Segmentation, targeting and positioning.

Segmentation, targeting and positioning

1. MKM24 Marketing and Communication Week 5: Segmentation, Targeting , Positioning

2. The marketing strategy journey The marketing strategy development process aims to answer a complete set of questions: Where are we now? Where do we want to be? How will we get there? Did we get there?

3. Learning objectives Explain the principle of STP Know the different dimensions that marketers use to segment markets Outline how firms select target segments Explain the differences between various strategic approaches to target marketing Comprehend what is involved in positioning a product or service against competitors

4. Consumer Buying Decision Process In addition to understanding how these factors influence consumers, marketers must identify and understand: Who makes the buying decision The types of buying decisions The stages in the buying process

5. Consumer Buying Decision Process Understand Buying roles Buying behavior Buying decision process Initiator Influencer Decider Buyer User

6. Consumer Buying Decision Process Understand Buying roles Buying behavior Buying decision process Complex buying behavior Limited buying behavior Habitual buying behavior Variety-seeking buying behavior

7. Consumer Buying Decision Process Understand Buying roles Buying behavior Buying decision process Problem recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior

8. STAGES OF THE CONSUMER BUYING PROCESS Consumer buying decision process includes six stages. They are: Problem Recognition Information Search Evaluation of alternatives Purchase Decision Purchase Post-Purchase Evaluation

9. Consumer Buying Decision Process Problem Recognition

10. 1. PROBLEM RECOGNITION Difference between the desired state and the actual condition. Example: By seeing a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes. Hunger stimulates your need to eat.

11. Problem Recognition Information Search Consumer Buying Decision Process

12. 2. INFORMATION SEARCH Internal Search: --- Memory External Search: --- Friends and Relatives A successful information search leaves a buyer with possible alternatives, the evoked set . Example: Hungry, want to go out and eat, evoked set is Chinese food Indian food Burger king

13. Information Search Internal

14. Information Search Internal External

15. Problem Recognition Information Search Evaluation of Alternatives Consumer Buying Decision Process

16. 3. EVALUATION OF ALTERNATIVES Need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives. Example: If you want to eat something spicy, then Indian food gets the highest rank etc…

17. Evaluation of Alternatives Consideration Set (Evoked Set) Evaluative/choice Criteria Technical Social Personal Emotional

18. Problem Recognition Information Search Evaluation of Alternatives Purchase Consumer Buying Decision Process

19. 4. PURCHASE DECISION : Choose buying alternative, includes product, package, store, method of purchase etc. 5. PURCHASE : May differ from decision, time lapse between purchase decision and the actual purchase, product availability.

20. Postpurchase Evaluation Problem Recognition Information Search Evaluation of Alternatives Purchase Consumer Buying Decision Process

21. Postpurchase Evaluation Cognitive Dissonance Did I Do the Right Thing?

22. 6. POST-PURCHASE EVALUATION : It is the outcome Satisfaction or Dissatisfaction. This can be reduced by warranties, after sales communication etc. Example: After eating an Indian meal, you may think that really you wanted a Chinese meal instead.

23. Consumer Buying Decision Process ^^^ Postpurchase Behavior: Consumers’ expectations are compared to performance Postpurchase satisfaction influences future behavior Purchasing behavior Word-of-mouth communications

24. SITUATIONAL INFLUENCES Physical Surroundings Social Surroundings Time Purchase Reason Buyer ’ s Mood and Condition Consumer Buying Decision Process Possible Influences on Consumer Buying Decisions

25. SITUATIONAL INFLUENCES Physical Surroundings Social Surroundings Time Purchase Reason Buyer ’ s Mood and Condition PSYCHOLOGICAL INFLUENCES Perception Motives Learning Attitudes Personality and Self-concept Lifestyles Consumer Buying Decision Process Possible Influences on Consumer Buying Decisions

26. SITUATIONAL INFLUENCES Physical Surroundings Social Surroundings Time Purchase Reason Buyer ’ s Mood and Condition SOCIAL INFLUENCES Roles Family Reference Groups and Opinion Leaders Social Classes Culture and Subcultures PSYCHOLOGICAL INFLUENCES Perception Motives Learning Attitudes Personality and Self-concept Lifestyles Consumer Buying Decision Process Possible Influences on Consumer Buying Decisions

