Chapter 6. Segmentation, Targeting, and Positioning Target marketing, market segmentation, and product positioning; driving forces in the world of

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1 Chapter 6. Segmentation, Targeting, and Positioning Target marketing, market segmentation, and product positioning; driving forces in the world of marketing Atomic Skis Canada using these concepts, it took a fresh look at its business, more clearly understood what its consumers needed, and created better products and marketing programs to target consumers Seasoned marketers understand that strong marketing programs are grounded in gaining insights into what drives consumers to purchase particular products Being authentic is the foundation of our business at Atomic Skis We had stopped listening to our consumers Atomic went back to its roots, spoke to its consumers, and created products that were true to its skiing heritage. They call this authenticity; analyzed the market in detail and looked at consumer needs in each of its market segments Multiple focus groups analysis showed there were four basic segments, each with different needs and common characteristics from a psychographic (lifestyle and interests) and behavioural (product usage and benefit) perspective two basic questions, Where do you ski? and How do you ski? ; provided insight that drives skiing decision making and product selection needed to understand skiers' product needs for groomed runs versus deep powdered snow, and for multiple terrains versus the backcountry create authentic equipment that meets consumer needs and expectations segmented the ski market into four basic categories: (1) free skiers, (2) recreational all mountain skiers, (3) women, and (4) high performance racers Free skiers: people who live for the sport passionate skiers ski on runs that are not groomed enjoy skiing in the backcountry 5 to 35 years old well informed moderately brand loyal Performance of a ski is the most important buying variable Graphic design plays a less important role graphics that are youthful, modern, and edgy Recreational all mountain skiers: casual skiers less knowledgeable about ski products appearance of the ski rather than its performance youthful attitude that is tempered by age somewhat conservative 35 to 50 year age prefer safe, appealing graphics and are moderately brand loya 1

2 2 Women: fastest growing segment include recreational skiers through to advanced athletes Body shape, size, and strength more design oriented tend to select skis based on trends and graphic design rather than performance little brand loyalty Racers: high performance athletes men and women reliable, leading edge equipment that delivers results focus is on training, and product performance is critical to their decision making Graphics need to be minimized, be very conservative, and heavily emphasize brand names and logos highly brand loyal free skiing segment wanted a product that really delivered company signed top North American skier Chris Benchetler to work with its research and development team on the structure, design, and construction of a new ski that would carry his name looking to emphasize the authenticity, Chris Benchetler was also asked to design the graphics for this new ski and worked with Atomic Skis to ensure that graphic designs met technical requirements Market Segmentation essence of market segmentation, target markets, and product positioning is based on three important facts First, consumers have diverse needs Second, companies have finite amounts of money and it needs to be spent efficiently and effectively on consumers who are most likely to purchase the product Third; marketers need to have clear consumer insights on their target markets in terms of product needs, price expectations, purchase habits, and the communication tools used to gather information, stay informed, and be entertained. market segment means a piece of the market are two main market segments: the consumer market and the business market consumer market consists of goods, services, and ideas that a person can purchase or support for his or her own personal use business market involves products that are purchased either to run a business or to be used as a component in another good or service classified depends on its usage many products are tailored specifically for one market or the other, and not necessarily both market segmentation involves aggregating prospective buyers into groups that have common needs and respond similarly to marketing programs relatively homogeneous consist of people who are fairly similar in terms of their consumption behaviour, attitudes, and target market profiles

3 3 product differentiation to position their products apart from the competition in the eyes of consumers does not mean a product has to be better than the competition Marketers position their products as best they can to meet the needs of their target consumers may mean adding a unique feature; other times it may mean minimizing all costs to provide a cheaper alternative to the market Forms of Market Segmentation Mass Marketing exists in a limited capacity due to the competitiveness of the market and need for marketers to specifically address consumer needs product being marketed to the entire market with no differentiation at all natural gas; Propane for gas barbecues both the business and consumer markets Segment Marketing most common form of segmentation large companies involves designing specific products and services to meet the needs of different target groups Kellogg's brand approach to market segmentation host of breakfast cereals that appeal to different market segments 1906, Kellogg's started the cereal business as the Battle Creek Toasted Corn Flake Company with only one product, Kellogg's Corn Flakes product was marketed to everyone, and Kellogg's followed a mass marketing approach It now follows a segment marketing approach, using different products to meet the needs of different target groups mainstream health oriented adult, Kellogg's has All Bran, Special K, and Muslix who demand fun, pre sweetened cereals, Kellogg's offers Froot Loops, Mini Wheats, and Frosted Flakes wholesome family goodness, consumers can choose from Rice Krispies, Corn Flakes, and Corn Pops caters to the specific product needs of individual target markets has its own marketing programs each product's promotional programs are designed to speak to each target group in a different manner segmented approach is also followed by companies in the business to business market food service industry; Bick's pickles may be created for a large fast food chain; may also create a customized pickle product for another key account business to business market is often segmented by the needs of key accounts Flash Koodo Targets Youth Segment neon, spandex clad Koodo cizers; fat free mobility; targeted at 18 to 25 year olds; innovative marketing that flaunts its positioning as a fun, value conscious brand for youth; cheeky, irreverent tone, bright neon colours, and use of outdoor media make a splash in the market; Koodo's Sugar Streak interactive game; Build a Bash virtual all ages party game; The El Tabador game; most successful promotions was Last Mask Standing, a partnership between Koodo and MuchMusic/MusiquePlus

