Market Segmentation, Targeting and Positioning

By : Prof Sameer Kulkarni 1

The Starting Point

• Mass Marketing:  The Seller engages in – 1. Mass marketing>mass production>mass distribution>and mass promotion ONE PRODUCT FO ALL BUYERS.

It creates the largest potential market>leads to lower costs>lower prices>higher margins 2

Segment Marketing

• Role of Marketer • The marketer does not create the segments • The marketer identifies the segments and decide which one to target • The company can better design>price>disclose& deliver the product to satisfy the target market .

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Benefits of Segmentation

• Effective use of resources • Gain a focus • Create Value for a target market • Positioning 4

Steps in Market Segmentation, Targeting, and Positioning

Market Segmentation

1. Identify bases for segmenting the market 2. Develop segment profiles

Market Targeting

3. Develop measure of segment attractiveness 4. Select target segments

Market Positioning

5. Develop positioning for target segments 6. Develop a marketing mix for each segment 5

Step 1. Market Segmentation Levels of Market Segmentation Through Market Segmentation, Companies Divide Large, Heterogeneous Markets into Smaller Segments that Can be Reached More Efficiently And Effectively With Products and Services That Match Their Unique Needs.

Mass Marketing Same product to all consumers (no segmentation, i. e. a commodity) Segment Marketing Different products to one or more segments (some segmentation, i.e. Thumsup) 6

Steps in Market Segmentation, Targeting, and Positioning

Market Segmentation Market Targeting Market Positioning 1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments 3. Evaluate attractiveness of each segment 4. Select the target segment(s) 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept

Basic Market-Preference Patterns

(a) Homogeneous preferences (b) Diffused preferences (c) Clustered preferences Sweetness Sweetness Sweetness

Step 2. Market Segmentation

Levels of Market Segmentation

Mass Marketing

Same product to all consumers (no segmentation)

Segment Marketing

Different products to one or more segments (some segmentation)

Niche Marketing

Different products to subgroups within segments (more segmentation)

Micromarketing

Products to suit the tastes of individuals and locations (complete segmentation)

Local Marketing Individual Marketing

Tailoring brands / promotions to local customer groups Tailoring products/ programs to individual customers

Bases for Segmenting Consumer Markets

Geographic Region, City or Metro Size, Density, Climate Demographic Age, Gender, Family size and Fife cycle, Race, Occupation, or Income ...

Psychographic Lifestyle or Personality Behavioral Occasions, Benefits, Uses, or Attitudes

Step 3. Market Segmentation Geographic Segmentation International National Regional/City 11

Geographic Bases

• Region • Density • Climate • Population

Step 4. Market Segmentation

Bases for Segmenting Business Markets

Personal Characteristics Situational Factors Demographics Bases for Segmenting Business Markets Operating Characteristics Purchasing Approaches

Step 5. Market Segmentation Demographic Segmentation • Dividing the market into groups based on variables such as: – Age – Gender – Family size or life cycle – Income – Occupation – Education – Religion – Race – Generation – Nationality 14

Step 6. Market Segmentation Psychographic Segmentation Divides Buyers Into Different Groups Based on: 15

Step 7. Market Segmentation Behavioral Segmentation • Dividing the market into groups based on variables such as: – Occasions – Benefits – User status – Usage rate – Loyalty status – Readiness stage – Attitude toward product 16

Behavioral Bases

• User Status & Brand Loyalty • Personality/Lifestyle • Social Class • Occasion • Readiness to Buy • Benefits Sought • Usage Rate

Step 8. Market Segmentation

Segments must respond differently to different marketing mix elements & programs R equirements for effective segmentation Measurable Accessible Substantial Actionable

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Size, purchasing power, profiles of segments can be measured.

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Segments can be effectively reached and served.

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Segments are large or profitable enough to serve.

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Effective programs can be designed to attract and serve the segments.

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Evaluating Market Segments

• Segment size and growth • Segment structural attractiveness • Company objectives and resources 19

Step 9. Market Targeting Market Coverage Strategies

A. Undifferentiated Marketing Company Marketing Mix

Market

B. Differentiated Marketing

Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3 Segment 1 Segment 2 Segment 3 Company Marketing Mix

C. Concentrated Marketing

Segment 1 Segment 2 Segment 3 20

Step 10. Market Targeting

Evaluating Market Segments Segment Size and Growth Analyze sales, growth rates and expected profitability for various segments.

Segment Structural Attractiveness Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.

Company Objectives and Resources Company skills & resources relative to the segment(s).

Look for Competitive Advantages.

Choosing a market-coverage strategy

• Company resources • Degree of product homogeneity • Market homogeneity • Competitors’ strategies 22

P1

Five Patterns of Target Market Selection

Single-segment concentration M1 M2 M3 Selective specialization M1 M2 M3 Product specialization M1 M2 M3 P1 P1 P2 P3 P2 P3 P2 P3 P = Product M = Market P1 P2 P3 Market specialization M1 M2 M3 P1 Full market coverage M1 M2 M3 P2 P3

Step 11. Market Targeting

Choosing a Market-Coverage Strategy

Company Resources Product Variability Product’s Life-Cycle Stage Market Variability Competitors’ Marketing Strategies

Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the the target market’s mind.

• Step 12: Positioning for Competitive Advantage Product’s Position - the way the product is

defined by consumers

on important attributes the place the product occupies in consumers’ minds relative to competing products.

Marketers must: –

Plan

positions to give their products the greatest advantage in selected target markets 26

Positioning Strategies

• Positioning by specific product attributes • Positioning by benefits • Positioning for user category • Positioning for usage occasion • Positioning against another competitors • Positioning against another product class 27

Steps to Choosing and Implementing a Positioning Strategy • • • Step 1. Identifying Possible Competitive Advantages: Competitive Differentiation. Step 2. Selecting the Right Competitive Advantage: Unique Selling Proposition (USP).

Step 3. Communicating and Delivering the Chosen Position.

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The BCG Competitive Advantage Matrix

Number of Approaches to Achieve Advantage Few Many Large Volume Specialized Small Stalemated Fragmented

Product Differentiation

• Physical attributes • Service differentiation • Personnel differentiation • Location • Image differentiation 30

Product Differentiation

Form Fea tures Perfor mance Quality Conform ance Quality Dura bility Relia bility Repair ability Style Design

Services Differentiation

Ordering Ease Installation Customer Consulting Delivery Customer Training Maintenance & Repair

Which differences to promote?

• Important to customers • Distinctive • Superior • Communicable to customers • Preemptive • Affordable • Profitable 33

Image Differentiation

Media Atmosphere Symbols Events

Important Profitable Distinctive Affordable Differences Worth Establishing Superior Preemptive

Perceptual Map

Positioning map of service level versus price.

Source: MARG, 2007 36

Positioning Strategies

• Product Attributes • Benefits, Problem Solutions & Basic Needs • •Cholesterol Free Oil:Dhara • Specific Use : Gift for all Events Titan • Against Other Products: Tata salt Vs. Captain Cook • Product User : Fashion loving , Well to do Consumers :Vimal fabrics • Against a Competitor •Price & Quality