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  1. 1. Segmentation, Targeting & Positioning
  2. 2. Overview: Segmentation, Targeting & Positioning Why do this?
  3. 3. Market Segmentation - Principles <ul><li>Segmentation Variables </li></ul><ul><ul><li>Geographic </li></ul></ul><ul><ul><li>Demographic </li></ul></ul><ul><ul><li>Psychographic </li></ul></ul><ul><ul><li>Behavioral </li></ul></ul><ul><ul><li>Other (anything!) </li></ul></ul><ul><li>No single best way to segment a market. </li></ul><ul><li>Often best to combine variables and identify smaller, better-defined target groups. </li></ul>
  4. 4. Geographic Segmentation <ul><li>Divide markets into different geographic units. </li></ul><ul><li>Examples: </li></ul><ul><ul><li>World Region or Country: North America, Western Europe, European Union, Pacific Rim, Mexico, etc. </li></ul></ul><ul><ul><li>Country Region: Pacific, Mountain, East Coast, etc. </li></ul></ul><ul><ul><li>City or Metro Size: New York, San Francisco </li></ul></ul><ul><ul><li>Population Density: rural, suburban, urban </li></ul></ul><ul><ul><li>Climate: northern, southern, tropical, semi-tropical </li></ul></ul>
  5. 5. Demographic Segmentation <ul><li>Use Differences in: </li></ul><ul><ul><li>age, gender, family size, family life cycle, income, occupation, education, race, and religion </li></ul></ul><ul><ul><li>Most frequently used segmentation variable </li></ul></ul><ul><ul><ul><li>Ease of measurement and high availability. </li></ul></ul></ul><ul><ul><li>Usually the worst variable to use. </li></ul></ul>
  6. 6. Psychographic Segmentation <ul><ul><li>Psychographic segmentation divides a market into different groups based on social class, lifestyle, or personality characteristics. </li></ul></ul>People in the same demographic classification often have very different lifestyles and personalities.
  7. 7. Behavioral Segmentation <ul><li>Occasion </li></ul><ul><ul><li>Special promotions & labels for holidays. </li></ul></ul><ul><ul><li>Special products for special occasions. </li></ul></ul><ul><li>Benefits Sought </li></ul><ul><ul><li>Different segments desire different benefits from the same products. </li></ul></ul><ul><li>Loyalty Status </li></ul><ul><ul><li>Nonusers, ex-users, potential users, first-time users, regular users. </li></ul></ul><ul><li>Usage Rate </li></ul><ul><ul><li>Light, medium, heavy. </li></ul></ul>
  8. 8. Loyalty Status Segmentation Switchers Shifting loyals Split loyals Hard-core
  9. 9. User & Loyalty Status Segmentation
  10. 10. Geodemographic Segmentation <ul><li>PRIZM, by Claritas </li></ul><ul><ul><li>Organized by ZIP code </li></ul></ul><ul><ul><li>Based on U.S. Census data </li></ul></ul><ul><ul><li>Profiles on 260,000+ U.S. neighborhoods </li></ul></ul><ul><ul><li>62 clusters or types </li></ul></ul>
  11. 11. Claritas’ Prizm
  12. 12. Requirements for Effective Segmentation <ul><li>Segments must be </li></ul><ul><ul><li>Measurable </li></ul></ul><ul><ul><li>Accessible </li></ul></ul><ul><ul><li>Substantial </li></ul></ul><ul><ul><li>Differentiable </li></ul></ul><ul><ul><li>Actionable </li></ul></ul>“ Lefties” are hard to identify and measure, so few firms target this segment.
