GLOBAL MARKETING Marketing Segmentation Market Attractiveness Positioning

What is Market Segmentation? Process of dividing a potential market into distinct subsets of consumers with common needs or characteristics. Separating a heterogeneous market into smaller homogeneous units.

Important Elements of Market Segmentation Each market segment has unique needs and wants and will have a unique demand curve. Each market segment requires its own marketing strategy and marketing plan.

Market segmentation produces increased costs to the firm in the short run. Increased costs are generally offset by increasing sales in the long run.

The Segmentation Process Needs-Based Segmentation

The Segmentation Process Needs-Based Segmentation Segment Identification

Segmentation Bases Geographic –Country –Region –County size –SMSA population –Density Demographic –Age –Sex –Education –Occupation –Race –Family life cycle

Segmentation Bases Psychographic –Social class –Personality –Lifestyle –Activities, interests, & opinions (AIO’s) Behavioralistic –Decision unit –Usage rate –Readiness –Benefits sought –Occasion –Brand loyalty

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness

Market Attractiveness Market attractiveness represents the degree of market opportunity offered by a market segment and the ability of the firm to meet the segment’s needs within a competitive setting. Determining market attractiveness is a four-step process.

Determining Market Attractiveness... First, pre-select criteria that will be used to evaluate market attractiveness and competitive position.

Market Attractiveness Factors Market/customer –Size ($’s, units) –Market potential –Market growth rate –Product life cycle stage –Differentiation potential –Customer loyalty –Price elasticity Economic/technological –Investment intensity –Industry capacity –Level & maturity of technology utilization –Ability to pass through inflation effects –Barriers to entry/exit –Access to raw materials

Market Attractiveness Factors Competitive –Industry structure –Competitive groupings –Substitution threats –Perceived differentiation among competitors –Individual competitors’ strengths Environmental –Regulatory climate –Degree of social acceptance

Competitive Position Factors Market Position –Relative market share –Rate of change in share –Perceived actual or potential differentiation –Breadth of current or planned product line –Company image Economic/technological –Relative cost position –Capacity utilization –Technological position –Patented technology

Competitive Position Factors Capabilities –Management strength & depth –Financial –R&D/product development –Manufacturing –Marketing –Salesforce Capabilities, con’t –Distribution system –Labor relations –Relations with regulators Interactions with other segments –Market synergies –Operating synergies

Determining Market Attractiveness (continued)... Second, weight the market attractiveness and competitive position factors. –What is the relative importance of each factor to your firm? Third, rate each segment on attractiveness and competitive position.

Example of Weighting and Rating

Determining Market Attractiveness (continued)... Fourth, evaluate the implications of alternative positions within the market attractiveness/competitive position matrix for target market selection, strategic objectives, and resource allocation. –Select segment(s) that offer best opportunity for profits.

Market Attractiveness Competitive Position

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness Segment Positioning Strategy

Positioning Match offerings of firm to the needs and wants of market segments. Effective positioning involves understanding customers’ perceptions about both the psychological and physical characteristics of offerings. Positioning starts with a product. But positioning is not what you do to a product—it’s what you do to the mind of the customer. That is, you position the product in the mind of the customer.

Positioning Strategy Learn the customer’s viewpoint. Create positioning statement based on unique customer needs. Primary Needs Articulated Needs Exciting Needs

Positioning Statements To communicate positioning, a marketing plan should include a positioning statement following the form: “To (target group and need) our (brand) is (concept) that (point of difference).”

Example: “To young, active soft-drink consumers who have little time for sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine. With Mountain Dew, you can stay alert and keep going even when you haven’t been able to get a good night’s sleep.”

Points to Remember About Positioning: Based on consumer perceptions of tangible and intangible characteristics of offering. The intensity of the brand will affect positioning.

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness Segment Positioning Strategy Positioning “Acid” Test

Testing the Positioning Statement Test the positioning statement with target consumers--what do they think, how do they react to the statement? Assess need level: the stronger the need, the higher the expected customer interest. –“Do you see this product as solving a problem or filling a need for you?”

Testing, continued... Communicability and believability: if the scores on these dimensions are low, the positioning must be refined or revised. –“Are the benefits clear to you and believable?”

Testing, continued... Perceived value: The higher the perceived vale, the higher the expected consumer interest. –“Is the price reasonable in relation to the value?”

Testing, continued... Gap level between the new product and existing products: The greater the gap, the higher the expected consumer interest. –“Do other products currently meet this need and satisfy you?”

The Segmentation Process Needs-Based Segmentation Segment Identification Segment Attractiveness Segment Positioning Strategy Positioning “Acid” Test Strategy Implementation

Segmentation Strategies Mass Marketing Mass Customization

Multisegment Strategy Pursue two or more segments that are attractive and profitable, but not the whole market.

Sequential Segment Strategy Multisegment approach, but rather than pursuing all the attractive segments simultaneously, pursue the most attractive first; when cash flow from that segment is positive, then pursue the next most attractive segment, and so on.

Single-Segment Strategy Focus on just one attractive segment.

Niche Segment Strategy Focus on a smaller group within a segment. Requires a further customization of marketing strategy.

Mass Customization Strategy Focus on all niches within a segment by customizing strategies to each subsegment.