9/22/2024

MARKETING
MBAB5P05
SEGMENTATION,
Week3
TARGETING, AND
POSITIONING

Any new campaigns?

New products launched in

WHAT’S IN THE
the marketplace?
NEWS?

Companies entering new

markets?

MARKETING TASK

▪ Review a website and the Instagram feed of a brand

of your choice
▪ As you are looking at the website and the posts, is it
clear who the intended audience is?
▪ Is it clear what sort of segmentation approach they
are following?
▪ If not, how can they improve it?

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SEGMENTATION AND TARGETING PROCESS

MARKETING SEGMENTATION, TARGETING

AND POSITIONING (STP)
o Market — Group of people with sufficient
purchasing power, authority (ability), and
willingness to buy
o Regarding authority/ability, children might not be
able to afford purchases but they can still
influence the,
o By identifying, evaluating, and selecting a target
market to pursue for a good or service, marketers
can develop more efficient strategies.

WHY STP MATTERS

▪ Markets are fragmented, and despite notions about

“globalisation”, consumers are increasingly
looking for individual customised
products/services rather than the standardised
products or services.
▪ How likely is it that we could find even one
product, one brand, one movie, one song, one
book that everyone likes?
▪ I suppose we could have some universal
agreement in the negative sense i.e., a brand,
product, movie, song that we all dislike?

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WHY STP MATTERS

▪ The role of marketing is to offer choice by making
available different offerings to different groups of
buyers; this means different combinations of the 4
(or 5 or 7…) P’s;
▪ Buyers with a similar profile can be expected to
respond positively to a promotions campaign that
meets their common need
▪ Agree or disagree?
▪ The more specific the needs of the buyer the greater
the opportunity to create value – driven revenue
streams.
▪ Keep in mind it might not make sense for a brand
to address all needs if they simply can’t meet them

▪ Consumer products —
Products bought by
ultimate consumers for
personal use
▪ Business products —
TYPES OF Goods and services
MARKETS purchased for use either
directly or indirectly in
the production of other
goods and services for
resale

TYPES OF MARKETS
▪ A single product can serve different uses
▪ tires bought for the family car are consumer
products; tires bought by an auto manufacturer
are business products

▪ An item that starts out as a business product can be

modified for consumer use
▪ professional cookware sold to restaurants is
adapted and sold for home use

▪ To determine the classification of a good or service,

think about who is going to buy it, who will use it, and
how it will be used

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SOME TRUTHS ABOUT ‘MARKETS

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DESIGNING A CUSTOMER DRIVEN MARKETING

STRATEGY

Transportation As A Service

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THE ROLE OF MARKET SEGMENTATION

▪ Market segmentation:
Division of the total market into smaller, relatively
homogenous groups

▪ Meeting the needs of different market segments can

be obtained through several options:
▪ Change the product itself
▪ Identify the factors that affect purchase decisions
and then group consumers according to the
presence or absence of these factors
▪ Adjust marketing strategies to meet the needs of
each group

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Customer analysis
• Better understanding of
customer’s needs, wants and
characteristics; you can
address how, why and what
customers buy
Competitor analysis
WHY USE
MARKET • The key point is to understand
what segments are your
SEGMENTATION? competitors targeting their
products?
• If you know who your
competitors are targeting, it
helps make decisions about
the most appropriate
segments to target and what
kind of competitive advantage
you want to try to develop

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▪ Effective resource allocation

▪ Tradeoffs and priorities are
required since no one
company can serve the
needs of everyone;
WHY USE
MARKET ▪ Strategic marketing planning
SEGMENTATION? ▪ A firm that targets several
markets should have
different plans for each
segment as customers in
each segment will have
unique needs/wants

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CRITERIA FOR EFFECTIVE SEGMENTATION

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SEGMENTING CONSUMER MARKETS

Four common bases for segmenting
consumer markets:

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GEOGRAPHIC SEGMENTATION
▪ Division of an overall market into homogenous
groups based on their locations

▪ It’s one of the oldest forms of market

segmentation.

▪ It doesn’t ensure that all consumers in a location

will make the same buying decisions, but it does
help in identifying general patterns.

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GEOGRAPHIC FACTORS TO CONSIDER:

▪ Population size and distribution—concentration of
population, total population, and fastest-growing regions

▪ Worldwide population—nations with largest populations,

concentration of population, greatest metropolitan areas

▪ Global economic variables—nations that share similar

population and product-use patterns are often grouped
together rather than treating each nation as an
independent segment
▪ EU, Canada/US often lumped together too

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GEOGRAPHIC FACTORS TO CONSIDER:

▪ Job growth and household income—regions with similar
growth or the same income range

▪ Population migration patterns—growing or shifting areas

due to movement of Canadians (transfer, changed job
status or job loss, family proximity, etc.)

▪ Urban vs. suburban—shifts between downtown shopping

and suburban malls

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USING GEOGRAPHIC SEGMENTATION

▪ Demand for some goods and services can vary
substantially according to geographic region.

▪ Many major brands get 40 to 80 percent of their sales

from certain areas, called core regions.

