1. Chapter: 6

2. Objectives  Learn the three steps of target marketing, market segmentation, target marketing, and market positioning  Understand the major bases for segmenting consumer  Know how companies identify attractive market segments and choose target marketing strategy  Realize how companies position their products for maximum competitive advantage in the marketplace

3. Marketing Process Research customer and the market place Managing marketing information and customer data Select customer to serve: market segmentation and targeting Decide on value proposition: differentiation and positioning Product and service design: building a strong brand Price Create real value Distribution manage demand and supply chain Distribution Promotion Communicating the value Promotion Customer relationship management: build strong relationship with chosen customers Partner relationship management : build a strong relationship with marketing partners Create satisfied loyal customer Capture customer life time value Increase share of market and share of customer

4. What Is A Market? ‘A market consist of all the potential customers sharing particular needs and wants who might be willing to engage in exchange to satisfy their needs and wants.’

5. Steps in market segmentation, targeting and positioning Identify bases for segmenting the market Develop segment profiles Market Segment ation Develop measure of segment attractivene ss Select target segments Target Marketin g Develop positioning for target segments Develop a marketing mix for each segment Market Positionin g

6. Market Segmentation “Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.”

7. Segmentation  Why segment? Identifies opportunities and needs. Allows firm to focus on specific needs. Improves marketing mix for each segment. Allows small firm to exist.

8. Bases For Segmenting Consumer Markets BaseVariables Geographical segmentation Marketing mixes are customized geographically World Region or Country City Neighborhood City Density Climate Demographic segmentation Most popular segmentation Demographics are closely related to needs, wants and usage rates Age & life cycle Gender Family life cycle Family size Income Occupation Education Race Generation NationalityNationality

9. Bases For Segmenting Consumer Markets BaseVariables Psychographic segmentation Lifestyle, social class, and personality-based segmentation Behavioral segmentation Buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Occasions Benefits User Status User Rates Loyalty Status Readiness Stage Attitude Toward the ProductAttitude Toward the Product

10. Consumer Products Usage Category Heavy users Mediumusers Light users users

11. Benefits Of Segmentation  To The Customer: The obvious gain to customers is that they can find products that seem to fit more closely with what they want.  To The Marketing Mix: Segmentation helps companies to better understand their customers and to better allocate their resources.  To The Competition : Segmentation helps companies to position their product toward competitors’ products.  To The Economy Allows small firm to exist.

12. Requirements for Effective Segmentation To be useful, market segments should be:  Measurable: The size, purchasing power, and characteristics of the segment can be measured.  Substantial: The segments are large and profitable enough to serve.  Accessible: The segments can be effectively reached and served.  Differentiable: The segments are conceptually distinguishable and respond differently to different marketing-mix programs.  Actionable: Effective programs can be formulated for attracting and serving the segments.

13. Target Marketing The segmentation reveals the firms segment opportunities. The firm now has to evaluate the various segments and diced how many and which segment it can serve best. We now look at how companies evaluate and select target segments Target Market Consists of a set of buyers who share common needs or characteristics that the company decides to serve

14. Evaluating Market Segments  Segment size and growth (according to company ability)  Segment structural attractiveness ● Level of competition ● Substitute products ● Power of buyers ● Powerful suppliers  Company objectives and resources

15. Target Marketing strategies Targeting broadly Targeting narrowly

16. Selecting Target Market Segments  Undifferentiated (mass) marketing The seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers. Focuses on what is common in the needs of consumer rather then what is different Henry Ford epitomised this marketing strategy when he offered the Model T-Ford “in any colours, as long as it is black.”

17. Selecting Target Market Segments  Differentiated (segmented) marketing A firm decides to target several market segments and design separate offers for each. Developing a stronger position within several segments creates more total sales then undifferentiated marketing across all segments. Differentiated marketing increases the cost of doing business. Vodafone target several segments with different offers and services

18. Selecting Target Market Segments  Concentrated (niche) marketing Niche marketing is especially appealing when company resources are limited. Instead of going after small share of a large market, then firms goes after a large share of smaller segments or niche. A niche is a more narrowly defined group, typically a small market whose needs are not well served. The customers in the niche have a distinct set of needs and they will pay a premium to the firm that best satisfies their needs.

