Transcript Principles of Marketing

Principles of
Marketing
“ Segmentation, Targeting, and
Positioning: Building the Right
Relationship with the Right
Customers”
We’ve understood what
marketing is, how consumers
behave and the market place
environment, the next step is
to divide customers into
meaningful groups in order to
choose the most lucrative
segment and create offers
that serve the chosen
segment best.
Why is Segmentation important?
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Companies have moved away from mass marketing
(mass producing, mass distributing and mass
promoting) – the shot-gun approach is over. It is no
longer about one size fits all. The world’s mass market
has now slowly splintered into smaller segments.
Companies are now focusing their efforts on buyers
who have greater interest in the values they create best
(the rifle approach).
Companies today recognize that they cannot appeal to
all buyers in the marketplace or at least not all the
buyers in the same way because buyers are too
numerous , too widely scattered and to varied in their
needs and buying practices.
Different people want different mix of benefits from the
products they buy.
The Segmentation Process
Market segmentation
Target Marketing
Market Positioning
Identify basis for segmenting
the market.
Develop segment profiles
Develop measure of segment
attractiveness
Select target segments
Develop positioning for target
segments
Develop a marketing mix
for each segment
Market Segmentation:
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Through this process companies
divide large heterogeneous markets
into smaller markets that can be
reached more efficiently and effectively
with products and services that match
their unique needs.
Market segmentation is dividing a
market into smaller groups of buyers
distinct needs, characteristics, or
behavior who might require separate
products or marketing mixes.
Major variables used in segmenting
consumer markets
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Geographic Segmentation: Dividing a market into different
geographical units such as nations, states , regions, countries, cities or
neighborhoods.
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Demographic Segmentation: Dividing the market into groups based
on;
a) age
b) gender
c) family size
d) family life-cycle
e) income
f) occupation
g) education
h) religion
i) race and nationality
j) generation
Innovators
High resources
High innovation
Primary motivation
Ideals
Achievement Self-expression
THE
Thinkers
Achievers Experiencers
VALS
TYPOLOGY
Believers
Strivers
Makers
Low resources
Survivors
Low innovation
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The VALS ( Values & Lifestyle) Typology classifies people
according to how they spend their time (primary motivation)
and money, knowledge, strength, health (resources)
People guided by ideals are guided by knowledge and
principles. If they have high resources they will be Thinkers
and if they have low resources they will be Believers.
People guided by achievement look for products and
services that demonstrate success to their peers. If they
have high resources they will be Achievers and if they have
low resources they will be Strivers.
People guided by self-expression desire social or physical
activity , variety and risk. If they have high resources they
will be Experiencers and if they have low resources they
will be Makers.
If level of resources is too high then we have Innovators,
these people exhibit all three primary motivations in varying
degrees. When level of resources is too low , we have
Survivors, i.e. people who do not show any primary
motivation and just focus on meeting their needs rather than
fulfilling their desires.
Major variables used in segmenting
consumer markets
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Behavioral Segmentation: Dividing a market into groups based on
consumer knowledge , attitude, use or response to a product.
a) Occasional Segmentation is dividing the market into groups according to
occasions when buyers get the idea to buy, actually make their purchase or
use the purchased items.
b) Benefit Segmentation is diving the market into groups according to the
different benefits that consumers seek from the products.
i) User Status – nonusers, ex-users, potential users, first time users and
regular users of a product.
ii) Usage rate – light, medium and heavy product users
iii) Loyalty – very loyal to brand or company, less loyal or non-loyal.
Psychographic Segmentation: Dividing the market into different groups
based on social class, lifestyle or personality characteristics. People in the
same demographic groups can have very different psychographic makeups.
Lifestyles define a person’s pattern of living as expressed in his or her
activities, interests and opinions.
Major variables used in segmenting
business markets
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Business buyers are segmented in relatively
the same way as consumer markets yet they
can have some additional variables such as
customer operating characteristics,
purchasing approaches, situational factors
and personal characteristics.
