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Ch.9 Segmentation, Target Marketing, And Positioning

by: Alora Lornklang

Ch.9 Segmentation, Target Marketing, And Positioning MKTG 3650

Marketplace > University of North Texas > Marketing > MKTG 3650 > Ch 9 Segmentation Target Marketing And Positioning
Alora Lornklang
GPA 3.5

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These notes will cover Ch. 9 of the Textbook.
Foundations of Marketing
David Strutton
Class Notes
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This 10 page Class Notes was uploaded by Alora Lornklang on Thursday March 31, 2016. The Class Notes belongs to MKTG 3650 at University of North Texas taught by David Strutton in Spring 2016. Since its upload, it has received 21 views. For similar materials see Foundations of Marketing in Marketing at University of North Texas.

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Date Created: 03/31/16
MKTG 3650 Foundations of Marketing Practice Segmentation, T arget Marketing, and Positioning Market Segmentation, a Prerequisite to Success  When engaging in market segmentation, Firms deliberately aggregate “similar”  consumer or business consumers.   Specifically, Firms divide:  o Larger groups of potential customers into smaller groups of actual or  potential B2B or B2C customers.  o More heterogeneous groups into more homogenous groups of potential or  actual B2C or B2B customers.  o Larger masses of potential or actual customers who are less alike into  smaller collections of potential or actual customers who are more alike.   These groups or collections of potential or actual customers are called either  segments or market segments.   Members of market segments generally resemble each other in terms of their  beliefs and attitudes; incomes, educational levels, or zip codes; or lifestyle  preferences is absolutely crucial.   The membership of these segments will usually o Prefer or reject similar products o Respond more favorably or unfavorably to the same product values and/or promotional messages  React in similarly receptive or unreceptive ways to the same pricing strategies  Prefer to shop/not shop through the same retailing channels  Smart marketing managers understand: o They cannot successfully appeal to all customers or all segments at the  same time using the same mktg mix strategies o They should be choosy about the consumers or organizations with whom  they seek to develop lasting relationships.  o No such thing as a mass market exists anymore in the US.  Target Marketing, a True Money-Maker  Don’t just fish where the fish are. Instead, you should fish where the fish are more likely to take your particular bait.   Target marketing entails evaluating each of the various segments that the Firm  has identified and then deciding, based on these evaluations, which segments to  pursue.  Positioning: Why Firms Segment and Target in the First Place  Firm’s typically target two or three or more customer segments Defining and Developing Positions  Once targeted segments have been selected, the next step is to create a unique and uniquely desirable market position in the minds of the prospects or customers who comprise the respective targeted segments.   A position is the mental image that customers or prospective customers develop  and hold about specific products, brands and organizations.   A marketing mix management approach that determines, develops, and delivers  the unique values—or customer solutions—that the Firm: o Builds into new products or adds to existing products o Communicates and emphasizes about its products o Integrates into how its products are priced o Conveys to targeted customer segments through its supply chains and  marketing channels Two Perspectives on Positioning The Customer Perspective  From the customer’s perspective, positioning may be described as how customers  or potential customers define a product/brand based on its most important  attributes.  The Marketer Perspective   The act of positioning entails the art of implanting their products’ unique benefits  and differences; i.e., the brand’s differentiating value, in the collective minds of  targeted customers.   The Firm’s primary positioning goal is to differentiate a brand by building unique  bundles of benefits that differentially and favorably appeal to a substantial portion of the prospects or customers who make­up a targeted segment. Customers Are Doing It For Themselves   Marketers should “do positioning to customers” before customers “do positioning  to them.” Unique Means Unique, and the Meaning is Important  Unique means the “sole,” the “one,” or the “one and only.”   Things are either unique or they’re not.   When positioning within a given target segment, a unique marketing mix, a mix  designed to deliver unique benefits, values and solutions in the accurate sense of  the word, must be designed for each targeted segment.  The Role Played by Marketing Opportunity Analysis  MOAs involve scanning the environment to identify potentially profitable  markets that a Firm is currently able to successfully serve.   The MOA process requires that Firms define and analyze broader product­ markets and any submarkets that may exist within this broader market.   Marketers must identify smaller, more homogenous market segments for which  they develop specialized values and marketing programs.  Segmentation in Action  Haley characterized the overall toothpaste market as a broad, heterogeneous  product­market.   Given the heterogeneous nature of the toothpaste market, no single brand or  associated marketing program could possibly serve the entire market effectively.  Market Segments “Levels” Exist  The process of market segmentation begins by defining the overall mass market  or total product­market, such as the fitness product­market.   The Firm’s core goal during segmentation is to identify groups of customers  within the total product­market that are homogenous in terms of their needs;  problems, particularly of the unsolved variety; and purchasing­related  characteristics. Mass Markets, Mass-Marketing, and the Production Concept  Firms opt to target the “average buyer” in the mass market with a single  marketing program.  o This is called market­aggregation or undifferentiated­marketing targeting strategy.   Mass marketing is rooted in, and complements, the production concept.  o This concept assumes quality products that are priced right will sell  themselves.  When Does Mass Marketing and Targeting Make Sense?  Mass marketing is appropriate when the product category does not easily lend  itself to brand differentiation.  