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CHAPTER SEVEN Customer-Driven Marketing Strategy: Segmentation, Targeting & Positioning Lecturer: Insert your name here Ch 7 -1 Copyright © 2011 Pearson Education 1

Chapter Learning Outcomes
Topic Outline 7.1 Customer-Driven Marketing Strategy 7.2 Market Segmentation 7.3 Market Targeting 7.4 Differentiation and Positioning Ch 7 -2 Copyright © 2011 Pearson Education

Segmentation, Targeting and Positioning
Segmentation and Targeting 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. Market targeting (targeting) is the process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. Note to Instructor This weblink directs you to Boecker’s homepage. “Boeker Public Health is the Middle East largest Pest Management group providing World Class pest control, pest management, professional disinfecting, and pest control equipment & chemicals. Founded in 1993, Boecker provides World Class quality services for commercial & residential clients including Pest management, Food Safety Training & Consulting, Fumigation & Heat Treatment as well as professional disinfecting services”. Boecker’s offices are active in Lebanon, United Arab Emirates, Kuwait, Qatar and Nigeria. It is interesting to browse through their website and see the different services they offer for their various segments and targets. Ch 7 -3 Copyright © 2011 Pearson Education

Segmentation, Targeting and Positioning
Market Differentiation and Positioning Differentiation involves actually differentiating the market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Ch 7 -4 Copyright © 2011 Pearson Education

Market Segmentation Segmenting Consumer Markets
Geographic segmentation Demographic segmentation Psychographic segmentation Behavioral segmentation Ch 7 -7 Copyright © 2011 Pearson Education

Market Segmentation Segmenting Consumer Market Geographic segmentation divides the market into different geographical units such as nations, regions, provinces, parishes, cities, or even neighborhoods. Note to Instructor Protrac Online is an Egyptian company that specializes in providing the latest technologies in geo-marketing research and services by employing researchers, data analysts, and geo-professionals, and a large scale of data maps and tools. Protrac refers to geo-marketing as a sophisticated marketing science that uses geographical information for analyzing distribution channels of products. Protrac provides insight into the competition and target segments surrounding a specific distribution point. Hence, this allows companies to understand the specific changes needed in terms of distributing products so as to better serve the targeted consumers. Protrac offers three types of products: Geographical Digital Maps, Socio-Demographic Data, and Trade Channels Census and Survey Data. Hossam Ragheb, CEO of Protrac, said that using digital maps for marketing purposes is crucial, especially for Fast-Moving Consumer Goods companies (FMCGs), such as Coca-Cola, Proctor and Gamble, and Unilever. Ragheb added that “[for suppliers] to know where to sell the products... and where this outlet is, not only in terms of address, but the demographics] of the area—[for example] how many people bove 15 years [of age] are living in this area— gives them a sort of direction to know which products should go where.” Ch 7 -8 Copyright © 2011 Pearson Education

Market Segmentation Segmenting Consumer Markets Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Ch 7 -9 Copyright © 2011 Pearson Education

Market Segmentation Demographic Segmentation 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. Gender segmentation divides the market based on sex (male or female). Income segmentation divides the market into affluent or low-income consumers. Note to Instructor This weblink takes you to Atlantis, the Palm in Dubai. Specifically to the kids and teens page where you can see that special services are offered to this segment. Ch 7 -10 Copyright © 2011 Pearson Education

Market Segmentation Psychographic Segmentation Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics. Ch 7 -11 Copyright © 2011 Pearson Education

Market Segmentation Behavioral Segmentation Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product. Occasions Benefits sought User status Usage rate Loyalty status Note to Instructor Consumer loyalty: ‘Mac fanatics’—fanatically loyal Apple Computer users—helped keep Apple afloat during the lean years, and they are now at the forefront of Apple’s burgeoning iPod and iTunes empire. Students often get confused with the difference between behavioral and psychographic segmentation. Behavior is more tied into how consumers use the product. Real Marketing 7.1 discusses how consumers behave during the holy month of Ramadan. According to a study conducted by Maktoob Research regarding Ramadan in the region, 71 percent of respondents believe that the month inables them to experience a feeling of “solidarity and brotherhood with fellow Muslims.” It was discovered that most of the respondents enjoyed having Iftar (breaking their fasting) with their families at home compared with the significant portion, but not a majority, who said that they liked to have Iftar in restaurants. Muslim people rush to make Mawa’ed Rahaman (free public eateries), where poor people are offered free food at Iftar time. Accordingly, it is a good chance for businesses to show their support in corporate social responsibility (CSR) and to promote the Ramadan spirit. Special types of foods that are demanded during ramadan. For example, stores selling Eastern desserts, such as Konafa , Basbousa , and the like experience a substantial increase in demand during Ramadan, and they face the challenge of satisfying the large number of customers queuing in lines, particularly right before Iftar time. Ch 7 -12 Copyright © 2011 Pearson Education

Market Segmentation Segmenting Business Markets Geographic Demographic Benefits Sought User Status Usage Rate Loyalty Status Operating Characteristics Purchasing Approaches Situational Factors Personal Characteristics Ch 7 -14 Copyright © 2011 Pearson Education

Market Segmentation Segmenting International Markets Inter-market segmentation divides consumers into groups with similar needs and buying behaviors even though they are located in different countries. Ch 7 -16 Copyright © 2011 Pearson Education

Market Segmentation Requirements for Effective Segmentation To be useful, market segments must be: Measurable Accessible Substantial Differentiable Actionable Note to Instructor There are many left-handed people in the world. Yet few products are targeted toward this left-handed segment. The major problem may be that the segment is hard to identify and measure. There is little data on the demographics of ‘lefties.’ Private data companies keep reams of statistics on other demographic segments but not on left-handers. Ch 7 -17 Copyright © 2011 Pearson Education

