Market Segmentation and Positioning Chapter 6

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Market Segmentation and PositioningChapter 6

• Positioning is not what you do to a product it
  is what you do to the mind of a prospect (Ries
  and Trout, 1972)

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Learning Outcomes

• Describe the principles of market segmentation
  and the STP process.
• Explain the characteristics and differences
  between market segmentation and product
  differentiation.
• Explain how market segmentation can be undertaken
  in both consumer and business to business
  markets.
• Describe different targeting strategies.
• Explain the concept of positioning.
• Illustrate how the use of perceptual maps can
  assist the positioning process.

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Case Insight - Stagecoach

• One of the largest bus operators in the UK
• Operate express and local bus services across the
  country
• Comprehensive network of intercity operations
  under the megabus brand
• So how do Stagecoach identify who their customer
  are and where they might want to access their
  services?

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STP Process

• Method by which whole markets are subdivided into
  different segments
• Three activities that should be undertaken,
  usually sequentially, if segmentation is to be
  successful
• Segmentation
• Targeting
• Positioning

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STP Process
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Benefits of STP Process

• 80 of profits usually derived by 20 of
  customers Paretos Principle
• Enhancing a companys competitive position by
  providing direction focus for marketing
  strategies.
• Examining and identifying growth opportunities in
  the market through the identification of new
  customers, growth segments or new product uses.
• More effective and efficient matching of company
  resources to targeted market segments promising
  the greatest ROMI.

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Market Segmentation

• Market segmentation is the division of a market
  into different groups of customers with
  distinctly similar needs and product/service
  requirements.
• Purpose of market segmentation
• Leverage scarce resources.
• To ensure that the elements of the marketing mix
  are designed to meet particular needs of
  different customer groups.
• Allows organisations to focus on specific
  customers needs, in the most efficient and
  effective way.

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Marketing Segmentation

• Market Segmentation Product Differentiation

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Process of Market Segmentation

• There are two main approaches to segmenting
  markets
• Breakdown Method Adopts the view that the market
  is considered to consist of customers which are
  essentially the same, so the task is to identify
  groups which share particular differences.
• Build-Up Method Considers a market to consist of
  customers that are all different, so here the
  task is to find similarities.

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Process of Market Segmentation

• Aim is to identify segments where
• identifiable differences exist between segments
  (segment heterogeneity).
• similarities exist between members within each
  segment (members homogeneity).

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Segmenting Consumer Markets

• Segmentation Bases/Criteria
• Profile Criteria - Who my market are and where
  are they?
• Behavioural Criteria - Where, when, and how does
  my market behave?
• Psychological Criteria - Why does my market
  behave that way?

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Segmenting Consumer Markets
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Segmenting Consumer Markets
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Segmenting Business Markets

• Segmentation Bases/Criteria
• Organisational Criteria e.g., Organisational
  size and location
• Buyer Characteristics e.g., Choice criteria,
  purchase context

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Organisational Characteristics
Source McDonald and Dunbar (2004). Reproduced
with kind permission.
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Buyer Characteristics

• Decision Making Unit
• Policy factors
• Purchasing strategies
• Attitudes towards vendors and toward risk
• Choice Criteria
• What specifications of product/service they
  choose
• Purchase Situation
• Structure of the purchasing procedures
• Type of buying situation
• Stage in the purchase decision process

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Targeting

• To determine which, if any, of the segments
  uncovered should be targeted
• Evaluation of Market Segments - DAMP
• Distinct is each segment clearly different from
  other segments?
• Accessible can buyers be reached through
  appropriate promotional programmes and
  distribution channels?
• Measurable is the segment easy to identify and
  measure?
• Profitable is the segment sufficiently large to
  provide a stream of constant future revenues and
  profits?

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Segment Attractiveness Factors

• Rating approach for different segment
  attractiveness factors
• Market growth
• Segment profitability
• Segment size
• Competitive intensity within the segment
• Cyclical nature of the industry
• Each of these attractiveness factors is rated on
  a scale of 0-10 and loosely categorized as high,
  medium or low in attractiveness.

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Segment Attractiveness Factors
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Targeting Approaches
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Positioning

• The act of designing the companys offering and
  image so that they occupy a meaningful and
  distinct competitive position in the target
  customers minds.
• Two fundamental elements
• Physical attributes - the functionality and
  capability that a brand offers.
• Communication - the way in which a brand is
  communicated and how consumers perceive the brand
  relative to other competing brands in the market
  place.

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Perceptual Maps

• Represent a geometric comparison of how competing
  products are perceived

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Perceptual Maps
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Positioning Strategies

• Position a brand either functionally or
  expressively (symbolically)
• Functional
• Features
• Quality
• Use
• Expressively
• User
• Benefit
• Heritage

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Repositioning Srategies

• Change the tangible attributes and then
  communicate the new product to the same market
• Change the way a product is communicated to the
  original market
• Change the target market and deliver the same
  product
• Change both the product (attributes) and the
  target market

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Summary

• Described the principles of market segmentation
  and the STP process.
• Explained the characteristics and differences
  between market segmentation and product
  differentiation.
• Explained how market segmentation can be
  undertaken in both consumer and business to
  business markets.
• Described different targeting strategies.
• Explained the concept of positioning.
• Illustrated how the use of perceptual maps can
  assist the positioning process.