3.3.3 Making marketing decisions: segmentation, targeting, positioning Flashcards
Market segmentation
- The technique where the market is broken down into smaller sections with similar characteristics
- This will make the business focus and target the segment, or part, of the mass market that is most likely to buy the product or service on offer
Targeting
Selecting those market segments that are worth targeting
Positioning
Making decisions about the positioning of products within the market, in particular considering the competition they face and how they will be differentiated (market mapping)
The purpose of marketing
To identify and meet customer needs
Niche marketing
A relatively small number of potential customers
Advantages of niche marketing
Focus and respond quickly, high return on marketing spending, little competition, premium price
Disadvantages of niche marketing
Vulnerable to change, may attract large firms, sales levels may be low
Mass marketing
Anyone willing and able to buy
Advantages of mass marketing
High sales and regular revenue
Disadvantages of mass marketing
High profits attract competitors, hard to spot changes in consumer needs
Consumer marketing
Products to solve consumer needs
Business marketing
Serving the needs of the businesses
Examples of market segmentation
- Clothes industry
- Magazine industry
Ways in which the consumer market can be segmented
- Behaviour: brand loyalty, usage, attitudes, responses and price sensitivity
- Demographic: Age, family size, occupation, ethnicity, education and income
- Geographic: towns, counties, countries, climate and population growth rate
- Income: Life style and tastes. Socio-economic grouping e.g. A,B and C1
- Gender
Market segments
Groups of similar needs and wants within a market
The mass market: Behavioural segmentation
- When they buy
- How much they buy
- How brand loyal are they?
Socio-economic groups
- A: Upper middle class e.g. Top professionals
- B: Middle class e.g. Intermediate professionals
- C1: Lower middle class e.g. Junior management
- C2: Skilled working class e.g. Skilled manual workers
- D: Working class e.g. Semi and unskilled manual workers
- E: Poorest in society e.g. Pensioners and unemployed
Why Socio-economic grouping is useful
- They allow businesses to accurately target potential customers, recognise competitors, measure performance and anticipate future market trends
- It is therefore, impossible for a business to develop an effective marketing strategy, or “fine tune” a Marketing Mix, until market segments are correctly identified
Advantages of segmentation
- Understanding a market segment helps in meeting their needs; increased sales
- It is cheaper to produce a product/service that meets a specific need; increased profit margins
- Less wasteful of resources than trying to sell a product to everyone; advertising
- Segmentation is a way of differentiating a product or service from competition, thus enabling the business to charge a higher price
Disadvantages of segmentation
- Depends upon an entrepreneur’s knowledge of the market; this may be limited in the case of a small business set up.
- Segmentation is an approximation of behaviour; not everyone behaves in the same way
- May not be appropriate to a very small business with limited markets; putting all your eggs in one basket
Influences on choosing the target market
- Is there sufficient demand and potential profit to justify the investment?
- Does it have the ability to be competitive and gain sales?
- Niche or Mass market?
The influences on positioning are…
- The strengths of the business
- How innovative they are as a business
- What competitors are doing
- Market conditions
