mm aug 2014 module 3

Marketing – Module 3

Segmentation, Targeting and Positioning

Why STP?

• To Compete Effectively

• Focus on Customer and Satisfy

Requirements for STP?

• Identifying and Profiling distinct group of Buyers who differ in their needs and wants

• Select one or more market segments to enter

• For each segment, establish and communicate the distinctive benefit of the Company’s market offering

Market Segment

• Consists of group of customers who share similar needs or wants

• Factors considered for Segmentation– Measurable – Size, Purchase– Accessibility – Effectively reached and served– Actionability – Effective programs can be designed– Differentiable – Distinguishable– Substantial – Large and Profitable

Variables for Segmentation

• Descriptive Characteristics– Geographic– Demographic– Psychographic

• Behavioral Characteristics– Needs and Benefit– User and Usage Related– Loyalty Status

Geographic Segmentation

• Regions• Cities• Rural / Urban• Nations• Grassroot Marketing• Size and Market Attractiveness of different

geographic markets are important considerations

Demographic Segmentation

• Age and life cycle stage• Gender• Income• Socio-Economic Classification• Generation

Psychographic Segmentation

• Use of Psychology to understand customers• Division based on Psychological / Personality

Traits / Lifestyle / Values• People in the same demographic group can

display different Psychographic profiles• Most popular classification is VALS

Framework, classifies adults into 8 groups based on responses to a questionnaire

VALS Framework• Main Dimensions are Consumer Motivation

and Consumer Resources

VALS Framework

• Consumers are inspired by one of three primary motivations– Ideals: People guided by knowledge and principles– Achievement: look for products and services that

demonstrate success to their peers– Self Expression: Social / Physical Activity, Variety

and risk

VALS Framework

• The 4 groups with higher resources are– Innovators– Thinkers– Achievers– Experiencers

• The 4 groups with lower resources are – Believers– Strivers– Makers– Survivors

Behavioral Segmentation

• Needs and Benefit• Decision Roles• User and Usage Related: Occasions, User

Status, Usage Rate• Buyer Readiness Stage• Loyalty Status

TARGETING

• There are many statistical techniques for developing market segments

• Marketers are increasingly combining several variables in an effort to identify smaller better defined target groups

• This has led to need based market segmentation appraoch

Effective Segmentation Criteria

• Measurable• Substantial• Accessible• Differentiable• Actionable

Roger Best’s Seven Step• Needs Based Segmentation: Group customers into

segments based on similar needs and benefits sought by customers in solving a particular consumption problem

• Segmentation Identification: For each needs based segment, determine which demographics, lifestyle and usage behaviors make the segment distinct and identifiable (actionable)

• Segment Attractiveness: Using predetermined segment attractiveness criteria(market growth, competitive intensity, market access) determine overall attractiveness of each segment

Roger Best’s Seven Step• Segment Profitability: Determine Segment

Profitability• Segment Positioning: For each segment, create a

“Value Proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics

• Segment Acid Test: Create “Segment Story Board” to test the attractiveness of each segment’s positioning strategy

• Marketing Mix Strategy: Expand Segment Positioning strategy to include all aspects of marketing mix: Product, Price, Promotion and Place

Michael Porter’s Five Force

• Threat of Intense Segment Rivalry• Threat of new entrants• Threat of Substitute Products• Threat from Buyer’s growing bargaining power• Threat from Supplier’s growing bargaining

power

Evaluating and Selecting the Market Segments

• 2 Factors: Segment Overall Attractiveness and Company’s Objectives and Resources

• There are 4 approaches– Full Market Coverage– Multiple Segment Specialization– Single Segment Concentration– Individual Marketing

Full Market Coverage• A firm attempts to serve all customer groups with all the

products they might need, e.g. Microsoft, GM, Coca-Cola• Undifferentiated Marketing– Mass Communication– Largest Potential Market– Lowest cost, highest margin– Narrow product line keeps R&D, production, inventory costs

down• Differentiated Marketing: Different product to different

segments– Creates more sales than undifferentiated marketing– Increases the cost of business

Multiple Segment Specialization

• Selective Specialization: A firm selects a subset of all the possible segments

• There may be little or no synergy among segments, but each promises to be a moneymaker

• This strategy diversifies risk• Supersegment is a set of segments sharing some

exploitable similarities• A firm can attempt to achieve some synergy with– Product Specialization e.g. Microscope– Market Specialization

Single Segment Concentration

• Firm markets to only one particular segment• Concentrated Marketing• Niche is a narrowly defined customer group

seeking a distinctive mix of benefits within a segment

Individual Marketing

• Ultimate level of segmentation leads to Customized Marketing or one-to-one marketing

• Customerization combines operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice

Ethical Choice of Market Targets

• Marketers must target carefully to avoid any backlash

• Targeting can generate controversy when marketers take unfair advantage of vulnerable groups

• Socially Responsible Marketing

POSITIONING

• Company can make a mark• Requires keen understanding of consumer needs,

and wants, company’s capability and competitive actions

• “Foot in the present” and a “foot in the future”• Trick is to strike the right balance between what

the brand is and what it could be• Result is creating customer focused value

proposition

POSITIONING

• Requires that marketers define and communicate similarities and differences between their brand and its competitor

