N1DM04 Marketing

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N1DM04Marketing

• Session 3
• Segmentation, Targeting and Positioning
• Dr Vicky Story

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Objectives

• Explain importance of segmentation and review
  techniques currently employed in both consumer
  and business to business contexts
• Consider criticisms of segmentation
• Review different targeting approaches
• Explore issues in positioning

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What is market segmentation?

• Identification of individuals or
  organisations with similar characteristics that
  have significant implications for the
  determination of marketing strategy (Jobber,
  2007 275).
• Through market segmentation, companies
  divide large, heterogeneous markets into smaller
  segments that can be reached more efficiently and
  effectively with products and services that match
  their unique needs. (Kotler et al., 2008410).

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The need for market segmentation?

• Marketers understand that they cannot be all
  things to all people, all of the time.

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• When discussing Customer Market Segmentation
  Henderson (1979) wrote
• Successful market strategies segment the total
  market in a way that minimises competitors
  strengths while maximising yours.

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Costs of Segmentation

• Segment identification
• Manufacturing costs
• Marketing, stock holding and other associated
  costs
• Need to trade off higher cost versus higher
  revenue

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Segmentation, Targeting Positioning Process

• Select customers to serve
• Segmentation
• Identify bases for segmenting the market
• Develop profiles of segments
• Targeting
• Develop measures of segment attractiveness
• Select Target segments
• Decide on a value proposition
• Differentiation
• Create superior customer value
• Positioning
• Develop marketing mix
• Value for Targeted Customers

Source Kotler, Wong, Saunders Armstrong
(2008), Principles of Marketing, 5th European
Edition, p.410.
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Segmentation, targeting, positioning process
The disaggregated market
The segmented market
The target market
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2
3
1
2
3
Marketing mix targeted at segment 3
Segment 3 is judged to be most attractive and a
marketing mix strategy is designed for that
target market
The characteristics of individual customers are
understood
Customers are grouped into segments on the basis
of having similar characteristics
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Segmentation in Consumer Markets
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Consumer Segmentation Bases
Jobber (2007)
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Profile Bases

• Geographic
• Country, region, city, climate, density
• McDonalds
• Demographic
• Age, Gender, lifecycle etc.
• Lego Toys
• Socio-economic
• Social class, income, terminal education age

Age 2-5 8-14
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How important is where the consumer lives? ACORN

• Type of neighbourhood and dwelling (ACORN) is
  a relatively new segmentation base. Its
  underlying philosophy the fact that the type of
  dwelling and area a person lives in is a good
  predictor of likely purchasing behaviour
  including the types of products and brands which
  might be purchased. This classification analyses
  homes, rather than individuals, as a basis for
  segmentation. It is termed the ACORN system (A
  Classification of Residential Neighbourhoods).

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Life-cycle stages (Wells Gruber, 1986)

• Bachelor Stage young single people not living
  with parents
• Newly married couples without children (DINKIES)
• Full Nest I youngest child under 6 (ORCHIDS)
• Full Nest II youngest child over 6
• Full Nest III older married couple with
  dependent children
• Empty Nest I no children living at home, family
  head in work (WOOPIES)
• Empty Nest II family head retired
• Solitary survivor in work
• Solitary survivor retired (COCOON)

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SAGACITY

• Refinement of family life cycle grouping system
• System that believes that people have different
  behavioural patterns and aspirations as they
  proceed through life. Four main stages of life
  cycle are defined as
• Dependent (mainly under 24 living at home)
• Pre-family (under 35s who have established their
  own household, but without children)
• Family (couples under 65 with one or more
  children in the household)
• Late (adults whose children have left home or who
  are over 35 and childless)

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Behavioural bases

• Benefits sought
• Sainsburys basics
• Rachels Organic
• Purchase Occasion
• Emergency, gift, self-purchase
• Purchase behaviour
• Brand loyalty, organic
• Usage
• Heavy vs light
• Orange

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Behavioural Bases (cont.)

