marketing strategy 8 identifying market segments and targets

MARKETING STRATEGY

8 Identifying Market

Segments and Targets

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Process of Market Segmentation

1. Market Segmentation

2. Target Marketing

3. Differentiation and Positioning

4. Positioning for Competitive Advantage

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Market Segmentation

Market segmentation is the process that companies use to divide large heterogeneous markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs

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Market Segmentation

• Segmenting consumer markets• Segmenting business markets• Segmenting international markets• Requirements for effective segmentation

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The Segmentation Process

Defining the market Identifying the best market segmentation

criteria Applying the segmentation criteria and

dividing the market Analyzing and understanding the profile of

the priority consumer segment

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Effective Targeting Requires…

Identify and profile distinct groups of buyers who differ in their needs and preferences.

Select one or more market segments to enter.

Establish and communicate the distinctive benefits of the market offering.

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Four Levels of Micromarketing

Segments Niches – more narrowly defined customer

group Local areas - neighborhoods Individuals

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Segment Marketing

Targeting a group of customerswho share a similar set of

needs and wants ( e.g. young middle income buyers

who are looking for an expensive car).

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Customerization

Combines operationally drivenmass customization with customizedmarketing in a way that empowers

consumers to design theproduct and service offering

of their choice.(e.g. the firm provides a platform, toolsAnd rents out to customers the means

To design their own product – DIY, IKEA)

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Segmenting Consumer Markets

Geographic units – territories Demographic – age and life cycle, gender,

income Psychographic – personality, life-style –

activities, values Behavioral – occasions, benefits, user

status, usage rate, loyalty, attitudes

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Demographic Segmentation

Demographic segmentation is the most popular segmentation method because consumer needs, wants, and usage often vary closely with demographic variables and are easier to measure than other types of variables

Age and Life Cycle Life Stage Gender Income Generation Social Class

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Demographic Segmentation-Segmenting Consumer Markets

Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups

Income segmentation divides the market into affluent or low-income consumers

Gender segmentation divides the market based on sex (male or female)

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Behavioral Segmentation

Decision Roles Initiator Influencer Decider Buyer User

Behavioral Variables Occasions Benefits User Status Usage Rate Buyer-Readiness Loyalty Status Attitude

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Decision Roles

Initiator: The person who brings up the idea or identifies the need.

Influencer: The person who influences the outcome of the decision. Some people may be more motivated than others to get involved, and are more powerful to convince others of their choice.

Decider: The person who decides on any component of the purchase; when, what, how, who.

Buyer: The person who actually makes the purchase. User: The person who winds up using the product or

service.

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• Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product• Occasion• Benefits sought• User status• Usage rate• Loyalty status

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• Occasion segmentation divides buyers into groups according to occasions when they get the idea to buy, actually make purchases, or respond to a product e.g. buying an air ticket

• Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit e.g. buying a toothpaste

• User status divides buyers into ex-users, potential users, first-time users, and regular users of a product

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• Buyer-Readiness a market consists of people in different stages of readiness to buy the product; unaware, aware, informed, interested, desire or intend to buy the product

• Usage rate divides buyers into light, medium, and heavy product users

• Loyalty status divides buyers into groups according to their degree of loyalty

• Attitude different attitude groups can be found in a market; enthusiastic, positive, indifferent, negative and hostile

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Steps in Segmentation Process

Needs-based segmentation Segment identification Segment attractiveness Segment profitability Segment positioning Marketing mix strategy

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Effective Segmentation Criteria

Measurable: examples include the size, purchasing power, and profiles of the segments

Substantial: refers to the fact that the markets are large and profitable enough to serve

Accessible: refers to the fact that the market can be effectively reached and served

Differentiable: refers to the fact that the markets are conceptually distinguishable and respond differently to marketing mix elements and programs

Actionable: refers to the fact that effective programs can be designed for attracting and serving the segments

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Market Targeting - Evaluating Market Segments

• Segment structural attractiveness• Competition• Substitute products• Power of buyers• Power of suppliers

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Market Targeting - Evaluating Market Segments

• Company objectives and resources• Competitive advantage• Availability of resources• Consistent with company objectives

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Market Targeting - Selecting Target Market Segments

• Undifferentiated marketing• Differentiated marketing• Concentrated marketing• Micromarketing

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• Undifferentiated marketing targets the whole market with one offer• Mass marketing• Focuses on common needs rather than what’s

different

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• Differentiated marketing targets several different market segments and designs separate offers for each• Goal is to achieve higher sales and stronger

position• More expensive than undifferentiated

marketing

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• Concentrated marketing targets a small share of a large market• Limited company resources• Knowledge of the market• More effective and efficient

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• Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations• Local marketing• Individual marketing

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Market Targeting Selecting Target Market Segments

• Local marketing• Challenges:

• Increased manufacturing and marketing costs• Less economy of scale• Logistics

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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

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• Mass customization is the process through which firms interact one-to-one with masses of customers to design products and services tailor-made to meet individual needs. Has made relationships with customers important in the new economy.

• Provides a way to distinguish the company against competitors

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Market Targeting – Choosing a Targeting Strategy

Depends on:• Company resources• Product variability• Product life-cycle stage• Market variability• Competitor’s marketing strategies

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Differentiation and Positioning

• Product position is the way the product is defined by consumers on important attributes—the place the product occupies in consumers’ minds relative to competing products• Perceptions• Impressions• Feelings

• Positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions

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Choosing a Differentiation and Positioning Strategy

• Identifying a set of possible competitive advantages to build a position

• Choosing the right competitive advantages• Selecting an overall positioning strategy

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Choosing a Differentiation and Positioning Strategy

• Identifying a set of possible competitive advantages to build a position by providing superior value from:

• Product differentiation• Service differentiation• Channels• People• Image

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Identifying Possible Value Differences and

Competitive Advantage

Competitive Advantage is the advantage over competitors gained by offering greater value either through lower prices or by providing more benefits that justify higher prices

marketing strategy 8 identifying market segments and targets

Documents

lifecycle stage segmentation

market offering

popular segmentation

market segments

consumer needs

different age

different products

lifestyle activities