Chapter 7 The Segmentation-Targeting-Positioning Process Step 1 ...
Chapter 7
The Segmentation-Targeting-Positioning Process
Step 1: Establish Overall Strategy or Objectives - articulate the mission and the objectives of the company's marketing strategy clearly - must then be consistent with and derived from the firm's mission and objectives, as well as its current situation—SWOT Step 2: Segmentation Base - this step develops descriptions of the different segments, their needs, wants, and characteristics, which helps firms better understand the profile of the customers in each segment - with this they can distinguish the customer similarities within a segment and dissimilarities across segments - Marketers use various segmentation bases, including geographic, demographic, psychographic, and behavioural, or a combination
Geographic Segmentation - organizes customers into groups on the basis of where they live - could be grouped by country, region, areas within a region – province, city, neighbourhoods, area codes, or by climate - firms can provide the same basic goods or services to all segments even if they market globally or nationally; but, better marketers make adjustments to meet the needs of smaller geographic groups Demographic Segmentation - groups consumers according to easily measured, objective characteristics such as age, gender, income, education, race, occupation, religion, marital status, family size, family life cycle, and home ownership - most common means to define segments because they are easy to identify - not all firms can segment using demographics – eg activewear – all ages, incomes, etc wear it, even inactive people – stereotyping could lead to poor STP strategies - marketers may find it more advantageous to combine demographic segmentation with other segmentation bases Psychographic Segmentation - This segmentation base investigates into how consumers describe themselves; allows people to describe themselves by using those characteristics that help them choose how they occupy their time (behaviour) and what underlying psychological reasons determine those choices. - involves knowing and understanding three components: self-values, selfconcept, and lifestyles - Self Values: life goals, not just the goals one wants to accomplish in a day they refer to overriding desires that drive how a person lives his or her life; e.g. self-respect, self-fulfillment, or a sense of belonging - Self-Concept: The image a person has of himself or herself - Lifestyles: the way a person lives his or her life to achieve goals; eg lululemon built around a lifestyle - VALS: A psychographical tool offered by Strategic Business Insights that classifies consumers into eight segments: innovators, thinkers, believers, achievers, strivers, experiencers, makers, or survivors – most widely used psychographic system
- The upper segments have more resources and are more innovative; those on the bottom have fewer resources and are less innovative.
Behavioral Segmentation - Groups consumers based on the benefits they derive from products or services, their usage rate, their user status, and their loyalty. - Benefit segmentation: Groups consumers based on the benefits they derive from products or services; eg. Firefly Mobile: tweens get the benefit of a cool phone, and their parents enjoy the benefits of providing a cool product while
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still limiting cost and protecting their children; Hollywood: film producers know that people visit the theatre or rent films to get a variety of benefits and so they market them accordingly – laugh, warm and fuzzy etc Loyalty Segmentation: Strategy of investing in retention and loyalty initiatives to retain the firm's most profitable customers; eg loyalty cards – retail and transportation
Using Multiple Segmentation Methods - all segmentation methods are useful, each has its unique advantages and disadvantages - Because “birds of a feather flock together,” companies use a combination of geographic, demographic, and lifestyle characteristics, called geodemographic segmentation, to classify consumers – good for retail stores - PSYTE clusters: The grouping of all neighbourhoods in Canada into 60 different lifestyles clusters; the most popular tool for geodemographic segmentation
Step 3: Evaluate Segment Attractiveness - Is the segment identifiable, reachable, responsive, and substantial and profitable? Identifiable: - too much overlap between segments means that distinct marketing strategies aren't necessary to meet segment members' needs Reachable:
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Consumers must know the product or service exists, understand what it can do for them, and recognize how to buy it.