Major variables used in segmenting
International markets
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Forming segments of consumers who have
similar needs and buying behavior even
though they are located in different countries.
World markets can also be segmented based
on economic factors, geographic, political and
cultural factors.
Inter-market segmentation occurs where
segments are formed across countries
comprising of people with the same needs
and buying behavior.
Effective Segmentation:
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Measurable – size purchasing power of segments
can be measured
Accessible – the market segments can be
effectively reached and served.
Substantial – Choosing market segments that re
large and profitable to serve. A segment should be
the largest possible homogenous group worth
pursuing.
Differentiable – the segments are conceptually
distinguishable and respond differently to different
marketing mix elements and programs.
Actionable – Effective programs should be
designed to target different groups and the
company should have adequate resources to serve
the segments.
Target Marketing:
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Market Segmentation reveals the firm’s
market segment opportunities, the firm will
evaluate the various segments and decide
how may and which segments it can serve
best.
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Target Marketing is the process of
evaluating each market segment’s
attractiveness and selecting one or more
segments to enter.
The Steps of Target Marketing
1.
Evaluate the Market Segments.
2.
Select Target Market Segments
3.
Choose a Target marketing Strategy.
Evaluate the Market Segments.
1.
Segment Size and growth: The company must
collect and analyze data regarding the current
segment’s sales, growth rates and profitability. Right
size and growth is a relative matter. A company will
select a segment which is more appropriate to handle
as per the size of the company.
2.
Segment Structural Attractiveness: This factor
goes down if competitors are a lot and aggressive,
substitute products are present, power of buyers is
high and powerful suppliers are present.
3.
Company Objectives and Resources: Some
attractive segments can be dismissed quickly
because they do not mesh with the company's longrun objectives, or the company may lack skill and
resources needed to succeed in an attractive
segment. The company should enter only segments
in which it can offer superior value and gain
advantages over competitors.
Select Target Market Segments
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After segments have been evaluated, the
company will select which and how many
segments it will target. A target market is
selected, this consists of buyers who share a
common need or characteristics that the
company decides to serve.
Its focus may be broad , narrow or
somewhere in between, based on these
there are 3 target marketing strategies 1.
Undifferentiated marketing, 2. Differentiated
Marketing 3. Concentrated Marketing 4. Micro
Marketing
Undifferentiated Marketing
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Here the firm decides to ignore market
segment differences and target the whole
market with one offer
Also know as mass marketing
Focus is on common need rather than on
what is different
A product or marketing offer that appeals
to the largest number of buyers is
selected.
Mass marketers often have trouble
competing with more focused firms.
Differentiated Marketing
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Here the firm decides to target several
market segments and designs separate
offers for each.
By offering products and marketing
variations to segments, companies hope
for a higher sales and stronger position
with in each segment
This strategy increases costs of doing
business.
Concentrated (Niche) Marketing
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Here the firm goes after a large share of one or
a few segments or niches.
Good for firms with limited resources.
The firm achieves a strong position because of
its greater knowledge regarding a segment. It
can market more efficiently and effectively.
Niches are smaller and offer only one or few
competitors, henceforth smaller companies can
focus their resources more aptly.
Once established in a niche, a company may
grow into a larger firm.
Niche marketing involves higher risk for
companies whose business is dependent on
one or few segments.
Micro Marketing
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Here the firm goes after the ‘individual’ in every customer
rather than the customer in every individual.
This is the practice of tailoring products and marketing
programs to the needs and wants of specific individuals
and local customer groups.
Local Marketing: Focused on local customer groups, This
can drive up he marketing costs, it can create logistics
problem and the over all brand image may be diluted if the
brand message is too varied across groups.
Individual Marketing: Tailoring products to fit the needs
and preferences of individual customer – ‘customized
marketing’ , ‘one to one marketing’ – Mass customization
This helps smaller companies stand out against larger
competitors.
