Notes

[MUSIC]
So, in this section, what we'd like to
talk about is that concept I mentioned
earlier, segmentation.
Segmentation and targeting.
And this is a critical idea for marketing
and
very important for where we're going,
which is brand positioning.
It's called the STP framework:
segmentation, targeting and positioning.
And when we get to positioning, that's
when we first start getting to branding
which
is where we're headed.
So, the positioning process says, yous
tart with segmentation, with S of STP.
And segmentation says that you identify
variables
that allows one to segment the market.
Okay.
So I, we're going to figure out different
schemes for
how to break up the market into different
market segments.
The second part, the T is targeting.
You would evaluate the attractiveness of
each of
the segments and you choose a segment to
target.
And the third piece is positioning.
Once you get your targets segment, you
position your brand
and your product to meet the needs of that
target segment.
STP, segmentation targeting and
positioning.
So let me just give you the idea of why
this is so important to have
segmentation targeting and positioning.
And what I'm putting up on the background
now, is a slide
that shows you the importance values two
different segments have for roof tiles.
So in this graphic, you can see the
yellow segment, doesn't think price is
that important.
They don't care about whether or not it's
a low price.
But they do care about how attractive the
tiles look.
And they really care about how durable the
pu, tiles are.
On the other hand, the blue segment, they
care a lot about the price.
They want a low price.
They don't really care that much about how
it looks, and
they don't care that much about how long
the tiles last.
If you did not segment this market, the
optimal thing
to do would be to give average value to
everything.
And, what you would do, therefore, is not
please anybody.
The average value here would not be not a
low
enough price for the people who care about
low price.
And not enough durability for the people
who care about durability.
In some sense I think that is the lukewarm
tea.
You can have hot tea, an ice tea and if
you give average it's lukewarm tea and
nobody is happy.
So one of the reasons to segment the
market is if you don't, you tend to
try to reduce cost and go to the
average value and you are not meeting
anybody's needs.
Going back to that concept of customer
focus marketing, if I want to
give you exactly what you want, I need to
segment the market.
And what you'll see is there's
a heterogeneity or differences in
preferences.
And then I need to choose or target; which
one of
these segments I want to deliver to, and
deliver value to that segment.
And for example, in this case if I
delivered, durable tiles, to the seg-, the
yellow segment.
They would be willing to pay a higher
price for that, and I could be
very profitable, but if I went to a
lukewarm thing, I, might not sell to
anyone.
So segmentation means I divide the market
up into market segments.
in fact, let me just define it formally
here.
Market segmentation is the process of
dividing up the
market into distinct subsets, where any
subset could conceivably
be selected and then you pick one of those
market seqments to be your target.
And you reach or you deliver to that
customer
segment, that market segment, with a
distinct marketing mix.
Remember what the marketing mix is, the
four p's, product, place, promotion and
price.
And what that says, when I'm looking at
these different segments, they may want
different products.
It may make sense to advertise
to them differently.
It may make sense to price differently.
It may make sense to deliver at
a place decision, or distribute to them
differently.
and so that's the definition of market
segment,
a very, very critical idea in, in
marketing.
So the question is how can I divide up the
market?
And you might understand the idea that I'm
going to go
after market segments and I'm going to
choose one of them.
And then I'll give
a unique product package, or marketing
mix, to one of those segments.
Maybe you understand that concept.
But then the question is well, what are
the different ways to segment the market?
And there are actually lots of different
ways.
The most common way that people most, that
usually think about
is to divide up the market on
characteristics of the customer.
So intuitively, you might think about
demographics.
Well, men and women like different things,
so
let's make a female product and a male
product.
Or, old people like things that are
different than young
people, or rich people have different
needs than poor people.
So one of the segmentation schemes people
frequently think about are characteristics
of the customer.
Another one though, which doesn't really
focus on characteristics of
the customer says, well people like
different things in products.
They focus on different benefits so, in
running shoes,
some people care about comfort, some
people care about asthetics.
Some people
care about technology, and so it might
make sense to divide
up the market or segment the market on
benefits that people seek.
A third way to think of it is how do
people purchase?
Maybe they purchase online.
Some people purchase online, some people
like to go to physical stores,
some people like to use their phones or
some people purchase very frequently.
Some people only purchase once a year.
Some people like to switch around,
other people like to be loyal.
All of these are different characteristics
that you can use to segment the market.
Let me just give you a few examples of
some of the interesting
ways that people have segmented the
market, just to give you some ideas.
One of the ones, people talk about
demographics so
they talk about old versus young, male
versus females.
City dwellers versus country dwellers.
Another thing that and I'm sure you've
heard of this.
You may not know it by this term.
Another way to think about it is cohort
analysis.
And what cohort analysis says, it's not
really whether you're young
or old, it's the life experiences that
you've experience as a cohort.
