BUS203 Study Guide

Unit 2: Segmenting, Targeting, and Positioning

2a. Define the STP strategy

  • Why is market segmentation important?
  • What are the differences between target marketing and mass marketing?
  • What role does perceptual mapping play in the positioning process?

No one product or service can meet the needs of all consumers. Some consumers will be more interested in your product than others, and not all consumers will be able to afford your product or service. In order to determine the most attractive customer base for a product, companies will divide the population into groups of potential buyers. This process is known as market segmentation. During this process, consumers are grouped by the characteristics that make them most likely to purchase your product or service. Effective marketing strategies to reach these consumers can then be developed.

Target marketing, also known as differentiated marketing, enables a company to focus on select groups of consumers, and to customize products, services, and marketing messages specifically to meet their needs. This can help to streamline the marketing process and more efficiently use marketing dollars. Think about the commercials you see when you watch a television program, and consider how the products being advertised appeal to the people who are viewing that program. In contrast, mass marketing, or undifferentiated marketing, is a way of reaching all consumers in the marketplace. Messages are sent out to as many people as possible with the expectation that some of those viewers will become customers. Advertising during the Super Bowl is a good example of a mass marketing strategy. A wide range of products are advertised during the game, with the expectation that these products will appeal to some of the consumer groups viewing the game.

Product positioning enables a company to determine where their products sit in the minds of consumers relative to the competition in the marketplace. A product can only be perceived as being luxury or low quality if there are other products to compare them with.

A perceptual map places similar products or brands on a grid based on characteristics that are important to consumers. These characteristics can include price, quality, customer service, and other factors that meet consumer needs. By evaluating the brands that are located near a company's own products, the organization can see which brands are their primary competitors and the factors they are competing with. If there are many companies in the same quadrant, the company should seek to compete in other areas where there are fewer competitors.

To review, read Market Segmenting, Targeting, and Positioning.

 

2b. Identify the place of targeting and positioning in the marketing campaign

  • What are the various ways to segment a market?
  • What factors make target markets attractive to pursue?
  • What kinds of strategies are used to target certain markets?

Markets are segmented in four primary ways. First, consumers can be segmented based on their behavior. This includes the benefits consumers want from a product and the ways they use the product. Demographic segmentation includes consumers' ages, income levels, ethnicity, education, family life cycle, and other measurable factors that define a segment of the population. The geographic location of a consumer group also impacts whether or not a segment is attractive to a marketer. The location also affects the kinds of products and services consumers in an area will desire and purchase. Finally, consumers can be segmented based on psychographic factors, which explore the ways consumers think, what they value, and how they live their lives.

Once target markets have been identified, the next step is to determine if these segments are worth pursuing. It is not enough to segment the market but to also evaluate its value to the company and its brands. The factors that marketers will consider to determine if a market has potential include:

  • Size: Is the segment large enough to cover operating costs and still be profitable?
  • Growth: Is there potential for an increase in sales over time?
  • Entries in the market: Is the market already saturated with many competitors?
  • Accessibility: Are there obstacles to reaching the target market such as geography, politics, or technology?
  • Resources: Does the company have the resources to compete in the marketplace?
  • Fit: Do the products needed by these consumers fit with the company's current product line, mission, and objectives?

Once a company has identified the consumer groups that are most attractive to pursue, they must then decide which of those groups they will actually target.

Companies can choose a multisegment marketing strategy, which entails meeting the needs of different segments of the population. By spreading out their efforts, they can better compete in markets with many players. For example, hotel chains and cruise lines have locations and facilities that each have their own features and benefits, thereby meeting the needs of each consumer segment. By marketing each brand separately, the brands are able to stand apart from the competition.

A concentrated marketing strategy focuses on a select group of consumers. This can be risky since there are no other brands to turn to if there is a slump in the market or changes in consumer shopping behavior. Consider the recent closure of Toys R Us, and the impact online shopping had on the demise of this retailer.

Niche marketing focuses on an even smaller segment of the population, targeting a more select group of consumers. Companies that compete based on this strategy generally have a specific product that is popular among this small segment and have specialty products to meet their needs. An example of this might be a company that manufactures harmonicas, fishing lures, or knitting needles.

Microtargeting takes the segmentation process to an even more narrow level by identifying specific consumers and their characteristics in an attempt to isolate them from other consumers in the marketplace. This strategy may be used during an election in an attempt to appeal to those particular consumers based on factors that may influence their votes.

Global marketing presents a wide range of challenges that are not seen in a domestic targeting strategy. For example, while consumer segments in one market, or country, may be identified by certain factors, consumers in other locations may have completely different needs. These characteristics can be based on cultural factors, political factors, and other elements unique to that country. As a result, companies may manufacture different versions of the same product to meet local needs around the world.

Once a target market has been identified and evaluated, companies will determine the most effective way to position their product relative to the competition. As noted, earlier, much of this positioning process is based on the image consumers have of a brand. Sometimes, though, a company may choose to reposition their brand and compete in other ways in the marketplace. They may choose to select a new target market for their current products, introduce new products that can meet the needs of a new segment of the population, or change the image entirely. This process can be difficult since the brand's image may be ingrained in the minds of the consumer, but it has been done successfully. For example, Marlboro cigarettes, a brand that is identified by the macho image of a cowboy, were originally targeted toward women. A more recent example is Old Spice, which had been known as a brand for older consumers but repositioned their products as being trendy for younger generations.

To review, read Market Segmenting, Targeting, and Positioning.

 

2c. Identify competitive forces and define ways to develop a competitive analysis

  • What are the benefits of conducting a competitive analysis?
  • Which elements should be explored in a competitive analysis?
  • How would you conduct a competitive analysis?

In order to effectively compete in any industry, it is important to identify and understand the strategies used by the other players in that marketplace. A competitive analysis enables a company to become aware of how they relate to the competition, identify their strengths and weaknesses, and use this information to create barriers to new entries in the marketplace.

Some of the factors organizations should consider when identifying their competition include the attributes of those products and the price point at which those products are sold. The consumer segments targeted by the competition should be identified, as should the ways those products are used by consumers. Other factors to consider include geographic distribution, customer service, and other markets that the company serves.

As previously discussed, developing a perceptual map can be a valuable tool in evaluating a company's position in the marketplace and exploring the competitive environment. Also known as market maps, a perceptual map includes a variety of dimensions brands are defined by. These maps can also identify gaps in the marketplace or a product's deliverables and potential business alliances that may be profitable for the organization.

As an example, a perceptual map for the auto industry might include the degree that a car is practical or sporty, or costly or affordable. When placed on a grid based on how close a particular car meets any of these elements, car companies can learn more about the direct competition they are facing and identify grid areas where new entries might enjoy success.

To review, read Positioning and Market Segmenting, Targeting, and Positioning.

 

Unit 2 Vocabulary

This vocabulary list includes terms that might help you with the review items above and some terms you should be familiar with to be successful in completing the final exam for the course.

Try to think of the reason why each term is included.

  • behavioral segmentation
  • competitive analysis
  • concentrated marketing
  • demographic segmentation
  • differentiated marketing
  • geographic segmentation
  • global marketing
  • market segmentation
  • mass marketing
  • microtargeting
  • multisegment marketing
  • niche marketing
  • perceptual mapping
  • psychographic segmentation
  • repositioning
  • target marketing
  • undifferentiated marketing