MARK1012: Lecture 5: Razzaque

L5-1

RAZZAQUE:UNSW

L5-2

Lecture objectives
1. Explainmarketsegmentation,andidentifyvarious
possiblebasesforsegmentingmarkets.
2. Explaintherequirementsforeffectivesegmentation:
measurability,accessibility,substantiality,actionability.
3. Outlinetheprocessofevaluatingmarketsegmentsand
suggestsomemethodsforselectingmarketsegments.
t
th d f
l ti
k t
t
4. Illustratetheconceptofpositioningforcompetitive
advantagebyofferingspecificexamples.
5. Discusschoosingandimplementingapositioningstrategy,
andcontrastpositioningbasedonproduct,service,
personnelandimagedifferentiation.

RAZZAQUE:UNSW

L5-3

Some truths about Markets

Allmarketers bothB2CandB2B recognisethatthey
cannot(i)appealtoallbuyersinthosemarkets,or(ii)
appealinthesameway.
Buyersaretoonumerous,
toowidelyscatteredand
t
toovariedintheirneeds
i d i th i
d
andbuyingpractices.

Differentcompaniesvary
p
y
widelyintheirabilitiesto
servedifferentsegments
ofthemarket.

Ratherthantryingtocompeteinanentiremarket,often
againstsuperiorcompetitors,eachcompanymust
identifythepartsofthemarketthatitcanservebest.
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MARK1012: Lecture 5: Razzaque

L5-4

Designingacustomerdrivenmarketingstrategy
Selectcustomerstoserve

Decideonavalueproposition

Segmentation

Differentiation

Divide the total market

into smaller segments

Differentiate the market

offering to create superior
customer value

Create value
for targeted
customers

Targeting

Positioning

Select the segment or

segments to enter

Position the market offering

in the minds of target
customers

RAZZAQUE:UNSW

L5-5

Segmenting

the process of dividing the

total market for a good or
service into several smaller
groups
such that the members of
each group are similar with
respect to the factors that
influence demand.

Target Marketing

Evaluates each segments

attractiveness and selects
one or more segments to
enter
enter.
A target market is a group of
customers ( people or
organisations) for whom a
seller designs a particular
marketing mix.

RAZZAQUE:UNSW

L5-6

Segmentation
Segmentation is
necessary because
customers in a
market have:
Differences in buying
h bit
habits
Differences in the way
the good or service is
used
Different motives for
buying.

RAZZAQUE:UNSW

Markets are segmented by:

Intuition based on experience
and judgment
Mimicking competitors and
earlier market entrants
Performing a structured
analysis that includes
Identifying the current and
potential wants that exist within
a market
Identifying the characteristics
that distinguish segments
Finally, determining who has
each want.

Copyright 1997 by The McGraw-Hill Companies, Inc.

MARK1012: Lecture 5: Razzaque

L5-7

StepsinSegmentation,Targeting,PositioningandDifferentiation

7.Decideonavalueproposition

Product
Differentiation

6. Develop Marketing Mix for Each Segment

6.DevelopMarketingMixforEachSegment

Market
Positioning

5. DevelopPositioningforEachSegment
4. Select Target Segment(s)

Market
Targeting

3. Develop Measures of Attractiveness

2. Develop Profiles of Segments

Market
Segmentation

1. Identify Bases for Segmentation

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L5-8

Bases for Segmenting Consumer Markets

Geographic

Demographic

country,
region
population
population
density
population
size,
climate

Ageandlife
cycle
Gender
Income
Education
Occupation
Religion
Nationality

Psychographic

Behavioural

Socioeconomic
Status
Values - AIO
Personality

Purchase
occasion
Benefitssought
Usersought
U
h
Userrate
Loyaltystatus
Readinessstage
Attitudetowards
product

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L5-9

Colgate offers benefits to consumers

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MARK1012: Lecture 5: Razzaque

L5-10

Geo-demographic Segmentation
Geographic
Segmentation
Variables
(e.g.,SEAsia,City,
Kensington)

Geodemographic
SSegmentationVariable
t ti V i bl

Demographic
Segmentation
Variables

(e.g.,SEAsianMales;Low
incomeCitydwellers;SEAsian
LowIncomeearners;Senior
CitizensofKensingtonetc.)

