Market Planning-UNIT 4.2

1. Market Planning-UNIT 4.2 Market segmentation Targeting Positioning

2. Learning outcomes On completion of this lesson you should be able to: Demonstrate an understanding of usefulness of market segmentation and consumer profiles. Identify possible target markets. Apply an appropriate marketing mix to the target market (s) Construct a position map from given information. Develop and evaluate strategies designed to change customer perceptions.

3. Your Reading Focus Hoang,Paul ,Business &Management,Unit 4.2 Hall, Jones, Raffo, Business Studies 3rd Edition, Units 6 & 7. Stimpson, AS and A Level Business Studies, Chapter 1. Jewell, An Integrated Approach to Business Studies 4th Edition, Chapter 1. Barratt and Mottershead, AS and A Level Business Studies, Unit 3.

4. Introduction Segmentation is the term given to the grouping of customers with similar needs by a number of different variables. Once this has been done, segments can be targeted by a number of targeting strategies. The stage that then follows is known as positioning which is the place that products or services occupy in the market place in relation to the completion,as perceived by the target market.

5. What is Market Segmentation ? A market segment is a sub section of a market A market segment is a group of consumers who share similar characteristics.

6. What ways can a business segment it�s market? Gender (e.g. clothes) Age (e.g. magazines) Income / Class (e.g. cars) Location (e.g. newspapers) Life style (e.g. holidays) Ethnicity ( e.g. food) Education (e.g. books)

7. Reasons for Segmenting the market There are several important reasons why businesses should attempt to segment their markets carefully. These are summarized below Better matching of customer needs Enhanced profits for business Better opportunities for growth Retain more customers Target marketing communications Gain share of the market segment

8. Are the characteristics of customers and consumers in different markets, such as their age,gender,income and purchasing habits. Consumer profiles

9. Segmentation by demographics Demographic segmentation consists of dividing the market into groups based on variables such as Age Life-cycle stage Gender Income and Social class Marital status Lifestyle Religion

10. Segmentation by geographic factors Geographic location of customers can have implications for segmention. Location (eg-Singapore &Malaysia are multicultural &most businesses cater for the three main cultures-Chinese,Singaporean & Indian) Climate-typical weather in an area can have a large impact on business activity.Hence,many businesses are likely to adjust the products they sell in different parts of the world.

11. Segmentation by psychographic factors Psychographic factors are those that consider the emotions and lifestyle of customers, such as their habits ,hobbies, interests and values. Status Values Culture Hobbies and interests.

12. Advantages of segmentation greater knowledge of consumer profile/needs greater economies scale more specialist, more effective advertising more able to spot market �gaps� and �niche� markets greater profits

13. Drawbacks of Segmentation Firms may end up concentrating on a small segment � this increases risk �all eggs in 1 basket!� Segments can be small, therefore competition can be fierce More vulnerable to changing attitudes

14. Conclusion The underlying principle of market segmentation is that the product and services needs of customers differ.Market segmentation involves the groupings of customers together with the aim of better satisfying their needs whilst maintaining economies of scale. It is not always possible for a business to effectively carry out market segmentation.Marketeres often use the acronym DAMAS as a set of criteria for ensuring successful segmentation. Differentiation-segments must be unique and respond to the different marketing mixes of the business. Actionable-businesses must be able to provide suitable products to cater for each segment. Measurable-the size and purchasing power of each segment must be quantifiable. Accessible-business must be able to reach customers in a cost-effective way. Substantial-each market segment must be sufficiently large in order to generate profits.

15. Hoang,Paul,Business and Management,1st edition,IBID press,2007 Dave Hall, Rob Jones, Carlos Raffo, Business Studies, 3rd Edition, Causeway Press Ltd, 2005. Stimpson Peter, AS and A Level Business Studies, Cambridge University Press, 2000. Barratt Michael, Mottershead Michael, AS and A Level Business Studies, Pearson Education Ltd, 2000. www.bized.ac.uk www.tutor2u.net. Bibliography

17. Segmentation, Targeting, and Positioning�

18. Introduction McDonald�s has a great reputation for fast, consistent quality, family friendly food, it would be difficult to convince consumers that McDonald�s now offers gourmet food.� Thus, McD�s would probably be better off targeting families in search of consistent quality food in nice, clean restaurants.