  13. 13. <ul><li>Segment Size and Growth Potential </li></ul><ul><ul><li>Sales, profitability and growth rates </li></ul></ul><ul><li>Segment Structural Attractiveness </li></ul><ul><ul><li>Competition, substitute products, </li></ul></ul><ul><ul><li>buyers & supplier power, new entrants (Porter’s Five Forces) </li></ul></ul><ul><li>Company Objectives and Resources </li></ul><ul><ul><li>Core competencies </li></ul></ul><ul><ul><li>“ What business do we want to be in?” </li></ul></ul>Evaluating Market Segments
  14. 14. Targeting Segments - Overview
  15. 15. Market Preference Patterns
  16. 16. <ul><ul><li>Ignores segmentation opportunities </li></ul></ul>Undifferentiated (Mass) Marketing
  17. 17. Differentiated (Segmented) Marketing <ul><ul><li>Targets several segments and designs separate offers for each. </li></ul></ul><ul><ul><li>Coca-Cola (Coke, Sprite, Diet Coke, etc.) </li></ul></ul><ul><ul><li>Procter & Gamble (Tide, Cheer, Gain, Dreft, etc.) </li></ul></ul><ul><ul><li>Toyota (Camry, Corolla, Prius, Scion, etc.) </li></ul></ul>
  18. 18. Question du Jour <ul><li>Should the same company produce and market brands that compete with each other? </li></ul>
  19. 19. Niche Marketing <ul><ul><li>Targets one or a couple small segments </li></ul></ul><ul><ul><li>Niches have very specialized interests </li></ul></ul>
  20. 20. <ul><li>Tailoring products and marketing programs to suit the tastes of specific individuals and/or locations. </li></ul>Micromarketing
  21. 21. Flexible Marketing Offerings <ul><li>“ Naked”/Core solution </li></ul><ul><ul><li>Product and service elements that all segment members value </li></ul></ul><ul><li>Discretionary options </li></ul><ul><ul><li>Some segment members value </li></ul></ul><ul><ul><li>Options may carry additional charges </li></ul></ul>
  22. 22. Patterns of Target Market Selection: Product x Market Matrices
  23. 23. <ul><li>Controversies and concerns </li></ul><ul><ul><li>Targeting the vulnerable and disadvantaged </li></ul></ul><ul><ul><ul><li>Cereal, Cigarettes, Alcohol, Fast-food </li></ul></ul></ul><ul><ul><li>The “Catch-22” of Targeting </li></ul></ul><ul><ul><ul><li>Psychological Reactance </li></ul></ul></ul><ul><ul><ul><li>Failure to target seen as prejudice </li></ul></ul></ul>Socially Responsible Targeting
  24. 24. <ul><li>The place a product occupies in consumers’ minds relative to competing products. </li></ul>Positioning
  25. 25. eBay’s positioning: No matter what “it” is, you can find “it” on eBay! Positioning Example
  26. 26. To (target segment and need) our (brand) is a (concept) that (point-of-difference). Positioning Example “ To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.”
  27. 27. Positioning Maps: Luxury SUVs Price vs. Orientation Dimensions
  28. 28. <ul><li>Competitive advantages </li></ul><ul><li>Points of Parity </li></ul><ul><li>Points of Difference => Differentiation </li></ul><ul><li>Positioning results from differentiation and competitive advantages. </li></ul><ul><li>Positioning may change over time. </li></ul>Positioning Strategy
  29. 29. Sources of Differentiation <ul><ul><li>Product Design </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Additional Services </li></ul></ul><ul><ul><li>Image </li></ul></ul><ul><ul><li>People (Staff) </li></ul></ul><ul><ul><li>Price </li></ul></ul><ul><ul><li>Other </li></ul></ul>6-
  30. 30. Choosing the Right Competitive Advantages <ul><li>The best competitive advantages are… </li></ul><ul><ul><li>Important </li></ul></ul><ul><ul><li>Distinctive </li></ul></ul><ul><ul><li>Superior </li></ul></ul><ul><ul><li>Communicable </li></ul></ul><ul><ul><li>Pre-emptive </li></ul></ul><ul><ul><li>Affordable (to company and consumer) </li></ul></ul><ul><ul><li>Profitable </li></ul></ul><ul><li>Moral: Avoid meaningless differentiation. </li></ul>
  31. 31. <ul><li>Under-positioning : </li></ul><ul><ul><li>Not positioning strongly enough. </li></ul></ul><ul><li>Over-positioning : </li></ul><ul><ul><li>Giving buyers too narrow a picture of the product. </li></ul></ul><ul><li>Muddled Positioning : </li></ul><ul><ul><li>Leaving buyers with a confused image of the product. </li></ul></ul>Positioning Errors
  32. 32. Generic Product Positions & Value Propositions
  33. 33. Question du Jour <ul><li>Which is more important: Product or Positioning ? </li></ul>
  34. 34. In-class Activity <ul><li>Describe how each of the following brands, companies, or products is positioned: </li></ul>
  35. 35. In-class Activity, Part 2 <ul><li>Choose one of the companies/brands and… </li></ul><ul><ul><li>Identify relevant direct competitors </li></ul></ul><ul><ul><li>Choose the two dimensions that are most important to consumers </li></ul></ul><ul><ul><li>Develop a perceptual positioning map </li></ul></ul><ul><ul><li>Are there any opportunities in this category? </li></ul></ul>
  36. 36. In-class Activity, Part 3 <ul><li>Choose a company and invent a segmentation scheme for that company’s customers using the variables we discussed in class. </li></ul>
  37. 37. In-class Activity – Developing a Segmentation Scheme <ul><li>Develop a PSYCHOGRAPHIC/USAGE segmentation scheme for each of the following types of consumers. </li></ul><ul><ul><li>Segment the market into three or more substantive groups. </li></ul></ul><ul><ul><li>Be sure to think of the key psychological/usage drivers of consumption. </li></ul></ul><ul><ul><li>Name your segments – the more creative, the better! </li></ul></ul><ul><li>Consumers </li></ul><ul><ul><li>Vacationers </li></ul></ul><ul><ul><li>Internet Users </li></ul></ul><ul><ul><li>Restaurant Patrons </li></ul></ul><ul><ul><li>Eco-friendly product consumers </li></ul></ul><ul><ul><li>Smartphone Users </li></ul></ul><ul><ul><li>Grocery Store Shoppers </li></ul></ul>