▪ Other factors affecting geographic segmentation:

residence location type within a certain geographic
area (urban, suburban, rural), regional preferences or
needs, climate, distinctions within a geographic area
such as from certain areas, called core regions.

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SEGMENTING BY AGE
▪ School-aged children
▪ Teens and tweens
▪ Gen X
▪ Millennials
▪ Gen Y
▪ Baby boomers
▪ Seniors
Would you expect the messaging for each of
these segments?

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KEY AGE GROUPS CONT’D

▪ School-age children, and even those younger, have great

influence over family purchases, particularly regarding food
▪ Tweens (preteens) and teens are a rapidly growing market.
▪ This group influences purchases of food, clothing and
technology.
▪ Generation X, those born 1966-1981, tend to be well-educated,
optimistic, and technologically savvy, defining themselves less
by careers than previous generations.
▪ Baby boomers, those born 1947-1965, are a huge group,
influenced by early television, the Vietnam War, focus on
careers, tending to value health and quality of life.
▪ Seniors, those over age 65, tend to have high discretionary
incomes and rates of home ownership, are healthier, living
longer, are more active, and often have more money to spend
than previous generations.

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THE COHORT EFFECT

▪ Tendency of members of a generation to be
influenced and bound together by significant events
in their formative year, ages 17 to 22
▪ These events help define core values of the group
that eventually shape consumer preferences and
behaviour.
▪ Seniors were defined by the Great Depression and
WWII; baby boomers by the Vietnam War and the
civil rights movement; those who were roughly age
17 to 22 on September 11, 2001, have now been
defined as the Video Game Generation.
▪ What key events define your generation?

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GENDER SEGMENTATION

Within the context of the average Canadian family:

▪ Women drive an estimated 70-80% of consumer
spending
▪ About 75% of women identify themselves as the
primary shopper in the household
▪ Women influence about 85% of consumer spending
▪ 91% of women felt advertisers didn’t understand them

Gabe Rosenberg, “Study: 91 percent of women feel misunderstood by advertisers,”

https://contently.com

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ETHNIC SEGMENTATION

1. Visible minorities represent 20% of Canadian

population; by 2031 this figure will reach 30%

2. In Toronto, visible minorities make up 49.1% of the

population; in some surrounding cities such as
Markham and Brampton, this number exceeds
65%

3. This is an emerging trend in urban areas across

Canada making ethnic marketing a smart strategy
for many companies

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PSYCHOGRAPHIC SEGMENTATION
▪ What is psychographic segmentation?
▪ Psychographic segmentation divides a population into
groups that have similar psychological characteristics,
values, and lifestyles.
▪ Lifestyle refers to a person’s mode of living or daily
operations (think of what you do in your time off)
▪ Psychographic profiles are created through extensive
surveys that ask consumers to agree or disagree with a
collection of AIO statements (describing activities,
interests, and opinions).
▪ Many businesses turn to psychographic research to
learn what consumers want and need.

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VALS (VALUES, ATTITUDES, LIFESTYLES)

▪ A psychographic segmentation system developed
25 years ago and today owned and managed by SRI
Consulting Business Intelligence (SRIC-BI)
▪ Based on concepts of resources and motivation

▪ It divides consumers into eight psychographic

categories with profiles for each: actualizers,
fulfilleds, believers, achievers, strivers,
experiencers, makers, and strugglers

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VALSTM

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MARKET SEGMENTATION PROCESS

▪ Stage 1: Develop a relevant profile for each segment.
▪ Identifying promising segments, then understanding the
customers in each one
▪ Stage 2: Forecast market potential.
▪ Using market segmentation and market opportunity
analysis to produce a forecast of market potential within
each segment
▪ Stage 3: Forecast probable market share.
▪ Analyzing competitors’ positions in targeted segments
▪ Stage 4: Select specific market segments.
▪ Using the accumulated analysis and forecasts to weigh the
potential for reaching company goals and to justify
committing resources to developing one or more
segments

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TARGETING DEFINED
▪ “Having identified market segments, marketers must
decide which, if any, they intend to enter. A
marketing program which covers all elements of the
marketing mix can then be designed to suit the
particular requirements of those segments targeted.”
(Dibb and Simkin, 1991, p.7)

▪ Target market selection involves an assessment of

the target market attractiveness to determine which
the company should choose and prioritise to
compete with (Friedmann and Lessing, 1987)

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TARGETING: APPLIED
Target Profile:

Demographic
▪ 35 – 49 years old
▪ Male or female
▪ $100,000+ annually
▪ Executives, owners, professionals
▪ Cities over 500,000 population

Psychographic
▪ Progressive thinkers and risk takers;
interested in the arts and adventure
travel

Behaviour Response
▪ Attracted to brands based on
heritage, image and reputation

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MARKET TARGETING STRATEGIES

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MARKET POSITIONING OF THE PRODUCT

▪ After deciding which segment (or segments) of the
market to enter, the firm must decide which “position”
it wants to occupy in those segments.
▪ Positioning is customer perceptions of a product
image or benefits versus competitions’ products.
▪ Positioning allows companies to differentiate their
offerings from that of competitors.

▪ Product position is the way the product is defined by

consumers on important attributes.
▪ Tide is positioned as an all purpose family washing
detergent.

