Segmentation, Targeting & Positioning To understand different types of market segmentation To identify the value of niche and mass marketing

Segmentation, targeting and positioning Step 1: segment the market into groups of customers with similar characteristics Step 2: decide on what segment of the market to target Step 3: position the product on the market by identifying how it will be viewed in relation to its competitors Segmentation Targeting Positioning

*What is Market Segmentation? Market segmentation involves dividing a market into parts that reflect different customer needs and wants

Market Segmentation Segment C Segment B Segment D Segment A

Main Categories of Market Segment Demographic Segments Geographic Segments Income Segments Behavioural Segments

Market Segments SEGMENT BASIS SUMMARY DEMOGRAPHIC Dividing a market into segments based on demographic variables such as age, gender, family lifestyle, religion, nationality ethnicity etc. INCOME Dividing markets into different income segments, often on the basis of social-economic grouping BEHAVIOURAL Dividing a market into segments based on the different ways customers use or respond to a product. GEOGRAPHICAL Dividing a market into different geographical units, such as nations, regions, cities or neighborhoods print

Demographic segmentation Identifies subgroups of the population based on their demographic profile or characteristics Age Gender Level of education Race Religion Family size Stage in life e.g. empty nesters Demographics looks at the social and economic characteristics of individuals and households Was Lego correct to segment the market by gender? http://www.bbc.co.uk/news/business-19439692 Lego Friends 'not stereotypical'

Examples of Demographic Segmentation: Gender in Cosmetics

Examples of Demographic Segmentation: Age & Family Life-cycle in Holidays Shearings’ Coach Holidays Center Parcs Family Short Breaks Club 18-30

Income segmentation Identifying subgroups of the market based on their levels of income and profession A common method uses socio-economic groupings A – Higher managerial such as chief executives and directors B – Intermediate managerial such as solicitors, accountants and doctors C1 – Supervisory, clerical or junior professional such as teachers and junior managers C2 – Skilled manual such as plumbers, electricians and carpenters D – Semi and unskilled workers such as refuse collectors and window cleaners E - Pensioners, casual workers, students and unemployed Visit the Ford website – select 3 models of cars explain which socio economic group each car would suit. http://www.ford.co.uk/Cars

Examples of Income Segmentation: Consumer Income in Retailing

Examples of Behavioural Segmentation: Demand Stimulated by Occasions

Examples of Behavioural Segmentation: New & Loyal Customers

Geographic segmentation Geographic segmentation defines market categories based on where people live e.g. regions, cities or neighbourhoods People in different geographical areas display different characteristics and needs e.g. The South East of England is generally warmer than Scotland Tastes and traditions vary between countries Infrastructure in rural areas will differ from that of cities http://www.bbc.co.uk/news/business-30115555 How McDonald's conquered India How has McDonald’s had to reposition its products to meet the needs of the Indian market?

Examples of Geographic Segmentation: Localisation by Multinationals KFC in CHINA Starbucks in INDIA

*What is a Target Market? A target market is the set of customers sharing common needs and wants that a business decides to target

Targeting Targeting is the process of deciding which segment of the market to focus on This will be influenced by: Mission and objectives Perceived level of demand Degree of competition Nature of the product Understanding of the needs and wants of a specific segment

*Niche and Mass Marketing Niche Marketing Where a business targets a smaller segment of a larger market, where customers have specific needs and wants Mass Marketing Where a business sells into the largest part of the market, where there are many similar products offered by competitors Niche marketing may give a business first mover advantage and allow them to charge a premium price Mass marketing can give a business a high volume of sales but often at a low price

Why Target a Niche Market Segment? Advantages Drawbacks Less competition - a “big fish in a small pond” Clear focus - target particular customers Builds up specialist skill and knowledge Can often charge a higher price Profit margins often higher Customers tend to be more loyal Lack of economies of scale Risk of over dependence on a single product or market Likely to attract competition if successful Vulnerable to market changes – all “eggs in one basket” http://news.bbc.co.uk/1/hi/business/8647491.stm

Key Features of a Mass Market Customers form the majority in the market Customer needs and wants are more “general” & less “specific” Associated with higher production output and capacity + potential for economies of scale Success usually associated with low-cost (highly efficient) operation or market leading brands

Should chocolate makers be targeting a niche or a mass market? http://www.bbc.co.uk/news/business-33260415 The sticky dilemma facing chocolate firms

Positioning Where a product is placed in the market relative to its competitors How can market mapping be used to help position a business or product in the market?

MARKETING MIX Marketing Mix – the 7Ps Product Promotion Place People Process Physical evidence Price

Marketing mix Product? Price? Promotion? Place? Create a PowerPoint presentation on your new product and ensure you cover all elements of the marketing mix! Explain why you made each of your decisions.