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

Steps in market segmentation

(Exhibit 4.2, p. 113)

6. Develop marketing mix for each target segment

5. Select target markets 4. 3. 2. 1. Profile and analyse segments

Marketing mix

Target marketing

Select segmentation descriptors (variables)

Choose bases for segmenting the market

Market segmentation

Select a market or product category

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 Brand Convenience Pauls goats milk

Product category Milk

Step 2: Choose your bases for segmentation

geographic

demographic

psychographic

behavioural

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

Example a teddy for every occasion

Vermont Teddy Bears

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

Company marketing mix
Undifferentiated targeting

Market

Company mix 1 Company mix 2 Company mix 3

Multi-segment targeting

Segment 1 Segment 2 Segment 3

Company marketing mix

Concentrated targeting

Segment 1 Segment 2 Segment 3

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 Disadvantages focus on specific risky strategy needs of niche market narrow focus all eggs in one allows small basket organisations to compete effectively in stereotyping prevents growth niche markets into other segments strong position in an attractive market segment
e.g. Rolls Royce

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 oversegmentation 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

I think High price

Low quality

High quality

Generic brand

Low price

Positioning strategies may be based on

Product user
C A B

Attributes or benefits

Competitor

Price and quality

Use or application

Product class

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