STP

Segmentation target positioning

Market & Target Market

Group of people / organizations with:

Wants to satisfy,

Money to spend &

Willingness to spend.

Group of people / organizations with:

Wants to satisfy,

Money to spend &

Willingness to spend.

Is homogeneous group of customers at whom the seller specifically aims its marketing efforts.

Next our focus will be TM Strategies.

Is homogeneous group of customers at whom the seller specifically aims its marketing efforts.

Next our focus will be TM Strategies.

TARGET MARKETTARGET MARKET

MARKETMARKET

2 Broad Alternatives of TM Strategies:

Treat the whole market as a single unitTreat the whole market as a single unit

Is a process of dividing the total heterogeneous market for a product into several homogenous segments. Total market is seen as many smaller homogenous segments.

Is a process of dividing the total heterogeneous market for a product into several homogenous segments. Total market is seen as many smaller homogenous segments.

MARKET AGGRIGATIONMARKET AGGRIGATION

MARKET SEGMENTATIONMARKET SEGMENTATION

AssumptionSeller views the market as a series of Demand Curves.

Benefits & Limitations are Next..

AssumptionSeller views the market as a series of Demand Curves.

Benefits & Limitations are Next..

Rifle ApproachRifle Approach

Short gun approach.Short gun approach.

AssumptionThere is one demand curve.AssumptionThere is one demand curve.

Objectives

• Identifying Market Segments• Choosing Target Markets• Positioning

Steps in Market Segmentation, Targeting,and Positioning

1. Identifysegmentationvariables andsegment themarket

2. Develop profiles ofresultingsegments

MarketMarketSegmentationSegmentation

3. Evaluateattractivenessof eachsegment

4. Select thetargetsegment(s)

MarketMarketTargetingTargeting

5. Identifypossible

positioningconcepts foreach target

segment

6. Select,develop, andcommunicate

the chosenpositioning

concept

MarketMarketPositioningPositioning

Evaluation of segments

• Evaluating market segments– segment size & growth– segment’s structural analysis

• competition within the segment• existing or potential substitute products• relative power of buyers / suppliers

– company’s objectives & resources• environment, social responsibility, if it is core business, can

employ skills & resources superior to those of competition

3 basic questions

• Who is buying?• What do they buy?• When do they buy?

Market Segment

• A subgroup within the market who share certain relevant characteristics

• A group of customers with certain characteristics in common & whose needs can be met with a distinct marketing mix

What is a Market Segment?

Definition of target market segment:– A target segment is an internally homogeneous

group of consumers which is heterogeneous with respect to the mass market.

– Example: Probability that teens (13-19 year olds) will consume a ‘fizzy drink’ in a given week is 0.56. For all consumers (13-65) it is 0.25.

– Teens are two-times more likely to consume a fizzy drinks like coca-cola than the mass market.

Market segmentation - Definitions

• The analytical division of the market into discrete groups of customers that share common attributes.

• The identification of subsets of buyers within a market who share similarities, needs and who have similar buying processes.

Market segmentation

• A market segment is a large, identifiable group of customers within a market, which shows a predictable pattern of behavior in buying situations and can be profitably reached by means of distribution and communication.

What is a Market Segment?

• A schematic representation

Mass Market

Target Market

What is Segmentation Analysis?

Segmentation Strategies Compared

Supplier

Supplier

Supplier

A

B

C

A

B

C

B

Mass Marketing

Multiple Segment

Niche-Marketing

Ford 1920s

GM 1930s

Ferrari

What is Segmentation Analysis?

General Techniques• Socio-demographic (age structure profiles) –

part c of the lecture.• Benefit (economy segment (price);

durability(quality); symbolic (Hiranandani).• Lifestyle (Rolex)• Behavioural (Cigarette smokers & Bungie

Jumpers)

What is Segmentation Analysis?

Segmentation Techniques

Based on Usefulness and Measurability

Low

U

sefu

lnes

s

Hig

h

Low Measurable High

Attitudes

Lifestyle

Ethnicity

Age

Generic need

sought

Income

Gender

socio-demographic segmentation

Market-Segmentation Procedure

1. Survey stage– Motivations– Attitudes– Behavior

2. Analysis stage– Factors– Clusters

3. Profiling stage

Steps in Segmenting a Market

Select Market or Product Category

Choose Segmentation Bases

Select Segmentation Descriptors

Profile/Analyze Segments

Select Target Markets

Design, Implement, Maintain Marketing Mix

Steps inSegmenting aMarket

SubsequentMarketingActivities

Segmenting the Market

Bases for 1st Division

Reason to PurchaseBases for 1st Division

Reason to Purchase

Consumer Market (Ultimate Consumption)

