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  • 1. MARK4210, 2014 Spring, L1/L2 [Class #5] Segmentation, Targeting, Positioning MARK4210: Strategic Marketing 2014 Spring, Section L1/L2

2. 2 MARK4210, 2014 Spring, L1/L2 Overview: Segmentation, Targeting & Positioning 3. 3 MARK4210, 2014 Spring, L1/L2 Market Segmentation Dividing a heterogeneous market into groups of (potential) customers (i.e., market segments) distinct & similar characteristics, behaviors, or needs reacts differently to specific marketing strategies Source: Market Segmentation, Target Market Selection, and Positioning, Module Note, Harvard Business School, April 17, 2006 4. 4 MARK4210, 2014 Spring, L1/L2 Market Segmentation Why? Firms can serve segments more efficiently and effectively with products that match segment needs Identify groups that can be more effectively targeted with specific marketing efforts Minimizes guessing in formulating marketing mix strategy Leads to more effective implementation of marketing mix Provides basis for long range planning (e.g., market evolution, product development) Source: A Note of Consumer Market Segmentation, Harvard Business School, October 1, 1978 5. 5 MARK4210, 2014 Spring, L1/L2 Typical Segmentation Variables Based on consumers market history Product usage Product benefit Decision process Based on consumer characteristics Geography Demographic Psychographic General Lifestyle No single best way to segment a market, often need to combine variables and identify smaller, better-defined target groups Source: A Note of Consumer Market Segmentation, Harvard Business School, October 1, 1978 6. 6 MARK4210, 2014 Spring, L1/L2 Criteria for Selecting Segmentation Variables Source: Adapted from A Note of Consumer Market Segmentation, Harvard Business School, October 1, 1978 Differentiable internally homogenous (similar characteristics/ behavior), different from other groups Identifiable individuals can be efficiently assigned based on meaningful & measurable characteristics Substantial has effective demand group is large enough with income & purchase ability Accessible can be reached by promotional efforts and distribution channels Stable segment characteristics & members do not change in the short term 7. 7 MARK4210, 2014 Spring, L1/L2 Example: Coca Cola Segmentation (USA) Potential Market Regular market Weight- conscious Women Men 8. 8 MARK4210, 2014 Spring, L1/L2 Example: Cosmetics Market Segmentation Potential Market Male Female 60+ y.o.< 25 y.o. 25-39 y.o. 40-59 y.o. Skin Repair Wrinkle removal Glowing skin Social status 9. 9 MARK4210, 2014 Spring, L1/L2 Example: Hotel Segmentation Segment by Ave. Rates Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Marriott Group (USA) Hilton World- wide (USA) Accor Group (France) 10. 10 MARK4210, 2014 Spring, L1/L2 Steps in Segmentation Steps Some Guide Questions Define purpose & scope What are the marketing objectives (e.g., increase share, increase demand, combat competition)? Looking for new segments, or to better satisfy existing ones? Use existing data or new research? Analyze total market data Characteristics of the total market (e.g., size, structure)? Differences between users/non-users of the product class? Factors that distinguish users, non-users, users of competitors? Current competitive position (e.g., leader, niche)? Develop segment profiles What factor differentiates groups of consumers most clearly? Are profiles of each segment internally consistent? Evaluate segmentation Differentiable? Identifiable? Substantial? Accessible? Stable? Major similarities and differences among segments? Should number of segments be reduced or increased? How sensitive is the segmentation to the competitive environment, market growth? Source: A Note of Consumer Market Segmentation, Harvard Business School, October 1, 1978 11. 11 MARK4210, 2014 Spring, L1/L2 Targeting: Selecting Market Segments Segment Potential Sales, market share, profitability and growth rates Segment Structural Attractiveness Competition, substitute products, Buyers & supplier power, new entrants (Porters Five Forces) Company Objectives and Resources Core competencies What business do we want to be in? 12. 12 MARK4210, 2014 Spring, L1/L2 Selecting Market Segments: Evaluation Framework Segment A Segment B Segment C Segment Potential Market Size $$$$ $$$ $$ Market Growth -% +/-% +% Product Market Share %%%% %%% % Product Profitability $ $$$ $$$$ Segment Structural Attractiveness Competition High Medium Low Company Objectives & Resources Vision Fit Low Medium High Competency Fit High Medium Low 13. 13 MARK4210, 2014 Spring, L1/L2 Target Market Selection: Product (P) x Market (M) Matrices 14. 