mkt_principles
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 Lecture 6 - Market Segmentation
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PART A

Learning Objectives

Reading

PART B

Targeting customers

Bases for partitioning markets

Segmenting markets

 

Market targeting

 

PART A

Learning Objectives

When you have completed this lecture and accompanying module, you should be able to:

  • explain clearly what market segmentation is and its role in the marketing process
  • determine how a market should be segmented and explain your rationale for your bases of segmentation
  • determine the value of the market targets to your business
  • define the positioning strategies that can be adopted
  • determine what positioning strategy should be adopted for each market target

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bookReading

Read the prescribed text, chapter 6.

This chapter provides the content and substance of Lecture 6.  As in previous lectures, you may find it useful to make brief notes as you read, paying particular attention to the highlighted section of the text book. 

Then read Part B of Lecture 6 (below).

In Part B, salient points have been extracted from the chapter as a guide for your learning and as a useful basis for later revision.

After reading Part B, you will be ready to work through Module 5.

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PART B

Targeting customers

This lecture examines how marketers find, select and target their customers.
What does this involve?  Finding and engaging customers involves:

  • segmenting the market
  • targeting specific market segments
  • positioning the product.

Before proceeding, let us ask why we begin by segmenting the market.  Why not consider the alternative, ie. mass marketing?  The question we are really asking, then, is:

Are all customers the same?

Mass Marketing

Segmentation Marketing

mass_market 

segment_market 

Mass Marketing is about:

Segmentation Marketing:

  • product orientation
  • standardised product
  • lower costs of production, promotion and distribution
  • recognises that consumers are not all the same, and the demand products and services tailored to their individuality
  • shotgun approach
  • is about:
    • differentiated marketing mixes
    • competitive focus
    • profit focus
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Segmenting markets

segment_market2Marketing segmentation can be defined as:

    dividing a market into distinct groups of buyers with different needs, characteristics or behaviour who might require separate products or marketing mixes.

Coles Myer
Coles Myer offers a variety of multidimensional preferences, eg.:
product quality

  • price
  • purchase outlet

by owning various retail outlets with highly differentiated marketing mixes. 
Apart from Coles, then, they own:

  • Fosseys
  • Myer Stores
  • Grace Bros.
  • Katies
  • Target
  • K-mart
 

So what market are you in?
Product market partitioning or category partitioning breaks down the generic market into groups of brands that compete directly or closely with one another.

Defining the market in which you are competing is the first step to understanding market segments.

what_market

Sports cars
Mazda MX5 is a sports car. So is the Lamborghini. Do these cars compete with one another?

Sports cars
Mazda MX5 is a sport car.  So is the Lamborghini.  Do these cars compete with one another?

sports_cars 

Information Technology

consum_behav 

Communications

communicate 

Breakfast Cereals

breakfast 

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Bases for partitioning markets

Issues addressed as the basis for partitioning markets for a product include:

  • product forms, eg. fresh vs frozen; 4 wheel drive vs compact
  • benefits sought, eg. diet vs treat; value vs image
  • usage situations, eg special occasions vs staple; entertainment vs family use.

Segmenting consumers

Consumers can be segmented using one or a combination of the following variables:

  • geographic
  • demographic
  • psychographic
  • behaviour.

Why do we segment consumers?
We segment consumers in order to predict future behaviour, not to describe past behaviour.

Geographic segmentation

  • climate - beer / Schnapps
  • city size - number of franchise outlets, Foodplus / McDonalds
  • population density - building industry, retail industry.

Demographic segmentation
Demographic segmentation focuses on:

  • age - relevant to the nature of the product, eg. pensioners' insurance, barbie dolls
  • gender - eg. lingerie, Marlboro/Alpine
  • income - Club Med Lindeman Island, American Express Gold Card
  • education - Financial Review / Herald Sun
  • family life cycle - HBA singles, Parents magazine, Bride, Tarago
  • occupation - marketing magazines, 4 WD Hi-ace.

Geodemographic segmentation is extremely useful for direct mail, catalogue, sampling and other promotional offers.

Psychographic segmentation
State of mind characteristics include:

  • social class - old  money / new money
  • personality - sportsgirl / new woman
  • lifestyles - activities, interest, opinion; beliefs, attitudes;

Think of the marketing of Homer Hudson Icecream, Gary Milk or Vodafone, for instance.