Consumer Market (Ultimate Consumption)

Business Market (Business Selling)

Business Market (Business Selling)

OperatingSupplies

OperatingSupplies

RemakingMaterial

RemakingMaterial

ResellingReselling

Bases for Segmenting Consumer Markets

Occasions, Benefits, Uses, or Attitudes, amount of usage, usage occasions

Behavioral

Geographic

Region, City or MetroSize, Density, Climate Demographic

Age, Gender, Family size and life cycle, Race, Occupation, or Income ...

Lifestyle or Personality, social class

Psychographic

Segmenting Consumer Market

Behavioral - II (Usage Rate)Nonusers, Light users, Heavy users.

Behavioral - I (Benefits Desired)Quality, cost, Toothpaste.

PsychographicsPersonality, Life style, Values.

Demographic Income, Age, Family LC, Social ClassEducation, Occupation, Ethnicity.

Geographic Region, City / Metro area sizeClimate, Urban-rural

Bases for SegmentingConsumerMarkets

Bases for SegmentingConsumerMarkets

• Sells multiple brands within the same product category for a variety of products

• Brands feature a different mix of benefits and appeal to different segments

• Has also identified different niches within certain segments

• Product modifications are useful: Tide offers seven different product formulations to serve different niches’ needs

Procter & GambleProcter & Gamble

Case Study

The Family Life Cycle

Middle-aged divorcedwithoutchildren

Youngdivorcedwithoutchildren

Youngsingle*

Youngmarriedwithoutchildren*

Middle-aged marriedwithoutchildren

Youngmarriedwithchildren*

Youngdivorcedwithchildren

Middle-aged marriedwithchildren*

Middle-ageddivorcedwithchildren

Middle-agedmarried withoutdependentchildren

Middle-ageddivorcedwithoutdependentchildren

Oldermarried*

Olderunmarried*

Usual flowRecycled flowTraditional flow*

Bases for Segmenting Business Markets

• Type of organization• Size of organization• Location• Structure

Segmenting Business Market

Customer LocationCustomer Location Region & LocationRegion & Location

Customer TypeCustomer Type

Transaction ConditionsTransaction Conditions

Industry Size (Sales Volume, Employees, Production Facility,

& Sales Offices).Organizational Structure (Centralized vs Decentralization, Group vs Individual Decision). Purchase Criteria (Quality, Price, Durability, Time)

Industry Size (Sales Volume, Employees, Production Facility,

& Sales Offices).Organizational Structure (Centralized vs Decentralization, Group vs Individual Decision). Purchase Criteria (Quality, Price, Durability, Time)

Buying Situation 1. New buy- 1st time buying 2. Modified rebuy – modified from old3. Straight rebuy - 2nd or 3rd time buyingUsage Rate Non users, Light users, heavy usersPurchase procedures Bidding, lease.Order size Small, medium, large.Service requirements Large, Moderate, Heavy

Buying Situation 1. New buy- 1st time buying 2. Modified rebuy – modified from old3. Straight rebuy - 2nd or 3rd time buyingUsage Rate Non users, Light users, heavy usersPurchase procedures Bidding, lease.Order size Small, medium, large.Service requirements Large, Moderate, Heavy

Segmentation BasisSegmentation Basis DESCRIPTIONDESCRIPTION

Geographic

Customer Type

Customer Size

Product Use

Segmenting Business Markets

BusinesstoBusiness

BusinesstoBusiness

Purchasing Criteria

Purchasing Strategy

Importance

Personal Characteristics

Micro- segmentation

Macro- segmentation

Strategies for Selecting Target Markets

ConcentratedStrategy

UndifferentiatedStrategy

MultisegmentStrategy

Segmentation strategies

• Undifferentiated: Ignore segments

• Concentrated or focused: Concentrate on a single segment (Small firms)

• Differentiated: Different marketing mix for each segment (Large firms)

Segmentation strategies

MarketFirm

Segment A

Segment B

Segment C

Segment D

Segment A

Segment B

Segment C

Segment D

Firm

Firm

Undifferentiated

Marketing

Differentiated

Marketing

Concentrated/Focused

Marketing

Undifferentiated Strategy

• Also known as market aggregation• Targets entire market with the same

marketing mix – segments ignored• Used when segments cannot be identified or

where aggregation proves more profitable than segmentation

• Ford’s Model T car were sold as the universal car – “any car as long as it is black”

Concentrated strategy

• Marketing effort directed at a single highly defined segment

• Niche marketing – Rolex watches• Used when one group is especially attractive

for the organization to target• A useful strategy for smaller firms – avoids a

head on collision with major players• Provides scope for competitive advantage in a

small niche in the market

Differentiation Strategy

• Multi segment approach• Separate mix for each segment• Expensive In terms of product & marketing

cost• Only possible for large firms

Levels of Market Segmentation

Mass MarketingMass Marketing One product for all buyers. Economies of Scale possible.One product for all buyers. Economies of Scale possible.

