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MF Strategic Marketing Market segmentation, target market and positioning


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MF Strategic Marketing Market segmentation, target market and positioning

  1. 1. Market Segmentation, Selecting Target Market & Developing Product Positioning
  2. 2. MARKET SEGMENTATION: Strategic & Tactical Marketing Decisions Define a continuing basis for determining how an organization interacts with the market place to achieve its broad objectives Short duration actions adapted to specific situations to achieve limited objectives in line with the general strategy Marketing Strategy Marketing Tactics
  3. 3. MARKET SEGMENTATION: Strategic Marketing Decisions Characteristics Defining the scope and nature of an organization’s market place by segmenting the market into customer groups: ‘How can customers be grouped according to their needs and buying Patterns?’ Matching the activities of an organization to the market in which it operates by TARGETING selected customer groups: ‘’What benefits do these particular group of customers look for and how can we provide them?’’ Matching the strengths of an organization to the needs of a customer group by adopting an appropriate market POSITION: ‘’What do we have to offer this customer group that is special in some way?’’
  4. 4. MARKET SEGMENTATION: Levels of Segmentation Mass Marketing One standardized product for all. Market Segments Homogenous groups having similar characteristics Market sub-segments Narrower groups within segments Niche Marketing Group of buyers who require very specialized products or services Customized Marketing Segment of one.
  5. 5. MARKET SEGMENTATION: Levels of Segmentation: Example- Book Market Recreational Buyers Display Buyers Knowledge Buyers Students ParentsHobbyistsStamp Collectors NICHE SEGMENTS SUB-SEGMENTS
  6. 6. MARKET SEGMENTATION: Advantages Of Segmentation Closer matching between what is offered by the organization and customer needs Concentration of resources on areas of greatest advantage e.g. Body Shop – more natural & less synthetic Market leadership through domination of a narrowly defined market Key to profitability in competitive markets.
  7. 7. MARKET SEGMENTATION: Criteria for Effective Segmentation Measurability  Degree to which size and purchasing power of segments can be assessed, examples: age, income Accessibility  Degree to which a firm can reach intended target segments efficiently through unique communication & distribution strategies Substantialness  Degree to which identified target segments are large enough or have sufficient sales and profit potential to warrant unique or separate marketing programs.
  8. 8. MARKET SEGMENTATION: Criteria for Effective Segmentation Durability  Stability of the segments Differential Responsiveness  Extent to which market segments exhibit different responses to different marketing mixes
  9. 9. Developing Market Segmentation Strategy Define overall product market Identify bases for segmentation Describe segments Analyze segments for potential & likely success Select Target Markets Determine positioning & develop marketing mix
  10. 10. Define overall product market A company’s market Focus on customers Generic vs. Product market  Generic is a market with broadly similar needs and sellers offering various, often diverse ways of satisfying those needs.  Product market has very similar needs and sellers offer various close substitutes  Example, entertainment seekers  buy a digital camcorder or plasma screen TV, sign up for a cruise or reserve tickets for a concert.
  11. 11. Relationship between Generic & Product- Market Definitions Generic market definition Product - market definition Customer (user) needs Customer types Geographic area Product type (good and/ or service)
  12. 12. Narrowing down to target markets Narrowing down to specific product-market All Customer needs Some generic market One broad Product- market Homogeneous (narrow) product- markets Segmenting into possible target markets
  13. 13. Geography • National • Regional • Urban/ rural Psychographics • Lifestyle • Personality Bases for Segmentation Benefits Sought • Low price • Reliability • Safety • Convenience • Status Buyer Behavior • Purchase rates • Loyalty • Payment methods • Media usage Demographics •Age • Gender • Culture • Family Lifecycle • Company size End Use • Applications • Product Types
  14. 14. Principal benefit sought Demographic strengths Special behavioral characteristics Brands disproportionately favored Lifestyle characteristics Example: Toothpaste Market Benefit Segments Sensory Segment Flavor & product appearance Children Users of spearmint- flavored toothpaste Colgate Hedonistic Sociable Segment Brightness of teeth Teens, young people Smokers Macleans, Ultra Brite Active Worrier Segment Decay prevention Large families Heavy users Crest Conservative Independent Segment Price Men Heavy users Cheapest brand Value-oriented
  15. 15. Example: Market segments for High- Tech Products Less Affluent More affluent Sidelined citizens Not interested in technology Hand-Shakers Old consumers – typically Managers – who don’t touch their computers at work. They leave that to younger Assistants. Traditionalists Willing to use technology but slow to upgrade. not convinced upgrades and other add-ons are worth paying for. Media junkies Seek entertainment And can’t find much Of it on-line. Prefer TV And other media. EntertainmentBusiness Family THE PESSIMISTS Based on 131,000 people poll about their motivations, buying habits and financial ability to purchase high-tech products
  16. 16. Example: Market segments for High- Tech Products (contd..) Less Affluent More affluent Fast Forwards These customers are the biggest spenders, and they are early adopters of new technology for individual use. New age nurturers Also big spenders, but focused on technology for home uses such as family PC. Mouse potatoes They like the on-line world for entertainment and are willing to spend for the latest technotainment. EntertainmentBusiness Family THE OPTIMISTS Techno-strivers Use technology from cell phones and pagers to on-line services primarily to gain career edge. Digital Hopefuls Families with a limited budget but still interested in new technology. Good candidates for the under $1000 PC. Gadget-Grabbers They also favor on-line entertainment but have less cash to spend on it.
