Chapter 7

Market segmentation

The dividing of the market into groups with different characteristics, behaviors and patterns that require different marketing strategies and marketing mixes

Discuss how companies differentiate and position their products for maximum competitive advantage

Once a company has decided which segments to enter, it must decide on its differentiation and positioning strategy. The differentiation and positioning task consists of three steps: identifying a set of possible differentiations that create competitive advantage, choosing advantages on which to build a position, and selecting an overall positioning strategy. The brand's full positioning is called its value proposition—the full mix of benefits on which the brand is positioned. In general, companies can choose from one of five winning value propositions on which to position their products: more for more, more for the same, the same for less, less for much less, or more for less. Company and brand positioning are summarized in positioning statements that state the target segment and need, the positioning concept, and specific points of difference. The company must then effectively communicate and deliver the chosen position to the market.

Market positioning

The positioning of market offering in a distinctive and desirable place relative to their competitors in the minds of the consumer

Market targeting

The process of evaluating different segments and choosing one or more segments to serve

List and discuss the major bases for segmenting consumer and business markets.

There is no single way to segment a market. Therefore, the marketer tries different variables to see which give the best segmentation opportunities. For consumer marketing, the major segmentation variables are geographic, demographic, psychographic, and behavioral. In geographic segmentation, the market is divided into different geographical units, such as nations, regions, states, counties, cities, or even neighborhoods. In demographic segmentation, the market is divided into groups based on demographic variables, including age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation. In psychographic segmentation, the market is divided into different groups based on social class, lifestyle, or personality characteristics. In behavioral segmentation, the market is divided into groups based on consumers' knowledge, attitudes, uses, or responses concerning a product. Business marketers use many of the same variables to segment their markets. But business markets also can be segmented by business demographics (industry, company size), operating characteristics, purchasing approaches, situational factors, and personal characteristics. The effectiveness of the segmentation analysis depends on finding segments that are measurable, accessible, substantial, differentiable, and actionable.

Explain how companies identify attractive market segments and choose a market-targeting strategy

To target the best market segments, the company first evaluates each segment's size and growth characteristics, structural attractiveness, and compatibility with company objectives and resources. It then chooses one of four market-targeting strategies—ranging from very broad to very narrow targeting. The seller can ignore segment differences and target broadly using undifferentiated (or mass) marketing. This involves mass producing, mass distributing, and mass promoting the same product in about the same way to all consumers. Or the seller can adopt differentiated marketing—developing different market offers for several segments. Concentrated marketing (or niche marketing) involves focusing on one or a few market segments only. Finally, micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes local marketing and individual marketing. Which targeting strategy is best depends on company resources, product variability, product life-cycle stage, market variability, and competitive marketing strategies.

Occasion segmentation

divide buyers according to the occasions during which they decide to make a purchase

Behavioral segmentation

dividing buyers according to their knowledge, attitude and use or response to a product

Psychographic segmentation

dividing market according to lifestyle, social class and personal characteristics brands for the same type of product target different brand tribes eg: Starbucks and Krispy Kreme

Income segmentation

dividing market based on their income marketers target specific groups of different income and provide specific marketing mix according to their purchasing power

Age and life-cycle segmentation

dividing markets into different age and life cycle groups kids, young adults, adults teens Eg: Amazon with Kindle for kids

Benefit segmentation

dividing the buyers according to the benefits they seek from the product

Marketing strategy

in order to create a customer driven marketing strategy the following need to be done to the market segmentation targeting positioning differentiation

Gender segmentation

markets divided according to gender used in markets for clothes, toys, toiletries etc

Segmentation variables

1. Geographic variables - dividing the market into geographic units such as regions, cities, countries or even neighborhood Eg: Dominos localizes its products and services to better cater to the specific needs of individual regions 2. Demographic variables - dividing the market into different age and life-cycle, income, generation, gender religion, ethic etc. groups - Most common segment as the variables vary closely and it is much easier to measure than other variables 3. Psychographic variables 4. Behavioral variables

Define the major steps in designing a customer-driven marketing strategy: market segmentation, targeting, differentiation, and positioning

A customer-driven marketing strategy begins with selecting which customers to serve and determining a value proposition that best serves the targeted customers. It consists of four steps. Market segmentation is the act of dividing a market into distinct segments of buyers with different needs, characteristics, or behaviors who might require separate products or marketing mixes. Once the groups have been identified, market targeting evaluates each market segment's attractiveness and selects one or more segments to serve. Differentiation involves actually differentiating the market offering to create superior customer value. Positioning consists of positioning the market offering in the minds of target customers. A customer-driven marketing strategy seeks to build the right relationships with the right customers

Market differentiation

Differentiating the market offering to create superior value