Segment MarketingSegment Marketing

Niche MarketingNiche Marketing

Local MarketingLocal Marketing

Individual MarketingIndividual Marketing

Mid point between Mass MKTG & Individual MKTG. Better satisfaction of wants. Market segment consist of large identifiable group within a market.

Mid point between Mass MKTG & Individual MKTG. Better satisfaction of wants. Market segment consist of large identifiable group within a market.

Loyal buyers. A Niche is narrowly defined group, a small market whose needs are not being well served.Loyal buyers. A Niche is narrowly defined group, a small market whose needs are not being well served.

Banks, Restaurants localize their operations to cater the needs of locals.Banks, Restaurants localize their operations to cater the needs of locals.

Last stage in Market Segmentation: “Segments of one” or “Customized marketing”). New technologies (email, internet, fax are allowing organizations to deal individually.

Last stage in Market Segmentation: “Segments of one” or “Customized marketing”). New technologies (email, internet, fax are allowing organizations to deal individually.

LEVELSLEVELS DESCRIPTIONDESCRIPTION

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

• Segments must be large or profitable enough to serve.

• Segments can be effectively reached and served.

ActionableActionable

• Size, purchasing power, profiles of segments can be measured.

• Segments must respond differently to

different marketing mix elements & actions.

• Must be able to attract and serve

the segments.

Effective Segmentation

Conditions For Effective Segmentation

SubstantialityPlus Actionable for MKTG Program.

SubstantialityPlus Actionable for MKTG Program.

MeasurabilityDimensions of Segmentation.

MeasurabilityDimensions of Segmentation.

DifferentiableHomogeneous Within, & Heterogeneous Between the segments.

DifferentiableHomogeneous Within, & Heterogeneous Between the segments.

AccessibilityThrough MKTG Institutions.

AccessibilityThrough MKTG Institutions.

Criteria for Successful Segmentation

Criteria for Successful Segmentation

Firms engage in segmentation to…

• Develop different strategies for different parts of the market

• Increase sales & profit from each segment• Identify marketing opportunities• Dominate certain niche segments• Reflect differences in customer tastes• Prioritize on those segments most likely to

provide a higher return

Market Segmentation

• Cost/unit is high• Carry large assortment• Maintain big Inventory• Greater Inventory cost• Higher Administrative cost• Extra cost of multi-Advs.

• Cost/unit is high• Carry large assortment• Maintain big Inventory• Greater Inventory cost• Higher Administrative cost• Extra cost of multi-Advs.

• Customer oriented approach• Effective resources utilization• Easy to handle competition• Effective promotion• Rapid growth for small firms• Less resources required

• Customer oriented approach• Effective resources utilization• Easy to handle competition• Effective promotion• Rapid growth for small firms• Less resources required

LimitationLimitation

BenefitsBenefits

Effective Segmentation & Conditions. (Next)

3 Steps of Target Marketing

3. Market Positioning

Select one or moreMarket Segments

2. Market Targeting

Identify & profile distinct groups of buyers who require separateproducts &/or Marketing Mix

1. Market Segmentation

TargetMarketingTargetMarketing

Establish & communicate theproduct’s key distinct benefitsin the market

Steps in target marketing

1. Define the relevant market2. Analyze characteristics and wants of potential

customers• (geographic location, demographics, psychographics and

product related variables)3. Identify bases for segmenting the market4. Define and describe market segments5. Analyse competitor’s positions6. Evaluate market segments7. Select the market segments8. Finalize the marketing mix

Target Market Strategies

MULTIPLE / COMBINED SEGMENT STRATEGY

SINGLE SEGMENT

STRATEGY

MARKET AGGREGATION FULL MARKET COVERAGE

TargetMarketStrategies

TargetMarketStrategies

Strategic approaches to segmentation – Target Marketing

Single-segmentSingle-segmentConcentration (niching)Concentration (niching)