4 Niche Marketing type of market segmentation that allows a company to focus its efforts on a limited segment in the market Kashi; cereals with all natural ingredients; geared to health enthusiasts; eventual acquisition by Kellogg's Koodo; markets to a young crowd of 18 to 25 year olds who want only to talk, text, and use social media on their phones Method laundry detergent; eight times more concentrated than conventional detergents; and requires consumers to use 75 percent less detergent; carbon footprint of Method is 35 percent lower; due its lower requirements for water, plastic, energy, and oil business to business market Stitt Feld Handy Group, which provides services in training, negotiation, mediation, arbitration, and dispute resolution to corporations, government bodies, and their agencies services that assist in dispute resolution and conflict managemen Individualized Marketing allows marketers to use database technology to track consumer purchases and predict interests and future purchases enables marketers to customize offers and, in some cases, products to fit individual needs Dell uses this approach in marketing its technology products to both the consumer and business markets allows consumers to customize their purchases to meet individual needs business to business market, Dell also offers a customized approach to its customers, providing the same custom order approach, with the addition of leasing arrangements if requested key to successful product differentiation and market segmentation strategies lies in finding the ideal balance between satisfying a customer's individual wants and being able to do this profitably Steps in Market Segmentation marketer needs to combine strong analytical skills, sound strategic thinking, an understanding of the consumer, a vision on where the market is heading, and how this all fits with the company's direction ten steps The ten step process for segmenting a market 1. Review strategic company objectives.; clear and quantifiable; include sales, revenue, and profit targets; qualitative elements such as corporate social responsibility initiatives; new business direction 2. Identify specific business unit objectives. 3. Identify consumer/customer needs and common characteristics in the market. what drives the category and what future trends are evolving should be able to easily identify common interests and evolving trends by analyzing what products currently exist in the category Looking to other countries sometimes provides interesting ideas on where potential future interests may lie 4. Cluster common consumer/customer variables to create meaningful market segments. 4

5 clusters of products and gaps in the market that point to common consumer/customer interests, usage patterns, and prevailing attitudes clusters will identify the segments that exist in the market there is overlap between segments other times the segments are not well defined important during this step to review the market from a consumer/customer perspective and not from a product perspective 5. Conduct SWOT analyses on the segments to determine strengths, weaknesses, opportunities, and threats strengths and weaknesses refer to the internal areas of a company or a product/brand product image, its quality, or lack of advertising spending opportunities and threats look to areas outside the company, product, or brand, such as the competition, consumer trends, or technology involve a number of people 6. Identify the segment that best meets strategic company objectives. sifts through the facts and ideas that have surfaced during the SWOT analysis assesses the opportunities and threats in relation to a company's strategic direction 7. Identify marketing programs and budget requirements needed for this segment. full financial evaluation of the market to assess the costs of doing business identify what programs are required to support an initiative highlights what resources are needed to adequately compete in this segment 8. Create a sales forecast for this segment. should also consider anticipated competitive reactions 9. Conduct a profit and loss financial analysis for this segment. profit and loss statement is created to assess the financial viability of doing business in this market segment 10. Check financial forecasts against specific business unit objectives. Once the financial analysis is complete, marketers have the information needed to objectively assess whether they can achieve their business unit objectives for this segment Target Market Profiles an accurate target market profile is crucial to the success of all marketing initiatives as it drives all elements of the marketing mix profile is created by marketers, updated periodically as new information surfaces, and included in an area dedicated to ensuring that this information is readily available to marketers included in annual marketing plans and in strategic documents (1) geographics, (2) demographics, (3) psychographics, and (4) behaviouristics Geographics where a target market lives using variables such as country, region, province, city size, and type of location such as urban, suburban, or rural. Demographics easiest factors to determine is the demographic profile identifying ranges for age, gender, family life cycle, income, occupation, education, ethnic background, and home ownership for the main target market identified through a company's market research information and other secondary data 5