(e.g.,Male,LowIncome,
seniorcitizens)

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L5-11

WhyUseAgetoSegment?
Consider these bodily changes that accompany ageing:

Colourdiscrimination Olderpeoplehavedifficultydistinguishing
pastelsandthegreenbluevioletpartofthecolourspectrum.This
haveimpactonpackaging,brochuresanddisplays.
Glare Glareinpackaging,postersandfloorsinretailstoresshould
betoneddownoreliminated.
Hearing 25%
Hearing
25%ofpeopleover65experiencehearingloss;marketers
of people over 65 experience hearing loss; marketers
usingaudiocommunicatorsshouldselectspokespersonswhohave
deepertones.
Tastesensitivity Byage80,twothirdsofourtastesensitivityis
lost(mostforsweettastes,leastforsourtastes).Marketersshould
considerodouramplificationtoenhancethepalatabilityoffoodsand
beverages.
Touch Atage65,a5degreechangeintemperatureisneededto
equalthesensitivitya30yearoldwouldhavefora1degreechange.

RAZZAQUE:UNSW

L5-12

ASEGMENTATIONEXAMPLE
Female department store shoppers have been classified into 5
types, based on demographics, values and attitudes. The groups
and their descriptive names are:

1.FashionStatementsmostaffluentandeducated,usecredit
cards,expecttobetreatedwellbyretailpersonnel.

y similartoFashionStatementsbutwithlessincome.
2.Wannabuys
Enjoybuyingonimpulse.

3.FamilyValuesrepresentlargefamilies,oftenareprofessionals,
buyingfocusesonchildrenorthehome.

4.DowntoBasicsmostlikelytohavechildren,notcollege
educated,carefulspenders,prefernottousecredit,likecoupons.

5.Matriarchsolder,oftenretired,theylikedepartmentstoresbut
areriskaverseandhavefewpurchaseplans.

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MARK1012: Lecture 5: Razzaque

L5-13

Identifying and Analysing Business Market Segments

Personal
Characteristics

Demographic
Operating variables
Purchasing approaches
Situational factors
Personal characteristics

Demographics

Bases
for Segmenting
Business
Situational
Operating
Markets
Factors
Variables

Purchasing
Approaches

RAZZAQUE:UNSW

L5-14

More
Profitable

Signode CorporationsFourSegments
Programmed Buyers. This group buys products as a routine
purchase, pays full price, and accepts below average service. This
segment is highly profitable.
Relationship Buyers. This group views Signodes packaging as moderately
important. They are knowledgeable about competitors offerings. They
remain loyal if prices are competitive. Typically, they receive a small
discount and a modest level of service
service.

Less
Profitable

Transaction Buyers. This group sees Signodes products as very

important to their business. They are price and service sensitive.
They receive above average service and a 10% discount. They will
switch for a better price.
BargainHunters.ThisgroupseesSignodes productsasveryimportantto
theirbusinessanddemandthedeepestdiscountandhighestlevelofservice.
Theyknowtheirsuppliersandbargainhard.Theirlargevolumeisneededbut
theyarenotveryprofitable.

RAZZAQUE:UNSW

L5-15

SegmentingInternationalMarkets
Segmentingconsumers
withsimilarneedsand
buyingbehavioreven
thoughtheyarelocated
indifferentgeographical
Locations.

CommonLanguage
Religion
Customs

Intermarket

Geographic

Factors
for
SSegmenting
ti
International
Cultural
Economic
Markets

SouthAsia
MiddleEast
Australasia

NIE
OECD
ECM

Political/
Legal

Politicallyvolatile

RAZZAQUE:UNSW

MARK1012: Lecture 5: Razzaque

L5-16

Requirementsforeffectivesegmentation
Organizationmustbe
abletoidentifyand Measurable
measureeachsegment

Marketersshould
beabletodesign Actionable
Actionable
effective programs
effectiveprograms
toservethemarket

Organizationmustbe
abletodistinguishthe
segmentandrespond
toitsneedsdifferently

R
i
t
Requirements
Foreffective
segmentation

Accessible

Themarket
segmentcanbe
effectively reached
effectivelyreached
andserved

Shouldbelarge
Differentiable

Substantial enoughtobe

profitable

RAZZAQUE:UNSW

L5-17

EvaluatingMarket
EvaluatingMarketSegmentsI
SegmentsI
Segmentationrevealsthemarketsegmentopportunitiesfacingafirm.
Thefirmhastoevaluatethevarioussegmentsandchoosetheonestoserve.
Select the segment
with the right size
growth.