Pros and Cons of Targeting a Mass Market  Product differentiation can create brand preferences and reduce the degree to  which consumers use price as a major criterion for choosing between brands.   The greatest potential drawback to mass marketing is that customer wants and  needs may prove too diverse to employee the “one­size­fits­all” segmentation and targeting strategy.   Firms engaged in mass marketing are also more susceptible to fierce price  competition that undermines all Firms’ profit margins.  Market Segments within Mass Markets (Macro-segments)  Market Segments can be regarded and treated as large identifiable subgroups  that are split out from the mass market.   Consumers within segments tend to have overlapping wants, needs, and  purchasing­related characteristics and the marketer’s task is to find the key  dimensions on which consumers overlap and then create marketing programs that  target and appeal to these similarities.  Niches (Micro-Segments)  When macro­segments are further segmented, they become micro­segments, or  niches because each contains consumers that are significantly more similar to one  another with respect to customer needs and purchasing­related characteristics than were their parent segments.   By focusing the Firm’s limited marketing resources on satisfying the specific  needs of more precisely defined market segments, a differential advantage can be  obtained that cannot easily be matched by competitors.  Bases for Segmenting Consumer Markets  Before Firms can effectively create market segments they must determine the  customer characteristics or variables that will best “discriminate”—or distinguish  or separate—one segment from another.   The variables employed to segment markets also must reflect those characteristics that allow customers in the segments to respond favorably to the marketing mixes  tailored to those segments.  Geographic-Based Segmentation  Geographic segmentation entails dividing larger market areas into smaller more  precisely delineated areas defined by geographic location.   Geographic segments are established by dividing larger geographic markets using  existing political boundaries or population boundaries.  Demographic-Based Segmentation  Demographic segmentation occurs when one or more demographic traits are  employed to subdivide a market.   Demographic segmentation is widely employed and is probably the most poplar  form of segmentation for three reasons:  o Consumers with similar demographic profiles often have similar needs,  wants, and product/brand preferences.  o Demographic data are easy to obtain o Demographic segmentation is commonly employed because it works so  well in combination with other segmentation bases.  Segments Based on Age Differences   Marketers create age segments by grouping consumers based on age ranges.  Segments Based on Gender Differences  Gender has long been used for segmenting markets for clothing, hairdressing  products, cosmetics, and magazines.   Marketers utilize their knowledge of gender differences to tailor different  products and promotional programs to each gender category.  Segments Based on Income Differences  Income segmentation will more likely be used for products such as automobiles,  boats, clothing, cosmetics, and travel.   For the more expensive versions of such products, marketers are primarily  interested in targeting higher income consumers due to their greater purchasing  power and propensity to be early adopters of new products and technologies.  Segments Based on Family Life Cycle Stage  The stage of the family life cycle segmentation approach employs a rich  composite of demographic traits to define market segments.   When segmenting based on the family life cycle, Firms specifically recognize that consumers progress through a series of life cycle stages.   The consumer membership of each family life cycle stage essentially amounts to a market segment consumer membership of each family life cycle stage essentially  amounts to a market segment that possesses different wants, needs and problems,  and differing product/brand preferences.  Psychographic Based Segmentation  Psychographics, consisting primarily of lifestyle and personality traits, are  frequently used as segmentation bases.   Lifestyle segments emphasize differences in how people choose to live their lives, what they choose to do in their free time.   Marketers target products or services based on different patterns of lifestyle  behaviors.   Lifestyle patterns of behaving are uncovered through survey research in which  consumers are asked to report their activities, interests, and opinions.  Consumer Behaviors-Based Segments  Segments based on product usage rates typically divide consumers of a given  product into non­, light­, moderate­, and heavy­users.   When creating market segments based on product usage occasion, the emphasis is on identifying different consumption situations or purchase occasions under  which the product is consumed.  When segmenting consumers by the degree to which they are brand loyal, Firms  can determine the characteristics of loyal vs. non­loyal customers for their brands  and for those of its major competitors.   Brand loyalty often is defined based solely on consumers’ patterns of repeat  purchase behavior. Consumer Preference or Predisposition-Based Segments  Markets can be segmented based on differences in wants, needs, and attitudes of  consumers.   Firms who target benefit segments focus first on identifying and then on  satisfying the differing wants and needs that characterize the consumers who  constitute each segment.  Bases for Segmenting Organizational Markets  Organizations face different marketing challenges depending on geographic  locations of their customers  Nested segmentation mans that a number of segmentation bases are applied  hierarchically to more precisely define key market segments.   Structural characteristics such as customer industry type, organization size, and  the type of technology employed to drive customers’ business models can be used to segment organizational behaviors.  Methods For Creating Market Segments  HAS: hierarchical structures analysis Customer Based Approach to the HSA  With this technique, marketing managers employ their own judgment to decide  how larger aggregate markets should be broken up into small sub­markets or  market segments.  The Product-Based Approach to HSA  The objective of this approach is to ultimately identify relevant branded product­ markets in which the Firm competes.   