6 6 sources such as Statistics Canada Psychographics one of the most difficult variables to identify for marketers involves understanding consumers' attitudes to life, their personalities, general interests, opinions, and activities primary research that marketers have conducted Image based products; fragrance industry, for example, relies heavily on psychographics, as do many soft drink companies Behaviouristics how consumers use the product why consumers buy a product, the product benefit, how the product is used, and whether consumers are brand loyal in their purchase behaviour Usage rate; how usage rate plays a role in marketing can be seen with the fast food industry for every $1 spent by a light user in a fast food restaurant, a heavy user spends over $5 focus on the heavy user in this market to yield a greater return on investment target market profile is used extensively when creating advertising programs consumer insights are used to help develop campaigns Product Positioning position products in the market to appeal to certain target groups present a particular impression relative to the competition refers to the impression of the product you want to establish in consumers' minds relative to their needs and also in contrast to the competition three basic factors Image: Products are often positioned as leaders, contenders, or rebels in the market, also taking on characteristics such as trusted, prestigious, or thrifty Product attribute: Products with features that differentiate them from the competition are often positioned on this platform, bringing product claims to the forefront. Price: Products with brand parity and little product differentiation may position themselves on a price platform. Marketers create positioning statements to clearly and simply outline the positioning of a product in the market. crystallize the image for marketers so that they can design a marketing mix that aligns with the product's positioning otherwise the product may present a confusing image to consumers who will refrain from buying it positioning statement is generally included in an annual marketing plan and in relevant strategic documents. identify the main reasons the target market buys the product and what sets it apart in the market Positioning statements identify two key areas: (1) how the product meets consumer needs, and (2) how the product is differentiated in the market versus the competition. average a short paragraph and identify four elements: (1) the product name, (2) the category in which the product competes,

7 (3) one or two main reasons that the target market buys the product (product benefits), and (4) what sets the product apart from the competition. Repositioning change a product's positioning but do so when long term changes in consumer attitudes require a shift to more accurately reflect consumer needs Repositioning is often done with a refresh of a product and the various elements of its marketing mix Positioning Maps Positioning maps, also known as perceptual maps, are visual representations of how products or product groups are positioned within a category to consumers/customers can reveal gaps in the market where consumers may be under served, while also highlighting the competitive nature of the category clearly identify the two most important attributes that drive purchases in a category, whether this is in the business to business or the consumer market can identify opportunities to launch new product offerings in the marke Market Segmentation, Target Markets, and Product Positioning in Practice Segmentation, target markets, and positioning are fundamental concepts central to how marketers run their businesses. marketers immediately look to how their products are positioned in the market, consult with positioning statements, and then use the target market profiles to ensure that all elements are true to the image of their products mistake in this area could mean losing your consumers and clouding the image of your product in the market careful to ensure that all elements of the marketing mix are well coordinated to meet the product's positioning and target market expectations Market segmentation helps marketers place their product offerings in the context of a competitive market see the bigger picture from a consumer perspective focus on how competitors are servicing consumer needs market segmentation analysis also allows a marketer to identify gaps in the market and determine where future opportunities may lie REVIEW Market segmentation involves aggregating prospective buyers into groups that have common needs and who respond similarly to marketing programs. In the marketing world there are two main market segments: (1) the consumer market and (2) the business market. Companies segment the market using the following four approaches: mass marketing, segmented marketing, niche marketing, and individualized marketing. Segmenting the market involves ten steps that require analytical skills, strategic thinking, an understanding of the consumer, a vision of where the market is heading, and how this fits with company objectives. Marketers define their target markets by looking at four main variables: (1) geographics, (2) demographics, (3) psychographics, and (4) behaviouristics. Geographics looks at where a target market lives using variables such as country, region, province, city size, and types of location such as urban, suburban, or rural. Demographics includes identifying ranges for age, gender, family life cycle, income, 7

8 occupation, education, ethnic background, and home ownership. Psychographics involves understanding consumer attitudes to life, their personalities, general interests, opinions, and activities. Behaviouristics looks at why consumers buy a product, the product benefit, how the product is used, and whether consumers are brand loyal in their purchase behaviour. Usage rate also plays a role in this information. Product positioning refers to the image of the product in consumers' minds relative to the competition. Marketers create positioning statements to clearly and simply outline the positioning of a product. Repositioning includes a shifting of the product image and adjusting its marketing mix to more accurately meet consumer needs. Positioning maps are otherwise known as perceptual maps. They visually represent how products or product groups are positioned within a category to consumers. notes Product differentiation Def: Involves positioning a product apart from the competition in the eyes of consumers (123) Product positioning Def: The impression of the product you want to establish in consumers' minds relative to their needs and the competition (133) Positioning statement Def: A tool that identifies the main reasons the target market buys a product and what sets it apart in the market (134) 8