MM271 Introduction to Marketing
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MM271 Introduction to Marketing. Topic 4 Identifying Market Segments & Targets. Learning Objectives. By the end of this lecture, you will know Explain what market segmentation is, when to use it, and the five steps involved in segmentation.
MM271 Introduction to Marketing
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MM271Introduction to Marketing Topic 4 Identifying Market Segments & Targets
Learning Objectives • By the end of this lecture, you will know • Explain what market segmentation is, when to use it, and the five steps involved in segmentation. • Recognize the different factors used to segment consumer markets • Develop a market-product grid to use in segmenting and targeting a market. • Understand how marketing managers position products in a market.
1. An Overview • Segmentation • aggregate prospective buyers into groups (segments) that: • have common needs; and • respond similarly to a marketing action of a firm • Targeting • Evaluate the attractiveness of various segments • Decide how many and which segments to enter • Positioning • Define a product so that consumers will perceive it to be different from other competing products
1. An Overview Choose the bases of segmentation & group buyers into segments Develop a market-product grid & estimate the size of market Assess the attractiveness of the segments Pick the right one!!
2. Segmentation 2.1 Segmentation Variables – Consumer Market GEOGRAPHIC PSYCHOGRAPHIC Region Density Community Lifestyle Personality DEMOGRAPHIC BEHAVIORAL Occasions Benefits User status Usage rate Awareness Age Family Gender Income Education Occupation
2. Segmentation 2.1 Segmentation Variables – Consumer Market • Geographic • For marketers operate in more than one geographic area • Easy to localize marketing mix activities • Some companies seek to find untapped geographic areas • E.g. countries, states, provinces, regions, cities, districts • Demographic • Most commonly used easy to observe & measure • Age: may not related to one’s need & buying power • Gender: used for clothing, cosmetics, toiletries, magazines; now spread to cars, deodorants, sports & financial services • Income: used for car, boat, clothing, financial service, travel
2. Segmentation 2.1 Segmentation Variables – Consumer Market • Psychographic • People in same demographic group may have very different psychographic characteristics • Lifestyle segmentation is gaining popularity as people are buying products to express their way of living • Personality: marketers are trying to associate products with their target market’s personality type • Behavioral • Based on consumer knowledge, attitudes, uses or responses to a product • Some believe behavioral variables are the best starting point for segmenting markets • Occasion: when does one learn about, buy, or use a product? • Benefit: the product attributes that are useful to consumers • User/usage: frequency & volume of purchase & use
2. Segmentation 2.2 Develop Market-Product Grid • Step 1 • Classify the company’s available product into different categories • E.g.: breakfast, lunch, snacks, dinner • Step 2 • Line up different market segment against the number of product categories • Step 3 • Estimate the market size in each cell (market-product combination) • In terms of sales revenue or number of customers • Could use crude “guest estimates” if formal marketing research has yet to be conducted
3. Targeting 3.1 Assessing the attractiveness of each segment • Market size • Expected growth • Company’s competitive position • Level of competition • Substitute products • Power of buyers • Powerful suppliers • Cost of reaching the segment • Compatibility with the company’s objectives & resources
3. Targeting 3.2 Targeting Strategies • Undifferentiated strategy • Differentiated strategy • Concentration • Single-segment concentration • Product specialization • Market specialization
3. Targeting 3.2 Targeting Strategy • Undifferentiated Strategy • 1 product fits all • ignore market segment differences • modern marketers have strong doubts about this strategy
Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Differentiated strategy • Different product offerings for different market segments • Hope to attain higher sales & market position in each one • Higher production & marketing costs
Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Concentrated strategy – Single segment • One product goes after one market segment • Hope to achieve strong market position in the segment for greater knowledge, know-how & reputation • Higher risks if the market of the particular segment suddenly turns negative
Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Concentrated strategy – Product Specialization
Product 1 Product 2 Product 3 Segment 1 Segment 2 Segment 3 3. Targeting 3.2 Targeting Strategy • Concentrated strategy – Market Specialization
3. Targeting 3.2 Targeting strategies • Factors of considerations: • Company resources • Limited resources • The degree of product variability • Standardized product • Product’s life-cycle stage • Early stages • Market variability • Similar tastes & preferences • Competitors’ marketing strategies • Be careful of using opposites
4. Positioning 4.1 Positioning for Competitive Advantage • Definition • Create meaningful differences that distinguish one from its competitors • Steps: • Identify possible competitive advantage • Choose the right competitive advantage • Communicate & deliver the chosen position
4. Positioning 4.2 Identify possible competitive advantage • Competitive advantage • An advantage over competitors gained by offering consumers superior value through: • Lower prices • More benefits that justify higher prices
4. Positioning 4.2 Identify possible competitive advantage • Ways for creating differentiation IMAGES CHANNELS SERVICES PERSONNEL ORGANIZATION/ HERITAGE PRODUCT USER/USAGE
4. Positioning 4.2 Identify possible competitive advantage • Criteria for selecting differentiation premise 1 I M P O R T A N T 2 S U P E R I O R 3 P R E E M P T I V E
4. Positioning 4.3 Select the right competitive advantage • Perceptions of consumers • Which attributes are important for a particular product? • How do the consumer judge the existing products according to the important attributes? • Perceptual map • Illustrate two important attributes of a product class • Display the relative position of different products or brands in the minds of consumers on the map • Identify the location in which the company wish to “position”
