3.4 Market Segmentation, targeting and positioning Flashcards
Why businesses today recognise that they cannot appeal to all customers in the market? [2]
- There are too many customers, widely
scattered and too varied in their needs and buying practices. - Moreover, businesses
vary in their abilities to serve the different types of customers.
What is target marketing? [3]
- Identifying market segments
- Selecting one or more of them
- Developing products and marketing programmes tailored to each.
What is market segmentation?
Market segmentation refers to the identifying of different segments within a market
and targeting different products or services to them.
What is market segmentation in layman terms?
Instead of trying to sell only one product to the entire market, different products are targeted at different segments.
How to make market segmentation effective?
In order for market segmentation to be effective, businesses must research and
analyse the entire market carefully to identify the specific consumer groups that
exist within it.
Why do some businesses only market to one segment?
Such businesses make a virtue of concentrating on one segment and developing an image and brand that suit that
segment.
What are some advantages of market segmentation? [4]
Business can define their target market precisely, and design and produce goods
that are specifically aimed at these groups, leading to increased sales.
Businesses are able to identify groups of customers that are currently not being
targeted in the market, and businesses would gain higher market share and
customer loyalty if these groups are successfully targeted and sold products.
Businesses could focus on the use of differentiated marketing strategies on the
target market groups. This minimises wasting money on trying to sell products
to the entire market, since some consumer groups will have no intention of
buying the product.
SMEs that are unable to compete in the whole market are able to specialise in
one or two market segments.
What is the effect of market segmentation? [2]
- Customers in any markets differ in their wants, resources, locations, buying
attitudes and buying practices. - Through market segmentation, businesses divide
large, hetrogeneous markets into smaller segments that can be reached more
efficiently and effectively with goods and services that match their unique needs.
What are the limitations of market segmentation? [4]
Research and development and production costs might be high as a result of
marketing several different product variations.
Promotional costs might be high as different advertisements and promotions
might be needed for different segments. Thus businesses might not benefit
from marketing economies of scale.
Production and inventory-holding costs might be higher than for the option of
just producing and stocking one undifferentiated product.
By focusing on one or two limited market segments there is a danger that
excessive specialisation could lead to problems if consumers in those segments
change their purchasing habits significantly.
What is geographical segmentation?
Geographical segmentation is to divide the market into different geographical units such as nations, regions, states, counties, cities or even neighbourhoods.
What are the common bases for segmentation? [3]
- Geographical segmentation
- Demographic segmentation
- Behavioral segmentation
What will a business act from cultural differences? [4]
- For example in
Arab Muslim countries, businesses are not permitted to promote alcohol. - Businesses might also have to adjust the way products are promoted. In some
countries, competitions or lottery-type promotions are illegal. 3. Advertising of
apparal with photographs of semi-naked models would not be tolerated in some countries. - To suit the appropriate use of language in some countries, businesses
might have to change product names.
Where is gegraphical differences stem from?
Cultural differences.
What happens during geographical segmentation? [2]
- A business
may decide to operate in one or a few geographical areas; or to operate in all areas,
but would need to pay attention to geographical differences in needs and wants. - Many businesses localise their products, advertising, promotion and sales efforts to
fit the needs of individual regions and cities.
Why is detailed and accurate market intelligence essential?
Hence, detailed and accurate market intelligence is essential for businesses that aim to expand the geographical spread
of the markets in which their goods are sold.
What is demographic segmentation?
Demographic segmentation divides the market into groups based on variables such
as age, gender, family size, income, occupation, education level, religion, race etc.
How can age affect the business? [3]
- Consumer needs and wants change with age. - Some businesses segment the market by age, offering different products or using different marketing
approaches for different age groups. - For example, Nintendo, known for its youth-oriented video games, has a sub-brand called Touch Generations which targets ageing baby boomers. Touch Generations aims to attract older non-gamers by
offering skill-building or less violent games that might appeal to older
consumers.
How can income affect business? [3]
- Marketers of goods and services such as automobiles, clothing,
cosmetics, financial services and travel typically segment the market using
income. - Many businesses target rich customers with luxury goods and
convenience services. - For example, credit card companies offer premium credit
cards with perks, such as VISA’s Signature card, MasterCard’s World card and
the Centurion card by American Express.
