SEGMENTATION, TARGETING, and POSITIONING

SEGMENTATION, TARGETING, and POSITIONING COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH SEGMENTATION, TARGETING, and POSITIONING COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH SEGMENTATION, TARGETING, and POSITIONING COLLEGE OF BUSINESS ADMINISTRATION CHUNGANG UNIVERSITY PROF HYUNSUK SUH

7 SEGMENTATION, TARGETING, and POSITIONING

which a firm can direct its marketing efforts.

COLLEGE OF BUSINESS ADMINISTRATION

CHUNG-ANG UNIVERSITY PROF HYUNSUK SUH

Segmentation, Targeting, and Positioning

SEGMENTATION - Dividing a market into number of distinct groups with distinct needs, characteristics, or behavior who might require separate products or

segments, and finally develop products to meet the needs of those specific segments Steps in Target Marketing Strategy

Solomon/Marshall/Stuart 2009

The objectives of the current chapter are described.

Objectives

To understand the process of market segmentation.

To understand how companies identify attractive market segments and

choose a target marketing strategy

To understand how a company positions their products for competitive

advantage in the marketplace.

The concept of market segmentation is illustrated below.

Concept of Market Segmentation

No Market Segmentation Fully Segmented Market

The importance of market segmentation is illustrated below.

Importance of Market Segmentation

Market segmentation

Market segmentation

More precise definition of customers needs and wants

More precise definition of customers needs and wants

More accurate marketing

objectives

More accurate marketing

objectives

Improved resource allocation

Improved resource allocation

Better marketing results

Better marketing results

Any

Drawbacks?

A number of variables that can be used to segment customer markets is shown below.

Ways to Segment Consumer Markets

Example

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The Family Life Cycle (FLC) is a series of stages determined by a combination of age, marital status, and the presence or absence of children.

Age

Marital Status Children

The market segments can be presented in several ways Suppose the ice cream buyers are asked how much they value sweetness and creaminess as two product attributes Three(3) different patterns can emerge

Patterns of Market Segmentation

HOMOGENEOUS PREFERENCES

Where all customers have roughly the same preferences

The market shows no natural segment

DIFFUSED PREFERENCES

Customer preferences may be scattered throughout the

space, indicating that customers vary greatly in their

preferences.

CLUSTERED PREFERNCES

The market might reveal distinct preference clusters,

called natural market segements.

Sweetnes s

Not all segmentation is useful For example, table salt buyers could be divided into blond and brunette customers, but hair color is not relevant to the purchase of salt.

Measurable

Accessible

Differentiable

or Responsiveness

e.g Left-handed population

The market segments can be effectively reached and served

e.g Fragrance user who socialize a lot

The market segments are large or profitable enough to serve, largest possible

homogeneous group e.g car for shorter than 4ft.

The segments are conceptually distinguishable and respond differently to different marketing mix element

e.g Married-unmarried respond same to particular perfume?

Effective Segmentation

Which segmentation variable does Mac-Gray MicroFrdge using?

Mac-Gray MicroFridge

Example

Mac-Gray MicroFridge

What special benefit does

a MicroFridge offer, and to which market segment might this appeal?

Which segmentation variable does Coffee Joulies using?

Joulies: Thermodynamic ‘stones’ help keep coffee at the right temperature

Example

Company marketing

mix

Market

Company marketing mix

SEG 1 SEG 2 SEG 3

CMM 1 CMM 2 CMM 3

SEG 1 SEG 2 SEG 3

Targeting Strategy

A firm may decide to ignore market segment differences and target the whole market with one offer.

A firm may decide to target several market segments and design separate offers for each.

It is especially appealing when company resources are limited Instead of going after a small share of large market, a firm goes after a large share of one or few segments or niches

The examples of the different targeting strategies are illustrated below.

P1 P2 P3

P1 P2 P3

• 고객의 가치 ( 예 : 구매이력 , 매출 비중 등 ) 또는 수익성에 따 라

고객을 세분화하여 관리하는가 ?