And in particular it's very important what
happens when you're coming of age,
you know, right around 14, 15, 16, 17, 18,
that, those kind of.
Those things that hit you at that time of
your life are
critical, and they frame you as a
generation.
And so this is the idea, you've heard
probably of baby boomers.
That's a cohort.
Baby boomers were born, there's two
cohorts of baby boomers.
There's one that are born about 1950 and
then
the ones that are born you know about
1960s.
and those that cohort of baby boomers.
All come of age at a certain time, certain
things happen when they come of age,
and they react as a generation.
Generation X is another cohort and what
you're
hearing about nowadays is really is
Generation Y.
people who are coming of age now, these
are the kids who are in college.
they think of Generation Y, Millennials.
and why do we really focus on the current
generation?
Who's in college now, what's that current
generation?
Marketers are very interested in the
generation as they come of
age, when they are in college or when
they're this age.
Because many times, you make purchases at
this age
and then you're loyal to those brands over
time.
So it's, marketers feel it's very, very
important to
get in those people's consideration sets,
right, at this time.
So they spend a lot time studying, the
cohort of today and today's cohort is
Generation Y.
Generation Y is very different from all
the other generations.
First of all, it's a generation that was
completely brought up on the computer.
they think about free content.
they think about the social environment,
they're totally comfortable social
network, everything's wireless.
They think about things being designed
exactly for them.
They're totally used to customization.
This is a generation, electronic
generation that's quite different
from their parents and from generations
beforehand.
And you really need to understand
Generation Why
or the Millennials in order to market to
them.
What they don't like is mass marketing.
They don't like any kind of restricted
access.
They don't like thing that are going down
the beaten path.
They like new, they like different, they
like customized.
Millenials are big shoppers, but many
times the co-purchase with their parents,
some of the millenials still live with,
and are supported by their parents.
They think about information
electronically.
They are not readers of paper newspapers,
they don't care about print anymore.
They're very, very comfortable comfortable
multi-tasking and co-creating with the
product.
They're very connected, and the millenials
tend to be socially responsible.
So if you're segmenting the market by
cohorts and you decide
to target the millenials, you would have
to design a targeted
product or position your brand in a
specific
way to meet the needs of the millenials.
Another way that markets tend to be
segmented are by geography.
It turns out that people who are similar
tend to live together in the same
neighborhoods.
And there are different ways to segment,
there's segmentation scheme called prism.
That actually defines the entire country
based on these
geographic clusters.
And they're not, eh, they're not defined
necessarily about where they are.
So you could have a geographic
cluster with some characteristic sets in
California.
And people who live in New York may be in
that same, same cluster.
So people who live in say Beverly Hills
California, may
be similar to people who live in Scotia,
Scotia New York.
And those two may be in the same
cluster, even though they're separated by
3000 miles.
So the PRIZM clustering, or zip clustering
says, if you tell
me your zip code, and I'm giving you a
United States example.
But this kind of notion of geographic
segmentation is true around the world.
People who are similar tend to live in
neighborhoods that are similar.
And so you tell me where you live, I have
some
ideas of the kinds of things you might
like, the products
you might like, the clothes you might
wear.
The media you may attend to ecetera.
And what we find out and we'll talk about
later on in, in one
of the other parts of this program when
David Bell comes and talks to you.
That it turns out that where you
live physically also affects your online
behavior.
So location is a very very important
variable when thinking about segmentation.
And there
are lots of maps that can divide up say
the New York City for example.
Into a block by block, by block
segmentation scheme.
And show different consumer behavior by
blocks in New York City.
That's how tight the segmentation
geographic segmentation can be.
Once you define your segmentation
variables, then
you need to select a target segment.
and so what makes a segment attractive you
need to
balance the attractiveness of the segment
with
your capability to deliver to that
segment.
And you need to constantly monitor whether
the actual buyers that
you're targeting are matching what you
think that they should be doing.
so how do you?
Pick this segment.
You determine the attractiveness of the
segment, how big is it, how much
growth is there, how much money do they
have to spend, how stable
is it.
All of these are signs of an attractive
segment.
Then you think about, well how good are
you at meeting the needs of that segment.
What's your current position with respect
to that segment, how easy
is it for you to address the needs of that
segment.
And then you think about, well what about
the competition?
How many people are going after that
segment?
What's the strength of the competitors?
Are there potential competitors coming in?
And what you want to
do is pick the most attractive segment
where
you have a differential advantage over the
competition.
That's the best target segment for you to
consider.
And so what you're looking for, is you're
going to divide this segment, this
is a graph that shows you, you can have
low to high segment attractiveness.
And you can have low to high competitive
strength.
And the best segment to go after or
to target would be the most attractive
segment
where you are strongest relative to the
competition, that's perfect.
Sometimes you can't get the perfect
segment
and so you may choose something that's
a little bit less attractive but still
something that you think would be
profitable.
[MUSIC]