MM271 Introduction to Marketing

1. MM271Introduction to Marketing Topic 4 Identifying Market Segments & Targets

2. Learning Objectives • By the end of this lecture, you will know • Explain what market segmentation is, when to use it, and the five steps involved in segmentation. • Recognize the different factors used to segment consumer markets • Develop a market-product grid to use in segmenting and targeting a market. • Understand how marketing managers position products in a market.

3. 1. An Overview • Segmentation • aggregate prospective buyers into groups (segments) that: • have common needs; and • respond similarly to a marketing action of a firm • Targeting • Evaluate the attractiveness of various segments • Decide how many and which segments to enter • Positioning • Define a product so that consumers will perceive it to be different from other competing products

4. 1. An Overview Choose the bases of segmentation & group buyers into segments Develop a market-product grid & estimate the size of market Assess the attractiveness of the segments Pick the right one!!

5. 2. Segmentation 2.1 Segmentation Variables – Consumer Market GEOGRAPHIC PSYCHOGRAPHIC Region Density Community Lifestyle Personality DEMOGRAPHIC BEHAVIORAL Occasions Benefits User status Usage rate Awareness Age Family Gender Income Education Occupation

6. 2. Segmentation 2.1 Segmentation Variables – Consumer Market • Geographic • For marketers operate in more than one geographic area • Easy to localize marketing mix activities • Some companies seek to find untapped geographic areas • E.g. countries, states, provinces, regions, cities, districts • Demographic • Most commonly used  easy to observe & measure • Age: may not related to one’s need & buying power • Gender: used for clothing, cosmetics, toiletries, magazines; now spread to cars, deodorants, sports & financial services • Income: used for car, boat, clothing, financial service, travel

7. 2. Segmentation 2.1 Segmentation Variables – Consumer Market • Psychographic • People in same demographic group may have very different psychographic characteristics • Lifestyle segmentation is gaining popularity as people are buying products to express their way of living • Personality: marketers are trying to associate products with their target market’s personality type • Behavioral • Based on consumer knowledge, attitudes, uses or responses to a product • Some believe behavioral variables are the best starting point for segmenting markets • Occasion: when does one learn about, buy, or use a product? • Benefit: the product attributes that are useful to consumers • User/usage: frequency & volume of purchase & use

8. 2. Segmentation 2.2 Develop Market-Product Grid • Step 1 • Classify the company’s available product into different categories • E.g.: breakfast, lunch, snacks, dinner • Step 2 • Line up different market segment against the number of product categories • Step 3 • Estimate the market size in each cell (market-product combination) • In terms of sales revenue or number of customers • Could use crude “guest estimates” if formal marketing research has yet to be conducted

9. 3. Targeting 3.1 Assessing the attractiveness of each segment • Market size • Expected growth • Company’s competitive position • Level of competition • Substitute products • Power of buyers • Powerful suppliers • Cost of reaching the segment • Compatibility with the company’s objectives & resources

10. 3. Targeting 3.2 Targeting Strategies • Undifferentiated strategy • Differentiated strategy • Concentration • Single-segment concentration • Product specialization • Market specialization

11. 3. Targeting 3.2 Targeting Strategy • Undifferentiated Strategy • 1 product fits all • ignore market segment differences • modern marketers have strong doubts about this strategy

12. Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Differentiated strategy • Different product offerings for different market segments • Hope to attain higher sales & market position in each one • Higher production & marketing costs

13. Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Concentrated strategy – Single segment • One product goes after one market segment • Hope to achieve strong market position in the segment for greater knowledge, know-how & reputation • Higher risks if the market of the particular segment suddenly turns negative

14. Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Concentrated strategy – Product Specialization

15. Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Concentrated strategy – Market Specialization

16. 3. Targeting 3.2 Targeting strategies • Factors of considerations: • Company resources • Limited resources  • The degree of product variability • Standardized product  • Product’s life-cycle stage • Early stages  • Market variability • Similar tastes & preferences  • Competitors’ marketing strategies • Be careful of using opposites

17. 4. Positioning 4.1 Positioning for Competitive Advantage • Definition • Create meaningful differences that distinguish one from its competitors • Steps: • Identify possible competitive advantage • Choose the right competitive advantage • Communicate & deliver the chosen position

18. 4. Positioning 4.2 Identify possible competitive advantage • Competitive advantage • An advantage over competitors gained by offering consumers superior value through: • Lower prices • More benefits that justify higher prices

19. 4. Positioning 4.2 Identify possible competitive advantage • Ways for creating differentiation IMAGES CHANNELS SERVICES PERSONNEL ORGANIZATION/ HERITAGE PRODUCT USER/USAGE

20. 4. Positioning 4.2 Identify possible competitive advantage • Criteria for selecting differentiation premise 1 I M P O R T A N T 2 S U P E R I O R 3 P R E E M P T I V E

21. 4. Positioning 4.3 Select the right competitive advantage • Perceptions of consumers • Which attributes are important for a particular product? • How do the consumer judge the existing products according to the important attributes? • Perceptual map • Illustrate two important attributes of a product class • Display the relative position of different products or brands in the minds of consumers on the map • Identify the location in which the company wish to “position”