Consumer Behaviour

1

Week 11: The utility of segmentation, targeting and positioning

East, Wright & Vanhuele (2009)

Sharp 2012

1 BHO2434 Week 11

Review of market segmentation, targeting and positioning

Understanding why marketers segment, target and position their brands in the market

Challenging the need for segmentation, targeting and positioning

2 BHO2434 Week 11

Refresh…

Using an example, briefly describe in your own words:

1. Segmentation

2. Targeting

3. Positioning

3 BHO2434 Week 11

Identify

segmentation

bases

1. Market

Segmentation

2. Market

Targeting

3. Market

Positioning

Develop

profiles of

segments

Develop

positioning for

segments

Develop

marketing mix

for segments

Measure

segment

attractiveness

Select

target

segments

4 BHO2434 Week 11

Identify

segmentation

bases

1. Market

Segmentation

2. Market

Targeting

3. Market

Positioning

Develop

profiles of

segments

Develop

positioning for

segments

Develop

marketing mix

for segments

Measure

segment

attractiveness

Select

target

segments

5 BHO2434 Week 11

“ Few organisations…have either the

resources or the inclination to be a significant force within a loosely defined market. The sensible option, therefore is to look more closely at the market and find ways of breaking it down into manageable parts, and then to concentrate effort on serving the needs of one or two groups really well, rather than trying to be all things to all people”

(p. 180, Brassington & Pettitt, 2003)

6 BHO2434 Week 11

Consumer Behaviour

2

Mass Marketing ◦ Offering the same product and marketing mix to all

consumers

◦ Mass Marketing Issues

Appropriate if all consumers respond to a similar marketing mix

Benefits are that it is a low cost marketing strategy

one advertising and promotional strategy targeted to a single market for a generic product.

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Market Segmentation Issues ◦ Allows producers to avoid head on confrontation

By differentiating by price, styling, packaging, promotional appeal, usage, and distribution.

◦ Increased costs of segmentation

i.e. Shorter production runs, different promotional campaigns, consumer research

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Enables the organisation to achieve a better understanding of itself and its environment

To guide the redesign and repositioning of existing products ◦ Products/services fit more closely what customers

want ◦ To find new market segments.

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Customers may feel more responsive and loyal to organisations that speak directly to them ◦ and tailor their products accordingly.

Enables organisations to define shopping habits.

To shape advertising and promotional campaigns

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Geographic location

Demographic characteristics

Psychographic

Behavioural and attitudinal characteristics

Profitability

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Identification ◦ Relevant characteristics (eg: demographics,

lifestyle, benefits sought)

Sufficiency ◦ Sufficient number of people

Stability ◦ Stable and likely to grow

Accessibility ◦ Economical to reach

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Consumer Behaviour

3

Segmentation Exercise

In a small group your task is to segment the market of consumers who buy food.

– Particularly concentrate on the differences you’d expect to find between customers of the following:

– Coles

– Woolworths

– Aldi

– IGA

– BiLo

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Segmentation Exercise Part 2

Quick survey

In your households, who has the following loyalty cards:

– Fly Buys?

– Any others?

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Risk of poor definition and implementation of segmentation.

Knowing where to stop ◦ Cluster analysis driven by analyst!

Assumption that customers only fit into one segment

Assumption that it is profitable to tailor products to each segment

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Assumptions: 1. Customers only fit into

one segment

2. Customers of competing brands are different

3. Segmentation based on attitudes is stable

Research shows: 1. Business travellers also

take holidays fit into both segments

2. Kennedy & Ehrenberg (2003) found on average only 2% difference across segmentation bases

3. Attitudes are usually not stable over time e.g. D’allmo Riely et al,

(1997)

and segments based on them can not be stable over time!

