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Learning outcomes
1. Understand the concept of target marketing and its importance. 2. Identify and explain the target marketing process. 3. Understand the market targeting strategies and how target
marketing impacts the 4 Ps. 4. Understand the key elements involved in each of steps in the target
marketing process.
Markets and segments
Entire market Market segments
Subgroups of customers with homogeneous needs and wants.
More effective and efficient to serve viable segments within the
wider market.
Applies to both consumer markets and business markets.
Group of customers with heterogeneous needs and wants.
Difficult (almost impossible) to serve the entire market.
The target marketing concept
Process of identifying and understanding smaller, targetable market segments to tailor the marketing mix to maximise value between the company and the customers in those segments.
Involves three steps:
Requires thorough understanding of:
Segmentation Targeting Positioning
Industry Competitors Company Customers
Situation analysis (week 1) Buyer behaviour (week 2)
Why do marketers practice target marketing?
Identify growth and
market opportunities
Focus marketing
efforts
Streamline product
development and design
Derive appropriate
pricing strategies
Ultimately, target marketing is the tool that enables marketers the efficient use of resources to develop focussed offerings and more persuasive messages.
The target marketing process
Identify market segments (existing and potential
customer base)
Target the viable segment(s)
Develop a positioning
strategy for the viable
segment(s)
Segmentation Understand the
heterogeneity of consumer needs and wants of each
segment.
Targeting Choose a target segment
based on viability.
Positioning Position and differentiate
the offering (e.g., features, pricing, communication
channels). • Use positioning strategy as a guide
to allocate resources in overarching marketing strategy.
Segmentation
Market segmentation is the process of dividing the consumer market into smaller, homogeneous, meaningful segments on the basis of commonalities (i.e., similar needs, lifestyles, etc).
1. Identify variables that allow meaningful delineation of market segments. a. Easily measured and accessed.
b. Accurate and relevant in predictability.
2. Profile and personify the segments. a. Describe typical consumer that represents the segment.
b. Develop intimate understanding of segments.
Bases of segmentation
Demographic
• Based on demographic variables.
• Most commonly used.
• E.g., variables could be age and generational cohorts, ethnicity, gender, income, family composition, education.
Geographic
• Based on geographic variables.
• Especially relevant for certain industries and business models.
• E.g., variables could be country, region, city, urban vs. rural, climate.
Psychographic
• Based on psychological traits.
• Also commonly used. • Popular models are
Roy Morgan Values Segments, VALS.
• E.g., variables could be attitudes, values, lifestyles, interests, opinions and beliefs.
Behavioural
• Based on purchase and consumption behaviours.
• Direct indicator of emerging trends.
• E.g., variables cold be usage rate, benefits sought, usage occasion, loyalty, price sensitivity.
Business market segmentation is more complex and often fruitless due to one-to-one, relationship-based nature of marketing. If segmented, then often it is based on size of business, geography, industry, product application.
http://www.roymorgan.com/products/values-segments/about- values-segments
http://www.strategicbusinessinsights.com/vals/ustypes.shtml
Combining the bases of segmentation
Marketers never use just a single variable (e.g., age) within a single basis of segmentation (e.g., demographic).
For meaningful segmentation that provides accurate and relevant predictions about consumer preference and behaviour, the bases are almost always used in combination. Well-renown and popular models used by companies:
• Helix Personas (combination of Roy Morgan data and third-party data). • Claritas PRIZM Premier. • Euromonitor Global Consumer Types.
Profiling and personifying segments
Describes the typical customer in a particular market segment, including the common features shared by members of the segment and how the differ from other segments. à Describe based on segmentation bases and variables.
Example of profiling format: 1. Demographic description (e.g., age, gender) 2. Geographic description (e.g., location) 3. Psychographic description (e.g., lifestyles, attitudes, beliefs, values) 4. Behavioural description (e.g., usage and benefits sought from the specific product)
Then, develop a persona (i.e., name them, get to know them, develop deep understanding).
