Chapter 3

Segmentation, Segmentation, Targeting, Targeting, and Positioning and Positioning

Mass-marketing

A strategy that presumes there is one undifferentiated market and that one product will appeal to all consumers in that market.

Advantages Lower cost One advertising campaign is needed One marketing strategy is developed Usually only one standardized product is developed

Disadvantage It only works if all consumers have the same needs, wants, desires, and the same background, education and experience

Market matching strategy

Today, mass marketing has largely been replaced by a three-step market matching strategy

Market Matching Strategy

Market Matching

Segmentation

Targeting

Positioning

Market Matching Strategy

Segmentation Act of dissecting the marketplace into submarkets that require different marketing mixes Targeting Process of reviewing market segments and deciding which one(s) to pursue Positioning Establishing a differentiating image for a product or service in relation to its competition

Market segmentation

The process of dividing a market into distinct subsets (segments) of consumers with common needs or characteristics and selecting one or more to target with a distinct marketing mix

Segmentation Variables

Segmentation Variables

Geographic

Geodemographic

Behavioral

Demographic

Psychographic

Marketers may use a single variable Marketers may use two or more variables

Geographic Segmentation

Division of the market based on the location of the target market People living in the same area have similar needs and wants that differ from those living in other areas Climate Population density Taste Micromarketing

Demographic Segmentation

Partitioning of the market based on factors such as

age gender marital status income occupation education ethnicity

Age

Product needs and interests often vary with consumers age

Age Effects

Occurrences due to chronological age

Cohort Effects

Based on the idea that people hold onto the interests they learned to appreciate growing up

Gender

Gender is frequently a distinguishing variable Changes in the family and growth of the dualincome household have blurred some of the lines

Marital Status

1.
2. 3. 4.

Marketers have identified specific marital status groups, such as: Singles Divorced individuals Single parents Dual-income married couples They then market products specifically designed for one or more groups

Income, Education & Occupation

These three variables are often related and therefore often used together as a measure of ones social class. Income is commonly used because marketers feel it is a strong indicator of ability to pay for a particular product or service Income is often combined with other variables to narrow target markets:

With age to identify the important affluent elderly With age and occupation to produce the yuppie segment

Race and Ethnicity

The size and purchasing power of minorities make them an attractive target market The size of the market is growing dramatically relative to the majority population Targeting certain products (e.g., alcohol, tobacco) to such groups raises ethical issues

Tobacco and the African American Community

Why is there a concern about targeting African Americans? During the 90s, youth smoking rates increased sharply

12.6% in 1991 22.7% in 1997 80% increase

After Native Americans, African Americans have the highest rate of smokers of any ethnic group in the US African American men have the highest rate of death from lung cancer of any ethnic group in the US

81% of African American men who smoke and contract lung cancer die 51% of white men who smoke and contract lung cancer die

Tobacco companies have clearly targeted African Americans Brown & Williamsons Kool brand used a cartoon character, the penguin Willie, that was popular with black teens Has sponsored an annual jazz festival that attracts large black audiences In 1998 cigarette advertisements represented 60% of ad space in black newspapers Following the success of the movie Malcolm X, Star Tobacco Co. introduced a new brand called X, packaged in the black, red and green colors of the black nationalist movement Marketed in 20 states before pressure from the community forced discontinuance of the brand

Geodemographic Segmentation

A hybrid segmentation scheme Based on notion that people who live close to one another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits

Market research firms specialize in producing computer-generated geodemographic market clusters of consumers They have clustered the nations >250,000 neighborhoods into lifestyle groupings based on postal zip codes Marketers use the cluster data for mail campaigns, to select retail sites and merchandise mixes, to locate banks and restaurants, etc. You Are Where You Live.

Psychographic Segmentation

Partitioning of the market based on lifestyle and personality characteristics Marketers use it to further refine a target market Its appeal lies in the vivid and practical profiles of consumer segments that it can produce Accomplished by using AIO inventories

AIO Inventories

AIO research seeks consumers responses to a large number of statements that measure Activities Interests Opinions

Examples of the use of psychographic segmentation reflected in marketing messages

Kelloggs targets health-conscious consumers with brands such as Special K and Product 19 Old Spice is targeting the active sports lifestyle with High Endurance deodorant

Behavioral Segmentation

Partitioning of the market based on attitudes toward or reactions to a product and to its promotional appeals

1. 2. 3.

Behavioral segmentation can be done on the basis of: Usage rate Benefits sought from a product Loyalty to a brand or a store

1. Usage Rate

Differentiates between

heavy users medium users light users nonusers

In general, a relatively small number of heavy users account for a disproportionately large percentage of product usage Targeting those heavy users is a common marketing strategy

2. Benefit Segmentation

Marketers constantly attempt to identify the single most important benefit of their product that will be the most meaningful to consumers Changing lifestyles play a major role in determining the product benefits that are important to consumers and also provide marketers with opportunities for new products and services

3. Brand and Store Loyalty

The tendency of some consumers to repeatedly select the same brand within a given product category

A parallel tendency of some consumers to repeatedly patronize a particular retail establishment

Marketers often try to identify the characteristics of their brand-loyal customers so they can target consumers with similar characteristics in the larger population Marketers also target consumers who show no brand loyalty as a means of penetrating a larger market Marketers reward brand loyalty by offering special benefits to frequent customers

