Market Definition, Segmentation, & Targeting – Flashcards
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4 Parts to Marketing Planning Process
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1 Goals & objectives 2 Marketing strategy 3 Marketing mix 4 Financial projections
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4 Steps of Marketing Strategy
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1 defining the market (frame of reference) 2 segmenting the market 3 choosing the segments to target 4 positioning for target customers
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Step 1: Market Definition
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-identifies consumers & competitors of interest -establishes frame of reference -defined in terms of customer needs, not products
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Known as the Achilles' Heel of Strategy
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Market definition b/c of tension of defining market either too broadly or too narrowly
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Defining a market too narrowly
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-firm ignores competitors in adjacent markets or segments
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Defining a market too broadly
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-lack focus & clarity, resulting in inability to understand key competitors/consumers - ineffective targeting in the market
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"What business are we in?"
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Key question of defining the market broadly - focuses on the job to be done - based on customer needs - aware of environmental trends
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When defining the market more narrowly
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- done in order to plan effectively - practical definition of a market - served market metric - geographic region, product types, etc.
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"Served Market" metric
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- part of market definition - that portion of the total market for which the firm competes
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How to use both broad & narrow market definitions
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- Broad definition for Strategic thinking & formulation - Narrow definition for Strategic planning & implementation
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Step 2: Market Segmentation
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Dividing the market into groups of consumers who share similar characteristics - understand characteristics that differentiate consumers w/i a market -identify potential segments that may be a good fit for the firm
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Process of Marketing Segmentation
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- not everyone who buys a product wants the or needs the same thing to satisfy needs - not everyone responds to marketing activities in the same way
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Why Marketing Segmentation is critical
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- compare & contrast each of the potential segments - choose segment(s) the firm is best able to satisfy, given its skills, resources, & capabilities
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Identifying segments of consumers that (3 things)
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1 fit the firm's competencies best 2 whose needs the firm believes it can do a better job of addressing than competitors 3 ensure the firm can achieve financial goals
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3 Steps in Segmentation Analysis
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1 dividing the market into segments 2 profiling segments 3 determining attractiveness of each segment
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1 Divide market in segments (2 general categories)
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1 characteristics the describe a consumer independent of their relationship w/ the product (demo, geography, psychographics) 2 characteristics that describe consumer related to the product (usage, loyalty, benefits)
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Segments must be meaningful
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- consumer needs must be distinct across segments - more distinctive segments, less likely a firm will cannibalize their own brands - homogeneous w/i a segment & heterogeneous across segments - dimensions must be meaningful to the purchase decision - segmentation scheme makes it easy to to find consumers
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Segments of consumers, not products
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Any one person can fall into more than one segment, depending on the need being addressed - often overlooked aspect of segmentation
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2 Profile the segments
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- better understand opportunities - estimate size of each segment - understand competition - generate insight about consumers - rich descriptions makes targeting & positioning easier & more focused mktg mix
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Purpose of profiling
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- utilize demographic, psychographic, & geographic characteristics - purpose is descriptive
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Critical point of marketing process
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- process described is linear, but process evolves based on learning at each step - must evolve the market definition, segmentation scheme, & target understanding as the process evolves
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Profiling & Personas
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-fictionalized description of ideal customer - given a name & capture marketers' imagination - distributed widely w/i firm - shared understanding of consumer as a person
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3 Determine Attractiveness of each Segment
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- size, growth rate, competitive intensity, synergy w/i firm, match w/ firm, consistency w/ firm strategy - if profiling the market was done well, this is much easier
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Step 3: Choosing Target Market(s)
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- mass market (Ford's all black Model T) - multitarget market or differentiated (P & G) - niche (BMW)
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Evaluating Segmentation & Targeting Choices (5)
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1 Measurable 2 Substantial 3 Accessible 4 Differentiable 5 Actionable
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Step 4: Positioning & 4 Ps
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Not covered in this article
