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Chapter 5

Chapter 5. Identifying Market Segments and Targets. Foundations for effective segmentation. It is unlikely for any company to appeal to an entire market Identify segments of consumers Tailor offerings to meet the wants & needs of that particular group of consumers

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Chapter 5

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  1. Chapter 5 Identifying Market Segments and Targets

  2. Foundations for effective segmentation • It is unlikely for any company to appeal to an entire market • Identify segments of consumers • Tailor offerings to meet the wants & needs of that particular group of consumers • Market segmentation involves the identification of subgroups of consumers with similar wants and buying requirements • This helps the firm configure its marketing mix

  3. Criteria for identifying segments Behaviouristic Psychographic Geographic Demographic

  4. Geographic Segmentation • In the geographic segmentation approach, markets are divided into different geographic units. It ranges from local to global. These units may include nations, cities, or even neighborhoods. • Marketers can operate in one or few areas, or it can operate in all but pay attention to local variations.

  5. Demographic Segmentation The study of human population and it comprises of parameters that can be statistically measured.

  6. Demographic Variables

  7. No Market Segmentation

  8. Segmented by Gender

  9. Segmented by Age

  10. Age MaritalStatus Children Family Life Cycle

  11. Family life cycle stage • Family life cycle stage Life conditions that have a potential impact of product/service purchase decisions

  12. Criteria for identifying segments • Psychographic Bases • Perceptual issues • Combining individuals who are psychologically similar in their orientation • Excellent potential for effective targeting segments, understanding how the segments live their daily lives • Lifestyle • The ways in which individuals choose to live their lives • Personality • Similar personality types • Kotler (2003) lists four main variations of personality: compulsive, gregarious, authoritarian and ambitious • Core Values • Match its core values with those of the segments, building positive associations

  13. Personality Types

  14. Personality Types Ambitious Personality: Someone with a strong determination and desire to succeed and become really big. Authoritarian: dictatorial personality. They want to control others. Gregarious:outgoing, extrovert, friendly and sociable. Compulsive personality: it is a mental condition which makes consumers do certain things/develop certain habits which is out of their control. However, in the depth of their heart, they might want to discontinue. For example: Eating habits, orderliness, extreme sense of cleanliness.

  15. Behavioral Segmentation • Behavioral segmentation divides consumers into groups according to the following characteristics: • User status: non-users, ex-users, potential users, first time users, regular users. Blood bank (regular donors, first-time donors, ex donors), non branded oral care product users (potential). • Usage Rate: light user, medium user, heavy user. Industrial marketers refer to the 80-20 rule, meaning 20% of their buyers account for 80% of their sales volume.

  16. Loyalty Status Switchers

  17. Behavioral Segmentation • Benefit segmentation: In purchasing products, consumers are generally trying to satisfy specific needs. Hence, they are looking for products which provide specific benefits that satisfies these needs. The grouping of consumers on the basis of the benefits they are looking for in a product is known as benefit segmentation. • Example: The sensitive segment (medi plus, sensodyne), the healthy segment (pepsodent, white plus, colgate), the fresheners (close up, freshgel), the economic (Magic, pepsodent), the whitening (pepsodent whitening, medi plus whitening, toothpastes which removes cigarette marks etc.)

  18. P&G’s Brands • Laundry Detergent • Soap • Shampoo • Dishwashing Detergent • Tissue • Deodorant Tide, Cheer, Bold, Gain, Era, Dreft, Febreeze, Ivory Snow Ivory, Safeguard, Camay, Olay, Zest, Old Spice Pantene, Pert, Head & Shoulders, Vidal Sassoon Dawn, Ivory, Joy, Cascade Charmin, Bounty, Puffs Secret, Sure, Old Spice

  19. Why does P&G compete with itself? Answer: Different people want different mixes of benefits from the products they buy. People prioritize the benefits that they want from each type of product. Laundry Detergent brand positioning: Tide: all purpose family detergent ‘tough on greasy stains’ Cheer: color expert – prevents fading Bold: built-in fabric softener Gain: detergent that ‘gives you fresh smelling clothes’ Era: ‘power tool for stain removing and pretreating’ Ivory Snow: ‘mild cleansing benefits for a pure and simple clean’ Dreft: ‘helps remove tough baby stains’ pediatrician recommended

  20. Even Narrower Niches • Tide with Bleach • Tide Liquid with Bleach Alternative • Tide High Efficiency • Tide Clean Breeze • Tide Mountain Spring • Tide Free • Tide Rapid Action Tablets • Tide captures 38% of the market share • All P&G brands of laundry detergent capture 60% of the market share • Much more than any one brand could capture on its own!