• Positioning requires:– Determining a frame of reference by identifying the

target market and relevant competition– Identifying the optimal points of parity and points of

difference brand association– Creating a brand mantra to summarize the positioning

and essence of brand

Determining a competitive frame of reference

• Defines which other brands a brand competes with, therefore which brands should be the focus of competitive analysis

• Decision about the competitive frame of reference are closely related to target market decisions

• Target market can define the nature of competition


• Identifying competitors– Category membership, Aquafina, CitiBank– Range of actual and potential competitors can be much

broader than the obvious– More likely to be hurt by emerging competitors or new

technology rather than current competition, Nokia vs Samsung

– Firms should identify their competitive frame in the most advantageous way possible, Sensodyne

– Industry– Competitors


• Analyzing competitors– Company needs to gather info about each competitor’s

real and perceived strengths and weakness– Once company has identified competitor and its strategy,

it must understand what is each competitor seeking in the marketplace

– Many factors shape a competitor’s objective including size, history, current management and financial situation

– Parent company running for growth or for profit– Marketers must formally define the competitive frame of

reference to guide positioning

IDENTIFYING OPTIMAL POINTS OF DIFFERENCE AND POINTS OF PARITY

• Once frame of reference is defined, the company has to define the appropriate points of difference and points of parity associations

• Points of difference– Attributes or benefits that consumers strongly

associate with a brand, positively evaluate and believe they could not find to the same extent with a competitive brand


• Points of Difference– POD can be any type of attribute or benefit– Strong brand may have multiple points of difference,

Apple – Design, ease-of-use, Nike – Performance, innovative tech, winning

– Creating strong, favorable and unique associations is a real challenge, but essential one for competitive brand positioning

– Criteria to determine if brand association can be POD• Desirability• Deliverable• Differentiable


• Points of Parity– Attribute or benefit association that are not

necessarily unique to the brand but in fact be shared with other brands

– Category POP– Competitive POP, Hyundai, McDonalds

Situation What to emphasizeWhen the firm is a ‘me-too’ competitor

In this case, being a weaker competitor, the goal is to piggyback on the success of the market leader by highlighting many points-of-parity

When the firm as a market leader

This is the reverse situation from the one above. To maintain market leadership, the brand/product needs to be seen in as superior/different in key ways, thus highlighting the need to focus on relevant points-of-difference

When the firm enters an established and mature market

In this case, the likelihood of switching is relatively lower, so points-of-difference are required to break their habitual loyalty

When the firm and is a fast-growing market

Fast-growing markets have primary demand (that is, first-time customers to the market), therefore points-of-parity positioning will should be quite successful in capturing new customers

When there is a diversity of needs, even when looking at fairly narrow market segments

When there is significant diversity of consumer needs, a points-of-difference positioning should ensure that reasonable market share is generated

In a target market where the firm already offers multiple products

To reduce the risk of cannibalization of sales, the firm would need to have more emphasis on points-of-difference

In a relatively price sensitive market

Our goal in this case would be to provide additional benefits, in order to reduce the importance of price in the decision. Therefore, a points-of-difference positioning emphasis would be required

BRAND MANTRA

• Mantra is an articulation of the heart and soul of the brand

• Short 3 to 5 word phrases that capture the irrefutable essence or spirit of positioning

• Ensure understanding of the brand by employees as well as customers– Nike – Authentic Athletic Performance, Just do it– Disney – Fun Family Entertainment

Positioning Strategies

• Using Product Characteristics or Customer Benefits

• Positioning by Price and Quality• Positioning by use or application• Positioning by Product User• Positioning by Product Class• Positioning by Cultural Symbols• Positioning by Competitor

Tasks Involved in Positioning

• Identify the competitors• Determine how the competitors are perceived

and evaluated• Determine the competitors positioning• Analyze the customers• Select the position• Monitor the position

BRANDING

• AMA defines Brand as a “name, term, sign, symbol or design or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors

• Differences may be functional, rational or tangible

Role / Functions of Brands• Simplify Product Handling / Tracing• Organize Inventory and Accounting Records• Legal Protection• Quality• Intangible Asset

• A good brand name should be– Easy to pronounce and remember– Short and sweet– Legally protectable– original

Criticism against Branding

• Creates Brand Loyalty in turn promoting Monopoly

• Expensive• Confusion

Selecting Brand Name and Logo

• Easy to pronounce, recognize and remember

• Denote something about the nature / function of the product

• Types of Brands– Individual and Family– Manufacturer and Distributor Brand– Regional / National Brand

Brand Equity

• Refers to a set of assets and liabilities linked to brand, its name and symbol that add or to subtract from the value provided by the product or service to a form and or that firms competition

• Components– Customer Loyalty– Brand Awareness – Brand Recall– Perceived Quality– Brand Association – Attributes and Benefits– Proprietary Assets

Brand Equity – Benefits to Customers

• Information Processing• Confidence• Usage Satisfaction

Brand Equity – Benefits to Marketers

• Increase effectiveness of marketing• Increase customer loyalty• Premium prices• Growth opportunities• Competitive weapon

LA FIN

mm aug 2014 module 3

Business