Marketing Section 2

Segmentation, Targeting, and Positioning

The Importance of Market Segmentation

  • Markets have diverse product needs and preferences.

  • A market segment possesses:

    • Specific needs and wants.

    • Ability and willingness to buy.

  • Enables marketers to define customer needs better.

  • Competing effectively results in a competitive advantage.

STP Marketing Framework

  1. Segmenting:

    • Divide the market based on:

      • Needs/benefits

      • Demographics

      • Lifestyles

      • Behavioral measures

  2. Targeting:

    • Select the most appropriate market segments.

  3. Positioning:

    • Target customers with messages through the 4 P’s (Product, Price, Place, Promotion).

Bases of Segmentation

Demographic Segmentation

  • Characteristics include:

    • Age

    • Family structure and cycle

    • Occupation

    • Ethnicity

Psychographic Segmentation

  • Based on:

    • Values

    • Lifestyle

    • Personality

    • Activities

    • Interests

    • Opinions

Behavioral Segmentation

  • Divided by:

    • Amount of product bought or consumed.

    • 80/20 principle: 20% of customers generate 80% of demand.

Needs Segmentation

  • Grouping customers into segments based on the benefits they seek from products.

Targeting Strategies

  1. Undifferentiated Segmentation:

    • Marketing approach treating the market as a whole.

    • Advantages: Savings on production and marketing costs.

    • Disadvantages: Unimaginative products, vulnerability to competition.

  2. Differentiated Segmentation:

    • Strategy targets two or more segments with distinct marketing mixes.

    • Advantages: Greater financial success, economies of scale.

    • Disadvantages: High costs, potential cannibalization.

  3. Concentrated Segmentation:

    • Focus on a narrow market segment.

    • Advantages: Concentration of resources, small firms can compete, strong positioning.

    • Disadvantages: Segments could be too small or subject to change, large competitors may enter niche markets.

  4. Micromarketing Segmentation:

    • One-to-one marketing, highly individualized.

    • Long-term goal: Increase customer loyalty.

    • Shift towards direct and personal marketing as mass-media approaches decline.

Value Proposition

  • Unique Selling Proposition (USP): The complete mix of benefits that differentiate a brand.

  • Addresses the question: "Why should I buy your brand?"

  • Value determined by:

    • More quality for same/lower price.

    • Same quality for lower price.

    • Lower quality for a significantly lower price.

Positioning Statement

  • Format:

    • For [Target Market], the [brand] is the [Point of Differentiation] among all [Frame of Reference] because [Reason to Believe].

  • Point of Differentiation (POD):

    • Describes how the brand benefits customers uniquely.

  • Frame of Reference:

    • The category in which the company competes.

  • Reason to Believe:

    • Compelling evidence supporting differentiation claims.

Perception

  • Weber’s Law:

    • Greater initial stimulus requires more intensity to perceive a difference.

Perception Organization

  • Concepts include:

    • Figure and ground: Understanding arrangement of objects in space.

    • Grouping: Organizing stimuli into coherent groups.

    • Closure: Completing incomplete figures to form meaningful images.

    • Zeigernik Effect:

      • Incomplete tasks create a state of tension, leading to improved memory for those tasks.