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BHO2434 Week 11 17

2009 2011

Proportion by gender Deviation by gender Proportion by gender Deviation by gender

Male Female Male Female Male Female Male Female

Commonwealth Bank 49 51 1 -1 50 50 1 -1

ANZ Bank 50 50 3 -3 50 50 1 -1

Westpac 50 50 2 -2 50 50 1 -1

National Australia Bank 50 50 2 -2 49 51 0 0

St George 46 54 -1 1 47 53 -2 2

Bendigo Bank 43 57 -4 4 48 52 -1 1

Suncorp Metway 47 53 0 0 47 53 -2 2

BankWest 49 51 2 -2 50 50 1 -1

ING 44 56 -3 3 47 53 -2 2

Bank of Queensland 45 55 -2 2 48 52 -1 1

Total 47 53 49 51

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2009 2011

Proportion by gender Deviation from mean Proportion by gender Deviation from mean

Male Female Male Female Male Female Male Female

Herald Sun 52 52 -5 4 53 47 -4 3

The Age 55 45 -2 1 52 48 -5 4

Mighty V Regionals 52 48 -5 4 47 53 -9 9

mX 59 41 2 -3 54 46 -2 2

The Australian 63 38 6 -6 63 37 7 -7

The Financial Review 71 29 14 -15 70 30 14 -14

The Geelong Advertiser 44 57 -13 13 51 49 -5 5

57 44 56 44

Consumer Behaviour

4

BHO2434 Week 11 19

2009 2011

Deviation from average brand for age group Deviation from average brand for age group

14-17 18-24 25-34 35-49 50-64 50-64 14-17 18-24 25-34 35-49 50-64 50-64

Commonwealth Bank 2 5 1 -3 -4 0 2 7 1 -5 -3 -3

ANZ Bank 0 1 3 2 -3 -4 0 2 3 1 -3 -3

Westpac 0 -1 0 2 0 0 -1 0 -3 2 1 0

National Australia Bank -1 -2 -1 2 0 0 0 -1 0 1 1 -1

St George 0 0 -1 1 0 1 0 -2 -2 2 1 1

Bendigo Bank 1 -1 -5 -3 4 5 0 -1 -7 -3 4 7

Suncorp Metway 0 -2 -2 1 1 2 -1 -3 -2 2 1 2

BankWest 0 2 3 -2 -4 1 0 3 2 2 -3 -2

ING -2 0 7 1 0 -6 -3 0 10 2 -3 -5

Bank of Queensland -1 -2 -4 -1 6 2 -1 -3 -6 -1 8 2

BHO2434 Week 11 20

2009 2011

Deviation from average brand for age group Deviation from average brand for age group

14-17

18-24

25-34

35-49

50-64 65+ 14-17 18-24

25-34

35-49

50-64 65+

Herald Sun 1 -4 -4 0 2 6 0 -2 -2 -1 0 5

The Age 1 -4 -4 -1 5 3 1 -2 -3 -3 5 2

Mighty V Regionals 3 -5 -6 -1 4 6 2 -3 -4 -1 2 4

mX 0 22 16 -8 -14 -14 3 17 15 -4 -14 -16

The Australian -1 3 -1 -1 0 1 -2 0 -4 -2 4 5

The Financial Review -3 -7 5 13 2 -10 -3 -9 4 15 1 -8

Geelong Advertiser

1 -6 -6 0 3 9 -2 -1 -3 -2 2 6

2. Market

Targeting Measure

segment

attractiveness

Select

target

segments

3. Market

Positioning Develop

positioning for

segments

Develop

marketing mix

for segments

Identify

segmentation

bases

1. Market

Segmentation

Develop

profiles of

segments

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Marketing Mix Whole Market

Segment 2

Segment 1

Segment 3

Marketing Mix 1

Marketing Mix 2

Marketing Mix 3

Mass Marketing/ Undifferentiated

Marketing

Target marketing

Concentrated/Focused Marketing

Segment 2

Segment 1

Segment 3

Marketing Mix

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Many businesses use profitability segmentation to target profitable consumers ◦ Airlines

E.g. Business travellers get priority check in & baggage

◦ Banks

High value customers get their own 0800 number or are recognised by input of client number

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Heavy Users

20+ trips p.a.

Executive Users

4-20 trips p.a.

Business Travellers

VFR Travellers Holiday Travellers

Leisure Customers

All customers

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Consumer Behaviour

5

LHR-MEL $7,500

LHR-MEL $1500

BHO2434 Week 11

Targeting high value customers?

Using an airline example

– What are the benefits to the company of profitability segmentation and targeting?

– What are the risks of profitability segmentation and targeting?

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1. Do specific segments really differ from other segments in their purchasing patterns?

2. Does focussing on segments (i.e., targeting) really produce a better ROI?

(Wright, 1996)

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Consumers commonly buy from a repertoire of brands

(Ehrenberg, 2004)

Consumers attitudes are not stable ◦ attitudinal segmentation not stable!