Behaviour segmentation
Behaviour segmentation focuses on:

  • occasion - Christmas / Mother's Day / Easter
  • benefit segmentation - healthy / low calories / great taste; taste / Macleans 'Smile' / Colgate tartar control
  • user status - non-users, trialists, regular users
  • usage rate - light, medium, heavy
  • loyalty status - brand loyals, brand switchers, new or non-category users

Sucessful segmentation is:
                Measurable
                                   Accessible
                                                     Substantial
                                                                      Actionable

Creating segments
The marketer combines variables to create specialised and differentiated segments

Segment name

Segment 1

Segment 2

Segment 3

Segment 4

Demographic characteristics

       

Lifestyle characteristics

       

Benefits sought

       

Usage rate

       

Brands bought

       

Loyalty

       

Segmentation of the snack food market

 

Nutritional snackers

Weight watchers

Guilty snackers

Party snackers

Indiscrim'e snackers

Economical snackers

% snackers

22%

14%

9%

15%

15%

18%

Life style

Self-assured Controlled

Outdoor types Venturesome

High anxiety Isolate

Socialable

Hedonistic

Self-assured Price oriented

Benefits sought

Nutritious Natural

Low calorie Quick energy

Low calorie Good tasting

Good for entertaining Goes well with drinks

Good tasting Satisfies hunger

Low Price Best value

Consumption level

Light

Light

Heavy

Average

Heavy

Average

Snacks usually eaten

Fruits Vegetables Cheese

Vogurt Vegetables

Yogurt Cookies Crackers Candy

Nuts    Potato chips Crackers Pretzels

Everything

No specific products

Demographic

Better educated Have younger children

Younger    Single

Females   Low socio-  economic

Middle-aged Non-urban

Teens

Larger families  Better educated

 

Marketing segmentation
Australian football footwear

 

The Aussie Rules Kid

The Club Amateur

The Elite Footballer

Demographic

Male 6-15 years

Male 14-30 years

Male 18-35 years

Psychographics

Plays for fun; plays at school or in a team; loves the game; has footy heroes

Aspires to elite level performance; image is important; the recreational player

Highly competitive; wants the best to stay on top; the serious footballer

Benefits

Durability and inexpensive

Sound quality and comfort

High performance and high quality

Brands:
Puma
Adidas
Oladora

Acclaim
Rico Cup
Real Wedge

Excel
Powerglide
Cup
Nazionale

King
Predator
Veloce

 

Chocolate Market

CHOCOLATE EATERS:

Economical

Comfort

Indiscriminate

Party

Guilty

Lifestyle

Price oriented

Emotional

Hedonistic

Sociable

High anxiety

Benefits sought

Low price Value

Good taste

Good tasting

Good for entertaining

Good tasting Low fat/ calories

Consumption level

Average

Heavy

Heavy

Average

Heavy

Preference

Multi packs

Blocks and bars

No specific products

Bite sized Up-market

No specific products

Demographic

Large families Better educated

Female

Children

Over 20s

Female

 

Alcoholic beverages market

 

Experimenters

Economic drinkers

Social entertainers

Discerning gourmet

Demographic

18-24

18-65

24-45

30-60

Product Preferred

New age drinks
Beer
Mixed drinks

Wine
Beer

Quality wine
Boutique beer Champagne

Premium wine Imported wine Top shelf spirits Imported beer

Benefits sought

Good tasting
Cheap

Low price best value

Good quality Impressive

Best quality Prestige

Brands sought

Sub zero   
Lemon Ruski
Carlton Cold
Foster's

Coolabah
Victoria Bitter
Tooheys          
De Bortoli

Jamiesons Run
Foster's   
Yellowglen      
St. Huberts

Grange Hermitage
Blue Pyrenees
Leeuwin Estate

Entertainment

Clubs
Pubs         
Movies

Videos
Take away
Family restaurants

Dinner parties Restaurants Functions

Crown Restaurants Dinner parties
Wine tastings

Consumer lifestyle

Students      
New to work force Experiencers

Price oriented Strugglers

Career minded
Like to entertain and socialise Achievers

Actualisers
Achievers

Loyalty status

None to medium

Medium to heavy

Strong

Absolute

Palate

Adventurous
Immature

Limited     
Easily satisfied

Educated Experimental

Very educated Discerning

Psychographics

Drinks for fun and social reasons

Drinks for relaxation

Image conscious Impress friends and colleagues

Serious wine drinker/devotee Wants the best

Usage rate

Usage rate

Medium to heavy

Medium to heavy

Heavy

 

Sleepwear segmentation

 

Fringe dwellers (8%)

Free spirited contemporaries (17%)

Affluent sophisticates (23%)

Simple domesticates (26%)

Demographic

25-35+ Married/de facto

18-25+ Single

25-35+ Single

25-35+ Married

Lifestyle

Pubs, parties, budget conscious

Studying, value oriented, active

Dining out, shopping, value oriented

Working mother / housewife, budget conscious

Benefits sought

Practicality, convenience

Practicality, acceptable loungewear

Fashionability, comfort, status, lifestyle

Comfort

Brands sought

Fosseys, Kmart, Target

Sportsgirl, Sussan, Bras'n'Things

Country Road, Davenport, David Jones

Myer, David Jones, Target

Place of purchase

Discount / department stores

Small retail shops, department stores

Boutiques, upmarket department stores

Discount stores, small retail shops

Purchasing frequency

Every 2 years or as needed

1-3 times a year

Seasonal

1-2 times a year

 

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Business-to-business segmentation

Segmenting business-business markets
Variables common to both consumer and business-business markets include:

  • geographical
  • benefit
  • user status
  • usage rate
  • loyalty status. 