Sizeand
Growth

[e.g.,
g go
g for
f the Niche
market]

Desirablesizeandgrowth
doesnotensurehigh
profitability.Structural
factors[competition,
substitutes,powerof
buyer/sellers]areimportant

Company

Companymustevaluate
itsownobjectives,
resources,constraints,
strengthsand
weaknesses

Objectives
and

Structural
Attractiveness

Resources

RAZZAQUE:UNSW

L5-18

Evaluating Market Segments II

Segmentsizeandgrowth
collectandanalysedataoncurrentdollarsales,projectedsales
growthratesandexpectedprofitmarginsforthevarious
segmentstoselectsegmentsthathavetherightsizeandgrowth
characteristics,butrightsizegrowthisarelativematter.
butrightsizegrowthisarelativematter.

Segmentstructuralattractiveness
d
desirablesizeandgrowthmaynotprovideattractive
i bl i
d
th
t
id tt ti
profitability.Thecompanymustexamineseveralmajor
structuralfactorsthataffectlongrunsegmentattractiveness.

Marketingorganisationobjectivesandresources
positivesizegrowthandstructuralattractivenessmustmatch
thecompanysownobjectivesandresourcesinrelationtothat
segment.Someattractivesegmentscouldbequicklydismissed
Someattractivesegmentscouldbequicklydismissed
becausetheydonotmeshwiththecompanyslong
becausetheydonotmeshwiththecompanyslongrun
objectives.

RAZZAQUE:UNSW

MARK1012: Lecture 5: Razzaque

L5-19

MarketTargetingStrategiesI
Afterevaluatingdifferentsegments,thecompanymustdecidewhich
andhowmanysegmentsitwilltarget.Atargetmarketconsistsofaset
ofbuyerswhosharecommonneedsthatthecompanydecidestoserve.

Mass
Marketing

Segmented
Marketing

Niche
Marketing

Undifferentiated
marketing

Differentiated
marketing

Concentrated
marketing

Targeting
broadly

Localor
Individual
Marketing

Micromarketing

Targeting
narrowly

RAZZAQUE:UNSW

L5-20

MarketTargetingStrategiesII
Ignoremarketsegmentation;focus
onwhatiscommonratherthanwhatis
different.Designaproductandmarketing
programthatappealstolargestnumber
ofbuyers.Steel,Applesareexamples.
A. Undifferentiated Marketing

Company
Marketing
Mix

Market

Company Mix 1

Segment 1

Company Mix 2

Segment 2

Company Mix 3

Segment 3

B. Differentiated Marketing
Segment 1

Company
Marketing
Mix

Segment 2
Segment 3

Targetseveralmarketsanddesign
separateofferforeach.Caterforevery
p
ff f
f
y
purse,price,andpersonality(Toyota).
Examples:ColesMyerSupermarket,
Bilo,Myerstores

Goforlargeshareofoneorfewsub
marketsratherthanforsmallsharesof
manymarkets.DELL[PC],CRAY
[Mainframe],APOLLO[Workstation]

C. Concentrated Marketing
RAZZAQUE:UNSW

L5-21

ChoosingaMarketCoverageStrategy
Limited resource?
Go for concentrated

Competitor uses segmentation?

Cannot use undifferentiated.
Competitors
Strategies

Buyers have the

same taste?
Market
Go for
Variability
undifferentiated

Company
Resources

Factors
F t
Affecting
Strategy
Decisions

Product
Variability

Uniform products?
Undifferentiated.
Many products?
Differentiated.

Stage in
Life Cycle

A new product introduced in the market?

Go for undifferentiated or concentrated
RAZZAQUE:UNSW

MARK1012: Lecture 5: Razzaque

L5-22

MarketPositioningoftheProduct
Afterdecidingwhichsegmentorsegments)ofthemarket
toenter,thefirmmustdecidewhichpositionitwantsto
occupyinthosesegments.
Positioningiscustomerperceptionsofaproductimageorbenefits
customerperceptionsofaproductimageorbenefits
versuscompetitionsproducts.
versuscompetitionsproducts

Productposition isthewaytheproductisdefinedby
consumers
consumersonimportantattributes
consumersonimportantattributes.
on important attributes
Drive ispositionedasanallpurposefamilywashingdetergent;
Softlyasawashingdetergentfordelicatefabricssuchaswool.

Positioningisdifferentfromproductdifferentiation.
Differentiatedvalueiscreatedbythevaluepropositionusedby
marketersforthesegmentedmarket.
Valuepropositionreferstothefeaturesthatdifferentiatea
productfromcompetitorsofferings

RAZZAQUE:UNSW

L5-23

ChoosingaDifferentiationandPositioningStrategy
A three step process
1. Identifying a set of differentiating competitive advantages upon
which to build a position
2. Identifying and choosing the right competitive advantages
3. Selecting an overall positioning strategy.