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EXAMPLES OF POSITIONING STRATEGIES

Position …
… on specific product attributes [Hyundai Excel>>low price]

… on the benefits offered [Colgate>>cavity prevention]

… for certain classes of users [Mothercare>> baby products]

… against a competitor [Microsoft vis-à-vis Apple]

… away from competitors [7-up, the un-cola ]

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HEAD-ON POSITIONING

The Pepsi challenge is the classic example of head-on

positioning. Pepsi finds ways to show consumers
preferring their beverage over Coca-Cola.

Apple established Macintosh computers by comparing

them to PCs: “Hi I’m a Mac…and I’m a PC.”

The specific appeal type is referred to as comparative

advertising

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BRAND LEADERSHIP POSITIONING

Leaders in market share often advertise in a manner that
shows why the brand is highly acceptable to consumers.

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PRODUCT DIFFERENTIATION POSITIONING

A strategy that focuses on the unique attributes or
benefits of the product.

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TECHNICAL INNOVATION POSITIONING

A strategy that demonstrates continued technical
leadership in a product category.

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LIFESTYLE POSITIONING
In crowded markets where brands are similar, marketers
develop communications based on the lifestyle of the
target market.

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DEVELOPING A POSITIONING STATEMENT

PRODUCT
▪ Company and brand positioning should be summed
up in a positioning statement of the form:
▪ To (target segment and need) our (brand) is
(concept) that (point of difference).
▪ Example: ‘To busy, mobile professionals who need to
be always in the loop, Blackberry is a wireless
connectivity solution that allows you to stay connected
to data, people and resources while on the go, easily
and reliably – more so than competing technologies.’

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CHALLENGES OF POSITIONING STRATEGY

▪ Vague positioning – unclear what the company is trying
to position themselves as

▪ Confused – strategy keeps changing so customers don’t

know what the brand should mean to them

▪ Off-target positioning – company picks unimportant

dimensions to differentiate themselves on

▪ Over positioning – position too narrowly, either means

they appeal to too small of a market or are unable to
adapt to changing market conditions

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POSITIONING MAP FOR SELECTED RETAILERS

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GROUP EXERCISE
▪ Using the smartphone market,
firstly identify as many of the key
axes on which firms can position
themselves
▪ Next, create a perceptual map of
the various smartphone
manufacturers across a few of the
key axes you identified above
▪ Complete at least 2 perceptual
maps and use different axes for
each map

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Segmentation: Cluster Analysis

Appendix:
Cluster Analysis

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SEGMENTATION: CLUSTER ANALYSIS

What is Clustering?

Clustering of data is a method by which large sets of data is

grouped into clusters of smaller sets of similar data.
Example:

The balls of same color are clustered into a group as shown below :

Thus, we see clustering means grouping of data or dividing a large

data set into smaller data sets of some similarity.

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SEGMENTATION: CLUSTER ANALYSIS

Online channel Online & offline

Premium
For example Lico plans to customize offering discounted Saving Very
offering discounted
premiums
its auto insurance offerings and want premiums Important
to see what its customers view as
Segment
more important. A (49%)
Segment
B (15%)
• Savings on premium
• Existence of a neighbourhood
agent Agent Not Agent Very
(1 = not important; 7 = very Important Important

important)
Segment
The majority of Lico’s customers C (36%)
prefer premium saving (49%).
Customers who belong to segment B Offline channel
(about 36%) prefer having a Premium charging higher
Saving Not
neighbourhood agent. Some Important
premiums
customers (15%) prefer both.

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SEGMENTATION: CLUSTER ANALYSIS

Distance between two individuals is calculated through the Name Importance Score
measure called Euclidean Distance.
Premium Saving Neighborhood
If Joe and Sam are being clustered on the basis of n variables: Agent
Joe 4 7
Euclidean Distance =
√ (XJoe,1 – XSam,1)2 + ……. + (XJoe,n – XSam,n)2 Sam 3 4

Where Sara 5 3
XJoe,1 = the value of Joe along variable 1 (e.g., premium saving) Ali 4 6
XSam,1 = the value of Sam along variable 1

Euclidean Distance (Joe, Sam) = √ (4 – 3)2 + (7 – 4)2 = 3.2

Euclidean Distance (Joe, Sara) = √ (4 – 5)2 + (7 – 3)2 = 4.1

Euclidean Distance (Joe, Ali) = √ (4 – 4)2 + (7 – 6)2 = 1.0

Pairwise Distance Matrix

Joe Sam Sara Ali

Joe 0 3.2 4.1 1.0
Sam 0 2.2 2.2
Sara 0 3.2
Ali 0

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SEGMENTATION: CLUSTER ANALYSIS

Average of all points in

the cluster – Centroid

a c
{3, 5}
b
c a

Consider Joe, Sam and Sara belong to same cluster, then the
centroid would be:
Z = (z1, z2) = {(4+3+5) ÷ 3, (7+4+3) ÷ 3}
= {12/4, 14/3} = {3, 5}
z1 = average rating of Joe, Sam, and Sara on premium saving
z2 = average rating of the three on neighborhood agent

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