프로그램 A

프로그램 B 프로그램 D

프로그램 C DB

Premium

Young

Dormancy

Practical Customer

Occasional Customer

Frequent Buyer

Customer Segmentation

Target 고

객 Campaign

Premium

Young

휴면

Practical Customer Frequent Buyer

Positioning is the act of designing the company’s offering and image to occupy a

distinctive place in the mind of the target market The end-result is customer-focused

Volvo

(station

wagon)

Safety-conscious

which your family can ride

Domino’s

lovers

Delivery speed and good

quality

delivered to your door door within 30

Example

Products can be positioned for different

product class:

e.g Margarines position against butter (I can’t believe it’s not butter), chicken from beef

Products can be positioned against the

competitor:

e.g Burger King vs McDonalds, Avis vs

Hertz – We are number 2 so we work

An effort to position the product distinctively dominant on customers perception is called positioning strategy and some of the examples are described below.

Positioning Strategy

Products can be positioned on the

benefits they offer:

price/quality/attributes e.g Toothpaste-Crest reduced cavities,

Arm and Hammer whitens teeth

P

Example

The word positioning was popularized by two advertising executives, Al Ries and Jack Trout They see ‘positioning’ as a creative exercise done with an existing product.

Positioning According to Ries and Trout

Positioning starts with a product A piece of merchandise, a service, a company, and

institution, or even a person But positioning is not what you do to a product

Positioning is what you do to the mind of the prospect That is, you position the product

in the mind of the prospect.

Four (4) Strategic Alternatives

1 To strengthen its own current position in the customer’s mind

2 Grab and unoccupied positions

3 Deposition or Reposition the competition in customer’s mind

Two consultants, Michael Treacy and Fred Wiersema, proposed a positioning

framework called ‘value disciplines.’ Within its industry, a firm could aspire to be the product leader, the operationally excellence, or the customer intimacy.

Positioning According to Treacy and Wiersema

Value Discipline is based on the notion that in every market there is a mix of three types

of customers

1 Some customers favor the firm that is advancing on the technological frontier

2 Other customers want highly reliable performance

3 Still others want high responsiveness in meeting their individual needs

McDonald excels at operational excellence, but could not afford to slow down its

service to prepare hamburgers differently for each customer Nor could McDonald

lead in new products because each addition would disrupt the smooth functioning of its normal operations.

Example

A starting point in defining a competitive frame of reference for positioning is to

determine “Category Membership” - the products with which a brand competes and which function as close substitutes.

Category Membership

Rising Crust Pizza®

DiGiorno identified this niche market of

consumers that really wanted a high

quality, good tasting product that would

bridge the gap between frozen and

carryout/delivery pizza They wanted more

convenience and better value and that is

Example

Once the competitive frame of reference for positioning has been fixed by defining the target market and nature of competition, marketers can define the appropriate points- of-difference and points-of-parity.

Points-of-Difference

Points-of-difference (PODs)

Attributes or benefits consumers

strongly associate with a brand,

positively evaluate, and believe they

could not find to the same extent

with a competitive brand

Points-of-Parity

Points-of-parity (POPs) Associations that are not necessarily unique to the brand but may be

shared with other brands

When T-Fal sells its pans around the world, it takes into account each market’s

unique characteristics The advertisement show how Korean customers can use

T-Fal pan conveniently and stored in tight spaces.

a What unique selling proposition is this ad promoting?

b Which of the product differentiation variables is being communicated in the ad?

Why is this variable important to the target market?

c State the value proposition suggested by the T-Fal ad.

Solve the following example

The summary of basic marketing STP is described below.

Market Segmentation

A group of consumers

who respond in a similar

way to a given set of

efforts

Market Positioning

Occupy a clear and

distinctive place relative

1 Define variables for segmentation

2 Develop profiles for each segment

3 Develop measures to evaluate segments

4 Determine target segment

5 Define market position of chosen targets

6 Develop marketing mix strategy

Summary of STP strategy

Define the total market