Chapter Seven Segmentation, Targeting and Positioning

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Chapter Seven Segmentation, Targeting and
Positioning
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Identify segmentation variables
Develop profiles of the segments
Evaluate segments attractiveness And fit with
the firm
Select the target segments


Decide on the market positioning
Develop the integrated marketing mix
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7.1 Market Segmentation

• 1. Definition dividing a market into distinct
  groups of buyers with different needs,
  characteristics, or behavior who might require
  separate products or marketing mixes

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• 2. Benefits of market segmentation
• The overall objective of using a market
  segmentation strategy is to improve a companys
  strategy competitive position and better serve
  the needs of its customers.
• Four major benefits
• products---meet the needs or the market place
• effective and cost efficient promotional
  strategies
• market competition evaluation
• insight on marketing strategies

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• 3. Trends in Market Segmentation
• becoming increasingly sophisticated
• computer programs and databases assistance
• more sophisticated segmentation bases

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7.1.1 Bases of market segmentation (four basic
variables)

• 1. Geographic segmentation
• on the basis of population location
  rather large and too heterogeneous for effective
  segmentation without careful consideration of
  additional factors

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• 2. Demographic segmentation (most common
  approach)
• demographic variables age, gender,
  income, occupation, education, household size,
  lifestyle, stage in the family lifecycle, race,
  religion
• Reasons (advantages)
• They are easy to identify and measure.
• They are associated with the sales of many
  products and services.
• They are typically referred to in describing the
  audiences of advertising media so that media
  buyers and others can easily pinpoint the desired
  target market.

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• 3. Psycho-graphic segmentation
• psychological profiles of different
  consumers developed from the responses of
  consumers asked to agree or disagree with AIO
  (activities, interests and opinions) statements
• an important tool for understanding the
  behavior of present and potential target markets

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• 4. Behavioral segmentation
• based on buyers knowledge, attitudes, uses,
  or responses to a product
• behavior variables are the best starting
  point for building market segments
• occasions, product benefits, user status,
  loyalty status
• 1) Occasions
• according to occasions when buyers get the
  idea to buy, actually make their purchase, or use
  the purchased item.
• help firms build up product usage
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• 2) product benefits
• according to the different benefits that
  consumers seek from the product
• When differences among competing brands are
  slight, a firm may introduce a brand with a new
  benefit that appeals to a certain market segment.
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• 3) user status
• groups of nonusers, ex-users, potential
  users, first-time users, and regular users of a
  product
• Market share leaders will focus on attracting
  potential users, whereas smaller firms will focus
  on attracting current users away from the market
  leader.

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• 4) loyalty status
• be loyal to brands, stores, and companies
• the degree of loyalty
• completely loyal, somewhat loyal, or showing
  no loyalty to any brand
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• Care must be taken to consider segmentation
  variables that are highly relevant to a given
  situation but not necessarily contained in the
  textbook listings!
• E.g. detergent products one product formulated
  for washing silk and another for heavily soiled
  cotton(??).
• The type of dirt and nature of fabric vital
  variables for this given market

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• Hardly can any enterprise achieves its
  marketing goal by using only one variable to
  segment. More than one variables are adapted to
  divide market which provides more information
  about segments and enable the marketer to satisfy
  customers more precisely. More variables create
  more segments reducing the sales potential in
  each segments So in general, there is no single
  way to segment a market. A marketer has to try
  different segmentation variables, alone and in
  combination, to find the best way to view the
  market structure.

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7.1.2 Market segmentation procedure

• 1. Survey stage exploratory interviews and focus
  groups to gain insight into consumer motivations,
  attitudes, and behavior
• 2. Analysis stage
• 3. Profiling stage
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7.1.3 Criteria for effective segmentation

• Measurability size and characteristic
• Accessibility able to reach
• Market potential total capacity to absorb the
  products
• Responsiveness the largeness and the degree of
  sufficient sales and profit potential

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7.2 Market Targeting

• 1.Definition the process of evaluating each
  market segments attractiveness and selecting one
  or more segments to enter
• 2 phases
• Analyzing consumer demand
• Targeting the market

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• 7.2.1 Analyzing consumer demand
• A marketer must analyze its customers according
  to their characteristics.
• 3 types of demand patterns
• 1) Homogeneous demand
• 2) Clustered demand
• 3) Diffused demand (most costly product
  differentiation and more difficult to
  communication)

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7.2.2 Targeting the market segments

• 1. Three factors to be considered in deciding
  which and how many segments to serve
• 1) Segment size and growth
• first collect and analyze data on
  current segment sales, growth rates, and expected
  profitability for various segments.
• 2) Segment structural attractiveness
• examine several major structural factors
  that affect long-run segment attractiveness

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• 3) Company objectives and resources
• decide whether it possesses the skills
  and resources needed to succeed in that segment
  (superior to those of the competition)

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2. Strategies to target the market segments

• 1) Undifferentiated marketing????????
• 2) Differentiated marketing???????
• 3) Concentrated marketing???????