Responsive: - the segment must react similarly and positively to the firm's offering - eg if La Senza created a new line of formal dresses, although the formal dress wear segment meets all the other criteria for a successful segment, La Senza should not pursue it because the market probably will not be responsive to it. Substantial and Profitable: - If a market is too small or its buying power insignificant, it won't generate sufficient profits or be able to support the marketing mix activities - Segment profibility = (segment sizex s adoption % x purchase behavior x profit margin %) – fixed costs
Segment size = Number of people in the segment Segment adoption percentage = Percentage of customers in the segment who are likely to adopt the product/service Purchase behaviour = Purchase price × Number of times the customer would buy the product or service during a given time period Profit margin percentage = (Selling price − Variable costs) ÷ Selling price Fixed costs = Advertising expenditure, rent, utilities, insurance, administration, salaries
Step 4: Select Target Market - The key factor likely to affect this decision is the marketer's ability to pursue such an opportunity or target segment -firm is likely to assess both the attractiveness of the opportunity (opportunities and threats based on the SWOT analysis Undifferentiated Segmentation Strategy, or Mass Marketing - A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups - Not common today but can sometimes be effective for basic items like salt, sugar, greeting cards - Even gas companies have switched to differentiated strategies Differentiated Segmentation Strategy - A strategy through which a firm targets several market segments with a different offering for each - Eg La Senza, for instance, employs three store formats—La Senza, La Senza Girl, and La Senza Express—to appeal to three different segments respectively - More expensive/time consuming
-
Helps firms obtain a bigger share of the market and increase the market for their products overall
Concentrated (Niche) Segmentation Strategy - A marketing strategy of selecting a single, primary target market and focusing all energies on providing a product to fit that market's needs. - Eg Cora’s focuses on serving breakfast and brunch only; restaurants are open only until 3 p.m Micromarketing - An extreme form of segmentation that tailors a product or service to suit an individual customer's wants or needs; also called one-to-one marketing - Eg Build a bear - Mass Customization: The practice of interacting on a one-to-one basis with many people to create custom-made products or services; providing one-toone marketing to the masses. - This was not very possible before the Internet - Eg Nike “make your own shoe” Step 5: Identify and Develop Positioning Strategy - positioning: The mental picture that people have about a company and its products or services relative to competitors - positioning is what determines consumers' preference for a company's products or brands - this mental picture is formed from multiple sources such as friends, family, relatives, reference groups, published articles in magazines and newspapers, reports and stories from radio, TV, and the Internet, as well as the customer's own experience. - consumers form their own ideas and feelings about a product or brand - one of the most important but difficult and least understood aspects of marketing strategy development - Positioning strategies are realized by communicating particular messages (i.e., the positioning statement) in persuasive communications through different media - Usually, firms position their products and services according to value, product attributes, benefits and symbolism, and against competition - Value: a popular positioning method because the relationship of price to quality is among the most important considerations for consumers when they make a purchase decision - Product Attributes: focuses on those attributes that are most important to the target market; tend to focus on product leadership, emphasizing dimensions such as innovation, quality, performance, design, and reliability. - Benefits and Symbolism: emphasizes the benefits of the brand as well as the psychological meaning of the brand to consumers; For example, JACOB is
about comfort in a casual, modern style, and JACOB lingerie is about femininity.. -
Competition: Firms can choose to position their products or services headto-head against a specific competitor or an entire product/service classification on similar attributes within the target market; Head-to-head positioning often leads to price wars such as the “cola wars” and “airline wars,” which are good for consumers but bad for businesses.
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Market Leadership: Instead of positioning head-to-head, companies, especially market leaders, may emphasize their leadership position within their industry
Positioning by Using Perceptual Mapping - Displays, in two or more dimensions, the position of products or brands in the consumer's mind Five steps: Determine consumers' perceptions and evaluations of the product or service in relation to competitors' Identify competitors' positions Determine consumer preferences. Select the position. Monitor the positioning strategy Repositioning Growth Strategies and Reference Groups!! Most got wrong LOOK AT EX PART ABC
The Segmentation-Targeting-Positioning Process
Step 1: Establish Overall Strategy or Objectives - articulate the mission and the objectives of the company's marketing strategy clearly - must then be consistent with and derived from the firm's mission and objectives, as well as its current situation—SWOT Step 2: Segmentation Base - this step develops descriptions of the different segments, their needs, wants, and characteristics, which helps firms better understand the profile of the customers in each segment - with this they can distinguish the customer similarities within a segment and dissimilarities across segments - Marketers use various segmentation bases, including geographic, demographic, psychographic, and behavioural, or a combination
Geographic Segmentation - organizes customers into groups on the basis of where they live - could be grouped by country, region, areas within a region – province, city, neighbourhoods, area codes, or by climate - firms can provide the same basic goods or services to all segments even if they market globally or nationally; but, better marketers make adjustments to meet the needs of smaller geographic groups Demographic Segmentation - groups consumers according to easily measured, objective characteristics such as age, gender, income, education, race, occupation, religion, marital status, family size, family life cycle, and home ownership - most common means to define segments because they are easy to identify - not all firms can segment using demographics – eg activewear – all ages, incomes, etc wear it, even inactive people – stereotyping could lead to poor STP strategies - marketers may find it more advantageous to combine demographic segmentation with other segmentation bases Psychographic Segmentation - This segmentation base investigates into how consumers describe themselves; allows people to describe themselves by using those characteristics that help them choose how they occupy their time (behaviour) and what underlying psychological reasons determine those choices. - involves knowing and understanding three components: self-values, selfconcept, and lifestyles - Self Values: life goals, not just the goals one wants to accomplish in a day they refer to overriding desires that drive how a person lives his or her life; e.g. self-respect, self-fulfillment, or a sense of belonging - Self-Concept: The image a person has of himself or herself - Lifestyles: the way a person lives his or her life to achieve goals; eg lululemon built around a lifestyle - VALS: A psychographical tool offered by Strategic Business Insights that classifies consumers into eight segments: innovators, thinkers, believers, achievers, strivers, experiencers, makers, or survivors – most widely used psychographic system
- The upper segments have more resources and are more innovative; those on the bottom have fewer resources and are less innovative.
