Lecture # 8

CONSUMER SEGMENTATION

Ch # 7-Segmentation, Targeting & Positioning

Newport institute communication & economics Karachi

Market Segment

• A subgroup within the market who share certain relevant characteristics

• A group of customers with certain characteristics in common & whose needs can be met with a distinct marketing mix


Market segmentation - Definitions

• The analytical division of the market into discrete groups of customers that share common attributes.

• The identification of subsets of buyers within a market who share similarities, needs and who have similar buying processes.


3 basic questions

• Who is buying?

• What do they buy?

• When do they buy?


Steps to segmentation

MARKET SEGMENTATION

Identify bases for segmenting the market

TARGET

MARKETING

Develop measure of segment attractiveness

MARKET

POSITIONING

Develop positioning for target segments


Ways to segment

• Geographic: by geographical area

• Demographic: by population characteristics

• Psychographic: classification on the basis of psychological factors

• Behavioral: classifying by purchasing behavior


Ways to segmentGeographic

Region

Urban/Sub urban

Demographic

Age

Gender

Occupation

Socio-economic group

Psychographic

Life style

Personality

Social status

Behavioral

Rate of usage

Benefits sought

Loyalty status

Readiness to purchase


Choice of market segments

Unattractive segment

Average segment

Attractive segment

Absence of Competitive advantage

Strongly avoid

Avoid Possible

Avg. in terms of Competitive advantage

Avoid Possible Secondary target

Strong Competitive advantage

Possible Secondary target

Prime target


Firms engage in segmentation to…

• Develop different strategies for different parts of the market

• Increase sales & profit from each segment

• Identify marketing opportunities

• Dominate certain niche segments

• Reflect differences in customer tastes

• Prioritize on those segments most likely to provide a higher return

Evaluation of segments

• Evaluating market segments– segment size & growth– segment’s structural analysis

• competition within the segment

• existing or potential substitute products

• relative power of buyers / suppliers

– company’s objectives & resources• environment, social responsibility, if it is core business,

can employ skills & resources superior to those of competition


Segmentation strategies

• Undifferentiated: Ignore segments

• Concentrated or focused: Concentrate on a single segment (Small firms)

• Differentiated: Different marketing mix for each segment (Large firms)


Segmentation strategies

MarketFirm

Segment A

Segment B

Segment C

Segment D

Segment A

Segment B

Segment C

Segment D

Firm

Firm

Undifferentiated

Marketing

Differentiated

Marketing

Concentrated/Focused

Marketing


Undifferentiated Strategy

• Also known as market aggregation• Targets entire market with the same

marketing mix – segments ignored• Used when segments cannot be identified

or where aggregation proves more profitable than segmentation

• Ford’s Model T car were sold as the universal car – “any car as long as it is black”


Concentrated strategy

• Marketing effort directed at a single highly defined segment

• Niche marketing – Rolex watches• Used when one group is especially

attractive for the organization to target• A useful strategy for smaller firms – avoids

a head on collision with major players• Provides scope for competitive advantage

in a small niche in the market


Differentiation Strategy

• Multi segment approach

• Separate mix for each segment

• Expensive In terms of product & marketing cost

• Only possible for large firms


Continuum of targeting strategies

Undifferentiated Single marketing mix for all customers

Differentiated Different mix for each segment

Concentrated Targets single large segment

Niche Targets a single small segment

Customized Different mix for each customer


POSITIONING


Position in the market

• The location of a product or service alongside key competitors in the mind of consumers

• Refers to the place the product occupies in the consumer’s perceptual map of the market


Position and Positioning

• A product’s position ultimately depends on the attitudes of people in the target market

• Firms will seek to position their products to increase sales

• Either marketers accept the customer attitudes as they & tailor the product to fit those attitudes OR seek to change those attitudes

• Positioning indicates how a company wishes to compete in the market place


Positioning

• Arranging for a brand or product to occupy a clear and distinctive place in the minds of the target customers relative to competing products and brands


The role of positioning…

• To strengthen the power of messages directed at consumers

• To target a particular segment – RSTP

• To ensure that the product is differentiated in the minds of the consumer

• To decide on the ground on which to compete

• To analyze re-positioning possibilities


Porter’s generic strategies

• Cost leader: Compete by being the lowest cost producer

• Differentiation: Compete by offering something different & superior

• Focus: Become a niche player concentrating on small part of the market


Differentiation

• The basic principle is that you must either:- Differentiate your product- Be a provider of generic products to be sold at

the lowest prices


Perceptual map

• The visual representation of a brand within a specific market place showing its position relative to competitors

• Shows which and how products compete in consumers mind and suggests how a product can be positioned to maximize sales


A perceptual map for supermarkets

Full range

Limited range

Low price High price


Position map & NPD

• Two options for firms developing new products:- Develop a product to occupy identified gaps in

the market

OR- Develop “me-too” products which copy

existing rival

A position map will assist decision making


Other uses of Perceptual map

• To analyze strengths and weaknesses

• To reveal market segments

• To develop new strategies

• To reposition the product

• To decide on competitive position which the product to be distinguished from competitor offerings


Approaches to Positioning

• By attribute:- Associating the brand with a desirable

attribute

- E.g. Volvo cars associated with safety &

durability

• By price & quality:- Price level should be right to reflect quality

- E.g. Rolls Royce – High priced with quality


Approaches to Positioning

• With respect to application/use:- Kit Kat is positioned to link in with tea or

coffee break “Have a break – Have a Kit

Kat”

• By product user:

- E.g Ufone - “Everybody loves to Ufone”


Positioning strategies can be related to…

• Product attributes• Benefits offered• Price• Quality• Application• User categories• Specific usage

situations


Successful positioning strategy requires…

• Clarity

• Consistency

• Credibility

• Competitiveness


Mistakes in Positioning

• Under positioning: Consumers have limited perception of the brand & are unaware of the distinguishing features

• Over-positioning: Consumers believe that the brand in only active in very focused markets

• Confusion: Consumers are unclear how a brand is comparable with other brands


Re-positioning

• Changing the position of the product in the market

• It becomes necessary sometimes:

- To extend the product lifecycle

- To move into a new market segment

- Because of changes in society & in social

attitudes

- The brand evolves with time


Re-positioning

• Image re-position: No change in the product. Promotion is used to change the image of the product.

• Product re-positioning: Modification of the product

• Intangible re-positioning: Targeting a different market segment with the same product

• Tangible repositioning: Change in both product & target market


Re-positioning Example

• Johnson & Johnson Baby shampoo:

Originally aimed at infants. Re-positioned as a gentle, frequent use shampoo for the adults as well as babies.


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