of the product be identifiable </li></ul></ul></ul><ul><ul><ul><li>Benefits actually divide market into segments </li></ul></ul></ul><ul><ul><ul><li>One or more segments be accessible to the marketing effort </li></ul></ul></ul>8 –
    17. 17. Step 2: Determine Which Segmentation Variables to Use (cont’d) <ul><li>Variables for Segmenting Business Markets </li></ul><ul><ul><li>Geographic location </li></ul></ul><ul><ul><ul><li>Location affects the level of product demand. </li></ul></ul></ul><ul><ul><li>Type of organization </li></ul></ul><ul><ul><ul><li>Variations in firms’ characteristics leads to segmentation by type. </li></ul></ul></ul><ul><ul><li>Customer size </li></ul></ul><ul><ul><ul><li>Larger customers strongly influence how they are treated in the marketplace. </li></ul></ul></ul><ul><ul><li>Product use </li></ul></ul><ul><ul><ul><li>Firms use basic inputs in ways different from one another. </li></ul></ul></ul>8 –
    18. 18. Step 3: Develop Market Segment Profiles <ul><li>Market Segment Profile </li></ul><ul><ul><li>Describes the similarities among potential customers within a segment </li></ul></ul><ul><ul><li>Covers demographic characteristics, geographic factors, benefits sought, lifestyles, brand preferences, and usage rates </li></ul></ul>8 –
    19. 19. Step 4: Evaluate Relevant Market Segments <ul><li>Sales Estimates </li></ul><ul><ul><li>Market potential </li></ul></ul><ul><ul><li>Company sales potential </li></ul></ul><ul><li>Measuring Sales Potential </li></ul><ul><ul><ul><li>Breakdown approach: top-down analysis </li></ul></ul></ul><ul><ul><ul><li>Build-up approach: bottom-up analysis </li></ul></ul></ul><ul><li>Competitive Assessment </li></ul><ul><ul><ul><li>Who, how many, how large, and how strong? </li></ul></ul></ul><ul><li>Cost Estimates </li></ul><ul><ul><ul><li>The expense of developing a marketing mix </li></ul></ul></ul><ul><ul><ul><li>Costs of reaching segment relative to competitors’ costs </li></ul></ul></ul>8 –
    20. 20. Step 5: Select Specific Target Markets <ul><li>Issues in Selecting a Target Market </li></ul><ul><ul><li>Do customers’ needs differ enough to warrant the use of market segmentation? </li></ul></ul><ul><ul><li>In which market segment(s) should the firm participate? </li></ul></ul><ul><ul><li>Does the firm have the resources and skills to compete effectively in the target market? </li></ul></ul>8 –
    21. 21. Developing Sales Forecasts <ul><li>Sales Forecast </li></ul><ul><ul><ul><li>The amount of a product a company expects to sell during a specific period at a specified level of marketing activities </li></ul></ul></ul><ul><li>Common Forecasting Techniques </li></ul><ul><ul><li>Executive judgment </li></ul></ul><ul><ul><ul><li>Based on the intuition of the firm’s managers </li></ul></ul></ul><ul><ul><li>Surveys </li></ul></ul><ul><ul><ul><li>Sales force forecasting survey </li></ul></ul></ul><ul><ul><ul><li>Customer forecasting </li></ul></ul></ul><ul><ul><ul><li>Expert forecasting survey </li></ul></ul></ul><ul><ul><ul><li>Delphi technique (panel of experts) </li></ul></ul></ul>8 –
    22. 22. Developing Sales Forecasts (cont’d) <ul><li>Common Forecasting Techniques (cont’d) </li></ul><ul><ul><li>Time-series analysis </li></ul></ul><ul><ul><ul><li>Patterns in historical data yield information for use in trend analysis </li></ul></ul></ul><ul><ul><li>Trend analysis </li></ul></ul><ul><ul><ul><li>Cycle analysis </li></ul></ul></ul><ul><ul><ul><li>Seasonal analysis </li></ul></ul></ul><ul><ul><ul><li>Random factor analysis </li></ul></ul></ul>8 –
    23. 23. Step 5: Select Specific Target Markets (cont’d) <ul><li>Regression Analysis </li></ul><ul><ul><li>Predicting sales based on the relationship between past sales and one or more variables. </li></ul></ul><ul><li>Market Tests </li></ul><ul><ul><li>Making a product available in the marketplace and measuring purchases and consumer responses </li></ul></ul><ul><li>Using Multiple Forecasting Methods </li></ul><ul><ul><li>A combination of forecasting methods yields better </li></ul></ul>8 –
    24. 24. Three Types of Targeting Strategies 8 –
    25. 25. Variables for Segmenting Business Markets 8 –
    26. 26. Positioning 8 – Developing a specific marketing mix to influence potential customers’ overall perception of a brand, product line, or organization in general.
