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Importance of Segmentation
Defines needs and wants of most interested customers.
design marketing strategies
Focuses resources to maximize profits
Five Criteria
Substantial
Measurable
Differentiable
Accessible
Actionable
Substantial criteria
Enough to make a profit
Measurable criteria
Size and purchasing power must be measurable and identified.
Differentiable criteria
Segments must respond differently to marketing strategies.
Accessible criteria
Reach and serve the market
Actionable criteria
Ability to develop strategies to attract the segment to company’s products.
Segmentation Bases
Characteristics that influence buying behavior
Demographic
Psychographic
Geographic
Behavioral
Demographic Characteristics
The age, gender, income, family size, martial status.
Example:
A college student received special discounts from a store because of their age group and low income bracket
Psychographic characteristics
Adds psychology and personality traits to demographics.
Lifestyle: opinions, interests, and activities
VALS: eight psychographic groups based on motivation and resources.
Example:
Dick’s sporting goods segments consumers based on sports and activities they enjoy participating in.
Geographic Characteristics
Market size in an area, customer convenience (location), population shifts.
Example:
Spotify makes concert recommendations for shows that are near where I live.
Behavioral characteristics
Behavior toward products; occasions, loyalty and usage rate.
80/20 rule: 80% of companies demand comes from 20% of its users.
Ex: Spotify wrapped at the end of the year.
Factors in Selecting Target Markets
Growth potential
Sirius XM purchased Pandora = larger growth potential in target market versus paid radio.
Level of competition
New coffee shop may not select geographic target market saturated by Starbucks
Strategic Fit (with what company is and wants to be)
Lexus would not select target market looking for inexpensive transportation.
3 Target Market Strategies
Undifferentiated targeting
Differentiated targeting
Niche marketing
Undifferentiated targeting
Marketplace is one big segment
Limited use for uniform products like bananas.
Differentiated targeting
Pursues several different target markets at once with different strategies for each.
Example:
target going after college students, families.
Niche marketing
Unique products that target large share of small market.
Ex: Eat Fit Go, healthy foods
Market Positioning
Activities to create a certain perception of product in the eyes of the target market.
Analyze competitors’ positions
Define competitive advantage
Evaluate feedback
Analyze Competitors’ Positions
Understand how consumers perceive competition.
Extra important for similar goods and services
Ex:
Banks
Cellular service
Define Competitive Advantage
Price/quantity relationship: Walmart
Attributes: Air Jordans, Chevy v. Ford
Application: Apple products
Evaluate Feedback
Continuously listen to your customers.
Take feedback to improve, change your positioning.
Example:
Chevy took feedback from customers about its vehicles and created ads with real people to correct misconceptions and reposition itself.
Positioning Statement
Description of core target and picture of how the firm wants the market to view its product. Includes:
Target market
How customers should view the brand
How they are better
Ex: Coke
For consumers who want to purchase a wide range of products online with quick delivery (TARGET). Amazon provides a one-stop online shopping site (how they view them). Amazon sells itself apart from other online retailers with its customer obsession, passion for innovation, and commitment to operational excellence (how better).
Repositioning
Reestablishing a product’s position in response to changes in the marketplace.
Domino’s admitted issues, became transparent, improved product and ordering systems.
Repositioning the Competition
Dunkin’ tried to reposition Starbucks.
