Market Segmentation, Targeting, and Positioning Notes

Market Segmentation, Targeting and Positioning

  • Learning Objectives:
    • Understand the concepts of market segmentation, market targeting, and market positioning.
    • Discuss the major bases for segmenting consumer markets.
    • Explain how companies identify attractive market segments and choose a target marketing strategy.
    • Discuss how companies position their products for maximum competitive advantage in the marketplace.

Steps in Market Segmentation, Targeting, and Positioning

  • Create Value for Targeted Customers:
    • Segmentation: Divide the total market into smaller segments.
    • Targeting: Select the segment(s) to enter.
    • Differentiation: Differentiate the market offering to create superior customer value.
    • Positioning: Position the market offering in the minds of target customers.

Understanding Market Segmentation

  • Definition: Market segmentation is the process of dividing a heterogeneous market into several segments, each tending to be more homogeneous in significant aspects.
  • Need for Segmentation:
    • Differences in consumer preference patterns allow firms with limited resources to effectively compete by focusing on fewer segments.

Bases for Market Segmentation

  • Gender Segmentation: Dividing the market into males and females.
  • Age Group Segmentation: Dividing it into young, mature, and old.
  • Full Market Segmentation: Determine how many segments are created by combining different categories (e.g., gender and age).

Target Marketing

  • Definition: Target marketing involves identifying varied consumer preferences and offering different brands to capture business successfully.

Effective Targeting Requires

  • Identify and profile distinct groups of buyers who differ in needs and preferences.
  • Select one or more market segments to enter.
  • Establish and communicate the distinctive benefits of the market offering.

Segmenting Consumer Markets

  • Ways to Segment:
    • Geographic Segmentation: By country, region, city size, population density, and climate.
    • Example: Coca-Cola developed a twist-cap can for Japanese teenagers based on regional preferences.
    • Demographic Segmentation: Based on age, gender, family size, income, occupation, education, religion, race, and nationality.
    • Psychographic Segmentation: Divides buyers by personality, lifestyle, and social class.
    • Behavioral Segmentation: Based on occasions, benefits, user status, usage rate, loyalty status, readiness stage, and product attitude.

Requirements for Effective Segmentation

  • Measurable: Segment size and purchasing power can be quantified.
  • Substantial: Segments should be large or profitable enough to target.
  • Accessible: Segments must be reachable and serviceable.
  • Actionable: Programs must be developed to attract and serve the segments.
  • Differentiable: Segments must respond differently to different marketing strategies.

Evaluating Market Segments

  1. Segment Size and Growth: Analyze current sales, growth rates, and profitability of segments.
  2. Segment Structural Attractiveness: Evaluate competitive dynamics within the segment.
  3. Company Objectives and Resources: Assess skills and resources needed to succeed within chosen segments.

Choosing a Targeting Strategy

  • Factors influencing strategy include company resources, product variability, product lifecycle, market variability, and competitor marketing.
    • Undifferentiated Marketing: Targets the whole market with one offer.
    • Differentiated Marketing: Targets multiple segments with separate offers for each.
    • Concentrated Marketing: Focus on a large share of one or a few segments.
    • Micromarketing: Tailors products to individual needs or local preferences.

Differentiation and Positioning

  • Value Proposition: The unique value a company offers to its target segments, defined by consumer perception.
  • Positioning for Competitive Advantage: How the product is viewed in relation to competitors. Marketers must create effective marketing mixes to support the desired positioning.

Possible Value Propositions

  1. More for More: Premium products or services at a higher price.
  2. More for Less: Higher quality at a comparably lower price.
  3. The Same for Less: Comparable quality at a lower price, appealing to budget-conscious consumers.
  4. Less for Much Less: Budget options that fulfill lower performance requirements.
  5. More for Less: This combination often presents the strongest competitive advantage.

Developing a Positioning Statement

  • Must encapsulate the company and brand’s positioning:
    • Example: "To busy, mobile people who need to always be in the loop, the iPad is a multi-touch screen wireless connectivity solution that provides the best way to experience the Web, email, photos, and videos with just the touch of a finger."

Communicating and Delivering the Chosen Position

  • Ensure the marketing mix maintains the intended position through consistent performance and communication.
    • Aspects: Product quality, price strategies, advertising, distribution channels, and promotion strategies must align with position.
    • Monitoring: Regularly adapt to consumer needs and competitive strategies.