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Lecture 5

COMM 131 Lecture 5: Week 3, Session 1

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Queen's University
COMM 131
Nicole Robitaille

Session 1 Chapter 7: Segmentation, Targeting, and Positioning (Pg. 258-276) Requirements for Segmentation 1. Substantial: The market segments are large or profitable enough to serve. 2. Measurable: The size, purchasing power, and profiles of the segments can be measured. 3. Accessible: The market segments can be effectively reached and served. 4. Actionable: Effective programs can be designed for attracting and serving the segments. 5. Differentiable: The segments are distinguishable and respond differently to different marketing-mix elements and programs. Market Targeting Market segmentation reveals the firm's market segment opportunities. The firm has the evaluate the various segments (1) and decide how many and which segments it can serve best (2). Evaluating Market Segments When evaluating, a firm must look at three factors: 1. Size and Growth a. Company must first collect/analyze data on current segment sales, growth rates, and expected profitability. b. "Right size and growth" is RELATIVE. Fastest growing segments aren't always the most attractive. 2. Structural Attractiveness a. # and aggressiveness of competitors. b. Existence of actual/potential substitute products. c. Power of buyers, buyers w/ strong bargaining power will try to force prices down, demand more services, and set competitors against each other. d. Powerful suppliers, (makes segment less attractive). They control prices and reduce quality/quantity of goods. 3. Company Objectives and Resources a. Some segments will be dismissed if they don't mesh with the company's long-run objectives. b. Company should only enter segments in which it can create superior customer value/gain a competitive advantage. Selecting Target Market Segments After evaluating, company must decide which and how many segments it will target. • Can be carried out at different levels (broadly, narrowly, or in between). Market Targeting Strategies Undifferentiated Mass BROADLY Marketing Differentiated Marketing Segmented Concentrated Marketing Niche Micromarketing Local/Individual NARROWLY Marketing Target Market: A set of buyers sharing common needs or characteristics that the company decides to serve. 1. Undifferentiated Marketing (Mass): Firm decides to ignore market segment differences and go after the whole market with one offer. a. Focuses on common needs of consumers rather than different needs. 2. Differentiated Marketing (Segmented): Firm decides to target several market segments and designs separate offers for each. a. Ex. Toyota produces many different car brands (Yaris to Lexus). b. Companies hope for higher sales/stronger position in each market segment. c. Stronger position within several segments creates more total sales than undifferentiated marketing across all segments. 3. Concentrated Marketing (Niche): A firm goes after a large share of one or a few segments/niches. a. Firm achieves a strong market position because of greater knowledge of consumer needs in the niche it serves. b. Markets more effectively by fine-tuning its products/prices/programs. c. Markets more efficiently, targeting products, channels and communication toward only the consumer it can serve best/most profitably. d. Attracts only a few competitors. 4. Micromarketing: Tailoring products and marketing programs to the needs/wants of specific individuals and local customer segments (local marketing/individual marketing). a. Local Marketing: A small group of people who live in the same city, neighbourhood, or who shop at the same store. b. Individual Marketing (mass customization): Tailoring products/programs to the needs and preferences of individual customers. i. Ex. Custom-made suits, specifically designed shoes, furniture to order, custom-configured computers. Choosing a Target Strategy Which strategy used depends on: 1. Company resources a. Limited resources, concentrated marketing makes the most sense. 2. Product Variability a. Undifferentiated marketing is better for uniform products (ex. Grapefruit or steel). b. Products that vary in design are better for differentiation/concentration. (ex. Cameras and cars). 3. Product's Life Cycle a. May be practical to launch only one version = undifferentiated marketing/concentrated marketing. 4. Market Variability a. If most buyers have the same taste = undifferentiated marketing. 5. Competitors' Marketing Strategies a. If competitors use differentiated/concentrated marketing, undifferentiated marketing can be suicidal. b. Conversely, if competitors use undifferentiated marketing, using differentiated/concentrated marketing can be advantageous by focusing on the needs of buyers in segments. Socially Responsible Target Marketing Target marketing can create controversy/concern. Issues: • Targeting vulnerable/disadvantaged consumer with controversial or harmful products. o Ex. Marketers are criticized for their efforts directed towards children. (Don Cherry, kid hockey icon, I Molson Commercials). • Marketing of adult products spills over into the kid segment. (Pink is for 18-30 year olds, worn by girls that are 11). Issue is not who is targeted but how for what. Differentiation and Positioning Beyond deciding what segments to target, the company must decide on a value proposit
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