MARK4210, 2014 Spring, L1/L2

[Class #5]

Segmentation, Targeting,

Positioning

MARK4210: Strategic Marketing

2014 Spring, Section L1/L2

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Overview: Segmentation, Targeting

& Positioning

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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

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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

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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

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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

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Example: Coca Cola Segmentation

(USA)

Potential Market

“Regular” market “Weight-

conscious”

Women Men

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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

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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)

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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

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Targeting: Selecting Market

Segments

Segment Potential

• Sales, market share, profitability and growth rates

Segment Structural Attractiveness

• Competition, substitute products,

• Buyers & supplier power, new entrants (Porter’s Five

Forces)

Company Objectives and Resources

• Core competencies

• “What business do we want to be in?”

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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

…

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Target Market Selection: Product

(P) x Market (M) Matrices

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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

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Undifferentiated (Mass) Marketing

Ignores segmentation

opportunities

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Differentiated (Segmented)

Marketing

Targets several segments and designs separate

offers for each

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Niche Marketing

Targets one or a couple small segments

Niches have very specialized interests

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Micromarketing

Tailoring products and marketing programs to suit

the tastes of specific individuals and/or localities

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Positioning

Defined as marketer’s 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

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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

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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

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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 POP’s, 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

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Positioning Tool: Positioning/

Perceptual Map

Plotting consumer’s perception of brand, often based on

two important dimensions/ bases (e.g., quality - price)

Denim Jeans Market (Singapore)

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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

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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 Blair’s 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 JB’s competitive position in each segment? Consider the following

factors: Jones Blair’s current market share in each segment (need to calculate), the

fit between each segment’s need and the company’s 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.