  17. 17. Innovators Highest income, self esteem & abundant resources; can indulge in any or all self-orientations Thinkers High resource motivated by ideals; mature, responsible, well-educated professionals; practical consumers & rational decision makers Believers Low resource group; conservative & predictable consumers; prefer established brands; life centered around family, church, community & nation Survivors Lowest income, too few resources to be included in any self-orientation; oldest of all segments with limited means, who tend to be brand loyal Achievers Successful, work-oriented & get satisfaction from job & family; politically conservative & respect authority; Favor established products that show off their success to peers Strivers Values similar to achievers but few economic, social & psychological resources; style is important Experiencers Youngest of all the segments; Lot of energy; physical exercise & social activities; heavy spenders on clothing, fast food, music; emphasis new products Makers Practical people who value self-sufficiency; focused on family, work, physical recreation appreciate practical & functional products Example: VALS Values & Lifestyle
  18. 18. Market Targeting
  19. 19. Narrowing down to target markets Narrowing down to specific product-market All Customer needs Some generic market One broad Product- market Homogeneous (narrow) product- markets Single Target Market approach Multiple target Market approach Combined Target Market approach Segmenting into possible target markets Selecting target marketing approach
  20. 20. Market Targeting - Strategies Marketing Mix Market Marketing Mix 1 Marketing Mix Marketing Mix 2 Marketing Mix 3 Segment 1 Segment 2 Segment 3 Segment 1 Segment 2 Segment 3 Undifferentiated Strategy Differentiated Strategy Concentrated Strategy
  21. 21. Market Targeting - Strategies Undifferentiated Strategy Differentiated Strategy •Little diversity - applies the same marketing effort to the whole market • Lower costs • Vulnerable to competition • e.g. Coca Cola, brass & silver polish, Ford etc. •Targets distinct customer groups with appropriate marketing efforts for each segment • Developing different products or offering different mixes of pricing, promotion or distribution arrangements. •e.g. Marriott: Residence Inns, Marriott Courtyards, Fairfield Inns, Marriott Hotels, Marriott Resort Hotels.
  22. 22. Market Targeting - Strategies Differentiated Strategy •e.g. Clairol hair coloring market • Men with gray hair • Young men with gray hair • Young women • Middle aged women with gray hair • Glamour oriented middle aged women • Young and middle aged women (who perceive risks) • Brand loyal, long time users Clairol Option for Men Clairol Men’s Choice Clairol frost & tip Clairol Quiet Touch Clairol Loving Care Clairol Ultress Clairol Nice ‘n Easy Miss Clairol
  23. 23. Market Targeting - Strategies Concentrated Strategy •Usually one specialized segment; could be a combination of two • Effective use of resources • 80/20 principle • e.g. jewelers, clothes, radio stations etc. e.g. Chain saw manufacturer Professional lumberjackFarmCasual or occasional user
  24. 24. Market Targeting - Strategies Manufacturer of gasoline-powered lawn mowers Farm Professionals Maker of electric tools Electric chain saws, can target segment/s that provide a match between company goals & abilities and customer needs. Concentrated approach can be Employed.
