Chapter 10: Seeking and Developing Target Marketing Differentiation Strategies

Segment marketing

A market segment consists of a group of customers who share a similar set of needs and wants. Rather than creating the segments, the marketer's task is to identify them and to decide which one(s) to target. Segment marketing offers key benefits over mass marketing.

Developing a positioning strategy

A company's positioning strategy depends on the existing strength or weakness of their brand and their competitive intent. If the market is under supplied - a sellers' market - then the volume competitors may be content to pursue the same positioning strategy.

Niche marketing

A niche is a more narrowly defined customer group seeking a distinctive mix of benefits or values. Marketers usually identify niches by dividing a market segment into subsegments. Internet niching

Developing and communicating a differentiation strategy

Cost leadership Distinctive superior quality Cost leadership and differentiation

Bases for segmenting business markets

Business-to-business (see Chapter 8) markets can be segmented with variables that are used in consumer markets, such as geography, benefits sought and usage rate, together with some extra ones. Demographic 1 Industry: Which industries should we serve? 2 Company size: What size companies should we serve? 3 Location: What geographical areas should we serve? Operating variables 4 Technology: What customer technologies should we focus on? 5 User or non-user status: Should we serve heavy users, medium users, light users or non-users? 6 Customer capabilities: Should we serve customers needing many or few services? Purchasing approaches 7 Purchasing-function organisation: Should we serve companies with highly centralised or decentralised purchasing organisation? 8 Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on? 9 Nature of existing relationship: Should we serve companies with which we have strong relationships or simply go after the most desirable companies? 10 General purchasing policies: Should we serve companies that prefer leasing? Service contract? Systems purchases? Sealed bidding? 11 Purchasing criteria: Should we serve companies that are seeking quality? Service? Price? Situational factors 12 Urgency: Should we serve companies that need quick and sudden delivery or service? 13 Specific application: Should we focus on a certain application of our product rather than all applications? 14 Size of order: Should we focus on large or small orders?

Distinctive superior quality

Companies can also seek a competitive advantage from successfully creating a strong market- perceived value for their market offerings. Such companies are providing the market with the right quality attributes (performance, reliability, design, novelty etc.)

Cost leadership

Firms can gain a positive advantage in markets by developing and sustaining cost/efficiency gains. This cost-based approach can prove to be a winning strategy provided that a company offers an acceptable substitute to competitive offers from a reduced cost base.

Bases for segmenting consumer markets

Geographic segmentation Demographic segmentation Psychographic segmentation Behavioural segmentation

Geographic segmentation

Geographic segmentation calls for dividing the market into different geographical units such as nations, states, regions, counties, cities or neighbourhoods. The company can operate in one or a few areas, or operate in all but pay attention to local variations.

Behavioural segmentation

In behavioral segmentation, marketers place buyers into groups on the basis of their knowledge of, attitude towards, use of or response to a product. Decision roles Behavioural variables Occasions Benefits User status -->non-users, ex-users, potential users, first-time users and regular users. Usage rate Buyer-readiness stage Loyalty status 1 Hard-core loyals 2 Split loyals 3 Shifting loyals 4 Switchers Attitude The Conversion Model-->The Conversion Model measures the strength of customers' psychological commitment to brands and their openness to change 1 Convertible 2 Shallow 3 Average 4 Entrenched The model also classifies non-users: 1 Strongly unavailable 2 Weakly unavailable 3 Ambivalent 4 Available

Demographic segmentation

In demographic segmentation, the market is divided into groups on the basis of variables such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality and social class. One reason demographic variables are so popular with marketers is that they are often associated with customer needs and wants. Age and life cycle stage Gender Income The new consumer Generation Social class

Evaluating and selecting the market segments

In evaluating different market segments, the firm must look at two factors: the segment's over- all attractiveness and the company's objectives and resources. Single-segment concentration Selective specialisation Product specialisation Market specialisation Full market coverage undifferentiated marketing the firm ignores segment differences and trades on the whole mar- ket with one offer. differentiated marketing the firm operates in several market segments and designs different prod- ucts for each. counter segmentation--> broaden the customer base

Effective segmentation criteria

Measurable Substantial Accessible Differentiable Actionable

Creating differentiation and positioning strategies

No company can be successful if its products and services resemble every other product and offer- ing. As part of the strategic brand management process, each offering must represent a com- pelling, distinctive value offering in the mind of the target market. Positioning Establishing category membership Choosing POPs and PODs Creating POPs and PODs

Creating POPs and PODs

One common difficulty in creating a strong, competitive brand positioning is that many of the attributes or benefits that make up the points-of-parity and points-of-difference are negatively correlated. Low price vs high quality Taste vs low calories Nutritious vs good tasting Efficacious vs mild Powerful vs safe Strong vs refined Ubiquitous vs exclusive Varied vs simple Unfortunately, consumers typically want to maximise both the negatively correlated attributes or benefits.