27. How and Why Consumers Buy Influence Factors Cultural Social Personal Psychological Exert broadest and deepest influence Culture Subculture Social classes

28. How and Why Consumers Buy Influence Factors Cultural Social Personal Psychological Reference groups Membership Primary vs. secondary Aspirational vs. dissociative Family Social roles and statuses

29. How and Why Consumers Buy Influence Factors Cultural Social Personal Psychological Age Stage in life cycle Occupation Economic circumstances Lifestyle Personality Self-concept

30. How and Why Consumers Buy Influence Factors Cultural Social Personal Psychological Motivation Perception Learning Beliefs Attitudes

31. Factors Influencing Consumer Behavior Social Reference groups Family Roles and status Personal Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Psycho- logical Motivation Perception Learning Beliefs and attitudes Buyer Culture Sub- culture Social class Cultural

32. Psychological Influences on the Buying Decision Process Perception Information Inputs Selective Exposure Selective Distortion Selective Retention Motives Maslow’s Hierarchy of Needs Patronage Motives

33. Psychological Influences on the Buying Decision Process Perception Information Inputs Selective Exposure Selective Distortion Selective Retention Motives Maslow’s Hierarchy of Needs Patronage Motives

34. Consumer Buying Decision Process Marketers should attempt to influence and monitor postpurchase behavior Postpurchase communications reduce dissonance, returns, and order cancellations Talk with customers to discover new uses for existing products Investigate methods of product disposal

35. TYPES OF CONSUMER BUYING BEHAVIOR : There are four types of consumer buying behavior, they are : Routine Response/Programmed Behavior Limited Decision Making Extensive Decision Making Impulse buying

36. ROUTINE RESPONSE/PROGRAMMED BEHAVIOR Buying low involvement, frequently purchased, low cost items. Examples : Soft drinks, snack foods, milk etc.

37. 2. LIMITED DECISION MAKING Buying product occasionally. That is when you need to obtain information about unfamiliar brand in a familiar product category. Example: Clothes--know product class but not the brand.

38. 3.EXTENSIVE DECISION MAKING : Complex high involvement, unfamiliar, expensive and infrequently bought products. Spend a lot of time seeking information and deciding. High degree of risk. Example: Cars, homes, computers, education.

39. 4. IMPULSE BUYING : No conscious planning. The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next. For example: Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making.

40. STP framework Doyle, P. (2002), Marketing Management and Strategy, London: Prentice Hall.

41. General characteristics Geographic Language Political factors Demography Economy Industrial structure Technology Social organization Religion Education Specific characteristics Culture Lifestyle Personality Attitudes and tastes High degree of measurability, accessibility, and actionability Low degree of measurability, accessibility, and actionability , but high degree of relevance The basis of market segmentation Geographics Demographics Psychographics Behaviour

42. B2B Segmentation: The ‘Firmographic’ approach

43. DEFINITIONS MARKET SEGEMENTATION The act of dividing a market into distinct groups of buyers with different needs, characteristics or behaviour, who might require separate products or marketing mix. MARKET TARGETING The process of evaluating each market segment’s attractiveness and selecting one or more segment to enter. MARKET POSITIONING Arranging a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of the target consumers.

44. Steps in Market Segmentation, Targeting and Positioning Source: Kotler et al. (2008:410)

45. CUSTOMER COMPANY COMPETITION SEGMENTATION TARGETING POSITIONING ACQUISITION-RETENTION ID segmentation variables and segment the market Develop profiles of segments Evaluate segment attractiveness Select target segment(s) Develop positioning concepts for each target segment Select, develop, and communicate the chosen concept (4P’s) Identify Market Opportunities Set Strategy Developing Marketing Strategy

46. Why Segment? Allows companies the opportunity to enhance their profits (by matching needs). Companies can examine growth opportunities and expand their product line. Companies are not able to compete in all segments effectively.

