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Chapter 6: Market Segmentation and Positioning


STP Process = segmentation, targeting + positioning
o Identify attractive segments to target, new product opportunities, communication
strategies
o Key benefits:
 enhancing competitive position
 providing direction + focus for marketing strategies
 examining + identifying market growth opportunities
 effective + efficient matching of resources to target market segments
Market Segmentation
 Division of a mass market into identifiable + distinct groups
 Each group has got common characteristics + needs
 Similar responses to marketing actions
 Selected offerings for selected groups
 Product differentiation – adapt different variations of offering to satisfy different segments
 Marketers often seek to design offerings around consumer demand rather than their own
production needs
 Segmentation process is often problematic
o Identification of the key differences between groups
o Customer variability
o Needs may change
 Breakdown method
o Customers are essentially the same
o Task: identify groups that share particular differences
o Main method used
 Build-up method
o Customers are all different
o Find similarities
o Customer orientated
 Use of both methods together to be more accurate
 Must use current data – needs may change – customer changes into different segment
 Segmentation bases
o Profile criteria
 Demographic methods (age, gender, race, family size, education, religion)
 Geographic location (postal code system)
 Socio-economics (social class, income level – able to afford the product?)
 Life cycle – lifestage analysis (varying amounts of disposable income during
different stages in life – there are 12 lifestages groups)
 Geodemographics (who lives where + what they are like – improve
understanding of customers, people living in similar areas have the same
needs + lifestyle)
o Psychological criteria
 Attitudes + perceptions
 Psychographics (customers activities, interests, opinions, understand
lifestyles + patterns of behaviour)
 Benefits sought – provide customers with exactly what they want, based on
the benefits they derive from use
o Behavioural criteria



Usage (how often)
 Social interaction – symbolic aspect of use + social meanings
 Experimental consumption – emotional + sensory experiences
(satisfaction, fantasies, feelings, fun)
 Functional utilization – functional usage in different situations
 Transaction + Purchase
 Growth in transactional data through electronic transactions
 Who buys what, where, when, for how much
 Monitor purchase patterns – make sales promotions according to
that
 Media Usage
 Frequency of readership, viewership
 Effectiveness of media
o Data acquisition costs + ability of data to indicate predictable customer choice
behaviour has to be considered
 Business-to-business segmentation
o Organizational Characteristics
 Organizational size – buying requirements, delivery needs
 Geographical location – sales territories, websites increase channels for
distribution + communication
 Standard Industrial Classification Codes (SIC codes) – classify business
establishments by the type of economic activity (indication of the size of the
market)
o Customer Characteristics
 Decision-Making Unit (DMU) – specific requirements, policies, purchasing
strategies, attitudes, delivery cycles, quality standards
 Choice Criteria – specifications of proposition, might only target one single
segment
 Purchase Situation – structure of purchasing procedures, buying situation
(new task or rebuy?), what stage in purchase decision process, exclusive
contracts
Target Market
 All segments must be distinct (clearly differ), accessible, measurable, profitable (sufficiently
large)
 Segment attractiveness factors: market growth, profitability, size, competitive intensity,
cyclical nature of the industry, stability, mission fit
 Undifferentiated Targeting Approach
o One mass market – one marketing strategy
o Very expensive
o E
...
Olympics
 Differentiated Targeting Approach
o Several market segments
o Marketing strategy for each segment
o E
...
HP
o Disadvantage: loss of economies of scale resulting from resources required to meet
the needs of many market segments
 Concentrated Targeting Approach
o Only a few market segments
o Either for comp
...
g
...
g
...
must understand the market
 Must make the customer clear how each brand is different + help understand the value that
each represents
 Key is to identify the attributes that are important to the customers in the segment (might
be tangible or intangible)
 Understand what customers consider as the ideal standard – where is the brand in relation
to that > adapt brands attributes + communication?! > become more competitive
 Perceptual Mapping
o Geometric comparison of how competing products are perceived
o Shows position in the market
o The closer brands are clustered together, the greater the competition
o The further apart, the bigger the opportunity for new brands
o Insight on how the market operates
o Reveals strengths + weaknesses > assist strategic decisions about how to
differentiate + how to compete more efficiently
 Perceptions can be adjusted through advertising
 Functionally positioned brands emphasize the features + benefits
 Expressive brands emphasize the ego, social + hedonic satisfaction it can bring
Repositioning
 Four ways to approach repositioning
o Change tangible attributes + communicate new proposition to same market
o Change way of communication to the original market
o Change target market for the same product
o Change both – product + target market
 Can be difficult to accomplish
o Entrenched perceptions + attitudes towards the brand by buyers
o Vast (media) resources required



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