Segmenting and targeting

markets
Module 3
Chapter 4


Lecture Overview
what is market segmentation?
why do marketing organisations segment
the market for their product?
market segmentation process
segmenting consumer markets
positioning
segmenting business markets

Milk??
what type of milk do you drink?
do you drink more than one type?
why do you drink the type/(s) of milk
that you do?
The milk story
Once upon a time .
there was full-fat cream milk that was sold in one
pint glass milk bottles with silver foil tops, one
inch of cream sat on the top
the milkman delivered the fresh milk to the door
each morning and collected the empty bottles
but kiddies thought it was yucky and would not
drink it, so they developed flavoured milk
but flavoured milk and full cream milk was
considered to be fattening, so many women
would not drink it, so they developed low fat milk
Milk story cont..
now there is a milk to
meet the needs of just
about everyone
cream top/froth top
extra creamy
lactose free
high calcium
goats milk
check out
so everybody drank
milk and lived happily
every after
What is market segmentation?
process of dividing a market into
meaningful, relatively similar and
identifiable segments or groups (Summers
et al. 2005, p.111).
market segment
a sub-group of people or organisations that
share one or more characteristics that cause
them to have similar product needs
(Summers et al. 2005, p.111).
Why do firms segment the
market?
people have diverse needs, wants, buying
behaviours & lifestyles
one firm cannot satisfy everyones needs
market segmentation allows:
marketing organisations to define their customers
needs and wants more precisely
better estimation of market size and potential
development of more specific, focussed marketing
objectives
better allocation of resources
performance can be better evaluated when
marketing objectives are more precise
Why do firms segment the
market? cont
firms have different strengths
different areas of competitive advantage
firm should focus on who they can serve
best
segmenting can be a more profitable
strategy, if segments have unique
needs and are prepared to pay for a
differentiated offering
danger of over-segmentation
Target marketing
Marketing mix
Market segmentation
1. Select a market or
product category
2. Choose bases for
segmenting the market
3. Select segmentation
descriptors (variables)
4. Profile and analyse
segments
5. Select target markets
6. Develop marketing
mix for each target segment
Steps in market segmentation
(Exhibit 4.2, p. 113)
Step 1: Select a market or
product category for study
current market or existing product
related, but new market or product
totally new market or product
Product class Convenience
Product category Milk
Brand Pauls goats milk
Step 2: Choose your bases for
segmentation
psychographic behavioural
demographic geographic
Geographic Segmentation
region or location
define the region
market size
market density
climate
what types of goods are
segmented by geographic
bases?
Demographic Segmentation
age
gender
income
family life-cycle
age, marital status, children
refer to Exhibit 4.3, p.116
other demographic descriptors
occupation
education
religion, ethnicity, nationality
ABS data
Psychographic Segmentation
personality
traits, attitudes, habits
refer to Exhibit 4.4, p. 117 Porsche buyers
motives
rational (functional) or emotional (psychological)
lifestyle
activities, opinions, interests
refer to Exhibit 4.5, p. 118 and Exhibit 4.6, p. 119
value segments
geo-demographics
neighbourhood lifestyle categories
Morgan target mapping
Behavioural bases
benefits sought
usage rate
other behavioural descriptors
Benefits sought
what benefits are the market seeking?
example: cars
technical excellence BMW the ultimate
driving machine
safety and excitement Volvo Volvo for life.
economy Daewoo
prestige Mercedes
speed Mazda - zoom-zoom
Usage rate
usage rate
light
medium
heavy
user status
regular
non-users
ex-users
Other behavioural descriptors
purchase occasion
loyalty status
buyer readiness stage
awareness, interest, liking, preference,
conviction, purchase
attitude toward the product
brand loyalty
Vermont Teddy Bears
Example a teddy for every
occasion
Step 3: Selecting segmentation
descriptors
refer to table 2.1, study guide
not every descriptor (variable) is relevant for
every product
what descriptors (variables) actually create distinct
and meaningful segments for this product category?
high cost and time of over-segmenting
Consumer Segmentation and Targeting -
Nielsen Spectra
refer to Exhibit 4.7, p.120 for segmentation of
snack-food market.
Useful segmentation
is the segment substantial?
large enough to be profitable
growing segment
is the segment identifiable
and measurable?
can we easily identify members
and thus measure the size of
the segment?
can the purchasing power of the
segment be estimated?
Useful segmentation cont.
is the segment accessible?
can the segment be reached with a
specific marketing mix and through
established media and marketing
channels?
is the segment responsive?
will the segment respond differently
than other segments to a specific
marketing mix?
are the needs of the segment unique
enough to warrant the development of
a different marketing mix?

Who are your main target markets?
a target market is
a group of people or organisations for
which an organisation designs, implements
and maintains a marketing mix intended to
meet the needs of that group.. (Summers et
al. 2005, p. 125).

Market coverage strategies
should we mass-market (undifferentiated)
or target market (differentiated)?
if target marketing, then how many target
markets should we select?
what are the advantages and
disadvantages of each strategy?
refer to Exhibit 4.8, p. 125

Market coverage strategies
Segment 1
Segment 2
Segment 3
Company
marketing
mix
Segment 1
Segment 2
Segment 3
Company
marketing
mix
Company mix 1
Company mix 2
Company mix 3
Market
Undifferentiated targeting
Multi-segment targeting
Concentrated targeting
Undifferentiated targeting
(mass marketing)
Advantages
mass production,
mass distribution and
one promotional
strategy yield
economies of scale
lower costs
lower prices
Disadvantages
sterile,
unimaginative
product offering
that does not really
meet anyones
needs
susceptible to
competitors who
differentiate
Model T
Ford
Concentrated targeting
Advantages
focus on specific
needs of niche market
allows small
organisations to
compete effectively in
niche markets
strong position in an
attractive market
segment
e.g. Rolls Royce
Disadvantages
risky strategy
narrow focus
all eggs in one
basket
stereotyping
prevents growth
into other segments
Multi-segment targeting
(target marketing)
Advantages
access more markets
closely meet the needs
of each market
greater satisfaction
leads to loyalty
can be very profitable
if done well
e.g. Fosters
Disadvantages
developing
multiple marketing
mixes is costly
cost of over-
segmentation
product
proliferation and
cannibalisation
Positioning
position is
the place a product occupies in consumers
minds relative to competing offerings
(Summers et al. 2005, p. 129).
positioning involves
developing a specific marketing mix to
influence a potential customers overall
perception of a brand, product line or
organisation.. (Summers et al. 2005, p.129).
bases of differentiation
repositioning
perceptual mapping
My perceptual map for
chocolate
High quality
Low price
Low quality
I think
High price
Generic
brand
Positioning strategies may be based on
Competitor
Product class
Attributes
or benefits
Product
user
Price and quality
Use or application
B
A
C
Positioning Strategies
product attributes or benefits
Volvo Volvo for life
price/quality
Lindt Chocolate connoisseur quality
application or use
baking soda cooking, cleaning, bathing
product class
cork flooring
product user
Vegemite folate for pregnant ladies
Competitor
Avis we try harder
cultural symbols
i.e. Louie the Fly
In this lecture, we covered
why marketing organisations segment their
market
market segmentation
bases for segmenting the consumer market
various descriptors for each base
four characteristics of useful segments
three targeting strategies
undifferentiated, multi-segment, concentrated
positioning
positioning strategies