mm271 introduction to marketing topic 4 identifying market segments & targets

MM271MM271Introduction to MarketingIntroduction to Marketing

Topic 4

Identifying

Market Segments & Targets

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Learning ObjectivesLearning 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.

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1. An Overview1. 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

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1. An Overview1. An Overview

Choose the bases of segmentation &group buyers into segments

Develop a market-product grid& estimate the size of market

Pick the right one!!

Assess the attractiveness ofthe segments

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2. Segmentation2. Segmentation

2.1 Segmentation Variables – Consumer Market

GEOGRAPHIC

DEMOGRAPHIC

PSYCHOGRAPHIC

BEHAVIORAL

RegionDensity

Community

AgeFamilyGenderIncome

EducationOccupation

LifestylePersonality

OccasionsBenefitsUser statusUsage rateAwareness

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2. Segmentation2. 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

DemographicMost 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

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2. Segmentation2. 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

BehavioralBased 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

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2. Segmentation2. 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 2Line up different market segment against the number of product categories

Step 3Estimate the market size in each cell (market-product combination)In terms of sales revenue or number of customersCould use crude “guest estimates” if formal marketing research has yet to be conducted

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3. Targeting3. 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

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3. Targeting3. Targeting

3.2 Targeting Strategies Undifferentiated strategy

Differentiated strategy

ConcentrationSingle-segment concentrationProduct specializationMarket specialization

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3. Targeting3. Targeting

3.2 Targeting Strategy Undifferentiated Strategy

1 product fits allignore market segment differencesmodern marketers have strong doubts about this strategy

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3. Targeting3. Targeting

3.2 Targeting Strategy Differentiated strategy

Different product offerings for different market segmentsHope to attain higher sales & market position in each oneHigher production & marketing costs

Product 1 Product 2 Product 3

Segment 1

Segment 2

Segment 3

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3. Targeting3. Targeting

3.2 Targeting Strategy Concentrated strategy – Single segment

One product goes after one market segmentHope to achieve strong market position in the segment for greater knowledge, know-how & reputationHigher risks if the market of the particular segment suddenly turns negative Product 1 Product 2 Product 3

Segment 1

Segment 2

Segment 3

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3. Targeting3. Targeting

3.2 Targeting Strategy Concentrated strategy – Product Specialization

Product 1 Product 2 Product 3

Segment 1

Segment 2

Segment 3

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3. Targeting3. Targeting

3.2 Targeting Strategy Concentrated strategy – Market Specialization

Product 1 Product 2 Product 3

Segment 1

Segment 2

Segment 3

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3. Targeting3. 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

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4. Positioning4. 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

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4. Positioning4. 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

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4. Positioning4. Positioning

4.2 Identify possible competitive advantage Ways for creating differentiation

PRODUCT

SERVICES

PERSONNEL

CHANNELSIMAGES

ORGANIZATION/HERITAGE

USER/USAGE

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4. Positioning4. Positioning

1 I M P O R T A N TI M P O R T A N T

2 S U P E R I O RS U P E R I O R

3 P R E E M P T I V EP R E E M P T I V E

4.2 Identify possible competitive advantage Criteria for selecting differentiation premise

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4. Positioning4. 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 mapIllustrate 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”