BCPC 205

ELEMENTS OF MARKETING

LECTURE FIVE
CUSTOMER-DRIVEN MARKETING
STRATEGY
 Presentation Overview
1. Market segmentation
2. Importance of Segmenting the Market
3. Dimensions of Market Segmentation
4. Market Targeting
5. Target market selection strategies
6. Marketing positioning
7. Positioning strategies
 Market Segmentation
Market segmentation is the process that
companies use to divide large,
heterogeneous markets into small markets
that can be reached more efficiently and
effectively with products and services that
match their unique needs.

Dividing a market into distinct groups of buyers with different needs,

behaviour or characteristics, who might require separate
products or marketing mixes.
 Market Segmentation
• Segmenting consumer markets
• Segmenting business markets
• Segmenting international markets
• Requirements for effective segmentation
 Benefits of segmentation

Segmentation allows for:

• More precise market definition
• Better analysis of competition
• Rapid response to changing market needs
• Efficient resource allocation; and
• Effective strategic planning
Market Segmentation
Segmenting Consumer Markets

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Geographic
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Psychograph
Behavioral
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Bases for Segmenting Consumer Markets

Geographic segmentation divides the market

into different geographical units such as
nations, regions, states, countries, or cities

A GIS is used to assemble, store, manipulate and

display data by their location
 Bases for Segmenting Consumer
Markets

Demographic segmentation divides the market into groups

based on demographic variables such as age, gender,
family size, family life cycle, income, occupation,
education, religion, race, generation, and nationality
 Bases for Segmenting Consumer Markets

Demographic Segmentation
Age and life-cycle stage segmentation is the process of offering
different products or using different marketing approaches for
different age and life-cycle groups

Gender segmentation divides the market based on sex (male or

female)
No Market Segmentation
Segmented by Gender
Segmented by Age
 Market Segmentation
Segmenting Consumer Markets
Income segmentation divides the market into
affluent or low-income consumers

Psychographic segmentation divides buyers into

different groups based on social class, lifestyle,
or personality traits
 Bases for Segmentating Consumer
Markets
Behavioral segmentation divides buyers into groups
based on their knowledge, attitudes, uses, or responses
to a product
• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status
 Bases for Segmenting Consumer
Markets
Psychographic Segmentation
• Dividing the market into different groups based on social
class, lifestyle or personality characteristics
 Bases for Segmentating Consumer
Markets

Multiple segmentation is used to identify smaller, better-

defined target groups

Geodemographic segmentation is an example of

multivariable segmentation that divides groups into
consumer lifestyle patterns
Bases for Segmentating International
Markets
This could be done by following a two-step process
1. Defining macro segments - one or more
countries with similar market characteristics

2. Sub-dividing macro segments on the basis of

customer characteristics
 Bases or Variables for Segmenting
International Markets
• Geographic location

• Economic factors e.g. Income levels, levels of

economic development

• Political & legal factors e.g. monetary regulations,

stability of government, receptivity towards foreign
firms, etc.
 Bases or Variables for Segmenting
International Markets

• Cultural factors e.g. Common languages, values,

attitudes, religions, customs, etc.

• Inter-market segmentation segments are

developed on the basis of customers who have
similar needs & buying behaviour
Bases for Segmentating International
Markets

Geographic Economic
location factors

Political- Cultural
legal factors factors
 Bases for Segmentating Business
Markets

The bases for segmenting consumer markets are

the same used for segmenting business markets
 Conditions for Effective Segmentation

To be useful, market segments must be:

Measurable Accessible Profitable

Differentiable Actionable
 Conditions for Effective Segmentation

• Measurability – the degree to which the size,

purchasing power & profitability of a market
segment can be measured

• Accessibility – the degree to which a market

segment can be reached & served with
advertising medium or distribution channel
 Conditions for Effective Segmentation

 Profitability – the degree to which a market

segment is sufficiently large or profitable

 Actionability – the degree to which effective

programmes can be designed for attracting &
serving a market segment
 Benefits of segmentation
Segmentation allows for:
• More precise market definition
• Better analysis of competition
• Rapid response to changing market needs
• Efficient resource allocation; and
• Effective strategic planning
 Problems in Segmentation

• Choosing segmentation variables

• Can variables be measured

• Segment identification

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 Market Targeting
• It is important to evaluate the identified segments
& decide which ones to target

• A target market is a set of buyers sharing

common needs or characteristics that the firm
decides to serve

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 Evaluating Market Segments

1. Segment attractiveness
• Collect & analyse data on current sales values,
projected sales-growth rates, expected profit
margins

• Analyse structural factors such as potential

competitors, substitute products, power of buyers
& suppliers, etc.

