Segmentation Targeting and Positioning Chapter 7 Customer-Driven Marketing

Segmentation, Targeting, and Positioning Chapter 7 Customer-Driven Marketing Strategy: Creating Value for Target Customers

Objectives Be able to define three steps of target marketing: market segmentation, target marketing, and market positioning. Understand the major bases for segmenting consumer and business markets. Know how companies identify attractive market segments and how they choose a target marketing strategy. Comprehend how companies position their products for maximum competitive advantage. 7 - 1

Procter and Gamble in Kazakhstan List as many P&G products as you can 7 - 2

Procter and Gamble in Kazakhstan Describe the typical consumer for every product Secret, Old spice Ariel, Tide, Mif Wash&Go, Head&Shoulders, Pantene Camay, Safeguard 7 - 3

Procter & Gamble c Sells multiple brands within the same product category for a variety of products § Ariel, Tide, Mif Brands feature a different mix of benefits and appeal to different segments § Wash&Go, Head&Shoulders, Pantene Has also identified different niches within certain segments Tide offers seven different product formulations to serve different niches’ needs 7 - 4

What is Market Segmentation? Dividing a market into smaller groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes Ex. 7 - 5

Figure 7 -1: Steps in Market Segmentation, Targeting, and Positioning Select customers to serve Decide on value proposition Segmentation Divide the total market into smaller segments Differentiation Differentiate the market offering to create superior customer value Targeting Select segment(s) to enter Create value for targeted customers Positioning Position the market offering in the minds of target customers 7 - 6

The Process of Market Segmentation and Target Marketing The disaggregated market C 1 C 3 C 2 C 4 C 6 C 5 C 7 C 8 Age The characteristics of individual customers are understood The segment market 1 2 The target market 1 C 3 C 1 3 2 C 1 C 3 C 5 C 2 C 4 C 5 C 2 C 7 C 6 C 8 C 7 C 6 Adults Teens Kids Customers are grouped into segments on the basis of having similar characteristics 3 Marketing mix targeted at segment 3 Kids Segment 3 is judged to be most attractive and marketing mix strategy is designed 7 - 7 for that target market C 4 C 8

Segmentation of Airline Passengers 7 - 8 Source: Peter Doyle (1998), Marketing Management and Strategy, Prentice Hall Europe, p. 67.

Market Segmentation Key Topics Geographical segmentation Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables § Marketing mixes are customized geographically Requirements for Effective Segmentation 7 - 9

Market Segmentation Geographic Segmentation Variables World Region or Country Region State City or Metro Size Neighborhood Density Climate 7 - 10

Discussion Question Geographical climate is a legitimate means of segmentation for many products or services. Name several examples of products for which need (and demand) would vary on a geographical basis. 7 - 11

Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Geographical segments Demographic segmentation § § Most popular type Demographics are closely related to needs, wants and usage rates Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Requirements for Effective Segmentation 7 - 12

Market Segmentation Demographic Segmentation Variables Age Gender Family size Family life cycle Income Race Occupation Education Religion Generation Nationality 7 - 13

What type of demographic segmentation is reflected by this ad? 7 - 14

Household life cycle segmentation Based on: Gilly, M. and Enis, B. (1982), ‘Recycling the Family Life Cycle: A Proposal for Redefinition ’, in Mitchell, A. (ed. ), Advances in Consumer Research, 9, Association for Consumer Research, Ann Arbor, MI, 271– 6 7 - 15

Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Geographic segments Demographic segmentation Psychographic segmentation § Lifestyle, social class, and personality-based segmentation Behavioral segmentation Using multiple segmentation variables Requirements for Effective Segmentation 7 - 16

Swatch targets those with an active lifestyle 7 - 17

Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation § Typically done first Using multiple segmentation variables Requirements for Effective Segmentation 7 - 18

Market Segmentation Behavioral Segmentation Variables Occasions Benefits User Status User Rates Loyalty Status Readiness Stage Attitude Toward the Product 7 - 19

Benefit Segmentation: Champion Athletic Wear “Fit and polish” look for § function and style “Serious sports competitors” § performance and function “Value-seeking moms’ § Durability and value 7 - 20

Mobil’s Benefit Segmentation: enhanced profits 1. Road Warriors 16% § 2. Generation F 27% § 3. Branded products and reliable service Home Bodies 21% § 5. Fast fuel, Fast service, Fast food True Blues 16% § 4. Premium products and quality service Convenience Price Shoppers 20% § Low price Mobil charged $0. 02 per gallon more, But sales increased by 20 -25% 7 - 21