47. Segmentation What is segment? Group of consumers within the total market who are relatively homogeneous with regards to their perceptions of, evaluations of, need for, and behavior toward a product or service. These groups typically require different marketing strategies to influence their purchase and/or consumption of the product or service. These groups typically have same desires (benefit segmentation). Why segment the market? “Marketing of one”  better use of limited resources in attracting and serving customers (consumers are heterogeneous; customization vs. production cost

48. Effective Segmentation Measurable Accessible Substantial Differential Segments must be large or profitable enough to serve. Segments can be effectively reached and served. Actionable Size, purchasing power, profiles of segments can be measured. Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.

49. Segmenting Consumer Markets Consumer segmentation Behavioural Benefits sought Purchase occasion Purchase behaviour Usage Perceptions and beliefs Lifestyle Personality Psychographic Adapted from Jobber and Fahy (2006:114) © The McGraw-Hill Companies, 2006 Demographic Socio-economic Geographic Profile

50. Behavioural Segmentation Methods Source: Armstrong and Kotler (2006:166) and Jobber and Fahy (2006:114) VARIABLE EXAMPLE Benefits sought Convenience, status, performance, quality, service, economy, convenience, speed Occasion Regular / special occasion, self-buy, gift Purchase behaviour (see also biographic data) Loyalty status (none-medium-strong-absolute), brand switching Usage Light, medium, heavy user Beliefs / attitude / perception Favourable, unfavourable, enthusiastic, positive, indifferent, negative, hostile User status Nonuser, ex-user, potential user, first-time user, regular user Readiness stages Unaware, aware, informed, interested, desirous, intending to buy

51. Psychographic Segmentation Methods VARIABLE EXAMPLE Lifestyle Personality Extroverts, introverts, aggressive, submissive. Source: Armstrong and Kotler (2006:136-7) and Jobber and Fahy (2006:116)

52. Techniques for Segmentation Exploratory research (e.g. focus groups) Motivations Survey Attitudes Behavior Demographics Analysis Cross tabs (e.g., age vs. income) Factor analysis Cluster analysis Profiling Perceptions/Ratings for one respondent: Customer Values Distance between segments A and B A B C D A, B, C, D: location of segment centers. Typical members: A: families w/ small kids B: families w/ no kids C: restaurants D: health spas Example: Paper Towels Strength (importance) Water Resistance (importance)

53. Source: Daily Mail, 10/10/07, pg. 25

54. Source: Haley (1968, reprinted 1995:61)

55. Geodemographics “An availability of demographic consumer behaviour and lifestyle data by arbitrary geographic boundaries that are typically quite small.” Source: American Marketing Association Definition “The study of the relationship between geographical location and demographics.” Source: Kotler et al. (2008:418)

56. Using Geodemographic Information Identify profitable customers and/or prospects, evaluate local markets and plan public resources. Increase knowledge of your customer’s behaviour and lifestyle. Drive more effective customer communications, including targeting direct mail, leaflet distribution and local newspaper advertising. Local market planning – gives a more effective estimation of the demand for market offerings and a more effective location planning strategy. Used by many sectors of business: financial organisations, retailers and media owners.

57. Target Market Strategies Source: Armstrong and Kotler (2007:178)

58. Target Marketing Strategies Company Marketing Mix Market A. Mass Marketing Segment 1 Segment 2 Segment 3 Company Mix 1 Company Mix 2 Company Mix 3 B. Differentiated Marketing Segment 1 Segment 2 Segment 3 Company Marketing Mix C. Concentrated Marketing D. Micromarketing Customer 1 Customer 2 Customer 3 Company Mix 1 Company Mix 2 Company Mix 3

59. Basic Target Marketing Strategies

60. Choosing a Market-Coverage Strategy Factors Affecting Strategy Decisions Company Resources Competitors’ Strategies Market Variability Product Variability Stage in Life Cycle Source: Kotler et al. (2008:430)

61. Brand Positioning Is at the heart of the marketing strategy “. . . the act of designing the company’s offer and image so that it occupies a distinct and valued place in the target customer’s minds.” Philip Kotler 61

