Segmentation

Chapter 8

Case Study

P & G Segments the Market

Strategy Sells multiple brands within the same product category for detergents, soaps, and other goods. Each brand features a different mix of benefits and appeals to a different segment. Product modifications appeal to different niches within certain segments.

The Payoff P&G generates revenues in excessive of $4 billion in U.S. laundry detergent market alone. Tide has 34% share of powder and 24% share of liquid market segments. Combined, all P&G brands account for 75% share of powder and 55% share of liquid detergent markets.

Target Consumers: Market Segmentation

Group of consumers With a similar response To a given set of marketing stimuli

Requirements for Effective Segmentation

.
p.297

Measurability

Accessibility

Substantiality

Actionability

Segmentation
p.297

Accessible = can we reach these people? Actionable = do we have the resources to serve these people? (ie staff & $) Measurable = is there data available to use? Substantial = are there enough of these people to justify effort?

Target Consumers
Market Segmentation

Market Targeting

Market Positioning

The Marketing Process

Market segmentation:

Building up a market into groups with distinct needs Who might require (respond to) different marketing mix

Target marketing:

Evaluating the attractiveness of each market segment Deciding which segment(s) to enter Most profitably serve Occupying a clear, distinctive, and desirable place Relative to competing products In the minds of target customers

Figure 2.4

Market positioning:

Market Targeting: Evaluating Market Segments

Segment size and growth Segment structural attractiveness Company objectives and resources

Target Consumers: Market Targeting

Evaluating each segments attractiveness Selecting one or more segments to enter Single or multiple segment strategy

Selecting Market Segments

Company marketing mix Market A. Undifferentiated marketing (mass / combiners) Company marketing mix 1 Company marketing mix 2 Company marketing mix 3 Segment 1 Segment 2 Segment 3

B. Differentiated marketing (segmenters) Segment 1 Segment 2 Segment 3

Company marketing mix

C. Concentrated marketing

Steps in Market Segmentation, Targeting, and Positioning

6. Develop marketing mix for each target segment 5. Develop positioning Market positioning for each target segment 4. Select the target segment(s) Market targeting 3. Develop measures of segment attractiveness 2. Develop profiles of resulting segments Market segmentation 1. Identify bases for segmenting the market

Levels of Market Segmentation: Mass Marketing

Mass producing, mass distributing and mass promoting the same product in the same way to all consumers Largest potential market helps lower costs equaling lower prices or higher margins Difficult to access fragmented markets Problems in selecting from multiple ad media and distribution channels

Levels of Market Segmentation: Segmented Marketing

Marketing recognizes buyers differ in needs, perceptions, and buying behaviours Isolate broad segments comprising a market Adapt offers to best match segment needs Market more efficiently and effectively More focus and less competition

Levels of Market Segmentation: Niche Marketing

Marketing that focuses on subgroups within large identifiable groups in a market Dividing a segment into sub-segments Defining group with distinctive set of traits seeking special combination of benefits Price premium Few or no significant competitors Improves focus of limited resources

Levels of Market Segmentation: Micromarketing

Tailoring products and marketing programs to suit the tastes of specific individuals or locations Local marketing Local tailoring of brands and promotions Overcomes regional differences First-line customers Dilutes brand image and operation efficiency Logistical problems

Levels of Market Segmentation: Micromarketing

Individual marketing

Tailoring products and marketing programs to the needs and preferences of individual customers Mass customization Custom-made products Self-marketing

Market Coverage Strategies

Product / Market concentration (concentrated market)

One product for one group or segment (Topol toothpaste; Ferrari; NyQuil; Efferdent; Depends; Rolex; Viagra).

Product specialization (differentiated market)

One product for everyone (baking soda; Freedent gum; Crest toothpaste; jeans; chocolate; Tylenol)

Market specialization (differentiated market)

Many products for one specific market (Coleman camping supplies; Dorel furniture; Hasbro; Boeing / Martin Marietta; Weider)

Selective specialization (differentiated market)

Many products to several unrelated markets (Bombardier; Seagrams)

Full coverage (Mass or undifferentiated market)

Many products to everyone (Coke; Proctor & Gamble)

Market Selection Strategies

Influenced by:

Competitors strategy Stage in PLC (later stages more coverage) Corporate resources (financial, labour, management,
patents)

Nature of TM (affordability / attractiveness to product.

buyers have the same tastes, use undifferentiated.)