• Perceptions Beliefs
• LOreal
• Because youre worth it
• Dove
• Unilever identified a different belief segment
  characterised by women who rebel against beauty
  stereotypes.
• Avoiding direct competition
• Campaign for Real Beauty

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Lifestyle

• Consumers buy brands not only for their
  functional characteristics but to reflect the
  lifestyle to which they aspire.
• Seiko Watches

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Personality

• The importance of emotion and the relationship
  between feelings and rationalisations is
  highlighted in this Sony ad.
• Timberland

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VALS

• Which VALS type are you?
• Find out at
• www.sric-bi.com/VALS/presurvey.shtml

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Example 1

• Source Tourism Australia
• How Tourism Australia segments the Chinese market
  (ie Chinese tourists visiting Australia)
• 2 key attributes
• Extent of experience of travel close to home
  versus long haul
• Willingness to be challenged when travelling

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5 Market Segments based on emotions, attitudes
and behaviours
http//www.tourism.australia.com/content/Research/
Market20Segmentations/China_Segmentation_Study.pd
f
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Characteristics

• Self challengers
• 4.3 million (22 of long haul market)
• Are the most likely to be University educated
• Those who are single have the highest personal
  income
• Are the most likely to work for an international
  company,
• Are more likely to own a car, digital
  camera/video camera
• Are more likely to have an internationally
  recognised credit card
• Have the highest competency in the English
  language

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Ford have used attitudinal segmentation at the
onset of any new product developmentResponses
from consumer surveys to personal attitude
statements are plotted into eight semi-quadrant
categories using multidimensional scaling to
provide an attitudinal map known as a
consumerscape
Example 2
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(No Transcript)
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These are then translated into life-stages
(characteristics) which are then segmented into
attitudinal typologies through clustering
techniques. This comprised 9 groups with hot
buttons that characterise each segment
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Details of the codes used in the consumerscape
are as follows

• FS Frustrated StriversASI Active
  Self-IndulgentsF FunseekersVA Visible
  AchieversWBS Well-balanced SociablesSP Social
  PragmatistsCT Contented TraditionalistsCC Comf
  ortable ConformistsQC Quiet Carefuls

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(No Transcript)
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Segmentation in Business to Business Markets
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Segmenting Organizational Markets
Macro segmentation
Organizational size
Industry
Geographic location
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Macro and micro segmentation of Organizational
Markets
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• IBM
• Macro
• Industries
• Public sector
• Chief Information Officers
• Developers
• Corus Steel
• Macro
• Country
• Industry

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Survey of b2b in 1998

• Simkin and Dibb (1998) surveyed The Times 1000
• Segmentation approaches in b2b not very
  sophisticated
• Profitability, market growth and market size were
  the three most heavily used criteria.

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Requirements for segmentation

• Identifiable
• Segments exist
• Differentiable
• Similar within, differences between
• Able to differentiate meaningfully
• Actionable
• Can anticipate positive response from some
  segments
• Stable over time
• Sustainable

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Segment Forming and Profiling

• A priori have knowledge of groupings and then
  may simply seek further profile information
• Post-hoc rely on clustering or other similar
  techniques
• Aggregation versus disaggregation

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Criticisms of Segmentation
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Criticisms of Segmentation

• Do segments really exist?
• Segment overlap
• Technique driven
• Based on attitudes but attitudes are not the same
  as behaviour
• Segment stability/existence over time
  (cross-sectional versus panel data)

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Further Criticisms of Segmentation

• Segment at brand level or for product form
• Too much focus on consumers and not enough focus
  on competitors
• Relevance in e-commerce environments
• Is segmentation needed in an era of one to one?