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 Evaluating Market Segments

2. Company fit/business strengths

• Analyse the firm‘s objectives & resources in serving its
markets
3. Selecting market segements
 This should be based on ability to offer superior value
& gain competitive advantages over competitors

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 Targeting Strategies

There are four(4) market-coverage strategies

that a firm can choose from( or adopt)

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 Targeting Strategies
1. Undifferentiated marketing
– Segment differences are ignored due to
existence of weak segment differences or
through the view that the product appeal cuts
across segments

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 Targeting Strategies
1. Undifferentiated marketing
– The firm serves the whole market with one
product offer
– The offer focuses on what is common in the
needs of consumers

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 Targeting Strategies
1. Undifferentiated marketing
– It also focuses on a marketing programme that will
appeal to the largest number of buyers in the
market

– It has the hallmarks of quality, mass distribution, &

mass advertising

– It provides cost economies

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 Targeting Strategies
2. Differentiated marketing
– a firm targets several market segments & design
separate offers for each segment

– It creates more total sales than does undifferentiated

marketing due to its ability to cater for specific
segment requirements

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 Segment Strategy
3. Concentrated marketing
– It involves going for a large share of one or a few
submarkets (that are usu. ignored) (niche marketing)

– Adopted when a firm‘s resources are limited

– Ideal for small firms to gain competitive advantage

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 Segment Strategy
4. Micromarketing
• It involves targeting potential customers at a very basic
level such as lifestyle and specific occupation – possibly
even individuals themselves.
• By tracking demographic and personal information,
marketers can send e-mail, letters, etc. directly to
individual consumers who are likely to buy their products.
• However, it may cause a company to lose sight of other
reachable markets

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 Selecting and executing a strategy

No single best choice suits all firms. The basic

determinants of a market-specific strategy are:
• Company’s resources
• Product homogeneity
• Stage in the product life cycle
• Competitors’ strategies

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 Group Discussion
• What variables (bases of segmentation) will you
use for segmenting the market for:
– Casual clothing
– Beer
– holidays

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 Marketing positioning
• The concept of positioning seeks to put a product in a
certain position, or place, in the minds of prospective
buyers.

• Positioning refers to the place that a product or

service holds in the minds of the target audience(s)
relative to competitors’

• Marketers use positioning strategy to distinguish their

firm’s offerings from those of competitors and to
create promotions that communicate the desired
position.
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 Positioning Strategies
Possible approaches include positioning a product
according to the following categories:
• Attributes
• Price/quality
• Competitors
• Application
• Product user or Product class

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 Positioning Strategies
• A positioning map provides a valuable tool in
helping managers position products by
graphically illustrating consumers’ perceptions of
competing products within an industry.
• It represents two(2) different characteristics –
price and perceived quality – and show how
consumers view a product and its major
competitors based on these traits.
• They are useful tools for undertaking competitive
analysis and for communicating marketing
strategy. 41
 Positioning Strategies
• Changes in the competitive environment force
marketers to reposition a product-changing the
position it holds in the minds of prospective
buyers relative to the positions of competing
products

NB. Customers’ perception are important.

• If the objectives cannot be achieved from the

present position then the product may need to
be withdrawn or repositioned 42
 Repositioning Strategies
Repositioning is necessary for these
reasons:
• Change in customer needs
• Change in organisational objectives
• Environmental change
• New competitors appear
• New technology is developed
• Change in customers buying behaviour
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 Repositioning Strategies
An established position is easier to defend
than a new one, and a product is highly
vulnerable whilst shifting positions

Repositioning is always a demanding

challenge and requires a considerable
commitment of marketing resources and
may need a new or revamped corporate or
brand image and identity.
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