Choosing POPs and PODs

Points-of-parity are driven by the needs of category membership (to create category POPs) and the necessity of negating competitors' PODs (to create competitive POPs). Two important con- siderations in choosing points-of-difference are that consumers find the POD desirable and that the firm has the capabilities to deliver on it

Positioning

Positioning is the act of designing the company's offering and image to occupy a distinctive place in the minds of the target market.43 The goal is to establish the brand in the minds of consumers in order to maximise the potential benefit to the firm. Competitive frame of reference: - A starting point in defining a competitive frame of reference for a brand positioning is to determine category membership Points-of-difference - Points-of-difference (PODs) are attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand. Points-of-parity - Points-of-parity (POPs), on the other hand, are associations that are not necessarily unique to the brand but may in fact be shared with other brands.48 These types of associations come in two basic forms: category and competitive. Points-of-parity versus points-of-difference - For an offering to achieve a point-of-parity on a particular attribute or benefit, a sufficient number of consumers must believe the brand is 'good enough' on that dimension. With points-of-difference, however, the brand must demonstrate clear superiority. Consumers must be convinced that Louis Vuitton has the most stylish handbags, Duracell is the longest- lasting battery, and Crédit Lyonnais offers the best financial advice and planning.

The purpose of positioning

Professional positioning is of benefit to a supplier as it enables a company to invest its resources and skills in the right marketplace. As such it is both an effective and efficient strategy. The right market offering is being placed on the market and professional know-how is applied to achiev- ing this cost effectively.

Psychographic segmentation

Psychographics is the science of using psychology and demographics to better understand consumer market consumers. In psychographic segmentation buyers are divided into different groups on the basis of psychological/personality traits, lifestyle or values. 1 activities 2 interests 3 opinions. The four groups with higher resources are: 1 Innovators 2 Thinkers 3 Achievers 4 Experiencers The four groups with lower resources are: 1 Believers 2 Strivers 3 Makers 4 Survivors

Levels of market segmentation

Segment marketing Niche marketing Local marketing Individual marketing

Establishing category membership

Target customers are aware that Chanel is a leading brand of cosmetics, Nestlé is a leading brand of cereal, Accenture is a leading consulting firm, and so on. Often, however, marketers must inform consumers of a brand's category membership. Perhaps the most obvious situation is the introduction of new products, especially when category identification itself is not apparent. Straddle positioning: - Occasionally, a company will try to straddle two frames of reference. While a straddle positioning is often attractive as a means of reconciling potentially conflict- ing consumer goals and creating a 'best-of-both-worlds' solution, it also carries an extra burden. Communicating category membership: - 1.Announcing category benefits: To reassure consumers that a brand will deliver on the fun- damental reason for purchasing a category, marketers frequently use benefits to announce cat- egory membership. 2 Comparing to exemplars. Well-known, noteworthy brands in a category can also help a brand specify its category membership. 3 Relying on the product descriptor. The product descriptor that follows the brand name is often a concise means of conveying category origin.

Local marketing

Target marketing is leading to marketing programmes tailored to the needs and wants of local customer groups in trading areas, neighbourhoods, even individual stores.

Cost leadership and differentiation

The third option is to combine both cost reduction and quality advantages.

Individual marketing

The ultimate level of segmentation results in 'segments of one', 'customised marketing' or 'one- to-one marketing'.7 Today customers are taking a more individual initiative in determining what and how to buy.

Market targeting

There are many statistical techniques for developing market segments and targeting. Talent hits a target no one else can hit; genius hits a target no one else can see. Effective segmentation criteria Evaluating and selecting the market segments Additional considerations 1 Needs-based segmentation 2 Segment identification 3 Segment attractiveness 4 Segment profitability 5 Segment positioning 6 Segment 'acid test' 7 Marketing-mix strategy

Differentiation strategies

To avoid the commodity trap, marketers must start with the belief that you can differentiate any- thing. Competitive advantage is a company's ability to perform in one or more ways that competitors cannot or will not match.A leverageable advantage is one that a company can use as a springboard to new advantages, much as Microsoft has leveraged its operating system to Microsoft Office and then to networking applications. Customers must see any competitive advantage as a customer advantage. • Personnel differentiation - Companies can have better-trained employees. • Channel differentiation - Companies can more effectively and efficiently design their distri- bution channels' coverage, expertise and performance. • Image differentiation - Designer jewellery (Cartier).

What can positioning analysis do for a company's business?

To position market offerings/products/services in increasingly crowded markets, companies must understand the dimensions along which target customers perceive products in a category and how they view the firm's offer relative to competitive offers. • How do customers (current or potential) view their brand? • Which competitive brands do customers perceive to be their closest competitors? • What market offering and company attributes are most responsible for these perceived differences?

Repositioning

Today's markets are highly competitive and volatile so companies need to be prepared to make both proactive and reactive positioning decisions as market conditions dictate • New market categories appear • A competitor launches a market offering that is as good as or better than the existing company's brand • An initial launch error

Additional considerations

Two other considerations in evaluating and selecting segments are segment-by-segment invasion plans and ethical choice of market targets. Segment-by-segment invasion plans -A company would be wise to enter one segment at a time. Competitors must not know what segment(s) the firm will move to next Ethical choice of market targets -Marketers must target segments carefully to avoid consumer backlash. Some consumers may resist being labelled. Single people may reject single-serve food packaging because they don't want to be reminded they are eating alone.

Perceptual or positioning mapping

What can positioning analysis do for a company's business? Positioning maps Developing a positioning strategy

Positioning maps

When a perceptual or positioning map is plotted two dimensions are commonly used. Low price vs high high price Low quality vs High quality