MKT1705D Week 5 Segmentation, Targeting, and Positioning

Market Segmentation

Refers to the process of classifying consumers into groups exhibiting different needs, characteristics, or behaviour.

Market Segment

Refers to a group of consumers who respond in a similar way to a given set of marketing stimuli.

Benefits of Market Segmentation

1) Furnish more information about market

2) Provide input for opportunity analysis

3) Enhance effectiveness and efficiency of marketing program

Segmentation Bases

Refer to variables used to segment market.

Types of Segementation Bases

1) Geographic

2) Demographic

3) Psychographic

4) Behaviouristic

Geographic Segmentation

• Divides the market by location.

• Examples: Country, Region, City, Climate, Population Density

Demographic Segmentation

• Divides the market by measurable population characteristics.

• Examples: age, gender, income, occupation, education, family size, religion

Psychographic Segmentation

• Divides the market by lifestyle, personality, values, and interests

• Examples: adventurous travellers, health-conscious consumers, luxury seekers

Behavioural Segmentation

• Divides the market based on customer behaviour toward a product

• Examples: usage rate, brand loyalty, benefits sought, purchasing occasions, and user status

Types of Loyalty Status

1) Undivided Loyalty

2) Divided Loyalty

3) Spurious Loyalty

4) Latent Loyalty

Undivided Loyalty

Customers strongly prefer one brand and consistently repurchase it. This is the ideal type of loyalty.

High attitude towards brand, high chance of being a repeat purchaser.

Divided Loyalty

Customers are loyal to two or more brands and switch between them. For example, someone who regularly buys both Nike and Adidas.

High attitudes towards multiple brands, high chance of being a repeat purchaser for multiple brands

Spurious Loyalty

Customers repeatedly buy the brand, but not because they truly like it. They may buy it because it's the cheapest, most convenient, or the only option available. If circumstances change, they'll likely switch.

Low attitude towards brand, high chance of being a repeat purchaser until circumstances change.

Latent Loyalty

Customers have a strong positive attitude toward the brand but don't buy it often due to barriers such as high price, limited availability, or lack of opportunity.

High attitude towards brand, low chance of being a repeat purchaser due to barriers of purchase.

Market Targeting

Refer to the evaluation and selection of segments to cover.

Evaluative Criteria

Refers to the factors a company considers when deciding which market segment(s) to target after completing market segmentation.

Framework of Evaluative Criteria

1) Size and Growth (Current & projected sales & profits)

2) Structural Attractiveness (Current & potential competition, Power of buyers, Power of suppliers)

3) Firm’s characteristics (Fit long-run objectives, Fit strengths)

Target Market Selection

Refer to the process of deciding which market segment(s) a company will serve after evaluating the available segments.

Target Segment

Refers to the group of consumers to whom firm’s marketing program is directed.

Target Marketing Selection Strageties

1) Undifferentiated (Mass) Marketing

2) Differentiated (Segmented) Marketing

3) Concentrated (Niche) Marketing

4) Micromarketing

Undifferentiated (Mass) Marketing

• The company targets the entire market with one marketing mix.

• Assumes most consumers have similar needs.

• Example: A company selling basic table salt with the same product for everyone.

Pros: Lower costs, economies of scale.
Cons: May not satisfy diverse customer needs.

Differentiated (Segmented) Marketing

• The company targets multiple market segments, each with a different marketing mix.

• Example: A car manufacturer offering economy, family, and luxury models.

Pros: Greater market coverage and customer satisfaction.
Cons: Higher marketing and production costs.

Concentrated (Niche) Marketing

• The company focuses on one specific market segment.

• Example: A luxury watch brand targeting wealthy professionals.

Pros: Strong expertise and brand loyalty within the niche.
Cons: Higher risk if the niche declines.

Micromarketing

The company tailors its marketing to individual customers or very small groups.

Two forms:

• Local marketing: Customizing products or promotions for a specific location.

• Individual (one-to-one) marketing: Personalizing offerings for each customer (e.g., personalized recommendations on an e-commerce site).

Firm’s decision on which market to target

1) Company Resources

2) Product Variability

3) Product’s Life-Cycle Stage

4) Market Variability

5) Competitors’ Marketing Strategies

Market Positioning

Refers to consumers’ perceptions of where product/brand fits relative to competing alternates.

Unique Selling Proposition (USP)

Refer to the unique benefit or feature that makes a product or brand different from and better than its competitors. It gives customers a clear reason to choose that brand over others.

Differentiation

Refer to the process of creating meaningful differences in a product, service, or brand to make it stand out from competitors.

Positioning

Refer to the process of designing the company's offering and image so that it occupies a distinct, desirable place in the minds of the target customers.

Competitive Advantage

Refers to an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices.

Positioning Strategy

Refers to the plan a company uses to create a desired image or perception of its product or brand in the minds of its target customers.

Types of Positioning Strategies

1) Promotion Strategy

2) Distribution Strategy

3) Product Strategy

4) Pricing Strategy

Promotion Positioning

Position through product features, quality, design, packaging, or brand.

Example: Apple uses premium design and quality to position itself as innovative and premium.

Distribution Positioning

Position through where and how the product is sold.

Example: brands sell only in exclusive boutiques, while convenience stores position products as easily accessible.

Pricing Positioning

Position through price.

Example: Rolex uses high prices to signal luxury, while IKEA uses affordable prices to signal value.

Promotion Strategy

Position through advertising, branding, and communication.

Example: Nike's ads featuring elite athletes position the brand as inspiring and performance-driven.

Points-of-Difference (POD)

Refers to the attributes or benefits that customers strongly associate with a brand and believe they cannot get (or cannot get as well) from competitors.

Points-of-Parity (POP)

Refer to the attributes or benefits that a brand must have to be considered a legitimate competitor in a product category.

Positioning Pitfalls

Refer to the common mistakes that companies make when trying to position their brand or product. These mistakes can confuse customers or weaken the brand's image.

Types of Positioning Pitfalls

1) Under positioning

2) Over positioning

3) Confused Positioning

Under positioning

Customers have little or no clear idea of what the brand stands for.

• The brand fails to establish a distinctive position.

• It doesn't stand out from competitors.

Example: A new smartphone brand claims to be "good quality" but doesn't explain what makes it different from Samsung or Apple. Customers have no reason to choose it.

Over positioning

Customers have a very narrow or overly limited perception of the brand.

• The brand becomes associated with only one characteristic.

• Customers may think it's unsuitable for them.

Example: A luxury watch brand is perceived as only for millionaires, so many potential customers don't even consider it.

Confused Positioning

Customers receive mixed or inconsistent messages about the brand.

• The company changes its message too often or sends contradictory signals.

• Customers don't know what the brand stands for.

Example: A clothing brand advertises itself as both luxury and budget-friendly at the same time. The message is inconsistent.