Segmenting and targeting markets Module 3 Chapter 4
Lecture Overview • what is market segmentation? • why do marketing organisations segment the market for their product? • market segmentation process • segmenting consumer markets • positioning • segmenting business markets
Milk?? • what type of milk do you drink? • do you drink more than one type? • why do you drink the type/(s) of milk that you do?
The milk story… • Once upon a time ………. • there was full-fat cream milk that was sold in one pint glass milk bottles with silver foil tops, one inch of cream sat on the top • the milkman delivered the fresh milk to the door each morning and collected the empty bottles • but kiddies thought it was yucky and would not drink it, so they developed flavoured milk • but flavoured milk and full cream milk was considered to be fattening, so many women would not drink it, so they developed low fat milk
Milk story cont….. • now there is a milk to meet the needs of just about everyone • cream top/froth top • extra creamy • lactose free • high calcium • goats milk • check out • so everybody drank milk and lived happily every after
What is market segmentation? • process of dividing a market into meaningful, relatively similar and identifiable segments or groups (Summers et al. 2005, p.111). • market segment • a sub-group of people or organisations that share one or more characteristics that cause them to have similar product needs (Summers et al. 2005, p.111).
Why do firms segment the market? • people have diverse needs, wants, buying behaviours & lifestyles • one firm cannot satisfy everyone’s needs • market segmentation allows: • marketing organisations to define their customers needs and wants more precisely • better estimation of market size and potential • development of more specific, focussed marketing objectives • better allocation of resources • performance can be better evaluated when marketing objectives are more precise
Why do firms segment the market? cont… • firm’s have different strengths • different areas of competitive advantage • firm should focus on who they can serve best • segmenting can be a more profitable strategy, ifsegments have unique needs and are prepared to pay for a differentiated offering • danger of over-segmentation
Steps in market segmentation(Exhibit 4.2, p. 113) 6. Develop marketing mix for each target segment Marketing mix 5. Select target markets Target marketing • Profile and analyse • segments Market segmentation • Select segmentation • descriptors (variables) • Choose bases for • segmenting the market • Select a market or • product category
Step 1: Select a market or product category for study • current market or existing product • related, but new market or product • totally new market or product
Step 2: Choose your bases for segmentation geographic demographic psychographic behavioural
Geographic Segmentation • region or location • define the region • market size • market density • climate • what types of goods are segmented by geographic bases?
Demographic Segmentation • age • gender • income • family life-cycle • age, marital status, children • refer to Exhibit 4.3, p.116 • other demographic descriptors • occupation • education • religion, ethnicity, nationality • ABS data
Psychographic Segmentation • personality • traits, attitudes, habits • refer to Exhibit 4.4, p. 117 – Porsche buyers • motives • rational (functional) or emotional (psychological) • lifestyle • activities, opinions, interests • refer to Exhibit 4.5, p. 118 and Exhibit 4.6, p. 119 • value segments • geo-demographics • neighbourhood lifestyle categories • Morgan target mapping
Behavioural bases • benefits sought • usage rate • other behavioural descriptors
Benefits sought • what benefits are the market seeking? • example: cars • technical excellence – BMW – the ultimate driving machine • safety and excitement – Volvo – Volvo for life. • economy – Daewoo • prestige – Mercedes • speed – Mazda - zoom-zoom
Usage rate • usage rate • light • medium • heavy • user status • regular • non-users • ex-users
Other behavioural descriptors • purchase occasion • loyalty status • buyer readiness stage • awareness, interest, liking, preference, conviction, purchase • attitude toward the product • brand loyalty
Example – a teddy for every occasion Vermont Teddy Bears
Okay, we have arrived at a number of potential segments. Whish should be considered?
Step 3: Selecting segmentation descriptors • refer to table 2.1, study guide • not every descriptor (variable) is relevant for every product • what descriptors (variables) actually create distinct and meaningful segments for this product category? • high cost and time of over-segmenting • Consumer Segmentation and Targeting - Nielsen Spectra • refer to Exhibit 4.7, p.120 for segmentation of snack-food market.
Useful segmentation • is the segment substantial? • large enough to be profitable • growing segment • is the segment identifiable and measurable? • can we easily identify members and thus measure the size of the segment? • can the purchasing power of the segment be estimated?
Useful segmentation cont…. • is the segment accessible? • can the segment be reached with a specific marketing mix and through established media and marketing channels? • is the segment responsive? • will the segment respond differently than other segments to a specific marketing mix? • are the needs of the segment unique enough to warrant the development of a different marketing mix?
Who are your main target markets? • a target market is • ‘a group of people or organisations for which an organisation designs, implements and maintains a marketing mix intended to meet the needs of that group..’ (Summers et al. 2005, p. 125).
Market coverage strategies • should we mass-market (undifferentiated) or target market (differentiated)? • if target marketing, then how many target markets should we select? • what are the advantages and disadvantages of each strategy? • refer to Exhibit 4.8, p. 125
Company marketing mix Market Company mix 1 Segment 1 Company mix 2 Segment 2 Undifferentiated targeting Company mix 3 Segment 3 Segment 1 Segment 2 Company marketing mix Multi-segment targeting Segment 3 Concentrated targeting Market coverage strategies
Advantages mass production, mass distribution and one promotional strategy yield economies of scale lower costs lower prices Disadvantages sterile, unimaginative product offering that does not really meet anyone’s needs susceptible to competitors who differentiate Model T Ford Undifferentiated targeting (mass marketing)
Advantages focus on specific needs of niche market allows small organisations to compete effectively in niche markets strong position in an attractive market segment e.g. Rolls Royce Disadvantages risky strategy – narrow focus ‘all eggs in one basket’ stereotyping prevents growth into other segments Concentrated targeting
Advantages access more markets closely meet the needs of each market greater satisfaction leads to loyalty can be very profitable if done well e.g. Fosters Disadvantages developing multiple marketing mixes is costly cost of over-segmentation product proliferation and cannibalisation Multi-segment targeting(target marketing)
Positioning • position is • the place a product occupies in consumers’ minds relative to competing offerings (Summers et al. 2005, p. 129). • positioning involves • developing a specific marketing mix to influence a potential customers’ overall perception of a brand, product line or organisation..’ (Summers et al. 2005, p.129). • bases of differentiation • repositioning • perceptual mapping
My perceptual map for chocolate High price I think…… High quality Low quality Generic brand Low price
Product user Attributes or benefits Competitor Price and quality C A Use or application B Product class Positioning strategies may be based on
Positioning Strategies • product attributes or benefits • Volvo – Volvo for life • price/quality • Lindt Chocolate – connoisseur quality • application or use • baking soda – cooking, cleaning, bathing • product class • cork flooring • product user • Vegemite – folate for pregnant ladies • Competitor • Avis – we try harder • cultural symbols • i.e. Louie the Fly
In this lecture, we covered…… • why marketing organisations segment their market • market segmentation • bases for segmenting the consumer market • various descriptors for each base • four characteristics of useful segments • three targeting strategies • undifferentiated, multi-segment, concentrated • positioning • positioning strategies