What is demographic segmentation beneficial?
- Businesses typically prefer to segment customer groups using demographics
because consumer needs, wants and usage rates vary closely with demographic
variables. - Another reason is that demographic variables are easier to measure
compared to other types of variables.
How can gender affect business? [3 – 2 + 1 example]
- Typically, businesses dealing in clothing, cosmetics, toiletries and
magazines segment the market with gender. - Recent trend suggests that businesses which used to focus on one gender have expanded their focus to
target the opposite gender. - For example, Nike has increased its efforts to
capture the women’s sports apparel market. It overhauled its women’s apparel
line, called Nikewomen, to create better fitting, more colourful, more
fashionable workout clothes for women.
What are some common demographic variables? [3]
- Age
- Gender
- Income
What are some behavioural variables? [4]
- Occasion
- Benefits
- User status
- Loyalty
What is behavioural segmentation? [2]
- Behaviourial segmentation divides the market into groups based on their
knowledge, attitudes, uses of or responses to a product. - Behaviour variables are deemed to be a good starting point for building market segments.
How can user status affect business decisions? [2]
- Markets can be segmented into non-users, ex-users, potential users, first-time users and regular users of a product.
- For example, when
Unilever introduced deodorant in China, it had to explain to non-users why they
should buy the product. Many Chinese do not recognise the need for deodorant as they do not believe people suffer from body odour. Hence, Unilever had to
educate non-users to convert them into new users.
How can occasion affect business decisions? [3]
- Businesses may divide a market into groups according to occasions
where customers concieve the idea to buy, actually make their purchase or use
the purchased item. - Segmenting the market by occasions could help businesses build up product usage. - Occasions such as Valentine’s Day were promoted
partly to increase the sale of flowers, cards and other gifts.
How can benefits affect business decisions? [3]
- Businesses may divide the market into groups based on the different
benefits consumers may seek from the product. - This requires businesses to
conduct research on the major benefits people look for in the product class, the
types of people who look for each benefit, and the major brands providing each
benefit. - For example, a toothpaste manufacturer might segment the market
according to benefits such as gum care, sensitive teeth and teeth whitening.
What is one example of using multiple segmentation bases? [2]
- Marketers are increasingly using multiple segmentation bases to identify smaller, better defined target groups.
- For example, a bank may not only identify a group of
wealthy retirees, but also within that group distinguish several segments based on
their assets, savings, risk preferences, housing and lifestyles.
How can loyalty affect business decisions? [6]
- A market can be segmented by customer loyalty.
- Customers can be
loyal to brands such as Samsung, or stores such as Isetan. - Customers can be
divided into groups according to their degree of loyalty. - Some customers are
completely loyal, they purchase the same brand all the time. - Others are
somewhat loyal, they favour one brand but sometimes buy others. - The last group shows no loyalty to any brand, buying something different each time or
whatever that is on sale.
Why are marketers using multiple segmentation bases? [2]
- Marketers are increasingly using multiple segmentation bases to identify smaller, better defined target groups.
- For example, a bank may not only identify a group of wealthy retirees, but also within that group distinguish several segments based on their assets, savings, risk preferences, housing and lifestyles.
How do businesses decide on which and how many segments it will sell?
- A set of customers who share common needs or characteristics that the business decides to serve must be determined
What are the two types of segmentation?
- Mass marketing (broadly defined)
- Niche marketing (narrowly defined)
What is mass marketing?
Mass marketing means selling the same product to the entire market with no
attempt to target groups within it.
Why do businesses use mass marketing? [3]
- Businesses using mass marketing would ignore
market segment differences and target the entire market with one product
offering. - The mass marketing strategy focuses on what is common in the needs of consumers instead of what is different.
- The business designs a product and a
marketing programme that will appeal to the largest number of buyers.
What are examples of mass marketing? [2]
Examples of mass marketed products include the classic Coca Cola as well as Toyota Corolla vehicles.
What are some advantages of mass marketing? [2]
- Lower cost of production
- Fewer risks
Why is low cost of production an advantage of mass marketing? [2]
- Mass-market businesses are likely to benefit from
economies of scale and enjoy lower average costs of production. - The business
can thus turn its lower costs into lower prices to win the price-sensitive segment
of the market.