Checkout Direct offers retailers & manufacturers an excellent method of reaching segments of heavy users, as well as users of the direct competition. 7 - 22

Heavy and Light Users of Common Consumer Products Total consumption is high among heavy users (PARETO RULE) PRODUCT Soups and detergents HEAVY USERS LIGHT USERS 75% 25% Toilet tissue 71% 29% Shampoo 79% 21% Paper towels 75% 25% Cake mix 83% 17% Cola 83% 17% Beer 87% 13% Dog food 81% 19% Bourbon 95% 7 - 23 5%

Market Segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Requirements for Effective Segmentation 7 - 24

What is the base for segmentation? Cosmo magazine Prada clothes Advanced Auditing book Kinder Surprise Axe deodorant No pork inside sausages Wedding Dress Hotel chain customizes rooms according to the location of its hotels A quick-dry nail polish ABBA songs 7 - 25

Market Segmentation Demographic segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation § Industry, company size, location Operating variables § Technology, usage status, customer capabilities Purchasing approaches Situational factors § Urgency, specific application, size of order Personal characteristics § Buyer-seller similarity, attitudes toward risk, loyalty 7 - 26

Market Segmentation Geographic segmentation Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation § Location or region Economic factors § Population income or level of economic development Political and legal factors § Type / stability of government, monetary regulations, amount of bureaucracy, etc. Cultural factors § Language, religion, values, attitudes, customs, behavioral patterns 7 - 27

Market Segmentation Measurable Key Topics Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation § Size, purchasing power, and profile of segment Accessible § Can be reached and served Substantial § Large and profitable enough to serve Differentiable § Respond differently Actionable § Effective programs can be developed 7 - 28

Figure 7 -1: Steps in Market Segmentation, Targeting, and Positioning Select customers to serve Decide on value proposition Segmentation Divide the total market into smaller segments Differentiation Differentiate the market offering to create superior customer value Targeting Select segment(s) to enter Create value for targeted customers Positioning Position the market offering in the minds of target customers 7 - 29

Target Marketing Evaluating Market Segments § Segment size and growth § Segment structural attractiveness v v Level of competition Substitute products Power of buyers Powerful suppliers § Company objectives and resources 7 - 30

Figure 7 -2: Target Marketing Strategies 7 - 31

Target Marketing Choosing a Target-Marketing Strategy Requires Consideration of: § § § Company resources The degree of product variability Product’s life-cycle stage Market variability Competitors’ marketing strategies 7 - 32

Nokia Video 1 Why has segmentation been a successful marketing strategy for Nokia? 2 Which customer characteristics and segmentation variables are used by Nokia? 3 Identify and describe the segments Nokia markets. 4 What potential new markets could you add to the Nokia markets? 7 - 33

Figure 7 -1: Steps in Market Segmentation, Targeting, and Positioning Select customers to serve Decide on value proposition Segmentation Divide the total market into smaller segments Differentiation Differentiate the market offering to create superior customer value Targeting Select segment(s) to enter Create value for targeted customers Positioning Position the market offering in the minds of target customers 7 - 34

Positioning: What is it? Segmentation + Differentiation Consumer analysis Competitive analysis To Whom? What? 7 - 35

Positioning: § The place the product occupies in consumers’ minds relative to competing products. § Typically defined by consumers on the basis of important attributes. 7 - 36

High Quality Low High Price Amstel Ирбис Карагандинское Шымкенсткое Heineken Low Балтика Corona 7 - 37

Differentiating and Positioning Differentiation - act of designing a set of meaningful differences to distinguish the company’s offering from competitors’ offerings. Differential (competitive) advantage - an attribute of a product or a business that is not currently matched by rival companies or products and is highly desired by target market’s customers Positioning - process of creating an image for a product in the minds of target customers relative to competing products. 7 - 38

Positioning consists of 1. Identifying possible competitive advantages Product, Service, Personnel, Channel, Image Differentiation 2. Developing a positioning strategy How many differences to promote and which ones 3. Communicating and delivering the chosen position 7 - 39

Identifying Possible Competitive Advantages Positioning begins with actually differentiating the company’s marketing offer so that it will give consumers more value than competitors offer § by offering lower prices than competitors or § by providing more benefits to justify higher prices 7 - 40