If

Nature of product

(is it unique or basic?)

Chiquita Bananas are the sexiest brand

Summary of Strategies

Combiners strategy: undifferentiated market focuses on similarities and satisfies pretty well the needs of their TM. They have large groups, but may be chipped away easily by specialists. Hence planning and aggressive market is required. Example: Coke vs. Jolt Cola.

Segmenters strategy: differentiated market focuses on differences and satisfies very well the needs of their TM.
Both of the above can take an innovative or imitative approach. Example: IBM vs. clones; Levis vs. others.

Segmenting Dimensions

(see Table 8.1 p. 283)

Customer related Geographic: CMA, region, city, population Demographic: age, sex, income, language Situation related Psychographic: class, lifestyle, person Behaviouristic: benefits, usage, loyalty
Example: Coke in the morning

Segmenting Consumer Markets: Geographic Segmentation

Divide market into separate geographic units Nations, regions provinces, cities, etc. Develop regional marketing programs

Segmenting Consumer Markets: Demographic Segmentation

Most popular method Consumer patterns often follow their demographics Easier to measure than most segmentation variables Needed for market size and access

Segmenting Consumer Markets: Demographic Segmentation

Age and life-cycle stage

Wants and needs vary with stage Guard against stereotypes Buying patterns frequently follow gender

Gender

Income

Affluent to restricted incomes

Segmenting Consumer Markets: Psychographic Segmentation

Lifestyle

Reflected in purchases Express who they are

Personality

Segmenting Consumer Markets: Behavioral Segmentation

Divide market into groups based on consumer knowledge, attitude, use, or response to a product Occasions By occasions when buyers get the idea to buy, actually make the purchase, or use the item Benefits sought Major benefits, people seeking, brands deliver

Segmenting Consumer Markets: Behavioural Segmentation

User status Non-, ex-, potential, first-time, regular Usage rate Light - medium - heavy Heavy users may dominate total market Loyalty status Toward brand, store, and/or company Frequent buyers may not be loyal habit, indifference, low price, product unavailability

VALS

VALS - (Values - Lifestyles).

The population can be classified by nine (8 or 10 depending on whether we are describing USA or Canada or the world) Psychographic Lifestyles.

Most of us are either: Outer Directed or Inner Driven.

see various overheads

Prizm CE

(p.293)

Geodemography Birds of a feather flock together. ie where you live is how you will behave. 66 Canadian Lifestyles.

Positioning Competitively: Product Positioning

Defined by consumers on important attributes Place product occupies in mind relative to competing products Information overload Simplify evaluation Position happens - planned or not
use beer example ie smooth-bitter; dark-blond.

Positioning Competitively: Positioning Strategies

Product attributes Benefits offered Usage occasions Classes of users Directly against or away from competitor Different product class

Positioning Strategy: Choosing and Implementing

Communicate and deliver chosen position

Select the right competitive advantage

Identify possible competitive advantage

Positioning Strategy: Possible Competitive Advantages Product differentiation Service differentiation Personnel differentiation Image differentation

Positioning Strategy: Selecting Competitive Advantage How many differences to promote?

Overpositioning, underpositioning, confused positioning

Which differences to promote?

Important, distinctive, superior, communicable, pre-emptive, affordable, profitable

Communicating and Delivering the Chosen Position

Concrete action Easier to develop than implement Positions can be quickly lost

Repositioning
Repositioning involves changing the place an offering occupies in a consumers mind relative to competitive offerings. ie Cadillac or Lays potato chips has no trans-fat label.

Beware of Green washing vrs true greening of the environment.

GMs Strategy to Reposition Its Major Car Brands

A. Consumer perceptions in 1982 [o] and GM goals for 1990 [ ]
Cadillac o Buick o Family/ Conservative

B. Potential change in goals

from 1990 [ ] to 2002

Cadillac Buick

High Price
Oldsmobile o Personal/ Expressive o Pontiac

High Price ? ?
Oldsmobile

Family/ Conservative Pontiac

?
Personal/ Expressive

Chevrolet o

?
Chevrolet
Saturn (1990)

?
Saturn

Low Price

Low Price