Choosing Market Segments to Target

Once an organization has identified its most promising market segments, it must decide whether to target one segment or several segments Each targeted segment will then receive a specially designed marketing mix i.e., a specially tailored product, price, distribution network and/or promotional campaign

Market Targeting Strategies

There are three basic types of strategies: 1. Undifferentiated 2. Multisegment (Differentiated) 3. Concentration (Niche)

1. Undifferentiated Strategy

A strategy that ignores differences between groups within a market and offers a single marketing mix to the entire market It works when a product is new to the market and there is minimal or no competition

Advantages and Disadvantages

Economies in production and marketing Vulnerability to competitors offering more differentiated products and services to market subsegments

2. Multisegment/Differentiated Strategy

Targeting two or more segments with different marketing mixes for each

Advantages and disadvantages

Minimizes risks, as losses in one segment can be made up for in others Unique product features allow for higher prices Increased costs for differentiated products and marketing

3. Concentration/Niche Marketing Strategy

Focus on one sub-market

Greater knowledge of customers needs Economies of scale Entry of a strong competitor Change in size or tastes of the segment

Positioning

Deciding how the firm wants the company and its brands to be perceived and evaluated by target markets Differentiating the product from other products of the firm or its competition

Positioning complements and is an integral part of the companys segmentation strategy and selection of target markets The same product can be positioned differently to different market segments The result of successful positioning is a distinctive brand image on which consumers rely in making product choices

Perceptual Mapping

A spatial picture of how consumers view products or brands within a market Allows marketers to determine how their product appears in relation to competitive brands Enables them to see gaps in in positioning of all brands in the product class to identify areas in which consumer needs are not being met

A visual profile of how consumers perceive a number of pain relievers on the two dimensions of effectiveness vs. gentleness.
More

Effectiveness

Tylenol Extra-Strength Tylenol Bufferin Nuprin Motrin Advil

Anacin Bayer Excedrin Private Label Aspirin

Aleve Actron Orudis

Less

Gentleness to Stomach

More

Repositioning

Marketers may be forced to reposition products due to competition or a changing environment

Modifying an existing brand Targeting it to a new market segment Emphasizing new product uses and benefits Stressing different features with the intention of boosting sales

Selected Psychographic/Demographic Characteristics of the PC Magazine Subscriber

Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.

DEMOGRAPHICS SEX (BASE 990) Men Women AGE Under 25 25 - 34 35 - 44 45 - 54 55 - 64 65 or older Mean age

Percent 86 13 5 18 29 31 12 5 44.1

PSYCHOGRAPHICS Percent USE A COMPUTER 100 At home 96 At work 89 On vacation/traveling 46 SELECTED USE OF COMPUTER Word Processing 96 Connect to Internet 86 E-mail 84 For work 80 Accounting/record keeping 75 Reference 68 Recreation/games 66

DEMOGRAPHICS EDUCATION Some college or less Graduate college Education beyond college graduate

Percent 27 27 46

PSYCHOGRAPHICS Percent PORTABLE DEVICES USED WHEN TRAVELING ON BUSINESS Laptop/notebook computer 57 Cellular phone 47 Beeper or pager 30 Personal Digital Assistant/ electronic organizer 14

EMPLOYMENT STATUS Employed by someone else 68 Self-employed 21 Other 11

DEMOGRAPHICS

Percent

OCCUPATION/BUSINESS DEPT. Computer relatedprofessional 22 Senior or corporate management 16 Engineering-related professional 13 Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales 26 Others 23

PSYCHOGRAPHICS Percent TRAVEL FOR BUSINESS/PLEASURE Business Travel 5 or more days per month 31 5 or more nights away from home per month 17 Pleasure/Vacation Travel 15 or more days per year 37 Mean number of days per year 15.5 MEMBER OF FREQUENT FLYER PROGRAMS

90

DEMOGRAPHICS

Percent

INCOME Under $30,000 7 $30,000 - $49,999 15 $50,000 - $74,999 24 $75,000 - $99,999 19 $100,000 or more 24 Mean income $87,700 PRIMARY RESIDENCE Own 74 Rent 18 Other 3 No answer 5

PSYCHOGRAPHICS Percent FINANCIAL SERVICES Currently own Mutual funds 48 Stocks 44 Bonds 24 Life insurance/annuities 44 Currently use Brokerage services 36 On-line investment services 16 Retirement/financial planning 41

RESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC STATEMENTS Percent

Research before choose brand of new product to buy Other people ask my opinion about which computer products to buy Usually buy products based on quality, not price Prefer products that are latest in new technology Among group I am one of first to try new product

41

41 26 26 19

SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN PAST YEAR Percent Walking/running/jogging 63 Exercise/fitness/weight training 44 Bicycling 7 Swimming 37 Golf 27 Fishing 23 Boating/sailing 19 Skiing 19 Tennis 14

HOBBIES/OTHER ACTIVITIES PARTICIPATED IN Percent Listen to music 77 Reading 61 Going to movies 60 Surfing the Internet 50 Games-videos on computer 48 Gardening 32 Going to the theater 32 Cooking 30 Photography 30 Collecting stamps/coins 11 Sewing needlecraft 6