  21. Situation that occurs when sales of a new product cut into sales of a firm’s existing products. Cannibalization Cannibalization

  22. Cross-border segmentation and international challenges • A variety of new challenges faced by companies going outside their country borders • Culture is single biggest challenge • Study individual segments to determine choice drivers • Combine secondary data with on-the-ground observations • Phenomenology – studying consumers as they go through daily activities • Localization often depends on how similar are the uses of the product in the new context to the home uses • Diaspora marketing – using immigrants from the home country as targets in new international markets

  23. Diaspora marketing

  24. Figure 5.1 - Principles of Market Segmentation customer / client characteristics Values “soft” Attitudes Psychographics Who buys Lifestyle Market Segments Size? Access? Differentiated? Socio-economic & demographic “hard” Geography Benefits Subjective Perceptions Preference trade-offs What is bought and why customer / client behaviour Usage Price sensitivity Objective Promotional response Loyalty/ repeat purchase Source: Palmer & Millier (2004)

  25. Target Marketing • Evaluating Market Segments Segment Size and Growth Segment Structural Attractiveness Company Objectives and Resources Target Markets

  26. Target marketing strategies Target market is a set of buyer sharing common needs or characteristics that the company decides to serve. Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Micro-marketing (local or individual Marketing) Targeting narrowly Targeting broadly

  27. Target marketing strategies Undifferentiated) ( Mass) marketing A market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer . Differentiated ( Segmented ) marketing A market-coverage strategy in which a firm decides to target several market segments and designs separate offers for each. Concentrated (niche) marketing A market-coverage strategy in which a firm goes after a large share of one or a few segments or niches. Micro-marketing The practice of tailoring products and marketing programs to suit the tastes of specific individual and locations.

  28. Target marketing strategies Local marketinginvolves tailoring brands and promotion to the needs and wants of local customer groups (cities, neighborhoods and stores). • Benefits of local marketing • Increased marketing effectiveness in competitive markets • More customer-specific offerings • Challenges of local marketing • Increased manufacturing and marketing costs • Less economy of scale • Logistics • Dilution of company image

  29. Target marketing strategies Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers. • Also known as: • One-to-one marketing • Mass customization • Markets-of-one marketing

  30. Market Targeting Choosing a Targeting Strategy Depends on: • Company resources • Product variability • Product life-cycle stage • Market variability • Competitor’s marketing strategies

  31. Targeting • As per Derek F Abell (1980) the firm faces the following choices • Single segment concentration • Selective specialization • Product specialization • Market specialization • Full market coverage

  32. Patterns of Target Market Selection

  33. Positioning Positioning is the act of establishing the brand’s superior value or benefit in the minds of the consumers. In other words, the positioning of a brand provides consumers a compelling reason to make a purchase

  34. The Positioning Statement • The positioning statement serves as the foundation for all of the positioning efforts • The three key components: • (1) the audience and context • (2) the value proposition, and • (3) the action components that will be used by the company to deliver the value proposition to the audience in the context identified.

  35. Figure 5.2 - Sample Positioning Statement [Convince] To business managers and professionals engaged in making time sensitive decisions about international business, [That] DHL delivers on time [Because] its pickup, transportation and delivery system is wholly-owned and managed by DHL personnel, not by third party providers.

  36. Figure 5.3 - The 4 C‘s of Positioning • Clarity: in terms of target market and differential advantage • Consistency: maintain a consistent message • Credibility: in the minds of the target customer--they must believe the claim • Competitiveness: the differential advantage should offer the customer something of value competitors cannot provide (competitors should be named if possible)

  37. Figure 5.4 - Examples of Positioning Statements • Apple offers …. the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings. • The Chrysler PT Cruiser is an inexpensive, small car, that is versatile, fun to drive, and will appeal to active singles and young couples with children who otherwise would have bought an SUV or a minivan.

  38. Perceptual Mapping • Perceptual mapping is a diagrammatic technique used by strategists that attempts to visually display the perceptions of a brand relative to their competition in the customer mindset. • It represents a visual picture of how customers perceive different brands in their mindset. • Hence, it is not what the strategist believes, its about the perception of the consumers.

  39. Positioning and Product Differentiation In this perceptual map for Cadillac, see how Cadillac is repositioning itself as a car for younger drivers

  40. Perceptual Map of UK Confectionary brands

  41. High moisturizing Zest 7 Tone 4 Lever 2000 2 Dove 5 Safeguard Coast 8 Lux Nondeodorant Deodorant 3 1 Dial Lifebuoy Lava 6 Low moisturizing Product Positioning using perceptual maps

  42. Positioning and the importance of Consistency • The key strategic issue associated with positioning is to present a clear and consistent message to the target audience in all the medias while implementing a communication campaign. • Furthermore, the positioning of a brand cannot change from time to time. It needs to be consistently the same for many years, unless the strategist feels that repositioning is necessary. • The company that constantly tinkers with image stands the chance of confusing its target market

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