Objectives

To understand:
The most important strategies used by marketers. The concept of market segmentation meaning, benefits, limitations, and applications. The fundamental principles behind market segment identification and selection. The difference between end-consumer markets (B2C) and business markets (B2B). The principal bases for segmenting consumer markets.

Objectives
To understand:
Segmentation of the market based on demographic, lifestyle, and product-related factors. The importance of positioning a brand or company to appeal to target customer segments. Niche marketing and other positioning strategies to appeal to target segments. The need for a differentiation strategy to set a brand or company apart from the competition. The basis for a value-add strategy.

Strategic Decision-Making
Target decision- deciding which customers to deal with Positioning decision- deciding how to position the company so that it appeals to these customers

The offer decision- deciding what to offer that is of value

Nature of Market Segmentation

Market segmentation divides the total market for a product or service into several segments, whose needs for a certain product/service differ.
Management selects one or more of these market segments as the organizations target market

Benefits of Market Segmentation

Satisfy customers more efficiently and effectively by:
Better identifying and satisfying customer needs Enhancing customer relationships Developing more efficient and effective marketing strategies for the many target markets a firm reaches.

Conditions for Segmentation

Basis for segmentation must be measurable and the information accessible. The targeted market segment must be accessible through existing marketing channels.

Each segment should be large enough to be profitable.

Selecting Target Segments

A target segment is a group of customers to whom a company specifically directs its marketing efforts.

Selecting customer segments is essential for the development of an effective marketing program.
Competition has intensified. Market fragmentation

Exercise
Apply what you have learned so far to the cell phone/ wireless device industry. -What segments can you identify? -How do you think each segment would be targeted with marketing activities?

Guidelines in Target Segment Selection

1. Target segments should be compatible with the organizations goals and image. Guided by our strengths, our people, and our experience, we will provide the highest-level products and services available anywhere to our customers across Ontario, Quebec and Atlantic Canada. We will be a recognized leader among North Americas information and communication technology providers, focused on making life, business, and entertainment simple for the people we serve. Bell Aliant. (2007). Retrieved from the WWW on Sept. 17, 2007 from http://bell.aliant.ca/english/about/focus.shtml.

Guidelines Continued
2. Match the market opportunity represented in the target markets with the companys resources. 3. Pursue profitable sales volume. 4. Seek a market where there are the fewest and smallest competitors. i.e. Firefly phones

Market Opportunity Analysis

The existence of an opportunity segment is identified only once a company has determined through analysis that they can offer added value at a profit.

Basis for Segmenting Consumer Markets May segment B2C market on:
Geography where they are located Demography their characteristics Psychography their attitudes and values Behaviour why/how product is used

Consider trends and their implications

Changes in a market may increase, decrease or change the usage of a product or service

Geographic Segmentation
The process of segmenting a market into geographic regions and developing a different marketing strategy for each region.

Demographic Segmentation
Dividing the population into groups according to some characteristic. Consider differences across segments based upon age, gender, family life-cycle stage, income distribution, education, occupation, or ethnic origin.

Demographic differences are easiest to observe, but are very simplistic.

The Family Life Cycle

Income
Has considerable influence on how people buy. There is an important distinction in personal purchasing power disposable and discretionary income. People spend differently at different life cycle stages and in different income groups.

Psychographic and Relationship Segmentation Psychographics- attributes relating to personality, values, attitudes, opinions, interests, or lifestyles
Combining demographics and attributes allows for richer segmentation Values are the principles that guide how we live our lives, the relative importance of which will vary between individuals Lifestyles focus on activities and interests

Psychographic and Relationship Segmentation

Segmenting markets based on the kind of relationship the customer has or wants to have with the company.
Some customers want a close relationship, others do not.

Requires a detailed understanding of the current nature and state of the relationship, and the type of relationship that the customer will find satisfying, thus increasing loyalty

Behavioral Segmentation
Involves segmenting the market based on how consumers interact with the product. Three behavioural bases:
Benefits delivered Usage rate Occasions or situations in which it is used

Deciding the Appropriate Number of Target Segments

Can choose a single segment or multiple segments The market opportunity represented by the segment must match the companys resources. The segment must represent an opportunity to produce enough sales to generate a profit. The company should select target segments where it can enjoy a competitive advantage.

How Many Segments?

Single-Segment Segmentation
Selecting a single market to target Risk: All eggs in one basket

Multiple-Segment Segmentation
Identifying two or more segments as target markets Involves developing a different approach for each

Profiling Target Segments

Purpose:
To prepare as detailed an overview as possible of the customers who make up each of the segments of interest, in terms of their demographic, psychographic, and lifestyle characteristics.

Main Premise:
The better we know the customers in each of the segments we plan to target, the more likely it is that we can put together an integrated marketing program that they will find attractive.

Positioning Defined
The use of various marketing techniques and marketing-mix variables to create the desired image and consumer perception of the company and its particular brand or group of brands, relative to other brands. Position created using marketing mix variables

Positioning Strategies
Take on the competition head-on. Occupy a gap in the market. Set a brand apart from the competition. Occupy a position of leadership. Appeal to certain lifestyle segments.

Positioning
Position against competitors.
Either in direct comparison or by trying to occupy the same position

Position by appealing to a specific target segment of the market.

The position is closely tied to characteristics of the target segment

Position on the basis of inherent characteristics.

Address a market gap or set the brand apart from obvious competitors

Perceptual Maps
A graph of how consumers perceive the competing products/ brands along two or more important dimensions.
These dimensions are uncorrelated.

Why use a perceptual map?

Assess the competitive strength of different products/brands in different segments Assess the intensity of rivalry between brands/products in a given segment Assess the opportunities for gaining a differentiated position in a specific target market segment

Task
Draw a perceptual map with the axes labelled for price (cheap and expensive) and style (practical or trendy). Look at the pictures of the car ads and place the cars on your positioning map. Do this in groups of 2 or 3.

Positioning Strategies
1. Challenge the market leader 2. Occupy a gap in the market 3. Set a brand apart from the competition 4. Occupy a position of leadership 5. Position to appeal to lifestyle segments

Repositioning
The process of moving a company, store, or brand to a new position in the minds of target customers, usually by changing its image. Results from:
Gap in market Increase in competitive activity A change in the demographic characteristics, attitudes, or values of the target consumer market

Niche Marketing
The company decides to occupy a market niche where it can be distinct and competitionweak -Four steps
1. 2. 3. 4. Identify segments that are not well-served Determine how to gain a competitive advantage Expand the niche by meeting consumer needs Defend the niche position by improving product and service offerings

Differentiation
An attempt to gain an advantage over competition by distinguishing its value proposition. Creates the impression that what the company offers is more attractive to target customers than competition.

Differentiation
Emphasizes one or a few aspects of the marketing mix: price, product, services, distribution and/or marketing communications
New focus on customer experiences
Kraft Foods

Adding Value
Companies need to develop a strategy that will set themselves apart from their competitors by adding value for the customers, which competitors have not thought of adding.
Example: Mountain Equipment Co-op