(D’allmo Riley et al, 1997)

Kennedy & Ehrenberg (2001) found on average only 2% difference across segmentation bases

(Ehrenberg)

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Assumption that targeting consumers will lead to more efficient advertising spend

But consumers not only have a repertoire of brands, they also have a repertoire of media habits

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? ?

Target audience

No waste = efficient?

DJ effect

More people

More of the time

2x freq!

Consumer Behaviour

6

Before targeting specific segments you should be able to prove an improved ROI ◦ For each advertising $ do you get

More reach?

More frequency?

31 BHO2434 Week 11

Thinking back to your product

Could you be sure that a greater ROI would be achieved by segmentation and targeting a particular group?

32 BHO2434 Week 11

Identify

segmentation

bases

1. Market

Segmentation

3. Market

Positioning

Develop

profiles of

segments

Develop

positioning for

segments

Develop

marketing mix

for segments

2. Market

Targeting Measure

segment

attractiveness

Select

target

segments

33 BHO2434 Week 11

First appeared in the Advertising Age ◦ Reis and Trout (1972)

Now in every marketing textbook ◦ Seen as a fundamental aim of marketing

◦ Yet not scientifically tested

Position brand in consumers’ minds ◦ Make it the preferred brand for your brand’s target

market

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The objective is to position a product in the mind of the consumer: ◦ Differentiated from competition

◦ ‘own’ an image

◦ “Positioning is…how you differentiate yourself in the mind of the prospect” ”

(Reis & Trout, 2001)

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Volvo brand is positioned on ‘Safety’

While the BMW brand is positioned on ‘Driving’. ◦ (Reis and Trout, 2001)

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Consumer Behaviour

7

Oddbins position on ‘quality without snobbery’

While Sainsbury’s often position their wine sales on ‘price’

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1. Brand image varies with usage (e.g. Barwise & Ehrenberg, 1985)

2. Attributes that are prototypical are prototypical for every brand

(e.g. Romaniuk & Sharp, 2000; Rosch, 1978)

3. Attitudes are fickle on an individual level but remains stable at an aggregate level

(e.g. D’allmoRiley et al, 1997)

4. Consumers have repertoires of brands (e.g. Sharp, Wright & Goodhardt, 2002)

5. There is no brand segmentation (e.g. Kennedy & Ehrenberg, 2001)

39 BHO2434 Week 11

Barwise, T. P. and A. S. C. Ehrenberg (1985). "Consumer Beliefs and Brand Usage." Journal of the Market Research Society 27(No. 2, April): 81-93.

Brassington, F. & Pettitt, S. (2003). Princples of Marketing (3rd Ed).

Prentice Hall: London Dall'Olmo Riley, F., A. S. C. Ehrenberg, et al. (1997). "The Variability of

Attitudinal Repeat-Rates." International Journal of Research in Marketing 14(No. 5): 437-450.

Ehrenberg, A.S.C. (2004). What brand loyalty can tell us. Admap,

October, 36-38. Kennedy, R. & Ehrenberg, A.S.C. (2001). There is no brand

segmentation. Marketing Research, 13(1). Ries, A. and J. Trout (2001). Positioning: The Battle for Your Mind. NY,

McGraw Hill.

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Romaniuk, J. and B. Sharp (2000). "Using Known Patterns in Image Data to Determine Brand Positioning." International Journal of Market Research 42(Issue 2, Spring/Summer): 219-230.

Rosch, E. (1978). Principles of Categorization. Cognition and Categorization. E.

Rosch and B. B. Lloyd. Hillsdale, N.J., L. Erlbaum Associates: 27-48. Sharp, B., M. Wright and G.J. Goodhardt (2002). "Purchase loyalty is polarised

into either repertoire or subscription patterns." Australasian Marketing Journal 10(3): 7.

Wright, M & Esslemont, D. (1994). The logical limitations of target marketing. Marketing Bulletin, 5, 13-20.

Wright, M. (1996). The dubious assumptions of segmentation and targeting,

Management Decision, 34(1), 18-24.

Winchester, M.K.& Sharp, B. (2002). Arguments against brand positioning. Professional Marketing Research Society Conference/Association Professionelle de Recherche en Marketing, Nottawasaga, Canada.

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