Chapter 6 - Market Segmentation & Positioning Flashcards
What is the STP process used for?
- To identify which, out of all potential customers, we should focus on; the most attractive and accessible customer group. Provides direction for marketing strategies and brand differentiation.
- To identify new product/service opportunities
- To allocate resources to support key marketing goals.
What is market segmentation?
The division of a mass market into distinct and identifiable groups, that are defined by common characteristics and needs, and display similar responses to marketing actions. The purpose is to ensure that elements of the marketing mix (price, distribution, products, promotions) meet the needs of different customer groups.
What is the difference between product differentiation and market segmentation?
- A product differentiation strategy involves highlighting a product’s attributes to emphasize differences between it and those of competitors. First focusing on the product offering and then seeing which part of the market that responds.
- A market segmentation strategy requires focus on particular segments of customers who share similar needs or characteristics. Focus on researching needs of a specific market segment and then developing a product that meets those needs.
What are the two main approaches of market segmentation?
- The build-up method. Approaches the task from the perspective of identifying markets that consist of customers who are similar. Customer-oriented and seeks to find common needs.
- The breakdown method. Identifies those groups that share particular differences. The most established approach.
The goal of both approaches is to identify segments where there are identifiable differences between them (segment heterogeneity) and similarities within them (member homogeneity).
What are segment bases to use as a foundation for segmenting consumer markets?
- Profile criteria (demographic, geographic, socioeconomic)
- Psychological criteria (Lifestyle, personality, perceptions, attitudes, motives, benefits sought)
- Behavioural criteria (purchase/transaction, consumption, media usage, technology usage)
In what order does segmentation consideration go; from easy access/low predictability to difficult to access/high predictability?
Demographic –> Geodemographic –> Psychological –> Behavioural
What is demographics?
Relate to age, gender, family size and life cycle, generation, income, occupation, education, ethnicity, nationality, religion and social class.
What are organisational characteristics that can be used for segmentation in B2B-markets?
- Firmographics. Size, age, industry, type
- Economic. Revenue, profit, budget
- Geographic. Local/national/multinational/global.
How can we segment B2B markets based on the buyer within the organization?
- Decision-making unit structure
- Choice criteria
- Purchase situations; what purchase structure do they have, what buying situation is present, which stage have they reached?
What is the DAMP model?
Can be applied to determine which segment to target.
- Distinct: is each segment clearly different from other segments? If so, different marketing mixes will be necessary.
- Accessible: can buyers be reached through appropriate promotional programmes and distribution channels?
- Measurable: is the segment easy to identify and measure?
- Profitable: is the segment sufficiently large to provide a stream of constant future revenues and profits?
What are some key questions for developing the marketing mix to target a segment?
- How can the segments be reached with appropriate communications?
- What is the media consumption pattern of the target audience?
- Where can they gain access to our offerings to purchase them?
- Does the offering need to be adapted for different segments and should it be priced the same or differently for all segments?
What are the four general targeting approaches?
- Undifferentiated marketing. No line/differentiation between segments and we use one masse strategy for entire market.
- Differentiated targeting approach. Several segments to target that are attractive to the organization. Different marketing strategy for each segment.
- Focused/concentrated marketing. Few segments to target, used if limited resources or prefer exclusive strategy towards the market.
- Customized marketing. Marketing strategy for each customer rather than each segment. Common in B2B and customised products.
What are some segmentation limitations?
- Considers needs of customer groups rather than individuals. There is thus a chance that customers’ needs are not fully met.
- Insufficient consideration of how market segmentation is linked to competitive advantage, unless it is clearly built into the segmentation directly.
- Not clear how managers can measure the effectiveness and value of segmentation exercises.
- Segmentation plans may fail because of implementation barriers.
1. Infrastructure barriers. Culture, structure and availability of resources can prevent the process from ever starting.
2. Process issues. Lack of experience, expertise, analytical capability. Can hamper how segmentation is undertaken and managed.
3. Implementation barriers. Is a new segmentation model developed, and how do organizations shift to using that new model? It may require a move away from a business model based on offerings to one based on customer needs.
What is positioning and what are its two fundamental elements?
How offerings are differentiated from one another to give customers a reason to buy. How customers judge an offering’s value relative to its competitors, ability to deliver promises made and what value they derive from it.
It has two fundamental elements:
- Attributes, functionality and capability that the brand offers.
- The way in which a brand is communicated and how customers perceive the brand relative to competing brands. What the advertising does for the product in the prospect’s mind.