19. Targeting Targeting is the next stage in marketing planning. Targeting refers to the market segments that a business wishes to sell to. There are three broad targeting strategies that a business can use. Niche marketing /concentration marketing Undifferentiated marketing Differentiated marketing

20. Niche/concentration marketing This targets a specific and well-defined market segment. In the concentrated strategy, one firm chooses to focus on one of several segments that exist while leaving other segments to competitors.� For example, Southwest Airlines focuses on price sensitive consumers who will forego meals and assigned seating for low prices.� Examples-Louis Vuitton handbags, Armani suits, cartier watches,ferrari cars

21. Advantages of niche marketing Better marketing focus since a specific market segment is being targeted. Less competition as businesses can charge higher prices for their exclusive products. Firms become highly specialised.

22. Are small and limits the number of customers in the market. Few opportunities to exploit economies of scale. Threat of larger firms entering the market Disadvantages of niche marketing

23. Undifferentiated/mass marketing This is startegy that ignores targeting individual market segments. In the undifferentiated strategy, all consumers are treated as the same, with firms not making any specific efforts to satisfy particular groups.� This may work when the product is a standard one where one competitor really can�t offer much that another one can�t.� Examples-Coca-cola,Nokia ,Nike, Apple

24. Advantages of undifferentiated marketing Huge potential of economies of scale. No need to tailor different marketing mixes for different segments. Can establish a bigger customer base in order to earn more profits.

25. Disadvantages of undifferentiated marketing Not suitable for all businesses because there are high entry barriers for mass production. Competition can become fierce. Lack of focus as specific customers are not being directly targeted.

26. Differentiated marketing This strategy devises appropriate strategies for each market segment. In contrast, most airlines follow the differentiated strategy:� They offer high priced tickets to those who are inflexible in that they cannot tell in advance when they need to fly and find it impractical to stay over a Saturday.� These travelers�usually business travelers�pay high fares but can only fill the planes up partially.� The same airlines then sell some of the remaining seats to more price sensitive customers who can buy two weeks in advance and stay over.

27. Customers can enjoy a more satisfying experience. Risks are spread out by focusing on several market segments. Examples-Maruti suzuki Advantages of differentiated marketing

28. Is costly, only large companies have the financial resources to target all segments. Marketing economies of scale cannot be fully exploited. Excessive differentiation can drain a firm�s resources and confuse customers. Disadvantages of differentiated marketing

29. Positioning Positioning is a process that focuses on conveying product value to buyers, resulting in a family of documents which drive all outbound communications Yet in recent years, it seems as if positioning has �devolved� into a document of vague superlatives that convey nothing as they attempt to trick the customer into buying the product. The best positioning clearly states how the product will solve specific customer problems.

30. Positioning Positioning can be defined as follows: Positioning is how a product appears in relation to other products in the market

31. Market Positioning Market Positioning is an analytical tool that ranks different products, services or firms in relation to others in the market according to the views of the general public. There are three stages to positioning Identify-the competitiveness of the product. Decide-on which aspects of these strengths should be marketed. Implement-the desired positioning by using an appropriate marketing mix.

32. Unique selling point(USP) USP is any aspect of a product that makes it stand out from those offered by customers. The USP explains why customers buy the product over rival brands, for example, its appealing packaging. A USP can be a major source of competitive advantage and therefore firms will want to emphasize their products USP in order to attract customers.

33. Perceptual map Brands can be positioned against competing brands on a perceptual map. A perceptual map defines the market in terms of the way buyers perceive key characteristics of competing products. It is also defined as a visual tool which shows the customers perception of a product or brand in relation to others in the market.

34. The basic perceptual map that buyers use maps products in terms of their price and quality, as illustrated below:

35. Two dimensional diagram The two dimensional diagram plots customer perceptions using variables such as price and quality. Premium brands-are products of high quality and high price Example-Lexus,BMW,Mercedes Benz Economy brands-are products that are of low quality but appropriately priced. Example-Foodworld sugar,

36. Continued Bargain brands-are those that are of high quality but with low prices. Example-Reebok Factory outlet Cowboy brands-are products that are of poor quality but highly priced.

37. Use of Position maps Allows business to identify any gaps in its product portfolio. Can be used for targeting strategies Can also inform businesses of a need for reposition their products.

38. This unit has used the term �tactics� and �strategy "many times. Marketing tactics (short term plans)and marketing strategies(medium to long term plans) are used in order to achieve the marketing objectives of an organization. Development of marketing strategies and tactics

39. Bibiliography Hoang,Paul,Business and Management,1st edition,IBID press,2007 Dave Hall, Rob Jones, Carlos Raffo, Business Studies, 3rd Edition, Causeway Press Ltd, 2005. Stimpson Peter, AS and A Level Business Studies, Cambridge University Press, 2000. Barratt Michael, Mottershead Michael, AS and A Level Business Studies, Pearson Education Ltd, 2000. www.bized.ac.uk www.tutor2u.net.