    27. 27. <ul><li>“ Positioning starts with a product. A piece of merchandise, a service, a company, an institution, or even a person… But positioning is not what you do to a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect..” (Al Ries & Jack Trout) </li></ul><ul><li>The process of creating an image for a product in the mind of target customers </li></ul>Positioning 8 –
    28. 28. Position 8 – The place a product, brand, or group of products occupies in consumers’ minds relative to competing offerings.
    29. 29. Product Differentiation 8 – A positioning strategy that some firms use to distinguish their products from those of competitors.
    30. 30. Characteristics of positioning <ul><li>Positioning is a facilitating process that coordinates marketing functions. </li></ul><ul><li>Positioning strategy can be applied to both micro and macro levels of marketing. </li></ul><ul><li>The position a customer perceives for a product may be based on the product’s physical features or intangible images created by the company’s promotional efforts. </li></ul><ul><li>To be effective positioning must be consumer oriented. </li></ul>8 –
    31. 31. Keys to successful positioning 8 – Consistency Clarity Credibility Competitiveness Successful positioning
    32. 32. Perceptual mapping to establish (product) position 8 – Perceptual mapping is a means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds.
    33. 33. Developing perceptual maps <ul><li>Identify a set of competing brands </li></ul><ul><li>Identify important attributes </li></ul><ul><li>That consumers use when choosing between brands using qualitative research </li></ul><ul><li>Conduct quantitative marketing research where consumers score each brand on all key attributes </li></ul><ul><li>Plot brands on a two dimensional brands </li></ul>8 –
    34. 34. Tools for drawing perceptual maps… <ul><li>Experiential basis (stereotypes..) </li></ul><ul><li>Market research (consumer surveys; focus groups etc.) Qualitative as well as quantitative. </li></ul><ul><li>With tools such as – </li></ul><ul><ul><li>Multi dimensional scaling techniques </li></ul></ul><ul><ul><li>Discriminant analysis </li></ul></ul>8 –
    35. 35. Perceptual Mapping – Levi’s 8 – Red Tab Basics High Price Low Price Classic Designer Old product New product Vintage Red Line Silver Tab Slates Dockers Premium Dockers Classics 501 Red Tab Dry Goods L2 Red Tab Elesco
    36. 36. Positioning Strategies <ul><li>Positioning strategies are designed to answer </li></ul><ul><li>2 basic questions: </li></ul><ul><li>Against whom should you position? </li></ul><ul><li>How should you position? </li></ul>8 –
    37. 37. Positioning Strategy-What does it mean? <ul><li>Developing a favourable image in the mind of consumers that differentiates the organisation from its competitors </li></ul><ul><ul><li>Focus on intangible element, as tangible element difficult to differentiate </li></ul></ul><ul><li>Ensuring that target markets clearly understand what the service, product or brand stands for </li></ul><ul><li>Establishing a match between the benefits sought by the consumer, the company’s strengths and its competitors weaknesses </li></ul>8 –
    38. 38. Steps in positioning Step 1: Identify product positions <ul><li>To identify a product’s existing or desired position, we need to understand the product and the consumer. </li></ul><ul><li>A product can be described – </li></ul><ul><ul><li>physically with respect to its function or its sensory or physiological characteristics; </li></ul></ul><ul><ul><li>Socially in terms of the social uses to which it can be put; or </li></ul></ul><ul><ul><li>Psychologically in terms of its use in expressing human emotions, desires or behaviours. </li></ul></ul>8 –
