MOS – Textbook Notes Chapter 6 – Segmentation and Targeting ...

MOS – Textbook Notes Chapter 6 – Segmentation and Targeting Market Segmentation  The essence of market segmentation, target markets, and product positioning is based on two important facts: o Consumers have diverse needs and a single product cannot satisfy everyone o Companies have finite amounts of money, and it needs to be spent efficiently and effectively on those consumers who are most likely to purchase the product  In the marketing world there are two main market segments: o The consumer market consists of goods, services, and the ideas that a person can purchase for their own personal use o The business market involves products that are purchased either to run a business or to be used as a component in another good or service  Market segmentation involves aggregating prospective buyers into groups that have common needs and respond similarly to marketing programs  Product differentiation is to position their products apart from the competition in the eyes of the consumer Forms of Market Segmentation  Mass Marketing o Mass marketing involves a product being marketed to the entire market with no differentiation at all  Ex: natural gas, propane  Segment Marketing o Most common form o Segment marketing involves designing different products and services to meet the needs of different target groups  Ex: General Mills and Kellogg’s o In the business-to-business market, the market is often segmented by the needs of key accounts  Niche Marketing o The type of market segmentation that allows a company to focus its efforts on a limited segment in the market is called niche marketing  Individualized Marketing o New technology has welcomed individualized marketing as a segmentation option for marketers  Involves customizing offers and, in some cases, products that fit individual needs o Internet ordering, flexible manufacturing, and marketing processes have made individualized market segments possible, tailoring goods or services to the tastes of individual customers

Steps in Market Segmentation The process of segmenting a market for both consumer and business-to-business market is divided into eight steps: 1. Review company objectives 2. Identify consumer/customer needs and common characteristics in the market 3. Cluster common consumer/customer variables to create meaningful market segments 4. Conduct a SWOT analysis on the segments to determine strengths, weaknesses, opportunities, and threats a. A SWOT analysis is a process by which a company can identify opportunities and whether it has the strength to compete in a segment that may already be well served by the competition 5. Identify the segment that best meets company objectives 6. Identify marketing programs and budget requirements needed for this segment 7. Create a sales forecast for this segment 8. Conduct a profit-and-loss financial analysis for this segment Target Market Profiles  Marketers need to have a clear understanding of what drives their consumers, what delights them, and what does not  Target market profiles are usually included in annual marketing plans and in strategic documents that relate to this specific product  Marketers define their target markets by looking at four main variables: o Geographics o Demographics o Psychographics o Behaviouristics Geographics  A geographic descriptor of a target market looks at where a target market lives using variables such as country, region, province, city size, and type of location such as urban, suburban, or rural Demographics  Demographics identifies people by age, gender, family life-cycle, income, occupation, education, ethnic background, and home ownership  Based on secondary research Psychographics  Psychographics involves understanding consumer attitudes to life, their personalities, general interests, opinions, and activities  Based on primary research

Behaviouristics  Behaviouristics looks at why consumers buy a product, the product benefit, how the product is used, and whether consumers are brand loyal in their purchase behaviour Product Positioning  Marketers position products in the market to appeal to certain target groups and to present a particular image relative to the competition  Product positioning refers to the image of the product you wan to establish in consumers’ minds relative to the competition  Marketers create positioning statements to clearly and simply outline the positioning of a product o These statements are used to crystallize the image for the marketers so that they can devise all the elements of the marketing mix to align with the product’s positioning o Included in an annual marketing plan and in relevant strategic documents o Positioning statements identify four elements:  Product name  The category in which the product competes  One or two main reasons that the target market buys the product  What sets the product apart from the competition Repositioning  Companies rarely change a product’s positioning but do so when long-term changes in consumer trends require a shifting of the product to more accurately meet consumer needs  Repositioning is often done with a revamping of the product and the various elements of the marketing mix Positioning Maps  Positioning maps, also known as perceptual maps, are visual representations of how products or product groups are positioned within a category to consumer/customers  Useful tools for marketers as they can reveal gaps in the market where consumers may be under-served, while also highlighting the competitive nature of the category o Identify opportunities to launch new product offerings in the market