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Targeting Segments
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Targeting marketing

• The choice of which market segment(s) to serve
  with a tailored marketing mix

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Segment attractiveness
Best, R.J., (2009), p180

• Need to consider ability to serve
• Match to resources/capabilities
• Net marketing contribution

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Segment Choice
Competitive position
Segment
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Target marketing strategies

• Undifferentiated marketing

Whole market
ORGANISATION
MARKETING MIX
TARGET MARKET

• Product
• Price
• Promotion
• Distribution

Wal-Mart?
Everybody
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Target marketing strategies

• Differentiated marketing

Marketing mix 1
Marketing mix 2
Marketing mix 3
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Example of Differentiated Strategy
Marketing Mix 1
Utilitarian Customer

Marketing Mix 2
Trendy- Casual
LEVIs
Marketing Mix 3
Price shopper
Marketing Mix 4
Mainstream
Tradition- alist
Marketing Mix 5
Jobber, 2007
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Target marketing strategies

• Focused/Concentrated marketing

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Example of Focused Strategy
Independent DIY Shops
Unserved
MARKETING MIX
ORGANISATION

• Product
• Price
• Promotion
• Distribution

Cement Manufacturer
Builders Merchants
Unserved
National DIY Chains
Jobber, 2007
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Single segment (niche)

• Focus on largest segment
• Defend smaller segment
• Build a growing segment
• Reconfigure

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Target marketing strategies

• Customized marketing

Marketing mix 1
Marketing mix 2
Marketing mix 3
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Example of Customized Strategy
INDIVIDUAL MIXES
ORGANISATION
INDIVIDUAL CUSTOMERS
Marketing Mix 1
Nissan
Industrial Electronic Systems Supplier
Marketing Mix 2
Birdseye
Marketing Mix 3
Heinz
Marketing Mix 4
Levis
Jobber, 2001l
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Deciding on a Value Proposition
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How to differentiate

• Product Specific Differentiation
• Form Quality (performance, conformance
  durability etc.) Style Design.
• Non-product Specific Differentiation
• Personnel (skills, service delivery, attitude)
  Channel (extent of coverage, type, innovation)
  Image (build confidence, emotional significance)
  Support (repair, installation, advice etc.).
• In relation to competition

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Good differentiation

• Important (of value)
• Unique (distinctive, superior)
• Sustainable (can be protected)
• Viable (price/profit)

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Positioning

• "Positioning starts with a product. A piece of
  merchandise, a service, a company, an institution
  or even a person. Perhaps yourself. But
  positioning is not what you do to a product.
  Positioning is what you do to the mind of the
  prospect. That is you position the product in
  the mind of the prospect.
• Ries and Trout (1981)

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Positioning and CA
Skills and resources
Customers
Position
Competitors
Performance
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Positioning

• End result is the creation of a customer focused
  value proposition

Company and Product Target customers Benefits Price Value Proposition
Volvo (station wagon) Safety-conscious upscale families Durability and safety 20 premium The safest, most durable wagon in which your family can ride
Dominos (pizza) Convenience-minded takeaway pizza lovers Delivery speed and quality 15 premium A good, hot pizza, delivered to door within 30 mins of ordering at an affordable price
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Value Positioning
Price
Less Same More
More More for less (Skoda, Ikea, Asda/Wal-Mart) More for same (Lexus, Nokia, Subway) More for more (Starbucks, Merc Benz)
Benefits Same Same for less (Dell, Amazon.com) Me too
Less Less for less (low cost airlines, Formula 1 hotels)
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Perceptual mapping

• Provide comparison of what consumers want with
  what is currently offered and what is ideal
• Basis for comparing brands
• Opportunity to spot gaps in the market

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A perceptual map of supermarkets
High price
Waitrose
M S
Sainsburys
Co-op
Narrow product range
Broad product range
Tesco
ASDA
Lidl
Morrisons
Aldi
Low price
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Choosing a Position

• Fit with strengths
• Understand what chosen segment values
• Consider competition
• How many USPs single, double triple benefit?
• Singapore Airlines (Service)
• Aquafresh (healthy gums, strong teeth and fresh
  breath)

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Successful positioning

• Clarity
• Consistency
• Credibility
• Competitiveness

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Summary

• Segmentation concerned with identifying customer
  groups
• Targeting is concerned with identifying most
  appropriate segment(s)
• Understanding customers and competition
• Need to match with organisational capabilities
• Positioning reflects competitive advantage
• Identify and communicate what makes the
  organisation different