Business -business markets also use:

  • demographic variables - industry, company size
  • operating variables - technology, customer capabilities
  • purchasing approaches - purchase criteria, purchasing policies, nature of existing relationship
  • situational factors - urgency of delivery, size of purchase order, applications of the product
  • personal characteristics - buyer-server similarity, attitude to risk, corporate culture and so on.

IBM segmentation variables
As an example, note that IBM marketing segments by:

  • industry: petroleum, finance, educational, manufacturing, distribution
  • user status: existing customer, lapsed customer (win back), new customer (competitive bid)
  • company size: number of employees, revenue
  • geographical location.

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Market targeting

Evaluating market segments
There are three things to note at the outset of evaluating market segments.  They are:

  • segment size and growth
  • segment structural attractiveness, ie. competitors, threat of substitutes, power of buyers and suppliers
  • company objectives and resources.

Undifferentiated marketing
Undifferentiated marketing:

  • ignores differences and focuses on similarities between consumers
  • is similar to mass marketing
  • can be seen in the examples of Vegemite marketing, and early Coca Cola marketing.
    mkt_mix1

Differentiated marketing
With differentiated marketing, the firm operates within several segments and develops a separate marketing mix for each, thereby generating greater sales and market share.

mkt_mix2
Examples of differentiated marketing include:
  • Ford: Laser, Falcon, Capri
  • Unilever: Cold Power, Omo, Drive
  • Amatil: Coca Cola, Dieet Coke, Caffeine-free Coke
  • Recreation: Triathlon training, Boxercise, Big T-shirt class, Personal training
  • RMIT marketing: Associate Diploma, Bachelor of Business, Graduate Diploma Marketing, Masters in Marketing (by coursework), Masters in Marketing (thesis).

Concentrated marketing
With differentiated marketing, the firm focuses on a single segment, aiming for a strong market position within that segment.  It is also called niche marketing.

mkt_mix3
Examples of concentrated or niche marketing include:
  • Maggie T
  • BRW
  • Rolls Royce.

BMW 3161
At $36,000:

    Given its price, I have no idea who will buy it.  The car is aimed at people who have always wanted a BMW but haven't been able to afford one.  those people might be driving a new Honda Accord or a 10 year old Ford Falcon.

Martin Roller
Managing Director

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Positioning
To be successful today, you must touch base with reality.  And the only reality that counts is what's already in the prospect's mind.

The basic approach of positioning is not to create something new and different but to manipulate what's already up there in mind, to retire the connections that already exist.

Adapted from Trout and Ries  'Positioning' 1986

Positioning strategy checklist

  • v What position do we own in the mind of the prospect?
  • v What position do we want to own?
  • v Whom must we outgun?
  • v Do we have the resources?
  • v Can we stick it out?
  • v Does our advertising match our position?

Positioning is 'the easy way into the mind'.
The 'easy way' into a person's mind is to be the first one there, eg. Kodak; Kleenex; Xerox; Coca Cola; Hertz; General Electric.

This is the Positioning Era.  To succeed in our over-communicated society, a company must create a position in the prospect's mind, one that takes into consideration the company's own strengths and weaknesses as well as those of its competitors.

The company must be looking for a gap.

Perceptual map
The following graph represents the perceptions of prestige cars held by senior managers earning $80,000+.

percept_map
Spectator perceptions of sport
percept_sport
Positioning strategies
Products can be positioned on:
  • product attributes: a glass and a half of full cream milk
  • product benefits: Colgate tartar control; Macleans white teeth
  • usage occastion: it's times like these; Nescafe - gets you talking.

Other positioning strategies include:

  • type of user - Coco Pops advertisements, where adults come out of the closet; Pampers for girls; J & J Baby Shampoo for Adults
  • away from its competitors - when only the best will do; Only 'Glad' is good enough; 7 UP the Uncola
  • against a competitor - Avis: we try harder
  • against other product classes - butter vs margarine; Pert two-in-one.

Defining the product position
To define the product position, the marketer:

  • describes the target segment
  • describes the product or service, and the name of the general product category
  • describes the brand benefit/s.

Position statement

[Brand X] is the brand of [category/product need] that offers [target market description] [benefit].

So:

    Subzero is the brand of alcoholic soda that offers young, hip, fashionable women a trendy alternative to beer and spirits.

    RMIT is the university that offers career minded students and prospective students a practical learning environment that is closely linked to industry.

BMW positioning

We have moved away from the yuppie image of the 1980s.  BMW's image is now based on quality and prestige.  Saveety, comfort, handling and styling are the key attributes of the BMW brand.

BMW  The ultimate driving machine.

Martin Roller

BMW 316I positioning

To reduce the risk of undermining the upmarket appeal of the BMW brand, the advertising for the 316I will have a similar look and feel to the advertising for other, more expensive BMWs. 

Roller says: Everything we do must be consistent with the BMW brand image.  the tone of voice and language we use is exactly the same for a $262,000 or a $36,000 car.  We do not want to be positioning the 316I as a cheap, bargain-basement BMW.  Obviously, there will be some cannibalisation of sales on other BMW models, but the pricing and marketing strategy of the 316I is much broader than anything we have done in the past.

Martin Roller, BMW

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