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MKTG 2030 Chapter Notes -Customer Development, Brand Management


Department
Marketing
Course Code
MKTG 2030
Professor
Neil Smith

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MKTG CHAPTER 3: MARKET SEGMENTATION AND POSITIONING
THE CONCEPT OF SEGMENTATION
- In our complex society, everyone has different needs and priorities in products
- Understanding these needs is complex because technological and cultural advances
- Market fragmentation: occurs when peoples diverse interests and backgrounds have divided them
into different groups with distinct needs and wants
o Ex. Sports shoes went from being divided into athletic and non-athletic to all sorts of
different athletic needs (jogging, basketball, soccer ... skateboarders vans, airwalk, DC)
- Target marketing strategy: instead of trying the sell the same thing to all customers they divide the
total market into different segments based on customer characteristics, select one or more
segment, and develop products particular to that segment
- Five step process :
1. Select markets:
Define your market
Understand customers’ needs and wants, benefits and features sought, purchase
and consumption behaviour
2. Market segmentation
Identify groups: geographic, behavioural, psychographic and demographic
segmentation
Describe and profile the groups: who, what, when, where, why
3. Market targeting
Evaluate segment attractiveness: size growth, strategic fit, competitive/comparative
advantage, level of competition/defendability
Decide which ones to target
4. Market positioning
How to compete, be differentiated, and be known for value creation
5. Create and execute marketing mix programs
- Segmentation: dividing a larger market into subgroups with fairly homogeneous needs and wants
that and between groups would have very different N&W and would find different products and
marketing programs appealing
o Key groups are chosen (target), decisions on how they want to brand they product
(positioning), and design marketing programs with products that uniquely appeal to target
Selecting and Segmenting a Market
- Challenge of a market strategy is knowing what market you’re in and which u should be segmenting
o Decision is done at exec level (strategic planning) of an organization
Criteria for identifying market segments
1. Similar enough within the group
Sane needs and wants
2. Different enough between the groups
Segment differences should be actionable (diff product, pricing, distribution...)
Without such differences, firms may use mass marketing strategy (ex. Useless to
develop separate lines of skin care for working and non-working women if they
have the same needs)
3. Large enough

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Judgement call
Depends on company size
4. Measurable market
People in segment must have purchasing power: authority/willingness/ability to
make purchase decision (low income, children, cultural/religious setbacks)
5. Reachable
Communication must be cost effective (ex. Hard to reach left handed blondies that
listen to hip-hop)
THE PROCESS OF SEGMENTATION
- Segmentation variables: bases for segmentation, can be used to group consumers into actionable
segments
- Large consumer segment can be sliced in numerous ways including: geographic, demographic,
psychological and behavioural differences
Behavioural Segmentation (approaches)
- Behaviour segmentation: Technique that divides consumers into segments on the basis of how they
act towards, feel about, or use a product or service
- Benefit (value) segmentation : segmentation approach, consumers grouped by benefits they seek in
a product category
o Ex. Restaurant convenience, fun, healthy, fine dining experience, novelty, family,
image/status, culture seekers
o Advantage: groups are seeking very diff products makes strategy design very actionable
- Product usage segmentation: groups consumers based on the amount of a product
purchased/consumed, how much its used
o 80/20 rule: 20% of purchasers typically account for 80% of sales (makes more sense to focus
on heavy users)
o Long tail : newer approach to segmentation companies can make money by selling small
amounts of items that only a few people want, provided they sell enough different items
- Usage occasions: indicator based on when consumers use a product most
Segmenting by Psychographics
- Psychographics : purchase decisions that reflect attitudes, values, interests, opinions, emotions,
personality, and lifestyles
- Psychographic segmentation: groups consumers by these variables related to psych, mental state,
or self
o Concerned with motivation to buy products
o Lifestyles are a powerful segmentation variable capture numerous behavioural,
psychographic, and demographic characteristics how people live, what they care about,
how they behave
o Products are communicated to these groups by showing how the brand supports/is
consistent with a particular lifestyle
o Ex. Apple : young, hip, unconventional outlook on life
- Some subscribe to larger services that sell info (ex. VALStm values and lifestyles: divides people
into 8 groups, 3 primary consumer motivations: ideals (knowledge and principals), achievement
(demonstrate success to others) and self-expression (social/physical activity, variety and risk))
o Based on us residents
o Others: environics, goldfarb segments (6 groups)
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Segmenting by Demographics
- Demographics: variables that describe objective characteristics of a pop or group
- Demos like age, sex, gender, income, class, family structure and so on are not often good starting
points or foundation for segmentation because in these schemes, criterion of people are no similar
enough to be offered the same products
- Ex. Music market segment by psychographics makes more sense than for ex. age or sex
- Limited to primary basis of segmentation
SEX
- Clothing, footwear, fashion, fragrance
- Socialization by sex starts at a very early age, must be responsive (pink and blue diapers)
AGE
- Diff product categories based on generation
- Less useful in brand preferences
- Baby boomers largest demographic segment in Canada
- Echo boom (gen y) : children of baby boomers, resist reading or watching TV, do everything online
o Online and guerrilla mktg techniques
- Busters (gen x) : not spending power of boomers or echoers, more entrepreneurial, want to settle
down
FAMILY STRUCTURE
- Stage of family cycle, unlikely to need same products in same quantities
INCOME AND SOCIAL CLASS
- Distribution of wealth, determines buying power
ETHNICITY
- Multicultural approach, recognizing diversity, different impacts on G&S
GEOGRAPHY
- Depend on region of country
- Geodemography: segmentation technique that combines geographic and demographics
SEGMENTING BUSINESS MARKETS
Company specific behaviour or characteristics
- How businesses and other organizations behave when devising segmentation schemes
- Operating variables: useful basis’ of segmentation, production tech used, the business customer’s
degree of technical, financial, or operations expertise and whether the prospect is a current user or
non-user of the product
- Must consider how diff customers will use products and in what quantities, different end uses
Industrial Psychographics
- Relates indirectly to organizations not to the people that work in the org
- Industrial psych: to understand buyers, help sales ppl better understand relation with clients
- Segmented by missions, goals, values, of org
ORGANIZATIONAL DEMOGRAPHICS
- Important to have market info (ex. Demand, existing customers/competition, and etc)
- Ex. NAICS (north American industry classification system)
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