    39. 39. Step 2: Identify positioning bases 8 – Attribute Price and Quality Use or Application Product User Product Class Competitor Positioning Bases
    40. 40. Positioning bases contd. <ul><li>Product characteristics and customer benefits: they tell us how the customer is going to be benefited by the attributes of the product. </li></ul><ul><li>Price quality: this positioning approach is based on the notion of giving value through quality products sold at low prices. </li></ul><ul><li>Product use: this associates the product with a use. </li></ul>8 –
    41. 41. <ul><li>Product user: this is association of a product with a user or user type. </li></ul><ul><li>Product class: some products may benefit by positioning themselves within a product class </li></ul><ul><li>Symbols: the use of symbols to position brands. </li></ul><ul><li>Competition positioning </li></ul>Positioning bases contd. 8 –
    42. 42. Steps 3: Selecting a position <ul><li>Factors to consider when selecting the basis for a position – </li></ul><ul><ul><li>The market position: is the product a leader, no. 2, or one of the small brands </li></ul></ul><ul><ul><li>The positioning used by current competitors. </li></ul></ul><ul><ul><li>Compatibility of the desired positioning with consumers’ needs, wants and current perception of the product’s positioning versus its competitors, and a given product class. </li></ul></ul>8 –
    43. 43. Selecting a position contd. <ul><ul><li>The newness of the considered basis for positioning and its departure from the current practice in the market. </li></ul></ul><ul><ul><li>The resources available to communicate the positioning effectively and the compatibility of the positioning with the firm’s marketing strategy </li></ul></ul><ul><ul><li>The firm’s desire for an innovative image rather than a “me-too” image. </li></ul></ul><ul><ul><li>The firm’s ability to execute the chosen positioning effectively and creatively; and </li></ul></ul><ul><ul><li>The legality of the proposed positioning. </li></ul></ul>8 –
    44. 44. <ul><li>To communicate a co. or brand positioning a marketing plan should include a positioning statement, viz; To (target group and need) our (Brand) is (concept) that (point-of-difference). E.g. - </li></ul><ul><ul><li>“ To busy professionals who need to stay organized , Palm Pilot is an electronic organizer that allows you to back-up files on your PC more easily and reliably than competitive products” . </li></ul></ul>Step 4: Communicating a position 8 –
    45. 45. Repositioning 8 – Changing consumers’ perceptions of a brand in relation to competing brands. Q: How is repositioning accomplished?
    46. 46. Repositioning <ul><li>Reasons For Repositioning </li></ul><ul><li>Falling sales </li></ul><ul><li>An opportunity to serve an emerging market </li></ul><ul><li>The threat of competition eroding market share </li></ul><ul><li>Dangers </li></ul><ul><li>Sending confusing signals </li></ul><ul><li>Losing existing customers </li></ul><ul><li>May require change in personnel </li></ul>8 –
    47. 47. Repositioning strategies 8 – PRODUCT Same Different TARGET MARKET Same Different Image repositioning Intangible repositioning Product repositioning Tangible repositioning
    48. 48. STP Marketing recap… 8 – <ul><li>SEGMENTING </li></ul><ul><li>Consider variables for segmenting market. </li></ul><ul><li>Look at profile of emerging segments. </li></ul><ul><li>Validate segments emerging. </li></ul><ul><li>TARGETING </li></ul><ul><li>Decide on targeting strategy. </li></ul><ul><li>Decide which and how many segments should </li></ul><ul><li>be targeted. </li></ul><ul><li>POSITIONING </li></ul><ul><li>Understand consumer perceptions. </li></ul><ul><li>Position products in the mind of the consumer. </li></ul><ul><li>Design appropriate marketing mix. </li></ul>