Segmentation, Targeting, and Positioning Chapter 7 Dr Inda

Segmentation, Targeting, and Positioning Chapter 7 Dr Inda Sukati Faculty of Management Universiti Teknologi Malaysia 1

Segmentation, Targeting, and Positioning 7-2 2011 Pearson Education, Inc.

Introduction How to identify like groups of potential customers? How to chose the groups to target? How to segment those groups? How to position the brand in the mind of the customer? There are 4.2 million horseback and cart riders in 2011 Great Pearson Education,Britain. Inc. 7-3

Market Segmentation Represents an effort to identify and categorize groups of customers and countries according to common characteristics 77.5 million dogs are owned in the U.S. 2011 Pearson Education, Inc. Who owns whom? 7-4

Targeting The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond Focus on the segments that can be reached most effectively, efficiently, and profitably 7-5 2011 Pearson Education, Inc.

Positioning Positioning is required to differentiate the product or brand in the minds of the target market. 7-6 2011 Pearson Education, Inc.

Global Market Segmentation Defined as the process of identifying specific segments—whether they be country groups or individual consumer groups—of potential customers with homogeneous attributes who are likely to exhibit similar responses to a company’s marketing mix. 7-7 2011 Pearson Education, Inc.

Contrasting Views of Global Segmentation Conventional Wisdom – Assumes heterogeneity between countries – Assumes homogeneity within a country – Focuses on macro level of cultural differences – Relies on clustering of national markets – Less emphasis on withincountry segments Unconventional Wisdom – Assumes emergence of segments that transcend national boundaries – Recognizes existence of within-country differences – Emphasizes micro-level differences – Segments micro markets within and between countries 7-8 2011 Pearson Education, Inc.

Global Market Segmentation Demographics Psychographics Behavioral characteristics Benefits sought Skiing became a sport in Norway where it was invented 4,000 years ago. 2011 Pearson Education, Inc. 7-9

Demographic Segmentation Income Population Age distribution Gender Education Occupation 7-10 2011 Pearson Education, Inc.

Demographic Facts and Trends A widening age gap exists between the older populations in the West and the large working-age populations in developing countries In the European Union, the number of consumers aged 16 and under is rapidly approaching the number of consumers aged 60-plus Asia is home to 500 million consumers aged 16 and under Half of Japan’s population will be age 50 or older by 2025 7-11 2011 Pearson Education, Inc.

Demographic Facts and Trends America’s three main ethnic groups—African/Black Americans, Hispanic Americans, and Asian Americans— represent a combined annual buying power of 1 trillion The United States is home to 28.4 million foreign-born residents with a combined income of 233 billion By 2030, 20 percent of the U.S. population—70 million Americans—will be 65 or older versus 13 percent (36 million) today India has the youngest demographic profile among the world’s large nations: More than half of its population is under the age of 25 7-12 2011 Pearson Education, Inc.

Segmenting by Income and Population Income is a valuable segmentation variable – 2/3s of world’s GNP is generated in the Triad but only 12% of the world’s population is in the Triad Do not read into the numbers – Some services are free in developing nations so there is more purchasing power For products with low enough price, population is a more important variable 7-13 2011 Pearson Education, Inc.

Per Capita Income 7-14 2011 Pearson Education, Inc.

10 Most Populous Countries 7-15 2011 Pearson Education, Inc.

Age Segmentation Global Teens–young people between the ages of 12 and 19 – A group of teenagers randomly chosen from different parts of the world will share many of the same tastes Global Elite–affluent consumers who are well traveled and have the money to spend on prestigious products with an image of exclusivity 7-16 2011 Pearson Education, Inc.

Gender Segmentation In focusing on the needs and wants of one gender, do not miss opportunities to serve the other Companies may offer product lines for both genders – Nike, Levi Strauss 7-17 2011 Pearson Education, Inc.

Psychographic Segmentation Grouping people according to attitudes, values, and lifestyles – SRI International and VALS 2 Porsche example – – – – – Top Guns (27%): Ambition, power, control Elitists (24%): Old money, car is just a car Proud Patrons (23%): Car is reward for hard work Bon Vivants (17%): Car is for excitement, adventure Fantasists (9%): Car is form of escape 7-18 2011 Pearson Education, Inc.

Psychographic Segmentation The Euroconsumer: – Successful Idealist–Comprises from 5% to 20% of the population; consists of persons who have achieved professional and material success while maintaining commitment to abstract or socially responsible ideals – Affluent Materialist–Status-conscious ‘up-and-comers’ – many of whom are business professionals – use conspicuous consumption to communicate their success to others 7-19 2011 Pearson Education, Inc.

Psychographic Segmentation The Euroconsumer: – Comfortable Belongers 25% to 50% of a country’s population conservative most comfortable with the familiar content with the comfort of home, family, friends, and community – Disaffected Survivors Lack power and affluence harbor little hope for upward mobility tend to be either resentful or resigned concentrated in highcrime urban inner city attitudes tend to affect the rest of society 7-20 2011 Pearson Education, Inc.