ProductProductspecializationspecialization

M1 M2 M3 P1

P2

P3

SelectiveSelectivespecializationspecializationM1 M2 M3

P1

P2

P3

M1 M2 M3

Full marketFull marketcoveragecoverage

P1

P2

P3

MarketMarketspecializationspecializationM1 M2 M3

P1

P2

P3

P1

P2

P3

M1 M2 M3

P = ProductP = ProductM = MarketM = Market

Continuum of targeting strategies

Undifferentiated Single marketing mix for all customers

Differentiated Different mix for each segment

Concentrated Targets single large segment

Niche Targets a single small segment

Customized Different mix for each customer

Additional Criteria• Ethical Choice of Market Targets• Segment Interrelationships & Supersegments• Segment-by-Segment Invasion Plans• Intersegment Cooperation

Positioning and Differentiation

The BCG CompetitiveAdvantage Matrix

Volume

FragmentedStalemated

Specialized

Siz

e o

f th

eS

ize

of

the

Ad

van

tag

eA

dva

nta

ge

SmallSmall

LargeLarge

Number of ApproachesNumber of Approachesto Achieve Advantageto Achieve Advantage

FewFew ManyMany

Product Differentiation

FormFea-

turesPerfor-mance

QualityConform-

anceQuality

Dura-bility

Relia-bility

Repair-ability

Style Design

DeliveryDelivery

Services Differentiation

OrderingEase

OrderingEase

Maintenance& Repair

Maintenance& Repair

CustomerTraining

CustomerTraining

InstallationInstallation CustomerConsulting

CustomerConsulting M

iscellaneo

us

Services

Differentiation

• Personnel• Channel

Media Atmosphere

Symbols

Events

Image Differentiation

Differences WorthDifferences WorthEstablishingEstablishing

AffordableAffordable SuperiorSuperior

ProfitableProfitable

PreemptivePreemptive

DistinctiveDistinctive

ImportantImportant

PositioningPositioning is the act of is the act of designing the company’s designing the company’s

offering and image to offering and image to occupy a distinctive occupy a distinctive

place in the the target place in the the target market’s mind. market’s mind. P 298 P 298

Bases for positioning• Product attributes• Product benefits• Company image• Product class• User category• Positioning against competition• Usage occasion• Cultural symbol• Price-quality association• Positioning by packaging• Positioning by endorsement

Perceptual Map

0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2

1.01.0

0.80.8

0.60.6

0.40.4

0.20.2

-0.2-0.2

-0.4-0.4

-0.6-0.6

-0.8-0.8

MagicMagicMountainMountain

JapaneseDeer Park

BuschBuschGardensGardens

Knott’sKnott’sBerryBerryFarmFarm

LionLionCountryCountrySafariSafari

MarinelandMarinelandof theof thePacificPacific

DisneylandDisneyland

EconomicalEconomical

Fun ridesFun ridesExerciseExercise

FantasyFantasyGood foodGood food

Easy to reachEasy to reach

Educational,Educational,animalsanimals

Little waitingLittle waitingLive showsLive shows

Sales & Profit Life Cycles

IIntroductionntroduction GrowthGrowth MaturityMaturity DeclineDecline

TimeTimeSal

esS

ales

&

& p

rofi

tsp

rofi

ts (

$)($)

Four IntroductoryMarketing Strategies

Rapid-Rapid-skimmingskimmingstrategystrategy

Rapid-Rapid-skimmingskimmingstrategystrategy

Rapid-Rapid-penetrationpenetration

strategystrategy

Rapid-Rapid-penetrationpenetration

strategystrategy

Slow-Slow-penetrationpenetration

strategystrategy

Slow-Slow-penetrationpenetration

strategystrategy

Slow-Slow-skimmingskimmingstrategystrategy

Slow-Slow-skimmingskimmingstrategystrategy

PricePrice

LowLow

HighHigh

PromotionPromotionHighHigh LowLow

Maturity Stage

• Market Modification• Product Modification• Marketing-Mix Modification

Decline Stage

• Increase investment• Resolve uncertainties - stable investment• Selective niches• Harvesting• Divesting

Market Evolution

• Emergence• Growth• Maturity• Decline

Market-Fragmentation andMarket-Consolidation Strategies

(a) Market-fragmentation(a) Market-fragmentation stagestage

M

C

J XYZ

K FGL

DE

AB

H

(b) Market-consolidation(b) Market-consolidation stagestage

X

M

C

ABDE

FG

JK

L

YZ

H