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Chapter 9

MKC1200 - Chapter 9 (week 5).docx

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Dr Maya Mandery

MARKET SEGMENTATION, TARGETING AND POSITIONING MARKET SEGMENTATION – it is the division of the market into groups of buyers who might require separate products or marketing mixes. MARKET TARGETING – it is the evaluation of each segment in the market based on attractiveness and choosing one or more segments to enter. DIFFERENTIATION – it is the creation of special market offerings to satisfy the needs of the target market MARKET POSITIONING – it is the creation of a clear and attractive image in the minds of the target market about the product. WHY IS MARKET SEGMENTATION IMPORTANT 1) Marketing increases the effectiveness and the efficiency of production 2) It enables tailoring of a marketing mix to match the target market’s unique needs 3) It prevents allocation of resources to segments that will never become customers. 4) The segment members will respond in the same way to the same marketing mix. 5) It increases number of satisfied customers with fewer offers. SEGMENTING CONSUMER MARKETS 1) Geographic segmentation – it is the division of the entire market into smaller geographical units like countries, states, neighbourhoods, suburbs etc. Eg. Hilton in Sydney is more sleek and cosmopolitan while Hilton in Hawaii is more open, airy and relaxed. Mobile marketing – marketing done through any mobile electronic devices. Location-based marketing or geomarketing – marketing done according to the location of the customer. 2) Demographic segmentation – it is segmentation of the market based on the age and lifecycle stage, income, gender, religion and other traits. a) Age and life-cycle stage – the needs of the consumer market change as they grow older and are in different life-cycle stages. Most marketing is aimed at towards the adult population between 18-35 and the population above 55 is often ignored even though they make up 39% of the nation’s wealth b) Income – the wants of the segments differ when divided among the income. Some people prefer cheap products and shops like Kmart target that segment while shops like Louis Vuitton target the richer end of the population. c) Gender – it is obvious that women prefer different things to men. Pubs are increasing becoming more women-oriented by providing booths, clean toilets and girly nights. d) Multivariate demographic segmentation – focusing on just one aspect of the demography is not a smart to segment the market. Usually a combination of factors is used to create a good segment. For example targeting women as the main customers of RSL clubs is too vague. However when segmented with more detail, like single women around age of 50, it focuses its efforts on a clearer segment. 3) Psychographic segmentation – dividing the market into different groups based on their psychological/personal traits, lifestyle, social class and values. Examples include newly married couples, single households, university students etc. 4) Behavioural segmentation – dividing the market into groups based on the consumers knowledge of the product, their attitude towards it, the way they use it and their responses to it. a) Usage rate – depending on the number of the times the customer purchases the product. There could be light, medium and heavy users. b) User status – the market could be divided into non-users, potential users, first time users and regular users of the product. c) Loyalty status – the market could be divided into how loyal the customers are ranging from being completely loyal, somewhat loyal to not at all loyal. d) Buyer readiness stage – the market will include people from different stages including being unaware of the product, being aware and being interested in buying the product. e) Attitude towards product – whether there is a positive or negative attitude towards the product and how to change the negative attitudes into positive by checking the cause of the negative attitude. f) Purchase occasions – different occasions to purchase different products. Christmas decorations are bought only during Christmas time, high demand for scary costumes in Halloween. g) Benefits sought – dividing the market depending on the different benefits that consumers expect from the product. Herbal toothpastes are for people who don’t want to use artificial ingredients, whitening toothpastes are for people who want shiny white teeth, and fresh smelling toothpastes are for people who want fresh and good breath. h) Online behaviour – the behaviour of the consumers is targeted online to provide relevant advertising. Also the posts on social networking sites are watched. Positive feedback is appreciated and encouraged and negative feedback is evaluated and changed. REQUIREMENTS OF EFFECTIVE SEGMENTATION 1) Measurable – the size and purchasing power of the different segments must be measured. For example there is a substantial amount of left handed people but only a few products made for them. 2) Accessible – the segment must be effectively reached and served. For example a company wants to sell its perfumes to single women that socialise a lot. Unless it can find a particular area where they live or shop, the segment is of no use. 3) Substantial – the segment must be large enough to cover costs and make a profit. It wouldn’t be practical if a car manufacturer made cars for people who are 220cm in height or more. 4) Differentiable – the needs of the segment must be different. For example if the marketers separately markets milk for men and women it would be worthless as they both have the same need and want the same product. 5) Actionable – effective programs must be able to be designed for the different segments. For example a small airline company cannot reasonably target seven segments in the population. TARGET MARKET – a set of buyers in the market sharing the same needs or characteristics that the company decides to serve EVALUATING MARKET SEGMENTS 1) Segment size and growth – the different segments need to be evaluated by collecting data on current dollar sales, future sales growth rates and estimated profit margins. The right size and growth rate is a relative matter. It is assumed that all companies prefer huge current dollar sales, growth rates and profit margins. However the largest segment is not always the best option and for small companies, targeting a smaller segment with less competition might be a better option. 2) Segment structural attractiveness – it is not enough to have a segment with a decent size and growth rate, the profitability of each segment must be evaluated. Factors like large number of competitors, a large number of substitute goods, a high bargaining power of customers and a strong power from the suppliers has an adverse effect on the attractiveness of a segment. 3) Company objectives and resources – after a segment with good size and growth rate, with high profitability is chosen, it must be checked to see if the segment is in accordance with the objectives of the company. Also the company needs to make sure that it is able to get hold of the required resources to satisfy the needs of the segment. SELECTING TARGET MARKET SEGMENTS 1) Undifferentiated marketing – this form of marketing doesn’t focus on dividing the market into segments and provides a common product to the entire market. It provides economies of scale. It can be used when the needs of th
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