Differentiation Dimensions 7 - 41

Competence Design Style Repairability Reliability Durability Conformance Performance Features Form Product Differentiation Variables Product 7 - 42

Porsche is positioned on the basis of performance and freedom. 7 - 43

Positioning Choosing a Positioning Strategy: § Choosing the right competitive advantage v How many differences to promote? • Unique selling proposition (USP) • Positioning errors to avoid v Which differences to promote? 7 - 44

Perceptual Map - а means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers. Map can show that there are no brands in a particular area, there may be room for a new product. Research can be conducted to determine what characteristics an “ideal product” would have. If there is no competitive offering in the product space the ideal product would occupy on the map, a market opportunity may exist. Repositioning. To see how consumers perceive competing products and take actions to try to change the product offering and the image it projects to consumers. 7 - 45

Consumer Perception in 1982 and GM goals for 1990 High price Cadillac Buick Family/ Conservative Oldsmobile Pontiac Personal/ expressive Chevrolet Saturn Low price 7 - 46

Positioning Criteria for Meaningful Differences Important Distinctive Superior Communicable Preemptive Affordable Profitable 7 - 47

Which Difference to Promote? · Important: The difference delivers a highly valued benefit to a sufficient number of buyers · Distinctive: The difference either isn’t offered by others or is offered in a more distinctive way by the company · Superior: The difference is superior to other ways of obtaining the same benefit · Communicable: The difference is communicable and visible to buyers · Pre-emptive: The difference cannot be easily copied by competitors · Affordable: The buyer can afford to pay for the difference · Profitable: The company will find it profitable to introduce the difference 7 - 48

Figure 7 -4: Possible Value Propositions Value proposition is the full mix of benefits upon which a brand is positioned 7 - 49

Possible Value Propositions Rolex Lexus Start ups Dell 7 - 50 1 dollar store, Southwest

Positioning Strategies Positioning by attribute: Associating a product with a particular feature Positioning by benefit: Associating a product with a special customer benefit Positioning by quality/price: Using price as a cue to higher quality, with higher quality being reflected in more features and/or services Positioning by use/application: Associating the product with a use or application Positioning by user: Associating a product with a user or class of user Positioning by product category: Associating the product with others in a similar product class Positioning by competitor: Identifying the product by using a 7 - 51 competitor as a reference point

Positioning by attribute: Associating a product with a particular feature: colour, size, design 7 - 52

Positioning by benefit: Associating a product with a special customer benefit: quality, performance 7 - 53

Positioning by quality/price: Using price as a cue to higher quality, with higher quality being reflected in more features and/or services 7 - 54

Positioning by use/application: Associating the product with a use or application 7 - 55

Positioning by user: Associating a product with a user or class of user 7 - 56

Positioning by product category: Associating the product with others in a similar product class 7 - 57

Positioning by competitor: Identifying the product by using a competitor as a reference point: 7 UP - uncola 7 - 58

Positioning Strategies - Examples 7 - 59

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Choosing a Positioning Strategy: § Developing a positioning statement v Positioning statement states the product’s membership in a category and then shows its point-of-difference from other members of the category. v To (target segment and need) our (brand) is (concept) that (point-of-difference) v “To busy, mobile professionals who need to always be in the loop, Black. Berry is a wireless connectivity solution that allows you to stay connected to data, people, and resources while on the go, easily and reliably – more so than competing technologies” 7 - 61

Positioning Choosing a Positioning Strategy: § Communicating and delivering the chosen position v v Entire marketing mix must support the chosen strategy May require changes to the product, pricing, distribution or promotion. 7 - 62

Communicating & Delivering Chosen Position If a company builds a position on offering superior value (Ex. better quality and service) to the target markets it must then DELIVER that position § § § produce high-quality products charge a higher price distribute through high-class dealers advertise in high-quality media hire and train more service people find retailers who have good reputation for service § develop sales and advertising messages that broadcast its superior service 7 - 63

Figure 7 -1: Steps in Market Segmentation, Targeting, and Positioning Select customers to serve Decide on value proposition Segmentation Divide the total market into smaller segments Differentiation Differentiate the market offering to create superior customer value Targeting Select segment(s) to enter Create value for targeted customers Positioning Position the market offering in the minds of target customers 7 - 64