Why are fewer risks an advantage of mass marketing? [2]
- Mass market strategies contain fewer risks.
- As mass markets
contain large number of customers, any change in consumer buying behaviour would not lead to a rapid decline in sales.
What is niche marketing?
Niche marketing refers to identifying and exploiting a small segment of a larger
market by developing products to suit it.
When is niche marketing appealing?
Niche marketing is appealing when the
resources of the business are limited.
What can business achieve through niche marketing? [3]
- Through niche marketing, the business achieves a strong market position because of its greater knowledge of consumer needs in the niches it serves and the special reputation it acquires.
- Niche markets are typically smaller and may attract only one or a few competitors.
- This offers smaller
businesses the opportunity to compete by focusing their resources on serving
niches that may be unimportant or overlooked by larger businesses.
What are examples of niche market products? [2]
Examples of niche market products include no-frills budget airline Air Asia as well as luxury super
cars such as Ferrari.
What are some advantages of niche marketing? [2]
- High profit margins
- Status and image
Why are high profit margins an advantage of niche marketing? [3]
- If the niche market is currently unexploited by competitors,
then filling in a niche can offer businesses the opportunity to sell at high prices
and high profit margins. - This will be so until competitors react by entering the market. - Consumers are willing to pay more for an exclusive product in general.
Why are status and image an advantage of niche marketing?
Niche market products could also be used by large businesses
to create status and image, where their mass market products would lack such
qualities.
What is market targeting?
Targeting occurs when marketers evaluate each market segment and determine which segment or segments present the most attractive opportunity to maximise sales.
What is a target market?
A target market is the group of customers in which the business has decided to direct marketing efforts.
What are some criteria in selecting a target market? [3]
- Potential sales, costs and profits
- Alignment with business objectives and availability of resources
- Competition in the market
What does potential sales, costs and profits refer to?
This refers to the potential growth in size of the segment.
What does the business need to do to measure the potential growth?
The business must collect and analyse data on current segment sales, growth rates, and expected profitability
for various segments.
What does the growth rate trend tell us?
Typically, the higher the growth rate, the more attractive the segment is.
What is one example for potential sales, costs and profits? [3]
- For example, Singtel’s existing residential landline is still a profitable business.
- However, revenue and profits have declined over the years as more and more consumers use their mobile phones exclusively and no longer use their house phones.
- While a marketer would look at the residential phone business and see
large sales potential, the growth potential is very limited, making the segment far less attractive.
What do Canon act upon with the new potential growth? [4]
- Conversely, Canon found out that 25 percent of its DSLR camera users were women and they were a new growing market segment.
- Hence, it launched its ‘Be Empowered’ campaign, targeting primarily at women, and youths secondarily. - In Singapore, activities that have been organised include a photography seminar for women only.
- Its advertising campaign was fronted by famous professional female photographers.
What should marketers ensure about the target markets? [3]
- Marketers should ensure that the target markets selected is aligned with the vision
and mission statement of the business. - Essentially, the business must consider its own objectives and resources.
- Businesses may dismiss attractive segments if they
do not align well with its long-term objectives.
What is an example of a hotel chain in regard to gamblers?
For example, a hotel chain may decide not to target recreational gamblers and enter the gambling/ casino industry as it preaches wholesomeness in its vision and mission statement.
What does more competition indicate for marketers? [3]
- The more intense the competition is within a segment, the less attractive it is to
marketers. - Competitors tend to fight extremely hard to prevent loss of market
share, and the potential for price wars could negatively impact success. - In general, a business has to work harder and invest more in advertising and promotion to earn
sales revenue and increase market share if there are more competitors in the
market.
What are some instances the business lack in attractive segment? [2]
- At times, the business may lack the skills and resources required to do well in an
attractive segment. - For example, even though organic food products are a growing
market, businesses may lack the financial resources and technological capability to enter into this target market.
What happens when other factors are constant? [2]
- When considering two market segments in which other factors such as size and
growth potential are constant, the one with less competitors would be more attractive. - For example, American fast food chain A&W might want to reconsider
reentering the Singapore market where there are already a large number of fast
food chains such as McDonald’s, KFC, Burger King, Jolibee etc.
What is positioning?
Positioning refers to the activities a business undertakes to create a perception of its products in the eyes of the target market.