  25. 25. Market Targeting Higher costs using differentiated marketing include:  Product modification cost  Manufacturing cost  Administrative cost  Inventory cost  Promotion cost
  26. 26. Sales Forecast “Level of sales a single organization expects to achieve based on a chosen market strategy and an assumed competitive environment.” Market Targeting – Estimating Potential
  27. 27. Sales Forecasting Methods  Qualitative  Survey of buyer’s intentions  Expert Opinion  Composite of sales force estimates  Quantitative  Trend Analysis  Market Tests  Statistical Demand Analysis Sales Forecast
  28. 28. Sales Forecast = f (M, T, C, U, P) M = Market potential T = Proportion of market you are Targeting C = Extent of market Coverage U = Number of Units expected to sell per customer during the year P = Average Price per unit (P) Therefore, Sales Forecast = M x T x C x U x P Making A Sales Forecast
  29. 29. Making A Sales Forecast - Example Total number of potential buyers = 1 Million Target Market (25%) = x 0.25 Market Coverage (75%) = x 0.75 Units purchased per year (20) = x 20 Average Price ($10)= x $10 Forecasted Sales = $ 37.5 Million
  30. 30. Important Factors for Selecting Target Segments  Segment’s Potential Sales  Competition currently selling to the segments  Firm’s objectives & distinctive competence A number of variables can be selected simultaneously for targeting a market place  e.g. Burton Group Selecting Target Markets
  31. 31. Positioning
  32. 32. Image of a product or a firm in the eyes of the customer in relation to the competitors’ products and/or products offered by the same firm Positioning (for Competitive Advantage) 3 Steps in a Positioning Strategy: 1. Select the positioning concept 2. Design the dimension or feature that most effectively conveys the position 3. Coordinate the Marketing Mix to convey a consistent position
  33. 33. Positioning for Competitive Advantage: Strategies Products can be positioned on the basis of: Superiority to competitors Use or application Users Product Class Directly against competitors
  34. 34. Positioning Map/ Perceptual Mapping Brands of soaps High moisturising Nondeodorant Deodorant Low moisturising Tone Dove Lux Lever 2000 Lifebuoy Dial Zest Mercury Safeguard
  35. 35. Positioning Map/ Perceptual Mapping Automobiles Luxurious Traditional Sporty Functional Lincoln Cadillac Mercedes Oldsmobile Chrysler Buick BMW Infiniti Lexus Porsche Chevrolet Nissan Toyota Saturn VW Ford Dodge Acura Mercury
  36. 36. Positioning Map/ Perceptual Mapping Mobile Phone Service Provider Innovative Coverage High High Low Low Mobilink Paktel Warid Ufone Telenor
  37. 37. Wind’s classification for segmentation  Single basis for segmentation for all marketing decisions may result in incorrect marketing decisions as well as a waste of resources.  For general understanding of a market  Benefits sought  Product purchase and usage patterns  Needs  Brand Loyalty and switching pattern  A Hybrid of the variables above  For positioning studies  Product usage  Product preference  Benefits sought  A hybrid of the above variables Strategic Market Segmentation
  38. 38.  For new product concepts  Reactions to new concepts (intention to buy, preference over current brand etc.)  Benefits sought  For pricing decisions  Price sensitivity  Deal proneness  Price sensitivity by purchase/ usage pattern  For advertising decisions  Benefits sought  Media usage  Psychographic/ lifestyle  For distribution decisions  Store loyalty and patronage  Benefits sought in store selection Strategic Market Segmentation
  39. 39. Basic Patterns/ Procedures of Segmentation  An a priori segmentation – management decides on a basis for segmentation e.g. product purchase, loyalty etc. OR grouping customers using descriptive characteristics and then comparing response differences across the groups  Clustering – segments determined on the basis of a clustering of respondents on a set of relevant variables. The only significant difference is that the segments are determined after the data have been collected on the basis of perceived groupings or clusters within the data. OR Forming groups based on response differences (e.g. frequency of purchase etc.) and determining if groups can be identified based on differences in their characteristics. Strategic Market Segmentation
  40. 40. Hooley’s review of multivariate techniques which he dichotomizes as being either predictive or descriptive in nature.  Predictive Techniques  Multiple Regression  Multiple Discriminant Analysis  Conjoint Analysis  Descriptive techniques  Factor Analysis  Cluster analysis  Multidimensional scaling Strategic Market Segmentation
  41. 41. Multiple Regression – develops a model of the relatonship between a dependent variable such as sales and 2 or more independent variables such as price, promotional expenditure etc. so that variations in the former may be explained and predicted in terms of changes in the latter. Strategic Market Segmentation
  42. 42. Multiple Discriminant Analysis – also uses a set of independent variables to predict one or more dependent variables. It is useful in marketing as a means of discriminating between market segments in terms of member characteristics.  Example. Strategic Market Segmentation
  43. 43. Conjoint Analysis – identifies the relative importance of each product attribute in creating an overall desirability for the product.  Example. Strategic Market Segmentation
  44. 44. Conjoint Analysis Industrial cleanser – 3 attributes important for customers  Cleansing ingredient  Form  Brand Name To operationalize attributes, certain levels for each attribute needs to be determined; in this case 2 levels were determined L E V E L S  Ingredients Phosphate free Phosphate based  Forms Liquid Powder  Brand Name A B
  45. 45. Conjoint Analysis Next step: Evaluations from respondents regarding their preferences across 8 combinations of the two different levels for each of the three attributes. (1=most preferred and 8=least preferred) Ranking Liquid Phosphate free A 1 1 Liquid Phosphate free B 2 2 Liquid Phosphate based A 5 3 Liquid Phosphate based B 6 4 Powder Phosphate free A 3 7 Powder Phosphate free B 4 5 Powder Phosphate based A 7 8 Powder Phosphate based B 8 6
  46. 46. Cluster Analysis groups people according to the similarity of their answers to questions such as brand preferences or product attributes. OR It classifies objects (e.g. respondents, products etc.) so that each object is similar to others in the cluster based on a set of selected characteristics. The resulting clusters should exhibit high internal homogeneity and high external heterogeneity. Strategic Market Segmentation
  47. 47. Multidimensional Scaling – also known as perceptual mapping, is a procedure that determines the perceived relative image of a set of objects (firms, products, ideas etc.). The purpose is to transform consumer judgments of overall similarity or preference into distances represented in multidimensional space. Strategic Market Segmentation