Marketing OperationsSTP

Marketing And Sales Operations

Segmentation

The act of dividing the market into specific groups of consumers/buyers who share common needs and who might require separate products and/or marketing mixes.

Market Segmentation

Identifying the most productive bases for dividing a

market, identifying the customers in different

segments and developing segment descriptions.

• Let us focus on the following questions:

1. How can a company identify the segments that make up a market?

2. What criteria can a company use to choose the most attractive target markets?

Target Marketing• Target marketing requires marketers to take

three major steps:– Identify and profile distinct groups of buyers

who differ in their needs and preferences (market segmentation).

– Select one or more market segments to enter (market targeting).

– For each target segment, establish and communicate the key distinctive benefit(s) of the company’s market offering (market positioning).

Targeting

The process of evaluating the various segments in the market and selecting the most suitable segment(s) to go after.

Positioning

Using the elements of the marketing mix to establish

in the minds of consumers a particular image of your

product or service, in relation to those of your

competitors.

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The Process Of Market Segmentation

Segmentation Consider the basis on which to segment the market

Look at the profile of people and how they break into groups Confirm that these groups are valid segments

Targeting Decide on a target strategy

Decide which segments should be targeted and why

PositioningUnderstand consumer perceptions Position products in the mind of the consumer Design an appropriate marketing mix to meet customer requirements

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Market Segmentation and Competitive Positioning

Segments are

often formed

based upon

common customer

characteristics,

brand preferences,

and upon customer

attitudes.

Basis for segmenting consumer markets: Geographic; Demographic (social grading system);

Geo-demographic (ACORN); Behavioural;

Lifestyle (Psychographic);

Basis for segmenting business to business markets: Using the

Standard Industrial Classification (SIC); by the industry technology; by the size

of the organisation; by season purchasing trends; by geographical location; by

the type of product needed

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Psychographic/Lifestyle Variables

Behavioural Variables

Demographic Variables Geographic Variables

Age, gender, race, ethnicity, income, education, occupation, family size, family life-cycle, religion, social class

Personality attributes, motives, lifestyles

Region, urban,suburban, rural, city size, county size, state size, market density, climate, terrain

Volume usage, end use, benefit expectations, brand loyalty, occasions price sensitivity

Variables For Segmenting Consumer Markets

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Customer Size Product Use

Type of OrganisationGeographic Location

Variables For Segmenting Organisational Markets

Socio-Economic Grading SystemSocio-economic Status Characteristics of Occupation

A

B

C1

C2

D

E

Upper Middle Class

Supervisory/Clerical/Junior managerial/ professional

High Managerial/Professional

Intermediate Managerial/ administrative professional

Semi-skilled and Unskilled labour

Skilled manual labour/administrative

Casual workers, pensioners, unemployed

Grades

Middle Class

Lower Middle Class

Skilled Working Class

Working Class

Lowest Level of Subsistence

Income Range (Annual)

Above $4.0m

$2.4m - $4.0m

$1.3m - $2.3m

$0.7m - $1.2m

$0.4m - $0.6m

Below $0.4m

Geo-Demographic Segmentation

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ACORN consumer targeting classification

19.8%

11.5%

7.6%

22.3%

13.7%

22.6%

2.4%

Category A Thriving

6. Affluent urbanites, town and city areas 7. Prosperous professionals, metropolitan areas 8. Better-off executives, inner-city areas

1. Wealthy achievers – suburban area 2. Affluent greys, rural communities 3. Prosperous pensioners4. Affluent executives 5. Well-off workers, family areas

11. New home-owners, mature communities 12. White-collar workers, better-off multi-ethnic areas

9. Comfortable middle-aged, mature home owning areas 10. Skilled workers, home owning

13. Older people, less prosperous areas 14. Council estate residents, better off homes 15. Council estate residents, high unemployment 16. Council estate residents, greatest hardship 17. People in multi-ethnic low-income areas

Category B Expanding

Category C Rising

Category D Settling

Category E Aspiring

Category F Striving

Unclassified

Table 10-1: Steps in Segmentation ProcessDescription

1. Needs-Based Segmentation

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

2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable).

3. Segment Attractiveness

Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.

4. Segment Profitability Determine segment profitability.

5. Segment Positioning For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics.

See text for complete table

Effective Market Segmentation

Measurable

Accessible

Substantial

Differentiable

Actionable

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Go to Hooley chapter 10

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Corporate Positioning Strategies

1. Market Leaders - are extremely dominant and high profile, and possess significant market share within their industry. Pepsi and Coca-cola are good examples.

2. Market Challengers – fairly significant, cash rich and well resourced organisations who are aggressive in seeking to take market share away from other players. This makes them particularly difficult to compete with.

The development of a positioning strategy is essential not only for products and services, but also for the organisations which offer them.

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Corporate Positioning Strategies...continued

3. Market Followers - are found second or third or even lower down the rankings in the marketplace. It is can sometimes prove more advantageous to be a market follower than a market leader.

Whatever the leader does, the follower duplicates.

4. Market Nichers - apply the previously discussed strategy of “focus”, to differentiate their product or service offerings so as to achieve competitive advantage in a particular segment of the market.

Nichers mostly move towards the high end of the market.

Developing and Communicating a Positioning Strategy

• Positioning

• Value position

Table 11.1: Examples of Value PropositionsDemand States and Marketing Tasks

Company & Product

Target Customers Benefits Price Value Proposition

Perdue (chicken)

Quality-conscious consumers of chicken

Tenderness 10% premium

More tender golden chicken at a moderate premium price

Volvo

(station wagon)

Safety-conscious “upscale” families

Durability and safety

20% premium

The safest, most durable wagon in which your family can ride

Domino’s (pizza)

Convenience-minded pizza lovers

Delivery speed and good quality

15% premium

A good hot pizza, delivered to your door door within 30 minutes of ordering, at a moderate price

Developing and Communicating a Positioning Strategy

• Positioning According to Ries and Trout– Strengthen own current position– Grab an unoccupied position– De-position– Re-position– Product ladders

• Positioning According to Treacy and Wiersema– Value disciplines

• Product leader• Operationally excellent firm• Customer intimate firm

– Treacy and Wiersema propose that a business should follow four rules for success

1. Become best at one of the three value disciplines.

2. Achieve an adequate performance level in the other two disciplines.

3. Keep improving one’s superior position in the chosen discipline so as not to lose out to a competitor.

4. Keep becoming more adequate in the other two disciplines, because competitors keep raising customers’ expectations.

Developing and Communicating a Positioning Strategy

• Positioning: How many ideas to promote?• Unique selling proposition

– Four major positioning errors1. Underpositioning

2. Overpositioning

3. Confused positioning

4. Doubtful positioning

Developing and Communicating a Positioning Strategy

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Go to Hooley chapters 13 - 16