3.3.1 M AKING MARKETING DECISIONS : SEGMENTATION, TARGETING, POSITIONING AQA Business 3 D ECISION MAKING TO IMPROVE MARKETING PERFORMANCE Who is Lego’s target market?

3.3.1 M AKING MARKETING DECISIONS : SEGMENTATION, TARGETING, POSITIONING  In this topic you will learn about  The process and value of segmentation, targeting and positioning  Influences on choosing a target market and positioning

S EGMENTATION, TARGETING AND POSITIONING  Segmentation, targeting and positioning are 3 steps in a process  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

MARKET SEGMENTATION  Market segmentation occurs when the market is split into subgroups of consumers with similar characteristics  This helps to identify different types of consumer and different wants and needs  Segmentation methods include:  Demographic  Geographic  Income  Behavioural

D EMOGRAPHIC 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?

G EOGRAPHIC 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 How has McDonald’s had to reposition its products to meet the needs of the Indian market?

I NCOME 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. To what extent are income and profession a strong positive correlation? Is this always true?

B EHAVIOURAL SEGMENTATION  Characterises subgroups based on the behavioural patterns of the consumer rather than their characteristics  Reasons for making purchases e.g. needs, emotional, rewards  Frequency of purchase e.g. heavy user or light user  Time of purchase e.g. seasonal, weekly, late at night  Brand loyalty  Method of purchase e.g. online  Triggers e.g. response to digital marketing Are loyalty cards for the benefit of the consumer or the business?

B ENEFITS OF MARKET SEGMENTATION  There are a number of benefits for a firm that uses market segmentation as part of its market research:  Advertising can be targeted at specific market segments so that advertising spend is more effective  The most profitable and least profitable customers can be identified  Least profitable markets can be avoided  It becomes easier to identify new products  It helps the firm improve existing products and customer service

T ARGETING  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

T ARGETING  Targeting may include niche and mass marketing  Niche marketing is when a firm targets a small subsection or previously unexploited gap in a larger market Niche marketing may give a business first mover advantage and allow them to charge a premium price  Mass marketing is when a firm targets the whole of a market rather than a particular segment Mass marketing can give a business a high volume of sales but often at a low price Should chocolate makers be targeting a niche or a mass market?

P OSITIONING  Where a product is placed in the market relative to its competitors  Positioning can be achieved by changing elements of the marketing mix to meet the needs of the target market  Influences on positioning include:  Internal constraints e.g. budgets  Internal strengths e.g. creativity and innovation  Market conditions e.g. degree of competition  External environment e.g. state of the economy How can market mapping be used to help position a business or product in the market?

I N PAIRS  Select one industry e.g. watches, jewellery, mobile phones, hotels  Identify how the S,T,P process applies to that industry  Produce a poster to illustrate the S,T,P process in relation to your chosen industry

3.3.1 M AKING MARKETING DECISIONS : SEGMENTATION, TARGETING, POSITIONING  In this topic you have learnt about  The process and value of segmentation, targeting and positioning  Influences on choosing a target market and positioning