Step1:Identifying a set of differentiating competitive advantages

upon which to build a position
Canbedonethoughperceptualmappinganalysis
perceptualmappinganalysis.
Perceptualmapisamultidimensionalmapwhichidentifiesfactorsthat
discriminatebetweenbrands.
Itisausefultoolforplottingmovesovertimebycompetitorsaswellasthe
resultsofafirmsownbrandpositioningstrategy.

RAZZAQUE:UNSW

L5-24

PerceptualMapping
A perceptual map is a graphic representation of how
consumers in a market perceive a competing set of
products relative to each other. It is a multidimensional map
which identifies factors that discriminates between brands.
Based upon research using existing or prospective
g
determines those dimensions
consumers,, management
most important to consumers in evaluating brands and how
consumers see competitive products in terms of their
performance on these dimensions.
Not only are perceptual maps valuable in determining
consumer perceptions of existing products, they may offer
insights to new product opportunities. Gaps in the
perceptual space may suggest positions for new offerings in
the market.
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MARK1012: Lecture 5: Razzaque

L5-25

Perceptual Mapping and Positioning Decisions

Upscale, Classy

Mercedes
Lincoln Volvo
Cadillac Chrysler
Buick

Porsche
BMW

Saab
Honda

Conservative

Sporty

Ford

Nissan

Dodge
Plymouth

Toyota
Chevrolet
Hyundai

Cost-Cost
Performance
Gap

Practical, Affordable
RAZZAQUE:UNSW

L5-26

Brandpositionofdepartmentstores
High perceived quality and status

David Jones
y
Myer
Limited service
Less personal

Target

Extensive
personalised
service

Kmart

Low perceived quality and status

RAZZAQUE:UNSW

L5-27

Step2.Identifyingandchoosingtherightcompetitiveadvantage
Step2.
IdentifyingandchoosingtherightcompetitiveadvantageII

Consumerstypicallychooseproductsandservicesthatgive
themthegreatestvalue.Competitiveadvantagecanbe
providedby
Product differentiation
Highly standardised products (chicken, steel, aspirin) vs.
g yd
e e t ated, suc
oto ca s, co
e ca
highly
differentiated,
such as motorcars,
commercial
buildings and furniture. Features, performance, style,
design, consistency, durability, reliability and reparability
are all areas of possible differentiation.

Services differentiation
differentiate the services that accompany the product. Many
possibilities exist such as delivery, installation, repair and
customer training services.

RAZZAQUE:UNSW

MARK1012: Lecture 5: Razzaque

L5-28

Step2.Identifyingandchoosingtherightcompetitiveadvantage
Step2.
IdentifyingandchoosingtherightcompetitiveadvantageII
II

Personneldifferentiation
Byhiringandtrainingbetterpeoplethantheircompetitors.
Personneldifferentiationrequiresacompanytoselectitscustomer
contactpeoplecarefullyandtrainthemwell.

Imagedifferentiation
Worktoestablishimagesthatdifferentiatethemfromcompetitors.
g
p
Acompanyorbrandimageshouldconveyasingularanddistinctive
messagethatcommunicatestheproductsmajorbenefitsand
positioning.
Symbolscanprovidestrongcompanyorbrandrecognitionandimage
differentiation.
Acompanycanalsocreateanimagethroughthetypesofeventit
sponsors.
.
RAZZAQUE:UNSW

L5-29

Step2.Identifyingandchoosingtherightcompetitiveadvantage
Step2.
IdentifyingandchoosingtherightcompetitiveadvantageIII
III

Howmanydifferencestopromote?
Whichdifferencestopromote?
Ingeneral,acompany
needstoavoidthreemajor
positioningerrors:
U
Underpositioning
d
i i i failingto
f ili
positionthecompanyatall.
Overpositioning giving
buyerstoonarrowapicture
ofthecompany.
Confused positioning
leavingbuyerswitha
confusedimageofthe
company.

Important
Criteria Distinctive
for
Determining
Which
Differences
Affordable
Superior
to
Promote
Profitable

Pre-emptive

Communicable

RAZZAQUE:UNSW

L5-30

WhichDifferencestoPromote?
Adifferenceisworthestablishingtotheextentit
satisfiesthefollowingcriteria:
Important thedifferencedeliversahighlyvaluedbenefit.
Distinctive competitorsdonotofferthedifference.
Superior thedifferenceissuperiortootherwaysinwhichthe
y
f
customersmayobtainthesamebenefit.
Communicable thedifferenceiscommunicableandvisibleto
buyers.
Preemptive competitorscannoteasilycopythedifference.
Affordable thebuyerscanaffordthedifference.
Profitable thedifferencecanbeintroducethedifference
profitably.