Mass customization has made customer relationships very
important
Self marketing is coming into play where customers are
taking more responsibility for their choices.
Choose a Target Marketing Strategy
Factor
Strategy
Company Resources are low Concentrated Marketing
Product Variability is low
Undifferentiated marketing
Product life cycle stage is
‘new product’
Undifferentiated or
concentrated marketing
Product life cycle stage is
mature
Differentiated marketing
Market Variability is low
Undifferentiated marketing
Competitors Marketing
Strategy – if undifferentiated
Differentiated or
Concentrated.
In target marketing the issue is not who is targeted but rather how and for
what the audience is targeted - Socially responsible target marketing
comes into play.
Market Positioning
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Once the segments have been evaluated, selected
and targeted. Now the company must work on
positioning its product in the mind of the customer.
Product position is the way the product is defined by
the consumer on important attributes , or the place a
product occupies in the mind of a consumer relative
to competing products.
Positioning helps to simplify the buying process and
the customer does not have to re-evaluate the
products status.
Marketers must plan their ‘product position’ to gain
maximum advantage.
price
Perceptual
positioning maps
show the
consumer
perceptions of
their brands
versus competing
products on
important buying
dimensions. The
position of each
circle indicates
the brands
perceived
positioning on two
different
dimensions and
the size indicates
the brand’s
relative market
share.
luxury
Performance
orientation
Choosing a Positioning
Strategy
1.
Identifying a set of possible competitive
advantages upon which to build a position.
2.
Choosing the right competitive advantage.
3.
Selecting an overall positioning strategy.
Identifying possible
competitive advantages
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Competitive advantage can be gained
through:
Product Differentiation
Services Differentiation
Channel Differentiation ( how products get
to customers)
People Differentiation
Brand Differentiation ( Ritz Carlton, Nike,
UPS)
Choosing the Right
Competitive Advantage
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How many Differences to promote – USP, you could promote one or
two competitive attributes but be careful not to promise to many things
because there is a risk of disbelief and loss of clear positioning.
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Which Differences to promote – your brand may have several
attributes but its is important to know which ones are meaningful
enough to communicate to the customers, henceforth a difference is
worth establishing to the extent that is satisfies the following criteria:
1. Important – perceived as a highly valued benefit to target buyers
2. Distinctive – not offered by competitors
3. Superior – Superiors to others
4. Communicable – is visible to the buyers
5. Preemptive – cannot be easily copied
6. Affordable – Buyers can afford to pay for the difference
7. Profitable – the company can introduce the difference profitably
Value Proposition
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The full positioning of a brand – the full mix of benefits upon
which it is positioned.
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Value Proposition (VP) is the answer to the customer’s question “
Why should I buy your product instead of the competitor’s?”
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VP is how a company will differentiate and position it self in the
marketplace
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VP is the set of benefits or value the company promises to
deliver to consumers to satisfy their needs.
Selecting an overall
Positioning Strategy
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Price
Mfs – 40 rs main 20%
ziyada
Mfl-30 rs main 1.5 ltr
more
The same
less
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benefits
more
The same
less
More
for
more
More for More
same
for less
The
same
for less
Less
for the
less
The five blue cells
represent winning
value propositions,
where as the
orange cells
represent the
losing value
propositions. The
center yellow cell
represents at best
a marginal value
proposition.
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More for more involves providing the most upscale
product or service and charging a high price to cover
the costs.
More for the same is when a brand is introduced
offering comparable quality but at a lower price.
More for less is quite a winning proposition.
The same for less is also a powerful proposition
because everyone likes a good deal.
Less for much less is for the market which always
exists to take products that offer less and therefore
cost less.. This involves meeting consumer lower
performance or quality requirements at a much
lower price.
Develop a Positioning
Statement
The statement should follow the form:
To (target segment and need) our (brand) is
(concept) that (point of difference)
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Good marketers promise their customers only
what they can deliver and then over-deliver
and delight their customers.