Common segmentation mistakes
Segmenting a segment
• Groups end up being too small to be meaningful = not viable
Making a caricature not a persona
• Not using enough empirical evidence when creating personas often results in cartoon characters = not realistic
Forgetting that segments contain real people
• A segment simplifies a group of people, but ultimately, individuals make up the segment, so it is very likely that they will not all be completely identical = too simplistic, lacking appreciation of complexity
And forgetting that all segmentation bases shift over time.
Targeting
Market targeting is the process of systematically examining the possible market segments and selecting the most viable segment for the company to target.
1. Evaluate potential segments. a. Potential sales volume and revenue (size and attractiveness) b. Ability of company to serve the segment and compete with others c. Analyse cost structures
2. Select target segment(s). a. Market research b. Historical trends c. Purchasing patterns d. Test marketing
Evaluating potential segments
Market potential Total volume of sales of a product category that all companies in a particular industry expect to sell in a specific period of time, with level of marketing activity held constant. Sales potential (total volume of company sales) Market share × market potential Sales revenue Sales potential × average selling price
Competitor analysis Part of the situation analysis
Cost structure Evaluating the costs incurred in creation, communication, and delivery of offering. If fixed costs are high, consider not entering the market despite attractiveness.
Estimated maximum Depends on: • Stability of market potential • Stability of target segment • Level of industry marketing activity • Effectiveness of company’s promotional efforts
Market targeting strategies and the 4 Ps
Undifferentiated (mass) marketing Differentiated (segmented) marketing Concentrated (niche) marketing Micromarketing
Serving the whole market with one offer, do not consider segments.
E.g., petrol.
Target several different market segments with separate offers for each segment.
E.g., cars.
Target one segment or a niche within a segment.
E.g., boutique brands.
Ranges from small local markets (local marketing) to one individual (direct marketing).
E.g., real estate agents.
Focus on similar needs of consumers, not the differences.
Focus on different needs of consumers.
Focus on similar needs of a single group of consumers.
Focus on needs of a small group of consumers or single consumers.
Targeting broadly Targeting narrowly
Mass customisation: combination of mass production with individual customisation.
Marketing mix Market Marketing mix 1 Segment 1
Marketing mix 2 Segment 2 Marketing mix Segment or
niche
Marketing mix
Marketing mix
Positioning
Positioning is the process of developing a marketing mix to occupy a certain position in the minds of consumers in the target market, relative to competing offers.
Note: Consumer perceptions ≠ product characteristics
Directly linked with evaluation of alternatives stage in the consumer decision- making process.
• Provides consumers with heuristics to ‘short-cut’ decisions. • Based on simple propositions that consumers generally agree with and easily
remember.
The marketing mix is used in its entirety to position the offering.
Determine the position
If it’s an existing product, then you must analyse current position.
Based on market research and analysis (market research companies), perceptual mapping is conducted. 1. Identify determinant attributes of
the product or product category.
2. Assess how the company’s product and brand vs. competitors’ product and brand are positioned relative to these attributes.
Jane’s Chocolate
Repositioning
Jane’s Chocolate
Jane’s Chocolate
Proceed with caution!
Determine the marketing mix
What we’ll cover in detail in the next 4 weeks J
Summary 1. It is extremely difficult to serve the entire market. Therefore, marketers segment and target
segments of markets for effective and efficient marketing efforts using the target marketing concept.
2. The target marketing concept involves three steps and requires thorough understanding of the current situation and buyer behaviour.
3. There are four bases of segmentation, and appropriate bases and variables must be used for easy measurement, access, accuracy, and predictability.
4. Consumer market segmentation involves the four bases, whereas business market segmentation involves different bases and is often not possible due to the nature of business relationships.
5. Segmentation is conducted using the combination of the bases for meaningful segments. 6. The goal of targeting is to derive the most viable segment(s) to target. 7. There are four main market targeting strategies, each involving different variations of the marketing
mix. 8. Positioning is relative to competitors and their offerings. 9. Repositioning should be done with caution and a long-term view.