14 MARK4210, 2014 Spring, L1/L2 Strategies for Reaching Target Markets Range of potential target market Relevant strategies Full Market Coverage Multiple Segments Single Segments Individuals as Segments Source: Marketing Management, Kotler & Keller, Pearson, 2012 Mass Market Customization 15. 15 MARK4210, 2014 Spring, L1/L2 Undifferentiated (Mass) Marketing Ignores segmentation opportunities 16. 16 MARK4210, 2014 Spring, L1/L2 Differentiated (Segmented) Marketing Targets several segments and designs separate offers for each 17. 17 MARK4210, 2014 Spring, L1/L2 Niche Marketing Targets one or a couple small segments Niches have very specialized interests 18. 18 MARK4210, 2014 Spring, L1/L2 Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and/or localities 19. 19 MARK4210, 2014 Spring, L1/L2 Positioning Defined as marketers effort to identify a unique selling proposition for the product Arranging the product to occupy a clear, distinctive and attractive position relative to competition in the minds of target consumers Source: Market Segmentation, Target Market Selection, and Positioning, Module Note, Harvard Business School, April 17, 2006 20. 20 MARK4210, 2014 Spring, L1/L2 The Positioning Statement Common form: [The product/brand] is [single most important claim / product benefit or differentiation] among all [product category / competitive frame] in the [target market] because [single most important support / reason to believe] Primarily directed to potential customers Guides development of the marketing plan Source: Adapted from Market Segmentation, Target Market Selection, and Positioning, Module Note, Harvard Business School, April 17, 2006 21. 21 MARK4210, 2014 Spring, L1/L2 Positioning Statement: Key Characteristics A good positioning statement addresses: Who are the customers (target market)? What is the set of needs/benefit that the product fulfills? Why is the product the best option to satisfy those needs? Answers should be based on thorough understanding of customers, the competitive environment, the company itself, and conditions of the marketplace Source: Market Segmentation, Target Market Selection, and Positioning, Module Note, Harvard Business School, April 17, 2006 22. 22 MARK4210, 2014 Spring, L1/L2 Positioning: Key Considerations Competitive frame of reference Defining the target market and competition (category membership) Points of Difference (PDP) Differentiation Attributes or benefits consumers strongly associate positively with a brand, and believe they cannot find with a competitive brand Points of Parity (POP) Associations by consumers that are shared with other brands May not be reason to choose a brand, but absence can be reason to drop a brand Important to nullify competition by matching POPs, e.g., late market entrants try to make competitor's POD into a POP for the category, and then introduce a new POD to gain leadership Positioning may change over time 23. 23 MARK4210, 2014 Spring, L1/L2 Positioning Tool: Positioning/ Perceptual Map Plotting consumers perception of brand, often based on two important dimensions/ bases (e.g., quality - price) Denim Jeans Market (Singapore) 24. 24 MARK4210, 2014 Spring, L1/L2 Positioning: Role of Brands Positioning and branding are inextricably linked Brands are introduced to customers vocabulary to make product differentiation concrete Brands can be viewed as promises or pledges about the attributes (and thus positioning) of the product Source: Market Segmentation, Target Market Selection, and Positioning, Module Note, Harvard Business School, April 17, 2006 Registering brands (via Patent/Trademark office) affords legal protection against misuse of the brand name 25. 25 MARK4210, 2014 Spring, L1/L2 Jones-Blair Case Key Questions for Discussion How would you characterize the architectural paint coatings industry? How would you characterize the market area that Jones Blair serves? How should Jones Blairs market area be segmented? Which segment(s) should Jones Blair pursue? Why? First, how attractive is each segment to JB? Consider the following factors: size of each segment (need to calculate), characteristics of each segment, future growth Second, what is JBs competitive position in each segment? Consider the following factors: Jones Blairs current market share in each segment (need to calculate), the fit between each segments need and the companys capabilities Among the four different plans proposed by VP of Advertising, VP of Operations, VP of sales, VP of finance, what strategy should Jones Blair adopt? Apart from qualitative assessment, you also need to make a quantitative assessment of the various options (e.g., break-even). NOTE: It would be helpful for you to write down notes and calculations and bring them to class for discussion.

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