Market Targeting Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources Note to Instructor Structural attractiveness includes factors that affect long-run attractiveness. These factors might include strong and aggressive competitors, substitute products, and high power of buyers or powerful suppliers. Ch 7 -19 Copyright © 2011 Pearson Education

Market Targeting Selecting Target Marketing Segments Undifferentiated marketing targets the whole market with one offer Mass marketing Focuses on common needs rather than what’s different Ch 7 -21 Copyright © 2011 Pearson Education

Market Targeting Selecting Target Marketing Segments Differentiated marketing targets several different market segments and designs separate offers for each. Goal is to achieve higher sales and a stronger position More expensive than undifferentiated marketing Note to Instructor Differentiated marketing: Procter & Gamble markets six different laundry detergents, including Tide—each with multiple forms and formulations— that compete with each other on store shelves. Ch 7 -22 Copyright © 2011 Pearson Education

Market Targeting Selecting Target Marketing Segments Concentrated marketing targets a large share of one or a few smaller segments or niches. Limited company resources Knowledge of the market More effective and efficient Note to Instructor Aramex offers new services such as “Shop and Ship” for the customers in the Arab world willing to buy products from online shops in the United States and Europe, in order to differentiate itself from large competitors such as DHL, UPS, and FedEx. Real Marketing 7.2 highlights the concept of Islamic banking and its application in the Arab world. Islamic banking has gained a strong reputation in the past few years, especially after the financial crisis in 2008 as it showed the defects in the international banking systems. As a result, a variety of banks, led by HSBC, introduced Islamic banking initiatives in the region. Ch 7 -23 Copyright © 2011 Pearson Education

Market Targeting Selecting Target Marketing Segments Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local marketing Individual marketing Ch 7 -24 Copyright © 2011 Pearson Education

Market Targeting Selecting Target Marketing Segments Local marketing involves tailoring brands and promotion to the needs and wants of local customer groups Cities Neighborhoods Stores Note to Instructor Advances in communications technology have given rise to a new high-tech version of location-based marketing. By coupling mobile phone services with GPS devices, many marketers are now targeting customers wherever they are with what they want. This might include marketers reaching people near their stores, looking to make a decision. Discussion Question What are the drawbacks of local marketing? It can drive up manufacturing and marketing costs by reducing economies of scale. It can also create logistics problems as companies try to meet the varied requirements of different regional and local markets. Further, a brand’s overall image might be diluted if the product and message vary too much in different localities. Ch 7 -25 Copyright © 2011 Pearson Education

Market Targeting Target Market Strategies Individual marketing involves tailoring products and marketing programs to the needs and preferences of individual customers. Also known as: One-to-one marketing Customized marketing or mass customization Markets-of-one marketing Note to Instructor 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. Ch 7 -26 Copyright © 2011 Pearson Education

Market Targeting Choosing a Targeting Strategy Depends on: Company resources Product variability Product life-cycle stage Market variability Competitor’s marketing strategies Ch 7 -27 Copyright © 2011 Pearson Education

Market Targeting Socially Responsible Target Marketing Concern for vulnerable segments (Children) with controversial or potentially harmful products. Cigarettes Internet abuses Note to instructor Not all attempts to target children, minorities, or other special segments draw criticism. In fact, most provide benefits to targeted consumers. For example Samsung markets the Jitterbug phone directly to seniors who need a simpler cellphone that is bigger and has a louder speaker. Another example is Colgate. It makes a large selection of toothbrush shapes and toothpaste flavors for children. Such products help make tooth brushing more fun and get children to brush longer and more often. Thus, in target marketing, the issue is not really who is targeted but rather how and for what . Ch 7 -28 Copyright © 2011 Pearson Education

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 Note to Instructor Tide is positioned as a powerful, all-purpose family detergent. At Subway restaurants, you “Eat Fresh”. In the automobile market Mercedes and Cadillac are positioned on luxury, and Porsche and BMW on performance. Volvo positions powerfully on safety. And Toyota positions its fuel efficient, hybrid Prius as a high-tech solution to the energy shortage. “How far will you go to save the planet?” it asks. Ch 7 -29 Copyright © 2011 Pearson Education

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 Ch 7 -31 Copyright © 2011 Pearson Education

Choosing a Differentiation and Positioning Strategy Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. Note to Instructor Toughbook by Panasonic is positioned as the durable, reliable, wireless notebook that can protect the customer’s work even in the toughest environments. Ch 7 -32 Copyright © 2011 Pearson Education

Identifying Possible Value Differences and Competitive Advantages Identifying a set of possible competitive advantages to build a position by providing superior value from: Product differentiation Service differentiation Channel differentiation People differentiation Image differentiation Ch 7 -33 Copyright © 2011 Pearson Education

Developing a Positioning Statement To (target segment and need) our (brand) is (concept) that (point of difference). Note to Instructor The book provides the following example: “To busy, mobile professionals who need to always be in the loop, BlackBerry is a wireless connectivity solution that gives you an easier, more reliable way to stay connected to data, people, and resources while on the go.” Note that the positioning first states the product’s membership in a category (wireless connectivity solution) and then shows its point-of-difference from other members of the category (easier, more reliable connections to data, people, and resources). Placing a brand in a specific category suggests similarities that it might share with other products in the category. But the case for the brand’s superiority is made on its points of difference. Ch 7 -36 Copyright © 2011 Pearson Education

Communication and Delivering the Chosen Position
A company must take steps to deliver and communicate the desired position to target consumers. Choosing the positioning is often easier than implementing the position. Ch 7 -37 Copyright © 2011 Pearson Education

This work is protected by local and international copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from this site should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. Ch 7 -38 Copyright © 2011 Pearson Education

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