What does success within a target market depend on?
Success within a target market depends, to some extent, on how a business positions its products.
What can business rely on for market positioning?
A business could
rely on the use of a perceptual map, and at the same time, create a unique selling
proposition for its product.
What is perceptual map?
A perceptual map, also known as a positioning map, captures consumers’
perceptions of the business in relation to competitors.
What is the function of perceptual map? [4]
- Before deciding on which product to develop and launch, businesses would often analyse how the new
product would relate to the other brands in the market, in the minds of consumers. - To do so, a perceptual map is created, and the business must first establish two
features of this type of product that are considered important to consumers, based
on market research. - These features could be price, quality, perceived image, level
of comfort etc, and will be different for each product category. - The two features
would then form two axis and products from various competitors would be placed
on the axis to form the perceptual map.
How can perceptual map be used in terms of chocolate brands? [4]
- The two features used in this perceptual map is price and quality.
- The perceptual map seems to suggest that there is a gap in the market for high
quality-low price chocolates, as well as high price-low quality chocolates. - However, it is unlikely any chocolate manufacturers would produce chocolate products to fill
these two gaps. - A gap worth exploring though is the high price-high quality segment,
where the closest competitor is Lindt.
What are some reasons why businesses would undertake perceptual mapping? [7]
- Check reality
- Impact of campaigns
- Monitor new products
- Monitor competition
- Look for gaps
- Understand segments
- Track preference changes
What is check reality?
To see how the target consumers actually perceive the various
competitors’ offerings and positions.
What is impact of campaigns?
To measure or track the impact of recent promotional or
advertising campaign.
What is monitor new products?
To identify how well any new products have been positioned into the market.
What is monitor competition?
To monitor the impact of various offerings by competitors over time.
What is look for gaps?
To assist the business in identifying any gaps in the market, as a
source of information in developing new products.
What is understand segments?
To provide information that will help further understand different market segments.
What is track preference changes?
To track any changes in consumer preferences over time.
What are the limitations of perceptual maps? [3]
- Number of variables used
- Misalignment with business offering
- Data gathering
What is number of variables used?
A perceptual map only uses two variables/ features, and assumes that there are only two major factors affecting consumers’ buying
decision.
What is misalignment with business offering?
Due to miscommunication, lack of knowledge, impact from social media etc, what a customer thinks a business could offer may not be the same as what the business could actually offer.
What is data gathering?
The data needed to form a perceptual map is usually obtained
through surveys and can be difficult to obtain.
What is unique selling proposition (USP)?
A unique selling proposition (USP), also known as unique selling point, is the special
feature of the product that differentiates it from competitors’ products.
What are examples of USP? [2]
- Examples of USP include Dyson’s bladeless fan technology and Nox Restaurant’s
Dine in the Dark concept. - When Sony first launched it Xperia Z smartphone, its
waterproof feature was its USP, but other smartphone manufacturers had since caught up with the same feature.
What is the importance for businesses to create an effective unique selling proposition (USP)? [5]
Effective promotion that focuses on the differentiating feature of the product
or service.
Opportunities to charge higher prices due to exclusive design or service.
Free publicity from business media reporting on the USP.
Higher sales than undifferentiated products offered by competitors.
Customers more willing to be identified with the brand because ‘it’s different’.
What is differentiation?
This differentiation makes the product distinctive so that it stands out from competitors’
products in the eyes of consumers.
When is USP successful for Sony?
For Sony’s case, once other smartphone manufacturers caught up with the waterproof
feature, sales of the Xperia Z and subsequent models were no longer impressive.
When is unique selling proposition likely successful? [3]
- Developing a USP can be expensive but rewarding to the business if successful.
- It is most likely to be achieved by heavy and effective promotion, or by patented technical innovation.
- As consumers become wealthier and more selective in their
purchasing habits, businesses that are able to create value by developing products
different from competitors are most likely to capture consumers’ attention and gain higher profits.
When is USP unsuccessful (Westin Stamford Hotel)?
For example, when
Westin Stamford Hotel (now known as Swissotel The Stamford) in Singapore advertised that it is the world’s tallest hotel, it was not a USP that was important to most tourists; in fact its occupancy rate fell as many tourists were appalled by it.