RAZZAQUE:UNSW

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MARK1012: Lecture 5: Razzaque

L5-31

Various Possible Positioning Strategies

Product
Class
Awayfrom
Competitors

Product
Attributes
Benefits
Offered

G
H

Againsta
Competitor

D
E
B

Usage
Occasions

Users

Source: Kotler Brown Adam Armstrong

Marketing 5th Ed Copyright 2001 Pearson Education Australia

RAZZAQUE:UNSW

L5-32

ExamplesofPositioningStrategies

Position
on specific product attributes [Hyundai Excel>>low price]
on the benefits offered [Colgate>>cavity prevention]
according to usage occasions [Sustagen>>replaces body fluids]
p
]
for certain classes of users [[Mothercare>> babyy products]
against a competitor [Tandy and Compaq vis--vis IBM]
away from competitors [7-up, the un-cola >>vs Coke and Pepsi]
for different product classes [Margarines vs butter; margarines
vs cooking oil]
using combination strategies [J&Js affinity Brand is a hair
conditioner for women over 40 >> product class and user]

RAZZAQUE:UNSW

L5-33

SelectinganOverallPositioningStrategy
Thefullpositionofabrandistermedthebrandsvalue
proposition.
Companyandbrandpositioningshouldbesummedupina
positioningstatement.
Moreformorepositioning
Thesameforless a
involvesprovidingthemost
powerfulvalueproposition
offeringgooddeals.
upscaleproductorserviceand
chargingahigherpriceforhigher
Lessformuchless meets
costs.
thedemandforproducts
Moreforthesamecompanies
thatofferlessandcostless.
canattackacompetitorsmore
formorepositioningby
Moreforless awinning
introducingabrandofferingof
valuepropositionbutmay
comparablequalityatalower
beimpossibletomaintainin
price.
thelongrun.
RAZZAQUE:UNSW

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MARK1012: Lecture 5: Razzaque

L5-34

PossibleValuePropositions
Price
More

Morefor
more

Morefor
thesame

Benefitss

More

The Same

Less

Morefor
less

The
Same

Thesame
forless

Less

Lessfor
muchless
Losing value
propositions

Winning value
propositions

RAZZAQUE:UNSW

L5-35

DevelopingapositioningstatementProduct
Companyandbrandpositioningshouldbesummed
upinapositioningstatementoftheform:
is(concept)
(concept)
To(targetsegmentandneed)our(brand)is
(pointofdifference).
.
that(pointofdifference)
Example:
Example: To
Tobusy,mobileprofessionalswhoneedtobe
busy mobile professionals who need to be
alwaysintheloop,Blackberry isawirelessconnectivity
solution thatallowsyoutostayconnectedtodata,people
andresourceswhileonthego,easilyandreliably moreso
thancompetingtechnologies.

RAZZAQUE:UNSW

L5-36

Step3:Designmarketingprogramtocommunicatebenefits
andpersuadecustomers.
Afterselectingaposition,thecompanymusttakestrong
stepstodeliverandcommunicatethedesiredpositionto
targetcustomers.
Themarketingmixeffortsmustsupportthepositioning
strategy.
Designingthemarketingmixinvolvesworkingoutthe
D i i th
k ti
i i
l
ki
t th
tacticaldetailsofthepositioningstrategy.
Thepositionmustbemonitoredandadaptedovertimeto
matchchangesinconsumerneedsandcompetitors
strategies.
Thepositionshouldevolvegraduallyasitadaptstotheever
changingmarketingenvironment.
RAZZAQUE:UNSW

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MARK1012: Lecture 5: Razzaque

L5-37

The positioning
statement
addresses three
key questions:

1. Whoisthetarget
customer?
2.Whyshouldthe
customerbuy?
3.Whatareweselling?

Six Questions to Ask When

Applying a Positioning Strategy
1. Whatisourpresentpositioninthe
prospectsmind?
2. Whatpositionwouldweliketoown?
3. Whichcompaniesposegreatest
challenge against this position?
challengeagainstthisposition?
4. Dowehaveenoughfinancialsupportto
gainandholdthisposition?
5. Dowehavethecouragetostickwith
oneconsistentpositioningconcept?
6. Doesourcreativeapproach(4Ps)match
ourchosenpositioningstrategy?

RAZZAQUE:UNSW

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