62. Product Differentiation and Positioning Importance: “There is no such thing as a commodity” – Theodore Levitt “No matter how commonplace a product may appear, it does not have to be a commodity. Every product, every service can be differentiated” – Dermot Dunphy, CEO, Sealed Air Corp. Examples: vodka (defined by federal regulations as “neutral spirits so distilled or so treated after distillation with charcoal…. as to be without character, aroma, taste, or color”); bottled water. Differentiation can be achieved on: Product attributes Service factors Image

63. Positioning … … is “the act of designing the company’s offering and image to occupy a distinctive place in the the target market’s mind .” “Perception is reality ” – Bishop Berkeley Q: Where do we intend to be in the target consumers’ minds vis-à-vis the competition? Remember: We have to convince our target segment to choose our product; i.e., we have to convince them that our product meets or exceeds their needs and that does it better than competitive products.

64. Product Position “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.” Source: Kotler et al. (2008:432)

65. Target Market Often Part of Positioning

66. Positioning Maps / Perceptual Positioning “Consumers position products with or without the help of marketers. But marketers do not want to leave their product’s position to chance. They must plan positions that will give their products the greatest advantage in selected target markets, and they must design marketing mixes to create these planned positions.” Source: Kotler et al. (2008:434)

67. Services Differentiation i.e. Delivery, Installation, Repair Services, Customer Training Services Product Differentiation i.e. Features, Performance, Style & Design, or Attributes Image Differentiation i.e. Symbols, Atmospheres, Events Personnel Differentiation i.e. Hiring, Training Better People Than Competitors Do Identifying Possible Competitive Advantages

68. BRAND Brand Positioning WHY? FOR WHOM ? WHEN? AGAINST WHOM? SUMMARIZE IN A CONCEPT (Kapferer, 2004)

69. Its values What does it bring which is Its personality exclusive or better ? Its competence Which is the difference ? Its mission What does it rest on ? Its ambition BRAND CHARTER IDENTITY POSITIONING WHO IS THE BRAND? WHY THIS BRAND VS WHICH COMPETITOR? TO BE SEARCHED FOR IN THE BRAND HISTORY (IF EXISTING BRAND) OTHERWISE TO BE BUILT TO BE DEFINED FROM AN INSIGHT ON TARGET MARKET, IN COMPARISON WITH COMPETITORS

70. A Perceptual Map of Cars Porsche Classy Practical Sporty Conservative BMW Volkswagen Ford Mercedes

71. A Perceptual Map of Supermarkets M & S Sainsbury’s Asda Tesco High price Low price Extensive / luxury Limited basic

72. Summary: STP as Marketing Strategy Segmentation Identify segmentation bases and segment the market Develop profile of resulting segments Targeting Evaluate attractiveness of each segment based on 3Cs Select target segments Positioning Use perceptual map to identify current positions Identify positioning concepts for each target segment Select, develop, and communicate the chosen concept through marketing mix (the 4P’s)

73. Conclusion: Marketing Strategy and the Marketing Mix Goal: create value for customers and build customer relationships. Marketing strategy decisions include: Market segmentation and targeting Differentiation and positioning Marketing strategy must guide marketing mix decisions.

74. Unilever in Brazil: Marketing Strategies for Low-Income Consumers

75. Procter & Gamble's Brand Portfolio

76. Unilever's Brand Portfolio

77. Unilever in Brazil: Strategic Decisions Targeting decision (Go? No go?) Should Unilever divert money from its premium brands to invest in a lower-margin segment of the market? Does U. have the right skills and structure to be profitable in a market in which even small local entrepreneurs struggle? In the long run, what would U. gain and what would it risk? Market analysis (5Cs: Community, Company, Competitors, Customers, Context)

78. Team discussion Unilever in Brazil: Strategic Decisions Positioning (assuming that U. plans to target this segment) Write a positioning statement summarizing how U. plans to create value for low-income consumers in the NE of Brazil. Does U. need a new brand with a distinct value proposition? Why not reposition or extend an existing brand? Marketing strategy formulation (STP + branding choices)

79. Unilever in Brazil: Implementation Decisions