Week 06 · Introduction to Marketing
Davood Wadi, PhD
Welcome to Week 6 of Introduction to Marketing.
Today we will explore Segmentation, Targeting, and Positioning (STP).
We will cover the bases for segmenting markets, evaluating and selecting target markets, and developing a compelling positioning strategy.
Market segmentation involves dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors.
These distinct groups might require separate products or marketing programs.
The goal is to identify segments that are
Geographic segmentation divides the market into different geographical units, such as nations, states, regions, counties, cities, or even neighborhoods.
Demographic segmentation divides the market into segments based on variables such as age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.
Demographic variables are the most popular bases for segmenting customer groups because they are easier to measure.
Each company below splits its market in one way. Is it segmenting geographically or demographically?
Tap a card, then tap the group it belongs to.
Psychographic segmentation divides buyers into different segments based on lifestyle or personality characteristics.
People in the same demographic group can have very different psychographic characteristics.
Marketers often use personality variables to segment markets, offering products that align with consumer lifestyles.
Behavioral segmentation divides buyers into segments based on their knowledge, attitudes, uses, or responses to a product.
Variables include occasions, benefits sought, user status, usage rate, and loyalty status.
Benefit segmentation requires finding the major benefits people look for in a product class, the kinds of people who look for each benefit, and the major brands that deliver each benefit.
A sportswear brand segments its buyers by behavior. Which variable is it using in each case?
The campaign is timed to a moment when people buy, so it segments by occasion.
Cushioning and speed are the benefits people look for, so this is segmenting by benefits sought.
The group is non-users, or first-time users, so it segments by user status.
These buyers use a lot of the product, so the variable is usage rate.
These buyers keep coming back to the brand, so they are grouped by loyalty status.
The December holidays are an occasion for buying, so this segments by occasion.
Which concept does this case show?
Consumer and business marketers use many of the same variables to segment their markets.
Business buyers can be segmented geographically, demographically, or by benefits sought, user status, usage rate, and loyalty status.
However, business marketers also use additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics.
Discussion: Think of a brand of athletic shoes. How might they use a combination of demographic, psychographic, and behavioral segmentation to target a specific consumer group?
Market targeting involves evaluating each market segment's attractiveness and selecting one or more segments to enter.
A company should target segments in which it can profitably generate the greatest customer value and sustain it over time.
The target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
In evaluating different market segments, a firm must look at three factors: segment size and growth, segment structural attractiveness, and company objectives and resources.
A segment is less attractive if it already contains many strong and aggressive competitors or if it is easy for new entrants to come into the segment.
The company must also consider whether it has the skills and resources needed to succeed in that segment.
A Canadian snack company is weighing new segments. Which of the three factors does each finding speak to?
How big a segment is and how fast it grows is the first factor, segment size and growth.
Many strong and aggressive competitors make a segment less attractive in its structure.
The company lacks the skills and resources to succeed there, so this is about its own objectives and resources.
When it is easy for new entrants to come in, the segment is structurally less attractive.
A very small segment fails on size and growth.
What the company wants to achieve is its objectives, the third factor.
Which concept does this case show?
Undifferentiated (mass) marketing focuses on what is common in the needs of consumers rather than on what is different.
Differentiated (segmented) marketing targets several market segments and designs separate offers for each.
Concentrated (niche) marketing focuses on acquiring a large share of one or a few smaller segments or niches.
Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and local customer segments.
Discussion: A startup creates a new line of premium, organic, plant-based protein powder. Should they use differentiated marketing or concentrated marketing? Why?
Beyond deciding which segments to target, the company must decide on a value proposition.
Differentiation involves actually differentiating the firm's market offering to create superior customer value.
Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.
In planning their differentiation and positioning strategies, marketers often prepare perceptual positioning maps.
These maps show consumer perceptions of their brands versus competing products on important buying dimensions.
The position of each circle on the map indicates the brand's perceived positioning, and the size of the circle may indicate the brand's relative market share.
The differentiation and positioning task consists of three steps:
To build profitable relationships with target customers, marketers must understand customer needs better than competitors do and deliver more customer value.
Differences should be promoted if they are important, distinctive, superior, communicable, preemptive, affordable, and profitable.
A laptop maker is choosing which differences to promote. Each difference below fails one test. Which one?
A difference must deliver a benefit buyers value. This one does not matter to them.
Every competitor offers the same thing, so it is not distinctive.
Other ways to get the same benefit are better, so the difference is not superior.
If buyers cannot see the difference or have it explained to them, it is not communicable.
Competitors can copy it easily, so the difference is not preemptive.
Buyers cannot afford to pay for the difference, so it is not affordable.
The company cannot make money on this difference, so it is not profitable.
Which concept does this case show?
The full positioning of a brand is called the brand's value proposition.
It is the full mix of benefits on which a brand is differentiated and positioned.
Possible value propositions include "More for More," "More for the Same," "The Same for Less," "Less for much Less," and "More for Less."
Compare each brand with its rivals. Match each value proposition to the brand that offers it.
Value proposition
Brand
Tap a term, then the example it goes with.
Once it has chosen a position, the company must take strong steps to deliver and communicate the desired position to its target consumers.
All the company's marketing mix efforts (the 4 Ps) must support the positioning strategy.
Establishing a position or changing one usually takes a long time, but maintaining it requires consistent performance and communication.
Discussion: Think of a popular smartphone brand. What is its value proposition, and how does it differentiate itself from its main competitor in the minds of consumers?
The STP process is essential for creating customer value and building profitable relationships.
Segmentation allows marketers to identify distinct groups with unique needs.
Targeting selects the most attractive segments to serve.
Positioning ensures the brand occupies a clear, distinctive place in the consumer's mind.