Psychographic Segmentation: Sony’s U.S. Consumer Segments 7-21 2011 Pearson Education, Inc.

Behavior Segmentation Focus on whether people purchase a product or not, how much, and how often they use it User status Law of disproportionality/Pareto’s Law–80% of a company’s revenues are accounted for by 20% of the customers 7-22 2011 Pearson Education, Inc.

Benefit Segmentation Benefit segmentation focuses on the value equation – Value Benefits/Price Based on understanding the problem a product solves, the benefit it offers, or the issue it addresses 7-23 2011 Pearson Education, Inc.

Ethnic Segmentation The population of many countries includes ethnic groups of significant size Three main groups in the U.S. include AfricanAmericans, AsianAmericans, and Hispanic Americans Hispanic Americans – 40 million Hispanic Americans (14% of total pop.) with 560 billion annual buying power – CA Mexicans have after-tax income of 100 billion – The number of Hispanic teens will rise from 12 percent of the U.S. teen population to 18 percent in the next decade 7-24 2011 Pearson Education, Inc.

Assessing Market Potential Be mindful of the pitfalls – Tendency to overstate the size and short-term attractiveness of individual country markets – The company doesn’t want to ‘miss out’ on a strategic opportunity – Management’s network of contacts will emerge as a primary criterion for targeting 7-25 2011 Pearson Education, Inc.

Assessing Market Potential Three basic criteria: – Current size of the segment and anticipated growth potential – Potential competition – Compatibility with company’s overall objectives and the feasibility of successfully reaching the target audience 7-26 2011 Pearson Education, Inc.

Current Segment Size and Growth Is the market segment currently large enough to present a company with the opportunity to make a profit? If the answer is ‘no,’ does it have significant growth potential to make it attractive in terms of a company’s long-term strategy? 7-27 2011 Pearson Education, Inc.

Potential Competition Is there currently strong competition in the market segment? Is the competition vulnerable in terms of price or quality? 7-28 2011 Pearson Education, Inc.

Feasibility and Compatibility Will adaptation be required? If so, is this economically justifiable in terms of expected sales? Will import restrictions, high tariffs, or a strong home country currency drive up the price of the product in the target market currency and effectively dampen demand? 7-29 2011 Pearson Education, Inc.

Feasibility and Compatibility Is it advisable to source locally? Would it make sense to source products in the country for export elsewhere in the region? Is targeting a particular segment compatible with the company’s goals, brand image, or established sources of competitive advantage? 7-30 2011 Pearson Education, Inc.

Framework for Selecting Target Markets Demographic information is a starting point but not the decision factor Product-Market must be considered – Market defined by product category Marketing model drivers must be considered – Factors required for a business to take root and grow Are there any enabling conditions present? – Conditions whose presence or absence will determine success of the marketing model 7-31 2011 Pearson Education, Inc.

9 Questions for Creating a Product-Market Profile Who buys our product? Who does not buy it? What need or function does it serve? Is there a market need that is not being met by current product/brand offerings? What problem does our product solve? What are customers buying to satisfy the need for which our product is targeted? What price are they paying? When is the product purchased? Where is it purchased? 7-32 2011 Pearson Education, Inc.

Target Market Strategy Options Standardized global marketing – Mass marketing on a global scale – Undifferentiated target marketing – Standardized marketing mix – Minimal product adaptation – Intensive distribution – Lower production costs – Lower communication costs 7-33 2011 Pearson Education, Inc.

Target Market Strategy Options Concentrated global marketing – Niche marketing – Single segment of global market – Look for global depth rather than national breadth – Ex.: Chanel, Body Shop Differentiated global marketing – Multi-segment targeting – Two or more distinct markets – Wider market coverage – Ex.: P&G markets Old Spice and Hugo Boss for Men 7-34 2011 Pearson Education, Inc.

Positioning Locating a brand in consumers’ minds over and against competitors in terms of attributes and benefits that the brand does and does not offer – Attribute or Benefit – Quality and Price – Use or User – Competition 2011 Pearson Education, Inc. 7-35

Positioning Strategies Global consumer culture positioning – Identifies the brand as a symbol of a particular global culture or segment – High-touch and high-tech products Foreign consumer culture positioning – Associates the brand’s users, use occasions, or product origins with a foreign country or culture Beer is associated with this German’s culture; the symbol on his shirt is not German! 2011 Pearson Education, Inc. 7-36

Positioning Strategies Local consumer culture positioning – – – – Identifies with local cultural meanings Consumed by local people Locally produced for local people Used frequently for food, personal, and household nondurables – Ex.: Budweiser is identified with smalltown America Clydesdale Which Beer? 2011 Pearson Education, Inc. 7-37