L6: Segmenting, targeting and positioning – Marketing Management

What did we learn?

- People are different, separate solutions for different segments then each would be satisfied than if put them all into one group. This is best use of limited resources.

Segmenting, targeting and positioning

1. Segmentation: Dividing the entire market into smaller groups (our customers).

2. Targeting: Decide which segment(s) you want to target.

3. Positioning: How you build your position in customers mind in that segment.

STP Marketing

Figure out who your customers are, deciding which segment you want to target and making sure to position yourselves in the segment by making sure the product/service appeals to them in a effective and unique way. The marketing mix is a result of this process.

Market

A group of people or organizations that share similar needs or wants for a particular product and have the ability and willingness to buy it.

Market segment

Subgroup of people or organizations that share similar characteristicts that make them have similar product needs. Part of the overall group of potential customers you might want to target.

Market Segmentation

Process of dividing a market into meaningful, relatively similar and identifiable segments or groups.

Why is market segmentation important?

- Helps marketers define customer needs and wants precisely

- Helps decision makers define objectives (set better goals) and allocate resources more accurately and efficiently.

- Help identify opportunities for growth and prevent unnecessary expenses e.g. cheaper to target a smaller group.

- Offering tailored solutions to different segments, companies can increase customer satisfaction and use limited resources better.

Market segment must meet certain criteria:

- Substantial

- Identifiable and measurable.

- Accessible

- Responsive

Substantial

- The segment must be large enough to be profitable and to warrant attention and resources from a company.

Identifiable and measurable

- Need to be able to identify the segment and determine its size e.g. segmenting by age is measurable but segmenting by who feels young might not.

Accessible

- Be able to reach the people in the targeted segments with your marketing efforts e.g. some promising segments might be difficult to communicate or distribute to.

Responsive

- A segment should react differently from other segments in response to the marketing mix. They should show distinct characteristics so it´s easier to target each behavior and preference.

Basis for segmentation

geographic segmentation, demographic segmentation, psychographic segmentation, behavioral segmentation, benefit segmentation.

Geographic segmentation: Segments markets by:

- Region of a country or the world

- Market size: Can do different things based on size e.g. reaching lot of people on social media the cost is lower but if in Luxembourg need to do a marketing campaign

- Market density: Number of people within a unit of land e.g. segment based on: Lots of people in a small area or a big country with few people.

- Climate: Impacts purchasing behavior.

Geographic segmentation

- Base segmentation on where they exist.

Demographic

- Looks at the characteristics of people, how you describe your people.

Demographic segmentation: Segments markets by:

o Age: Segment markets in generational cohorts - all act + need differently e.g. Gen Z, baby boomers. E.g. phones for older people that want to call only.

o Gender: Even products used by both genders marketing can be tailored to appeal to different preferences e.g. colors and packaging e.g. feminine hygiene products.

o Income: Segment based on how much money people have e.g. cars.

o Ethnic background: Different ethnicities, national or cultural traditions, habits have different needs e.g. different skins, hair types.

o Family life cycle: Segmenting based on the different life stages of people since different products are needed during those stages e.g. being a parent in their 20s and in their 30s. E.g. different types of cars during the life stages, small car in early years and bigger one in later years for family.

Behavioral segments by:

- Categories based on customers behavior.

o Occasion segmentation: Looks at when a products is typically bought or used e.g. selling champagne for events, wine for wine testing.

o Usage-rate segmentation: Divides a market by how much a product is bought or used e.g. non-users, light users, heavy users: e.g. alcohol drinks.

o Buyer readiness stage: Consider how close a customer is to make a purchase e.g. those added items to a wish list. E.g. people who need to buy a car in some months.

Psychographic segments by:

- What you like as a person:

o Personality: Personality traits influence consumer behavior, not an identity but is more stable over your lives.

o Motives: Motive is to get certain benefits when buying.

o Lifestyles: Same age, income, ethnicity but based on lifestyle you have different buying patterns.

o Geodemographics: Combination of geo and demographic. E.g. famous segment is soccer moms who might be a target for big safe expensive cars.

Benefit segmentation

the process of grouping customers into market segments according to the benefits they seek from the product - e.g. toothpaste where they segment based on cleaner teeth, whiter, taste.

Segmenting business markets - B2B: Businesses can be segmented based on company characteristics:

- Geographic location

- Type of company

- Company size: Target smaller or larger ones.

- Product use: Same product can be used differently.

Purchasing strategies of buyers as a segmentation variable

E.g. Ica, Coop, Hemköp. ICA are owned by everyone in town, send out sales representative. Big sales force focus on ICA but smaller then focus on Coop since it´s more centralized. Are influenced by the personal characteristics of buyers.

Steps in segmenting a market

- Step 1: Select a market or product category for study.

- Step 2: Choose the base for segmentation.

- Step 3: Select the segmentation descriptors (specific characteristics within those bases).

- Step 4: Profile and analyze segments

- Step 5: Select markets (segments to target)

- Step 6: Design, implement and maintain appropriate marketing mixes for chosen segments.

Types of targeting strategies:

undifferentiated, differentiated, concentrated

Undifferentiated

- Uses a single marketing strategy for the entire market and treats it as one large group e.g. Coca-Cola marketing.

Differentiated

- Strategy involving 2 or more distinct target segments with different marketing strategy for each. Different segments that have different preferences, behaviors and income. E.g different cars for different people.

• Risk of cannibalization: Where sales of one product reduce sales of another from the same company.

Concentrated

Select only on specific segment to focus on.

Positioning

How you create an image and perception of your product or brands in the minds of your target customers withing a specific segment. Make people thinK your product is the right one for them.

Different tools you can use to position your brand:

- Attribute

- Price and quality

- Use or application

- Product user

- Product class

- Competitor

- Emotion

Must define a core positioning strategy:

- Core strategy:

• Find one or more groups with potential

• Position the brand to them

• Differentiate: Highlight what makes your brand different and what your product stand for.

• Emphasize competitive advantage

§ Is it valuable and relevant?

§ Superior?

§ Hard to copy?

§ Profitable?

• Aim to be number one.

- Alternative positioning strategies:

• Strengthen current position

• Find unoccupied position

• Trying to change how customers perceived your Deposition/reposition the competition.

Position based on

personality, price, vanish, dollar tree, position on kind and number of features,

Emotional positioning in commercial

Create emotion and tie it to the product.

Positioning risks, mistakes

- Under positioning: Not positioning the product narrowly enough which results in, too vague claims that appeal to many segments e.g. shampoo for both people and animals.

- Over positioning: Making the product´s appeal too narrow e.g. The sports bran Gatorade was over positioned as only for American football players.

- Confused positioning: Presenting inconsistent or contradictory messages about the product leading to a confused braand image e.g SAAB shifting image as a sports car, environmental car, intellectual car.

- Incredible positioning: Making claims that customers don´t believe e.g. zapper that kill a disease.

Summary for effective positioning

- People are different

-Separate solutions for different segments yield greater satisfaction for everyone

- Best use of limited resources

How to make it effective:

- Be clear

- Be unique

- Stay unique

- Be consistent