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Marketing And Sales Operations
Segmentation
The act of dividing the market into specific groups of consumers/buyers who share common needs and who might require separate products and/or marketing mixes.
Market Segmentation
Identifying the most productive bases for dividing a
market, identifying the customers in different
segments and developing segment descriptions.
• Let us focus on the following questions:
1. How can a company identify the segments that make up a market?
2. What criteria can a company use to choose the most attractive target markets?
Target Marketing• Target marketing requires marketers to take
three major steps:– Identify and profile distinct groups of buyers
who differ in their needs and preferences (market segmentation).
– Select one or more market segments to enter (market targeting).
– For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).
Targeting
The process of evaluating the various segments in the market and selecting the most suitable segment(s) to go after.
Positioning
Using the elements of the marketing mix to establish
in the minds of consumers a particular image of your
product or service, in relation to those of your
competitors.
Marketing And Sales Operations
The Process Of Market Segmentation
Segmentation Consider the basis on which to segment the market
Look at the profile of people and how they break into groups Confirm that these groups are valid segments
Targeting Decide on a target strategy
Decide which segments should be targeted and why
PositioningUnderstand consumer perceptions Position products in the mind of the consumer Design an appropriate marketing mix to meet customer requirements
Marketing And Sales Operations
Market Segmentation and Competitive Positioning
Segments are
often formed
based upon
common customer
characteristics,
brand preferences,
and upon customer
attitudes.
Basis for segmenting consumer markets: Geographic; Demographic (social grading system);
Geo-demographic (ACORN); Behavioural;
Lifestyle (Psychographic);
Basis for segmenting business to business markets: Using the
Standard Industrial Classification (SIC); by the industry technology; by the size
of the organisation; by season purchasing trends; by geographical location; by
the type of product needed
Marketing And Sales Operations
Psychographic/Lifestyle Variables
Behavioural Variables
Demographic Variables Geographic Variables
Age, gender, race, ethnicity, income, education, occupation, family size, family life-cycle, religion, social class
Personality attributes, motives, lifestyles
Region, urban,suburban, rural, city size, county size, state size, market density, climate, terrain
Volume usage, end use, benefit expectations, brand loyalty, occasions price sensitivity
Variables For Segmenting Consumer Markets
Marketing And Sales Operations
Customer Size Product Use
Type of OrganisationGeographic Location
Variables For Segmenting Organisational Markets
Socio-Economic Grading SystemSocio-economic Status Characteristics of Occupation
A
B
C1
C2
D
E
Upper Middle Class
Supervisory/Clerical/Junior managerial/ professional
High Managerial/Professional
Intermediate Managerial/ administrative professional
Semi-skilled and Unskilled labour
Skilled manual labour/administrative
Casual workers, pensioners, unemployed
Grades
Middle Class
Lower Middle Class
Skilled Working Class
Working Class
Lowest Level of Subsistence
Income Range (Annual)
Above $4.0m
$2.4m - $4.0m
$1.3m - $2.3m
$0.7m - $1.2m
$0.4m - $0.6m
Below $0.4m
Geo-Demographic Segmentation
Marketing And Sales Operations
ACORN consumer targeting classification
19.8%
11.5%
7.6%
22.3%
13.7%
22.6%
2.4%
Category A Thriving
6. Affluent urbanites, town and city areas 7. Prosperous professionals, metropolitan areas 8. Better-off executives, inner-city areas
1. Wealthy achievers – suburban area 2. Affluent greys, rural communities 3. Prosperous pensioners4. Affluent executives 5. Well-off workers, family areas
11. New home-owners, mature communities 12. White-collar workers, better-off multi-ethnic areas
9. Comfortable middle-aged, mature home owning areas 10. Skilled workers, home owning
13. Older people, less prosperous areas 14. Council estate residents, better off homes 15. Council estate residents, high unemployment 16. Council estate residents, greatest hardship 17. People in multi-ethnic low-income areas
Category B Expanding
Category C Rising
Category D Settling
Category E Aspiring
Category F Striving
Unclassified
Table 10-1: Steps in Segmentation ProcessDescription
1. Needs-Based Segmentation
Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem.
2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable).
3. Segment Attractiveness
Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.
4. Segment Profitability Determine segment profitability.
5. Segment Positioning For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics.
See text for complete table
Marketing And Sales Operations
Corporate Positioning Strategies
1. Market Leaders - are extremely dominant and high profile, and possess significant market share within their industry. Pepsi and Coca-cola are good examples.
2. Market Challengers – fairly significant, cash rich and well resourced organisations who are aggressive in seeking to take market share away from other players. This makes them particularly difficult to compete with.
The development of a positioning strategy is essential not only for products and services, but also for the organisations which offer them.
Marketing And Sales Operations
Corporate Positioning Strategies...continued
3. Market Followers - are found second or third or even lower down the rankings in the marketplace. It is can sometimes prove more advantageous to be a market follower than a market leader.
Whatever the leader does, the follower duplicates.
4. Market Nichers - apply the previously discussed strategy of “focus”, to differentiate their product or service offerings so as to achieve competitive advantage in a particular segment of the market.
Nichers mostly move towards the high end of the market.
Table 11.1: Examples of Value PropositionsDemand States and Marketing Tasks
Company & Product
Target Customers Benefits Price Value Proposition
Perdue (chicken)
Quality-conscious consumers of chicken
Tenderness 10% premium
More tender golden chicken at a moderate premium price
Volvo
(station wagon)
Safety-conscious “upscale” families
Durability and safety
20% premium
The safest, most durable wagon in which your family can ride
Domino’s (pizza)
Convenience-minded pizza lovers
Delivery speed and good quality
15% premium
A good hot pizza, delivered to your door door within 30 minutes of ordering, at a moderate price
Developing and Communicating a Positioning Strategy
• Positioning According to Ries and Trout– Strengthen own current position– Grab an unoccupied position– De-position– Re-position– Product ladders
• Positioning According to Treacy and Wiersema– Value disciplines
• Product leader• Operationally excellent firm• Customer intimate firm
– Treacy and Wiersema propose that a business should follow four rules for success
1. Become best at one of the three value disciplines.
2. Achieve an adequate performance level in the other two disciplines.
3. Keep improving one’s superior position in the chosen discipline so as not to lose out to a competitor.
4. Keep becoming more adequate in the other two disciplines, because competitors keep raising customers’ expectations.
Developing and Communicating a Positioning Strategy
• Positioning: How many ideas to promote?• Unique selling proposition
– Four major positioning errors1. Underpositioning
2. Overpositioning
3. Confused positioning
4. Doubtful positioning
Developing and Communicating a Positioning Strategy