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Segmentation, Targeting, and Positioning P&G – Segments the Market Strategy The Payoff Sells multiple brands within P&G generates revenues of the same product category $4+ billion in U.S. laundry for detergents, soaps, and detergent market. other goods. Tide has 34% share of Each brand features a powder and 24% share of different mix of benefits and appeals to a different liquid market segments. segment. Combined, all P&G brands Product modifications account for 75% share of appeal to different niches powder and 55% share of within certain segments. liquid detergent markets. Steps in Segmentation, Targeting, and Positioning Market Segmentation Geographic, demographic, psychographic, and behavioral variables are used in segmentation. There is no single way to segment a market. Often best to combine more than one variable in order to identify smaller, better- defined target groups. Geographic Variables Geographic segmentation divides a market into different geographic units. Variables and breakdowns include: – World Region or Country: North America, Western Europe, Pacific Rim, Mexico, etc. – Country Region: Pacific, Mountain, etc. – City or Metro Size: defined numerically – Density: rural, suburban, urban – Climate: northern, southern Demographic Variables Differences in age, gender, family size, family life cycle, income, occupation, education, race, and religion can be used to segment markets. – Frequently used in segmentation. – Easier to measure than most other types of variables. Demographic Targeting by Age Crest targets adults with the ad and product on the left, and children with the ad and product on right. Psychographic Variables Psychographic segmentation divides a market into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic classification often have very different lifestyles. Behavioral Variables Segmentation User Status by Occasion – Nonusers, ex-users, – Special promotions & potential users, first- labels for holidays. time users, regular – Special products for users. special occasions. Usage Rate Benefits Sought – Light, medium, heavy. – Different segments Loyalty Status desire different benefits – Brands, stores, from products. companies. Segmenting by Benefits Sought Citicards’ various products offer different benefits: – rewards – establishing credit – small business benefits – no frills value Geodemographic Segmentation Geodemographic: – Claritas, Inc. – Potential Rating Index for Zip Markets (PRIZM) – Based on U.S. Census data – Profiles on 260,000 U.S. neighborhoods – 62 clusters or types Segmenting Business Markets Consumer and business markets use many of the same variables for segmentation. Business marketers can also use: – Operating Characteristics – Purchasing Approaches – Situational Factors This American Express ad – Personal Characteristics targets small businesses. Segmenting International Markets Factors used: – Geographic location – Economic factors – Political and legal factors – Cultural factors Intermarket segmentation: – Segments of consumers who have similar needs and buying behavior even though they are located in different countries. Requirements for Effective Segmentation Measurable Accessible Substantial Differentiable Actionable “Lefties” are hard to identify and measure, thus few firms tailor their offers to this group. “Anything Left Handed” is an exception. Evaluating Market Segments Segment Size and Growth – Analyze current segment sales, growth rates, and expected profitability. Segment Structural Attractiveness – Consider competition, existence of substitute products, and the power of buyers & suppliers. Company Objectives and Resources – Examine company skills & resources needed to succeed in that segment. – Offer superior value & gain advantages over competitors. Target Marketing Strategies Target Marketing Strategies Undifferentiated (mass) marketing – Ignores segmentation opportunities products rarely succeed for long in the Such American marketplace. Differentiated (segmented) marketing – Targets several segments and designs separate offers for each. Coca-Cola, Procter & Gamble (soaps and detergents), and Toyota are a few examples. Target Marketing Strategies Concentrated (niche) marketing – Targets one or a couple small segments – Niches have very specialized interests Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and locations. – Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups— cities, neighborhoods, specific stores. – Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers. Choosing a Targeting Strategy Factors to consider: – Company resources – Product variability – Product’s life-cycle stage – Market variability – Competitors’ marketing strategies Socially Responsible Targeting Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern. – Vulnerable and disadvantaged can be targeted. – Cereal, cigarette, beer, and fast-food marketers have received criticism. – Internet has raised fresh concerns about potential targeting abuses. Product Positioning A product’s position is the way the product is defined by consumers on important attributes, or as the place the product occupies in consumers’ minds relative to competing products. – Perceptual position maps can help define a brand’s position relative to competitors. Positioning Map: Large Luxury SUVs Choosing a Positioning Strategy Identify a set of possible competitive advantages on which to build a position. Choose the right competitive advantages. Select an overall positioning strategy. Identifying Possible Competitive Advantages Key to winning target customers is to understand their needs better than competitors do and to deliver more value. Competitive advantage – extent to which a company can position itself as providing superior value. – Achieved via differentiation. Sources of Competitive Advantages can be Differentiation achieved by means of: – Products – Services – Image – People Which form of differentiation is promoted in the ad at right? Positioning Errors Underpositioning: – Failing to really position the company at all. Overpositioning: – Giving buyers too narrow a picture of the company. Confused Positioning: – Leaving buyers with a confused image of a company. Choosing the Right Competitive Advantages Not all brand differences The best competitive are meaningful and advantages are those that worthwhile, nor do all meet seven key criteria. differences make a good – Important differentiator. – Distinctive – Superior Each difference has the potential to create – Communicable company COSTS as – Preemptive well as consumer value. – Affordable – Profitable Possible Value Propositions Communicating and Delivering the Chosen Position Company must take strong steps to deliver and communicate the desired position to target consumers. The marketing mix efforts must support the positioning strategy. Must monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies.
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