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Market Segmentation, Targeting,

and Positioning

Types of competition

The competitive environment (Porter)

Sales forecasting

Steps of market segmentation

Bases for segmenting consumer markets

Target market strategies

Positioning

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The competitive environment

Should we compete?

If so, in what markets should we compete?

How should we compete?

The interactive exchange in the marketplace influenced by

actions of marketers of directly competitive products,

marketers of products than can substitute for one another,

and other marketers competing for the same consumers

purchasing power.

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Types of competition

No direct

competitorsRegulated by

government

No directly

competinggoods or

services

Considerable

electricity

Few

Difficult

Can be

similar ordifferent

Some

car

Few to many

Somewhat

difficult

Different

Some

cosmetics

Many

Easy

Similar

None

agriculture

Number of

competitorsEase to entry into

industry by new

firms

Similarity of

goods/services

offered by

competing firms

Control over price

by individual firms

Examples

MonopolyOligopolyMonopolistic

competition

Pure

competition

Characteristics

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Industry profitability

Exit barriers

Low High

Entry

barriers

Low Low, stablereturns

Low, risky

returns

High High, stablereturns

High, risky

returns

Industry is a group of firms which offer a product or

class of products that are close substitutes for each

other.

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Five competitive forces (Porter)

Potential entrants

Substitutes

Suppliers Buyers

Industry competitors

Rivalry among

existing firms

Buyer powerSupplier power

Threat of new entrants

Threat of substitutes

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Sales forecasting

Estimating currect demand

Estimating future demand = sales forecasting

Market potential =

Sets the upper limit on the demand that competing firms

can expect from a segmentTotal Market Potential (Q) = n x q x p

n = number of buyers in the market

q = quantity purchased by an average buyer per year

p = price of an average unit

The chain-ratio method

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The chain-ratio method

Demand for a new light beer = population xpersonal discretionary income per capita x

average percentage of discretionary income spent on food x

average percentage of amount spent on food that is spent on beverages x

........................that is spent on alcoholic beverages x

..that is spent on beer x

..that will be spent on light beer

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Sales forecasting methods

Quantitative forecasting: applies statisticaltechniques to previous data to predict numericalforecasts

Market tests

Trend analysis Exponential smoothing

Qualitative forecasting: more subjective in naturethan quantitative methods

Jury ofexecutive opinion Delphi technique

Sales force composite

Survey of buyer intentions

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Quantitative methods

Market test =A quantitative forecasting method that introduces a new

product, price, promotional campaign, or other marketing

variable in a relatively small test market location in order

to assess consumer reactions.

Trend analysis =

A quantitative forecasting method that estimates future

sales through statistical analysis of historical sales

patterns.Exponential smoothing =

A quantitative forecasting method that assigns weight to

historical sales data, giving the greatest weight to the most

recent data.

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Benefits and limitations of the

quantitative forecasting methods

Same limitations as trend analysis, but

not as severe due to emphasis on

recent data

Same benefits as trend analysis, but

emphasizes more recent data

Exponential smoothing

Assumes the future will continue the

past; ignores environmental changes

Quick; inexpensive; effective with

stable consumer demand and

environment

Trend analysis

Alerts competition to new-product

plans; time-consuming; expensive

Provides realistic information on actual

purchases rather than on intent to buy

Market test

LimitationsBenefits

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Qualitative methods

Jury of executive opinion (managerial judgement) =A qualitative forecasting method that combines and averages thesales expectations of various executives.

Delphi technique =A qualitative forecasting method that gathers and redistributes several

rounds of anonymus forecasts until the participants reach consensus.

Sales force composite =A qualitative forecasting method that develops sales estimates based on

the combined estimates of the firms salespeople.

Survey of buyer intentions =A qualitative forecasting method that samples opinions among

groups of present and potential customers concerning their purchase

intentions.

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Benefits and limitations of the qualitative

forecasting methods

Intentions to buy may not result in actual

purchases; time-consuming; expensive

Useful in predicting short-term and

intermediate sales for firms that serve only

a few customers

Survey of buyer intentions

Innacurate forecasts may result from lowestimates of salespeople concerned about

their influence on quotas

Salespeople have expert customer, productand competitor knowledge; quick;

inexpensive

Sales force composite

Time-consuming; expensiveGroup of experts can accurately predict

long-term events such as technological

breakthroughs

Delphi technique

Managers may lack sufficient knowlegde

and experience to make meaningful

predictions

Opinions come from executives in many

different departments; quick; inexpensive

Jury of executive opinionLimitationsBenefits

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Market segmentationDivision of a total market into smaller, relatively

homogeneous groups.

Market segments should be:

Measurable

Substantial

Accessible

Differentiable

Actionable

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Steps of market segmentation

1. Forecast market potential

2. Select segmentation criterias

3. Develop profiles of resulting segments

4. Select the target segment(s)

5. Positioning develop marketing-mix for each

target segments

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Sales forecast Making segments

Selecting the target

market

Positioning

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Bases for segmenting consumer

markets

Geographic segmentation Demographic segmentation

Psychographic segmentation Benefit segmentation

Locations (nation, city,

town, etc.)

Sex, age, income, education,

ethnic group, religion,houshold size, stage in the

family life cycle

Values and lifestyles (VALS)

Personality

Benefits

User status

Usage rate

Brand loyalty

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Generation segmentation

The Depression Cohort

The World War II Cohort

The Postwar Cohort Leading-Edge Baby Boomer Cohort

Trailing-Edge Baby Boomer Cohort

Generation X Cohort Generation Y Cohort(Schewe Karlovich)

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Example of psychographic segmentation

(gas purchases Mobil Corp. USA)

Road warriors (generally middle-aged, higher-income men,premium gas, sandwiches and drinks, driving over 25000 miles a year,spends the most on gasoline purchases)

True Blues (men and women with moderate to high-income, brandloyal, sometimes loyal to particular service stations) Generation F3 (fuel, food, fast, younger and mobile people,

heavy users)

Homebodies(usually housewives, driving their children around

during the day, stop at any convenient gas station)

Price shoppers (isnt loyal to brands or stations, rarely buyspremium gas, tight budgets, spend the least amount they can on gas eachyear)

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Target market strategies (STP

strategies)

Undifferentiated (mass-) marketing:Using the same maketing mix for all consumers

Differentiated marketing:Offers different marketing mix strategies to different segments

Concentrated marketing:Select one segment

Niche marketing:Selecting subsegment(s)

Individual marketing:Offering products and marketing mix to individual consumers

Mass customization:Preparing individually designed products and communication on a

large scale

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Positioning

Marketing strategy that emphasizes serving a specific market

segment by achieving a certain position in buyers mind.

identification differentiation

Goals

ofPositioning:

Basisof

Positioning:

product attributes technical items

users Johnson&Johnson

benefits toothpaste

personalities Nike

competitors telecom

price

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True or False?

The target market for a product is the specific segmentof prospective customers who are most likely to buy.

Market segmentation refers to the process of dividing thetotal market into several heterogeneous groups.

A firms marketing capabilities do not limit the number ofsegments to which it chooses to market.

Product-related segmentation focuses on consumersrelationships to goods and services.

Henry Fords strategy for the Model T is an example ofa) undifferentiated marketing, b) concentrated marketing,c) individual marketing.