Marketing managers use product­based HSA to define their “competitive set.” Profiling Market Segments  The major descriptors that are used to characterize consumer segments generally  include their demographics, psychographics, needs and attitudes, geographic  location, and media­graphics.   Demographics: o The standard demographic traits (age, income, education, occupation,  etc.).  o Demographics are crucial for fully profiling customers in market segments at any level.   Psychographics o Consist of preferred lifestyle traits and enduring personality traits.  Lifestyle traits capture consumers’ whole patterns of acting and interacting with other people and with various stimuli throughout the world.  o Personality captures unique psychological characteristics that lead to  consistent and enduing responses to events or marketing stimuli as each  arise in consumers’ environments.  o Normally developed through surveys (AIOs)  Attitudes: o Consistent and deeply­held consumer evaluations and tendencies to  respond favorably or unfavorably toward particular ideas, objects,  experiences, or people  Geographics: o Typically are used to tell us where customers live and where they shop  Media­Graphics: o Describe consumers’ media viewing habits and preferences Requirements for Effectively Segmenting Markets Homogeneous Within, Heterogeneous Between   Consumers within segments should share similar wants and needs that are  germane to the targeted product. (Homogeneous within)  By contrast, these customers should be distinctly different from customers who  populate other segments on these dimensions. (Heterogeneous between) Large, Measurable, and Profitable Enough   The size, purchasing power, and customer profiles associated with the market  segment must be large enough and measurable.   Market potential is a function of both the number of potential customers and  their product purchase rates.   Sales potential, by contrast, is a best­case estimate of the Firm’s possible share of the market potential.   Profit potential estimates readily follow from the initial two estimates.  Accessible through Communications and Distribution Channels  Firms must be able to effectively and efficiently reach those segments it has  chosen to target.  o Firms must assure the existence of the appropriate distribution and  communications channels required to reach customers in their target  markets.   Marketers must identify the right media to communicate with customers in market segments  Actionable   Firms must have adequate resources and expertise to ensure segments are  properly served; ideally in a manner superior to their competitors.   This might entail possessing the resources making it possible to gain access to the  right supply chains, logistics systems and financial services.  Market Targeting/ Target Marketing  The market targeting decision entails decisions about which market segments,  among those identified during the segmentation process, to pursue.   Undifferentiated Targeting  o One generic marketing program for all segments combined  Differentiated Targeting  o Multiple programs for a number of different segments  Concentrated  o A focused marketing program for a single segment o Target niche segments  Custom o Treat each customer as unique with a dedicated marketing mix Market Positioning  Market positioning (brand positioning) is essential for effective marketing  A well­conceived positioning strategy can earn a substantial customer following,  insulate the Firm from competition, and enhance the Firm’s profit picture by  permitting the Firm to raise overall prices.   The objective is to select the strategy that provides the brand with a distinct  personality or image (brand image) that can yield a differential competitive  advantage in the market.  Positioning Methods  Competitive­Based Positioning o Entails using customers’ existing perceptions of the Firm’s competitors’  brands as the basis from which to build and to eventually differentiate the  brand’s image.   Benefit­Based Positioning o Emphasizes the brand’s ability to satisfy specific needs that customers  may have.   Lifestyle­Based Positioning o Seek to establish or exploit relationships that already exist between the  desirable lifestyle and targeted consumer’s ideal or actual self­concept.   Usage­Based Positioning  o Usage­based positioning requires that an image be created for the brand  that strongly suggests when the brand should be used.   Price and Value­Based Positioning  o Price positioning  Usually means establishing a low price image for the brand .  o Value positioning  Can result in prices that are higher than the prices charged by  competitors.   The key to positioning on value is to maximize the ratio of benefits received to the total cost of the brand. Perceptual Mapping: A Tool for Assessing and Managing Positions  The process known as perceptual mapping offers a useful tool for ascertaining a  brand’s position relative to its competitors.  Developing Positioning Strategies: The Process  The ability to develop, manage, and strengthen the brand positioning process if  critical to any Firm’s success, survival, and longevity.  Step 1: Determine Brands in the Competitive Set   Step 2:  Determine Position Relative to Competing Brands   Step 3: Identify Important Areas of Competitive Differences  o Image differences, which imply the existence of distinct or unique brand  personalities that may result from the use of brand marks, logos, or trade  characters.  o Benefit or attribute differences of the sort that would confer functional  superiority to the particular brands that featured them  o Service differences of the sort that create a total service package, one that  is uniquely superior to services provided by competitors o People differences can be emphasized when a Firm’s human resources  constitute a distinct asset that can leveraged to create a superior position.   Step 4: Develop the Marketing Mix to Convey the Desired Position  Step 5: Re­evaluate the Position over Time Repositioning  Repositioning occurs when a Firm strategically changes the brand’s current  image or personality.   Perceptual mapping may suggest that the brand is simply too much like other  brands targeted to the same markets.   Marketing cannibalization means stealing sales from other brands marketed by the same company.   Brands may require repositioning when key consumption­related market  characteristics, such as demographic and psychographic compositions change and  the changes degrade demand.   Repositioning may prove necessary when brands experience serious decline in  sales and/or profits in their current markets. 


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