19. Selecting Target Market Segments  Micromarketing (local or individual) ● The practice of tailoring products and marketing programs to the need and wants of specific individuals and local customer groups – includes local marketing and individual marketing. ● Local marketing: Tailoring brands and promotions to the needs and wants of local customer groups – cities, neighborhood, and even specific stores. ● Individual marketing : tailoring products and marketing programs to needs and preferences of individual customers – also labeled “markets-of-one marketing”, “customized marketing”, “one-to-one marketing”, and “mass customization”

20. Selecting Target Market Segments  Product specialization- the firm specializes in a particular product and tailors it to different market segments.  Market specialization the firm specializes in serving a particular market segment and offers that segment an array of different products.

21. Selecting Target Market Segments Company Marketing Mix Company Marketing Mix Market Segment 1 Segment 2 Segment 3 Company Mix 1 Company Mix 2 Company Mix 3 Segment 1 Segment 2 Segment 3 Company Marketing Mix Company Marketing Mix (mass marketing) Undifferentiated Marketing (segmented marketing) Differentiated Marketing (niche marketing) Concentrated Marketing

22. Buyer Preference Patterns  Homogeneous preferences: The figure shows a market where all the consumers have roughly the same preference. The market shows no natural segments. SWEETNESS CREAMINESS -no natural segments -all buyers have same preference - Mass marketing is more suitable -no natural segments -all buyers have same preference - Mass marketing is more suitable

23. Buyer Preference Patterns  Clustered preferences: The figure shows a market where with distinct preference clusters, called natural market segments. SWEETNESS CREAMINESS -natural segments -increases as number of competitors increases - -segmented marketing is more proper -natural segments -increases as number of competitors increases - -segmented marketing is more proper

24. Buyer Preference Patterns  Diffused preferences: The figure shows a market where consumers preferences are scattered throughout the space, indicating that consumers vary greatly in their preferences. SWEETNESS CREAMINESS -no pattern (or poor research) -take center position - - niche marketing is more appropriate -no pattern (or poor research) -take center position - - niche marketing is more appropriate

25. Choosing Target Market Strategy  Considerations include: Company resources ○ Concentrated marketing makes the most since with limited resources. The degree of product variability ○ Undifferentiated marketing more suited for uniform products ○ Differentiated marketing suited products that vary in design more. Market variability ○ If most buyers have the same tastes, and react the same way to marketing effort undifferentiated marketing is appropriate.

26. Choosing Target Market Strategy  Considerations include: Product’s life-cycle stage ○ New products with only one version, undifferentiated marketing or concentrated marketing make the most sense ○ In the mature phase of the product life cycle differentiated marketing begin to make more sense. Competitors’ marketing strategies ○ When competitors use differentiated or concentrated marketing undifferentiated marketing can be suicidal.

27. Product Life – Cycle Dollars Time in years Loss 0 Profit Sales Volume INTRODUCTIONGROWTHMATURITYDECLINE

28. Positioning “ The place the product occupies in consumers’ minds relative to competing products.” Typically defined by consumers on the basis of important attributes. Involves implanting the brand’s unique benefits and differentiation (the complex set of perceptions, impressions, services and the tangible product) in the customer’s mind. “products are created in the factory, but brands are created in the mind”

29. Choosing a positioning strategy  Each firm must differentiate its offer by building a unique bundle of benefits that appeals to substantial group within the segment.  The positioning steps:

30. Identifying possible competitive advantage “competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower price or by providing more benefits that justify higher price”  Marketers must think throw the customer’s entire experience with the company’s products or service  Differentiation can be based on Products Services Channels People Image

31. Choosing the right competitive advantage  How many differences to promote? Unique selling proposition Several benefits  Which differences to promote? Criteria include: Important Distinctive Superior Communicable Preemptive Affordable Profitable

32. Selecting an overall positioning strategy value proposition. The full positioning of a brand - the full mix of benefits upon which it is positioned, called the brand’s value proposition. It is the answer to the customer question “why should I buy your brand”

33. Selecting an overall positioning strategy  Possible value proposition BenefitsBenefits PricePriceMoreMore The same LessLess MoreMore LessLess

34. Selecting an overall positioning strategy  More for More  More for the Same  More for Less  The Same for Less  Less for Much Less

35. Communicating the Positioning  Companies must be certain to DELIVER their value propositions.  Positions must be monitored and adapted over time.