MKTG1025 Lecture Notes - Lecture 6: Market Segmentation, Micromarketing

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6 Jun 2018

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CHAPTER 6 – CREATING VALUE FOR TARGET CUSTOMERS

Define the main steps in designing a customer driven market strategy: market segmentation, targeting,

differentiation and positioning

Customer-driven marketing strategy begins with selecting which customers to serve and deciding on a value

proposition that best serves the targeted customers. It consists of four steps. Market segmentation is the act

of analysing the bases upon which it might be best to divide a market into distinct segments of buyers with

different needs, characteristics or behaviours who might require separate products or marketing mixes. Once

the groups hae ee idetified, arket targetig ealuates eah arket seget’s attratieess ad selets

one or more segments to serve. Market targeting consists of designing strategies to build the right

relationships with the right customers . Differentiation involves actually differentiating the market offering to

create superior customer value. Positioning consists of positioning the market offering in the minds of target

customers.

List and discuss the main bases for segmenting consumer and business markets

There is no single way to segment a market. Therefore, the marketer tries different variables to see which

provide the best segmentation opportunities. For consumer marketing, the main segmentation variables are

geographic, demographic, psychographic and behavioural. In geographic segmentation , the market is divided

into different geographical units, such as nations, regions, states, local government areas, cities or

neighbourhoods. In demographic segmentation , the market is divided into groups based on demographic

variables, including age, gender, family size, family life cycle, income, occupation, education, religion, race,

generation and nationality. In psychographic segmentation , the market is divided into different groups based

on social class, lifestyle or personality characteristics. In behavioural segmentation , the market is divided into

groups ased o osuers’ koledge, attitudes, uses or responses to a product. Business marketers use

many of the same variables to segment their markets. But business markets also can be segmented by

business consumer demographics (industry, company size), operating characteristics , purchasing approaches ,

situational factors and personal characteristics . The effectiveness of segmentation analysis depends on finding

segments that are measurable , accessible , substantial , differentiable and actionable .

Explain how companies identify attractive market segments and choose a market targeting strategy

To target the est arket segets, the opay first ealuates eah seget’s size ad groth

characteristics, structural attractiveness, and compatibility with company objectives and resources. It then

chooses one of four market-targeting strategies – ranging from very broad to very narrow targeting. The seller

can ignore segment differences and target broadly using undifferentiated (or mass ) marketing . This involves

mass-producing, mass-distributing and mass-promoting the same product in much the same way to all

consumers. Or the seller can adopt differentiated marketing – developing different market offers for several

segments. Concentrated (or niche ) marketing involves focusing on only one or a few market segments. Finally,

micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific

individuals and locations. Micromarketing includes local marketing and individual marketing . Which targeting

strategy is best depends on company resources, product variability, product life-cycle stage, market variability

and competitive marketing strategies.

Discuss how companies differentiate and position their products for maximum competitive advantage

Once a company has decided which segments to enter, it must decide on its differentiation and positioning

strategy . The differentiation and positioning task consists of three steps: (1) identifying a set of possible

differentiations that create competitive advantage; (2) choosing advantages upon which to build a position;

ad 3 seletig a oerall positioig strategy. The rad’s full positioig is alled its alue propositio – the

full mix of benefits upon which the brand is positioned. In general, companies can choose from one of five

winning value propositions upon which to position their products: more for more, more for the same, the

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Document Summary

Chapter 6 creating value for target customers. Define the main steps in designing a customer driven market strategy: market segmentation, targeting, differentiation and positioning. Customer-driven marketing strategy begins with selecting which customers to serve and deciding on a value proposition that best serves the targeted customers. Market segmentation is the act of analysing the bases upon which it might be best to divide a market into distinct segments of buyers with different needs, characteristics or behaviours who might require separate products or marketing mixes. Once the groups ha(cid:448)e (cid:271)ee(cid:374) ide(cid:374)tified, (cid:373)arket targeti(cid:374)g e(cid:448)aluates ea(cid:272)h (cid:373)arket seg(cid:373)e(cid:374)t"s attra(cid:272)ti(cid:448)e(cid:374)ess a(cid:374)d sele(cid:272)ts one or more segments to serve. Market targeting consists of designing strategies to build the right relationships with the right customers . Differentiation involves actually differentiating the market offering to create superior customer value. Positioning consists of positioning the market offering in the minds of target customers. List and discuss the main bases for segmenting consumer and business markets.

