Market segmentation: The aggregation of prospective buyers into groups that have common needs and respond similarly to marketing programs.
2 main market segments:
– Business market: Products that are purchased either to run a business or to be used as a component in another product or service
Product differentiation: Involves positioning a product apart from the competition in the eyes of consumers.
Forms of market segmentation:
– Mass marketing: The marketing of a product to the entire market with no differentiation at all. (Ex: propane)
– Segment marketing: Designing different products and services to meet the needs of different target groups. (Most common, ex: healthy cereal)
– Niche marketing: When a company focuses its efforts on a limited segment in the market. (Ex: all natural ingredient cereal)
– Individualized marketing: Involves customizing offers and, in some cases, products that fit individual needs. (Ex: customized laptop)
Steps in market segmentation:
- Review company objectives: They should include sales, revenue, and profit targets, but also qualitative element such as gaining a new threshold in the market.
- Identify consumer/customer needs and common characteristics in the market: Looking at evolving trends. Common interest by analyzing what products currently exists in the category, which areas are expanding/shrinking.
- Cluster common consumer/customer variables to create meaningful market segments: Look for majority interest points.
- Conduct a SWOT analysis on the segments to determine strengths, weaknesses, opportunities and threats: A SWOT analysis is a process by which a company can identify opportunities and whether it has the strength to compete in a segment that may already be well served by the competition.
- Identify the segment that best meets company objectives: After the SWOT analysis they bring out the facts and assess the opportunities and threats in relation to company objectives.
- Identify marketing programs and budget requirement needs for this segment: If a particular segment has surfaced, further investigation will be required. This will include a full financial evaluation, resources need.
- Create a sales forecast for this segment: Looking at the sales potential for this segment.
- Conduct a profit and loss financial analysis for this segment: Budget requirements, sales forecasts are put with projected costs to determine what level of profits can be achieved in this market segment. Once everything is done, they can see whether objectives can be achieved by conducting business in this market segment.
Target market profiles:
Geographics: Where a target market lives using variables such as country, religion, province, city size, and types or locations such as urban, suburban or rural. (Ex: smart car for urban cities)
Demographics: Ranges from age, gender, family life cycle, income, occupation, education, ethnic-background, and home ownership. (Found on stats Canada)
Psychographics: Understanding consumer attitudes to life, their personalities, general interests, opinions, and activities. (General from primary research)
Behavioristics: Why consumers buy a product, the product benefit, how they use it, and whether they are brand loyal in their purchase behavior. (Cell phones, younger people use texting)
Product positioning: The image of the product you want to establish in consumers minds relative to the competition.
Positioning statements: A tool that identifies the main reasons the target market buys a product and what sets it apart in the market. (Look at marketing mix to accurately determine positioning in the market) They are clear and focused, and identify four elements (1) the product name (2) the category in which the product competes (3) one or two main reasons that the target market buys the product (4) what sets the product apart. Example: “Kashi cereal is positioned in the cold cereal market as a great-tasting, all natural, whole-grain cereal perfect for people who want to lead healthy lives. It focuses on all natural ingredients.
Repositioning: A revamping of the product and its marketing mix to more accurately meet consumer needs. (Ex: McDonalds changed their look to fancy interior, change in menu…)
Positioning Maps: Visual representations of how products are positioned in a category to consumers. (Example: Cereals, consumers can look at things more important than others such as healthy, price, sweetness…)