Behavioral Segmentation - Groups consumers based on the benefits they derive from products or services, their usage rate, their user status, and their loyalty. - Benefit segmentation: Groups consumers based on the benefits they derive from products or services; eg. Firefly Mobile: tweens get the benefit of a cool phone, and their parents enjoy the benefits of providing a cool product while
-
still limiting cost and protecting their children; Hollywood: film producers know that people visit the theatre or rent films to get a variety of benefits and so they market them accordingly – laugh, warm and fuzzy etc Loyalty Segmentation: Strategy of investing in retention and loyalty initiatives to retain the firm's most profitable customers; eg loyalty cards – retail and transportation
Using Multiple Segmentation Methods - all segmentation methods are useful, each has its unique advantages and disadvantages - Because “birds of a feather flock together,” companies use a combination of geographic, demographic, and lifestyle characteristics, called geodemographic segmentation, to classify consumers – good for retail stores - PSYTE clusters: The grouping of all neighbourhoods in Canada into 60 different lifestyles clusters; the most popular tool for geodemographic segmentation
Step 3: Evaluate Segment Attractiveness - Is the segment identifiable, reachable, responsive, and substantial and profitable? Identifiable: - too much overlap between segments means that distinct marketing strategies aren't necessary to meet segment members' needs Reachable:
-
Consumers must know the product or service exists, understand what it can do for them, and recognize how to buy it.
Responsive: - the segment must react similarly and positively to the firm's offering - eg if La Senza created a new line of formal dresses, although the formal dress wear segment meets all the other criteria for a successful segment, La Senza should not pursue it because the market probably will not be responsive to it. Substantial and Profitable: - If a market is too small or its buying power insignificant, it won't generate sufficient profits or be able to support the marketing mix activities - Segment profibility = (segment sizex s adoption % x purchase behavior x profit margin %) – fixed costs
Segment size = Number of people in the segment Segment adoption percentage = Percentage of customers in the segment who are likely to adopt the product/service Purchase behaviour = Purchase price × Number of times the customer would buy the product or service during a given time period Profit margin percentage = (Selling price − Variable costs) ÷ Selling price Fixed costs = Advertising expenditure, rent, utilities, insurance, administration, salaries
Step 4: Select Target Market - The key factor likely to affect this decision is the marketer's ability to pursue such an opportunity or target segment -firm is likely to assess both the attractiveness of the opportunity (opportunities and threats based on the SWOT analysis Undifferentiated Segmentation Strategy, or Mass Marketing - A marketing strategy a firm can use if the product or service is perceived to provide the same benefits to everyone, with no need to develop separate strategies for different groups - Not common today but can sometimes be effective for basic items like salt, sugar, greeting cards - Even gas companies have switched to differentiated strategies Differentiated Segmentation Strategy - A strategy through which a firm targets several market segments with a different offering for each - Eg La Senza, for instance, employs three store formats—La Senza, La Senza Girl, and La Senza Express—to appeal to three different segments respectively - More expensive/time consuming
-
Helps firms obtain a bigger share of the market and increase the market for their products overall
Concentrated (Niche) Segmentation Strategy - A marketing strategy of selecting a single, primary target market and focusing all energies on providing a product to fit that market's needs. - Eg Cora’s focuses on serving breakfast and brunch only; restaurants are open only until 3 p.m Micromarketing - An extreme form of segmentation that tailors a product or service to suit an individual customer's wants or needs; also called one-to-one marketing - Eg Build a bear - Mass Customization: The practice of interacting on a one-to-one basis with many people to create custom-made products or services; providing one-toone marketing to the masses. - This was not very possible before the Internet - Eg Nike “make your own shoe” Step 5: Identify and Develop Positioning Strategy - positioning: The mental picture that people have about a company and its products or services relative to competitors - positioning is what determines consumers' preference for a company's products or brands - this mental picture is formed from multiple sources such as friends, family, relatives, reference groups, published articles in magazines and newspapers, reports and stories from radio, TV, and the Internet, as well as the customer's own experience. - consumers form their own ideas and feelings about a product or brand - one of the most important but difficult and least understood aspects of marketing strategy development - Positioning strategies are realized by communicating particular messages (i.e., the positioning statement) in persuasive communications through different media - Usually, firms position their products and services according to value, product attributes, benefits and symbolism, and against competition - Value: a popular positioning method because the relationship of price to quality is among the most important considerations for consumers when they make a purchase decision - Product Attributes: focuses on those attributes that are most important to the target market; tend to focus on product leadership, emphasizing dimensions such as innovation, quality, performance, design, and reliability. - Benefits and Symbolism: emphasizes the benefits of the brand as well as the psychological meaning of the brand to consumers; For example, JACOB is
about comfort in a casual, modern style, and JACOB lingerie is about femininity.. -
Competition: Firms can choose to position their products or services headto-head against a specific competitor or an entire product/service classification on similar attributes within the target market; Head-to-head positioning often leads to price wars such as the “cola wars” and “airline wars,” which are good for consumers but bad for businesses.
-
Market Leadership: Instead of positioning head-to-head, companies, especially market leaders, may emphasize their leadership position within their industry
Positioning by Using Perceptual Mapping - Displays, in two or more dimensions, the position of products or brands in the consumer's mind Five steps: Determine consumers' perceptions and evaluations of the product or service in relation to competitors' Identify competitors' positions Determine consumer preferences. Select the position. Monitor the positioning strategy Repositioning Growth Strategies and Reference Groups!! Most got wrong LOOK AT EX PART ABC