Related Questions

Match the definitions or complete the statements in the first part of the quiz with the appropriate terms found in the second part.

Definitions/Statements

1. _____ refers to marketersâ focus on a product rather than on the needs of the market.

3. The impact of technology on buyer behavior relates to factors such as ____; the use of technology to engage customers and build relationships; customization of products and promotional messages; and better prices and distribution.

4. In the case of situational influences, this relates to the situation in which or the occasion on which the product will be used, e.g., special occasion or everyday use.

5. In the case of situational influences, this relates to the fact if we are in a store, point-of-purchase displays could influence us to buy something. We could also make unplanned purchases because we remembered something from seeing the brand while we are in the store.

6. This discipline on which consumer researchers draw focuses on society and large groups in society such as family and social class.

7. This discipline on which consumer researchers draw focuses on cultures and differences among cultures.

8. These are temporary circumstances that affect consumer purchase decisions.

9. In the case of situational influences, this refers to the fact that the person and the occasion for which we are buying something influence our purchase decisions.

10. According to the simple model of consumer decision making, reference groups, family, social class, culture, and subculture are among the _____ on buyer behavior.

11. According to the simple model of consumer decision making, motivation, personality trait, perception, and attitudes are among the _____ on buyer behavior.

12. According to the simple model of consumer decision making, advertising, buzz agents, customized messages, social media, and word-of-mouth are examples of ____.

13. This discipline on which consumer researchers draw focuses on behavior in small groups and helps consumer researchers to understand issues such as opinion leadership, diffusion of innovations, and communication.

14. In the case of situational influences, ______ are consumer mood states or physiological state (for example, hunger, thirst) that influence consumer decision-making.

15. The selection of one or more segments by a marketer to serve.

16. Developing a distinct image for a brand in the mind of consumers.

17. This is an effort by a marketer to change the existing perception that consumers have of a brand.

19. ___ segmentation involves segmenting based on variables such as urban, rural, suburb, state, cities, counties, and regions.

20. ____ segmentation is based on variables such as consumersâ lifestyles as indicated by their activities, interests, and opinions.

21. This criterion for effective targeting says that marketers should have some way of deciding which consumers fall into which segments.

22. This criterion for effective targeting says that marketers should be able to reach segments with appropriate media and distribution channels.

23. This is the most popular segmentation system combining lifestyles and values of consumers.

24. This household segmentation model is based on a combination of geographic and demographic information and the principle that âBirds of a feather flock together.â

25. ______ is defined as âsending consumers personalized and prompt offers and promotional messages designed to reach the right consumers and deliver to them highly relevant messages at the right time and more accurately than when using conventional segmentation techniques.â

Terms

A. Positioning

B. Accessibility

C. Anthropology

D. Situational influences

E. Consumption situation

F. Task definition

G. Identification

H. Marketing-oriented

I. Targeting

J. Psychographic

K. Marketing myopia

L. PRIZM

M. Interactive and novel communication channels

N. Sociology

O. Demographic

P. Purchase situation

Q. Behavioral targeting

R. Antecedent states

S. Communication sources

T. Geographic

U. Sociocultural influences

V. VALS

W. Psychological influences

X. Social psychology

Y. Repositioning

Match the definitions or complete the statements in the first part of the quiz with the appropriate terms found in the second part.

Definitions/Statements

1. _____ refers to marketersâ focus on a product rather than on the needs of the market.

2. _____ companies do not try to persuade consumers to buy what the firm has already produced, but rather to produce only products that they know they can sell, thereby satisfying consumersâ needs and turning them into loyal customers. 3. The impact of technology on buyer behavior relates to factors such as ____; the use of technology to engage customers and build relationships; customization of products and promotional messages; and better prices and distribution.