© 2002 Pearson Education Canada Inc. 7-1 principles of MARKETING Chapter 7 Market Segmentation, Targeting, and Positioning for Competitive Advantage

© 2002 Pearson Education Canada Inc. 7-2 Chapter Objectives Define the three steps of target marketing Identify the major segmentation bases for consumer and business markets Explain how to identify attractive market opportunities and choose market strategies Explain positioning and its relationship to competitive advantage

© 2002 Pearson Education Canada Inc. 7-3 Steps in Market Segmentation, Targeting, and Positioning Market segmentation 1. Identify bases for segmenting the market 2. Develop profiles of resulting segments Market targeting 3. Develop measures of segment attractiveness 4. Select the target segment(s) Market positioning 6. Develop marketing mix for each target segment 5. Develop positioning for each target segment

© 2002 Pearson Education Canada Inc. 7-4 Market Segmentation: Levels of Market Segmentation Mass Marketing

© 2002 Pearson Education Canada Inc. 7-5 Levels of Market Segmentation: Mass Marketing Mass producing, mass distributing and mass promoting the same product in the same way to all consumers Largest potential market helps lower costs equalling lower prices or higher margins Difficult to access fragmented markets Problems in selecting from multiple ad media and distribution channels

© 2002 Pearson Education Canada Inc. 7-6 Market Segmentation: Levels of Market Segmentation Segment Marketing

© 2002 Pearson Education Canada Inc. 7-7 Levels of Market Segmentation: Segmented Marketing Marketing recognizes buyers differ in needs, perceptions, and buying behaviours Isolate broad segments comprising a market Adapt offers to best match segment needs Market more efficiently and effectively More focus and less competition

© 2002 Pearson Education Canada Inc. 7-8 Market Segmentation: Levels of Market Segmentation Niche marketing

© 2002 Pearson Education Canada Inc. 7-9 Levels of Market Segmentation: Niche Marketing Marketing that focuses on subgroups within large identifiable groups in a market Dividing a segment into subsegments Defining group with distinctive set of traits seeking special combination of benefits Price premium Few or no significant competitors Improves focus of limited resources

© 2002 Pearson Education Canada Inc Market Segmentation: Levels of Market Segmentation Micromarketing

© 2002 Pearson Education Canada Inc Levels of Market Segmentation: Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals or locations Local marketing –Local tailoring of brands and promotions –Overcomes regional differences –“First-line customers” –Dilutes brand image and operation efficiency –Logistical problems

© 2002 Pearson Education Canada Inc Levels of Market Segmentation: Micromarketing Individual marketing –Tailoring products and marketing programs to the needs and preferences of individual customers –Mass customization –Custom-made products –Self-marketing

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Geographic Segmentation Divide market into separate geographic units Nations, regions provinces, cities, etc. Develop regional marketing programs

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Demographic Segmentation Most popular method Consumer patterns often follow their demographics Easier to measure than most segmentation variables Needed for market size and access

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Demographic Segmentation Age and life-cycle stage –Wants and needs vary with stage –Guard against stereotypes Gender –Buying patterns frequently follow gender Income –Affluent to restricted incomes

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Psychographic Segmentation Lifestyle –Reflected in purchases Personality –Express who they are

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Behavioural Segmentation Divide market into groups based on consumer knowledge, attitude, use, or response to a product Occasions –By occasions when buyers get the idea to buy, actually make the purchase, or use the item Benefits sought –Major benefits, people seeking, brands deliver

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Behavioural Segmentation User status –Non-, ex-, potential, first-time, regular Usage rate –Light - medium - heavy –Heavy users may dominate total market Loyalty status –Toward brand, store, and/or company –Frequent buyers may not be loyal habit, indifference, low price, product unavailability

© 2002 Pearson Education Canada Inc Segmenting Consumer Markets: Multiple Segmentation Bases Multiple bases used to better identify segments Geodemographic segmentation

© 2002 Pearson Education Canada Inc Segmenting Business Markets Business demographics Operating characteristics Purchasing approaches Situational factors Personal characteristics Plus consumer market variables

© 2002 Pearson Education Canada Inc Segmenting Business Markets: Major Segmentation Variables Business Demographics Industry Company Size Location Personal Characteristics Buyer-seller similarity Risk attitude Loyalty Situational Factors Urgency Specific application Size of order Purchasing Approaches Purchasing function organization Power structure Existing relationship nature General purchase policies Purchasing criteria Operating Variables Technology User/non-user Status Customer capabilities

© 2002 Pearson Education Canada Inc Segmenting International Markets Geographic location Economic factors Political and legal Cultural factors Intermarket (global) segmentation –common needs and buying behaviour

© 2002 Pearson Education Canada Inc Requirements for Effective Segmentation MeasurabilityAccessibility SubstantialityActionability

© 2002 Pearson Education Canada Inc Market Targeting: Evaluating Market Segments Segment size and growth Segment structural attractiveness Company objectives and resources

© 2002 Pearson Education Canada Inc Selecting Market Segments Company marketing mixMarket A. Undifferentiated marketing Company marketing mix 1 Company marketing mix 2 Company marketing mix 3 Segment 1 Segment 3 Segment 2 B. Differentiated marketing Segment 1 Segment 3 Segment 2 Company marketing mix C. Concentrated marketing

© 2002 Pearson Education Canada Inc Positioning Competitively: Product Positioning Defined by consumers on important attributes Place product occupies in mind relative to competing products Information overload Simplify evaluation Position happens - planned or not

© 2002 Pearson Education Canada Inc Positioning Competitively: Positioning Strategies Product attributes Benefits offered Usage occasions Classes of users Directly against or away from competitor Different product class

© 2002 Pearson Education Canada Inc Positioning Strategy: Choosing and Implementing Communicate and deliver chosen position Communicate and deliver chosen position Select the right competitive advantage Select the right competitive advantage Identify possible competitive advantage Identify possible competitive advantage

© 2002 Pearson Education Canada Inc Positioning Strategy: Possible Competitive Advantages Product differentiation Service differentiation Personnel differentiation Image differentation

© 2002 Pearson Education Canada Inc Positioning Strategy: Selecting Competitive Advantage How many differences to promote? –Overpositioning, underpositioning, confused positioning Which differences to promote? –Important, distinctive, superior, communicable, pre-emptive, affordable, profitable

© 2002 Pearson Education Canada Inc Positioning Strategy: Selecting Overall Strategy More The Same Less Benefits More The Same LessPrice More for More for less More for the same The same for less Less for much less

© 2002 Pearson Education Canada Inc Communicating and Delivering the Chosen Position Concrete action Easier to develop than implement Positions can be quickly lost

© 2002 Pearson Education Canada Inc Chapter Review What are the three steps of target marketing? What are the major levels of market segmentation? How do you identify an attractive market opportunity and choose strategies? How do position a product for competitive advantage?