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Company marketing mix
Market
Undifferentiated marketing
Marketing mix 1 Marketing mix 2 Marketing mix 3
Segment 1 Segment 2 Segment 3
Differentiated marketing
Marketing mix
Segment 1 Segment 2 Segment 3
Concentrated marketing
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7.3 Positioning

• Positioning is the development of a service and a
  marketing mix to occupy a specific place in the
  minds of customers within target markets

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Case study

• The ship
• The Ship restaurant is located on the waterside
  in an area adjacent to the shopping,
  entertainment and business areas in a thriving
  city. The restaurant was not well-run and
  provided cheap fast food to day trippers. A
  group of entrepreneurs have acquired the
  restaurant and are intending to refurbish it and
  make it into a profitable business venture.

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• Segmentation variables
• Price (should the ship go upmarket or go for a
  quick turnover, value-for-money (??????) market?)
• Time of day ( this may affect the type of meal
  and service required). Possibilities might be
  breakfast, morning coffee and snack, lunch,
  afternoon snack, pre-theater meal, evening meal,
  post-theatre meal( if the entrepreneurs thought
  that pre- and post-theatre meals were an
  attractive possibility, this starts to suggest
  possibilities about potential joint promotions
  with the theatres)

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• Nature of the menu requirements for potential
  customers such as geographic focus (e.g. Greek,
  Italian, Indian, Chinese, etc.),
• nature of food offered (e.g. special focus on
  fish, vegetarian dishes).
• Location of food consumption in restaurant,
  takeaway and home delivery.

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• Nature of occasion such as birthdays,
  anniversaries and corporate events( implication
  of this is that it might be desirable in the
  development of the restaurant to include a
  separate events space). This analysis is in
  outline and not exhaustive (e.g. age may be
  considered in order to develop a childrens menu).

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• Ship restaurant
• Only two segments will be briefly considered
  given space limitations. In real life, much more
  analysis would be needed.
• The Business Lunch Lower costs demanded, a more
  restricted menu might be acceptable and speed of
  service is critical. This business is potentially
  profitable with the possibility of developing
  repeat business and corporate events (
  relationship-marketing implications).

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• The Romantic Evening Dinner Extensive menu, time
  not so critical, high but unobtrusive level of
  service required. Ambiance romantic rather than
  clinical (implication is that need for lighting
  might change from lunchtime to evening). This
  segment also gives opportunities for developing
  repeat business and events( e.g. weddings).

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• Evaluation of attractiveness and fit with the
  firm
• Segments should be profitable and the restaurant
  able to offer something special (e.g.
  competition no point in opening up the 12th
  Italian restaurant in the area).

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• Here, decisions are starting to be made. We will
  consider that the decision is being formed to
  provide an upmarket experience. Thus, inexpensive
  meals for shoppers might be unattractive but
  business lunches attractive.

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• Select the target segments
• In this situation, the decision might be to go
  for business lunches, pre-theatre meals and
  romantic evening meals. Breakfasts might be
  rejected as not generating enough revenue and for
  not being a good fit the positioning.
  Post-theatre dinners might be rejected as table
  availability might be a problem (long leisurely
  dinners in the evening) and late-night travel
  might be a problem for staff. There may be
  logistics issues as well as marketing issues
  influencing the selection of given segments

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• Develop the market positioning
• The evaluation that higher margin segments are
  attractive implies that a premium marketing
  position with high standards of interior design
  and service provision are indicated. Evaluation
  of the competition might indicate that some
  positioning (e.g. Italian ) are well catered for
  and thus might no be appropriate. Given the
  waterside location a specialist seafood/fish
  focus might be appropriate (if not already
  populated with competition).

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• The positioning is giving a reason to the target
  customers as to why they should come here and not
  to some other eatery. The positioning decisions
  will have a profound influence on the development
  of the marketing mix (e.g. the design theme for
  the restaurant)