MM271 Introduction to Marketing Topic 4 Identifying Market Segments & Targets

2-2 Learning Objectives By the end of this lecture, you will know Explain what market segmentation is, when to use it, and the five steps involved in segmentation. Recognize the different factors used to segment consumer markets Develop a market-product grid to use in segmenting and targeting a market. Understand how marketing managers position products in a market.

An Overview Segmentation aggregate prospective buyers into groups (segments) that: have common needs; and respond similarly to a marketing action of a firm Targeting Evaluate the attractiveness of various segments Decide how many and which segments to enter Positioning Define a product so that consumers will perceive it to be different from other competing products

An Overview Choose the bases of segmentation & group buyers into segments Develop a market-product grid & estimate the size of market Pick the right one!! Assess the attractiveness of the segments

Segmentation 2.1 Segmentation Variables – Consumer Market GEOGRAPHIC DEMOGRAPHIC PSYCHOGRAPHIC BEHAVIORAL Region Density Community Age Family Gender Income Education Occupation Lifestyle Personality Occasions Benefits User status Usage rate Awareness

Segmentation 2.1 Segmentation Variables – Consumer Market Geographic For marketers operate in more than one geographic area Easy to localize marketing mix activities Some companies seek to find untapped geographic areas E.g. countries, states, provinces, regions, cities, districts Demographic Most commonly used  easy to observe & measure Age: may not related to one’s need & buying power Gender: used for clothing, cosmetics, toiletries, magazines; now spread to cars, deodorants, sports & financial services Income: used for car, boat, clothing, financial service, travel

Segmentation 2.1 Segmentation Variables – Consumer Market Psychographic People in same demographic group may have very different psychographic characteristics Lifestyle segmentation is gaining popularity as people are buying products to express their way of living Personality: marketers are trying to associate products with their target market’s personality type Behavioral Based on consumer knowledge, attitudes, uses or responses to a product Some believe behavioral variables are the best starting point for segmenting markets Occasion: when does one learn about, buy, or use a product? Benefit: the product attributes that are useful to consumers User/usage: frequency & volume of purchase & use

Segmentation 2.2 Develop Market-Product Grid Step 1 Classify the company’s available product into different categories E.g.: breakfast, lunch, snacks, dinner Step 2 Line up different market segment against the number of product categories Step 3 Estimate the market size in each cell (market-product combination) In terms of sales revenue or number of customers Could use crude “guest estimates” if formal marketing research has yet to be conducted

Targeting 3.1 Assessing the attractiveness of each segment Market size Expected growth Company’s competitive position Level of competition Substitute products Power of buyers Powerful suppliers Cost of reaching the segment Compatibility with the company’s objectives & resources

Targeting 3.2 Targeting Strategies Undifferentiated strategy Differentiated strategy Concentration Single-segment concentration Product specialization Market specialization

Targeting 3.2 Targeting Strategy Undifferentiated Strategy 1 product fits all ignore market segment differences modern marketers have strong doubts about this strategy

Targeting 3.2 Targeting Strategy Differentiated strategy Different product offerings for different market segments Hope to attain higher sales & market position in each one Higher production & marketing costs Product 1Product 2Product 3 Segment 1 Segment 2 Segment 3

Targeting 3.2 Targeting Strategy Concentrated strategy – Single segment One product goes after one market segment Hope to achieve strong market position in the segment for greater knowledge, know-how & reputation Higher risks if the market of the particular segment suddenly turns negative Product 1Product 2Product 3 Segment 1 Segment 2 Segment 3

Targeting 3.2 Targeting Strategy Concentrated strategy – Product Specialization Product 1Product 2Product 3 Segment 1 Segment 2 Segment 3

Targeting 3.2 Targeting Strategy Concentrated strategy – Market Specialization Product 1Product 2Product 3 Segment 1 Segment 2 Segment 3

Targeting 3.2 Targeting strategies Factors of considerations: Company resources Limited resources  The degree of product variability Standardized product  Product’s life-cycle stage Early stages  Market variability Similar tastes & preferences  Competitors’ marketing strategies Be careful of using opposites

Positioning 4.1 Positioning for Competitive Advantage Definition Create meaningful differences that distinguish one from its competitors Steps: Identify possible competitive advantage Choose the right competitive advantage Communicate & deliver the chosen position

Positioning 4.2 Identify possible competitive advantage Competitive advantage An advantage over competitors gained by offering consumers superior value through: Lower prices More benefits that justify higher prices

Positioning 4.2 Identify possible competitive advantage Ways for creating differentiation PRODUCT SERVICES PERSONNEL CHANNELS IMAGES ORGANIZATION/ HERITAGE USER/USAGE

Positioning 1 I M P O R T A N T 2 S U P E R I O R 3 P R E E M P T I V E 4.2 Identify possible competitive advantage Criteria for selecting differentiation premise

Positioning 4.3 Select the right competitive advantage Perceptions of consumers Which attributes are important for a particular product? How do the consumer judge the existing products according to the important attributes? Perceptual map Illustrate two important attributes of a product class Display the relative position of different products or brands in the minds of consumers on the map Identify the location in which the company wish to “position”