04 market segmentation & positioning rac
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Marketing Management
Market Segmentation and
Positioning
Lecture 04
Ian McPhee
Positioning is not what you do to a product; it is
what you do to the mind of a prospect (Ries and
Trout, 1972)
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Learning Outcomes
Describe the principles of market segmentation and
the STP process.
Explain the characteristics and differences between
market segmentation and product differentiation. Explain how market segmentation can be undertaken
in both consumer and business to business markets.
Describe different targeting strategies.
Explain the concept of positioning.
Illustrate how the use of perceptual maps can assist
the positioning process.
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Underlying Assumptions
Not all buyers are alike
Sub-groups can be identified
With similar behaviour, background, valuesand needs
Smaller & more homogeneous
Easier to satisfy a small group than larger
(Zikmund & DAmico, 1995)
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Levels of Analysis
Individual
Group or team
Departmental
Organizational
Environmental
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Maslows Hierarchy of Needs
(Abraham
Maslow)
(Abraham
Maslow)
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Case Insight - Stagecoach
One of the largest bus operators in
the UK
Operate express and local bus
services across the country
Comprehensive network of intercity
operations under the Megabus brand
So how do Stagecoach identify whotheir customers are and where they
might want to access their services?
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STP Process
Method by which whole markets are
subdivided into different segments
Three activities that should be undertaken,usually sequentially, if segmentation is to
be successful:
Segmentation
Targeting
Positioning
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STP Process
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Benefits of STP Process
80% of profits usually derived by 20% of customersParetos Principle
Enhancing a companys competitive position by
providing direction & focus for marketing strategies.
Examining and identifying growth opportunities in themarket through the identification of new customers,growth segments or new product uses.
More effective and efficient matching of companyresources to targeted market segments promising thegreatest ROMI.
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Market Segmentation
Market segmentation is the division of a market into
different groups of customers with distinctly similar
needs and product/service requirements.
Purpose of market segmentation:
Leverage scarce resources.
To ensure that the elements of the marketing mix are designed
to meet particular needs of different customer groups.
Allows organisations to focus on specific customers needs, inthe most efficient and effective way.
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Marketing Segmentation
Market Segmentation & Product Differentiation
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Process of Market Segmentation
There are two main approaches to segmenting markets:
Breakdown Method:Adopts the view that the market is
considered to consist of customers which are essentiallythe same, so the task is to identify groups which share
particular differences.
Build-Up Method: Considers a market to consist ofcustomers that are all different, so here the task is to find
similarities.
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Process of Market Segmentation
Aim is to identify segments where:
identifiable differences exist between
segments (segment heterogeneity).
similarities exist between members within
each segment (members homogeneity).
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Segmenting Consumer Markets
Segmentation Bases/Criteria
ProfileC
riteria - Who my market are andwhere are they?
Behavioural Criteria - Where, when, and
how does my market behave?
Psychological Criteria - Why does my
market behave that way?
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Segmenting Consumer Markets
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Segmenting Consumer Markets
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Segmenting Business Markets
Segmentation Bases/Criteria
OrganisationalC
riteria e.g.,Organisational size and location
BuyerCharacteristics e.g., Choice criteria,
purchase context
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Organisational Characteristics
Source: McDonald and Dunbar(2004). Reproduced with kind permission.
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BuyerCharacteristics
Decision Making Unit Policy factors
Purchasing strategies
Attitudes towards vendors and toward risk
Choice Criteria What specifications of product/service they choose
Purchase Situation Structure of the purchasing procedures
Type of buying situation
Stage in the purchase decision process
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Targeting
To determine which, if any, of the segments uncovered
should be targeted
Evaluation of Market Segments - DAMP Distinct is each segment clearly different from other segments?
Accessible can buyers be reached through appropriate
promotional programmes and distribution channels?
Measurable is the segment easy to identify and measure?
Profitable is the segment sufficiently large to provide a streamof constant future revenues and profits?
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Segment Attractiveness Factors
Rating approach for different segment attractiveness
factors:
Market growth
Segment profitability
Segment size
Competitive intensity within the segment
Cyclical nature of the industry
Each of these attractiveness factors is rated on a scaleof 0-10 and loosely categorized as high, medium or low
in attractiveness.
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Segment Attractiveness Factors
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Targeting Approaches
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Positioning
The act of designing the companys offering and image
so that they occupy a meaningful and distinct
competitive position in the target customers minds.
Two fundamental elements:
Physical attributes - the functionality and capability that a brand
offers.
Communication - the way in which a brand is communicated and
how consumers perceive the brand relative to other competingbrands in the market place.
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Perceptual MapsRepresent a geometric comparison of how competing
products are perceived
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Positioning Strategies
Position a brand either functionally or expressively
(symbolically)
Functional Features
Quality
Use
Expressively
User
Benefit
Heritage
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Repositioning Srategies
1. Change the tangible attributes and then communicatethe new product to the same market
2. Change the way a product is communicated to theoriginal market
3. Change the target market and deliver the same product
4. Change both the product (attributes) and the targetmarket
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Summary
Described the principles of market segmentation and theSTP process.
Explained the characteristics and differences betweenmarket segmentation and product differentiation.
Explained how market segmentation can be undertakenin both consumer and business to business markets.
Described different targeting strategies.
Explained the concept of positioning.
Illustrated how the use of perceptual maps can assist thepositioning process.