Topic 2:

Market Segmentation and

Product Positioning

Marketing
Marketing
Degree in Int. Business Economics
Prof. Antonio Ladrón de Guevara

September-December 2022
 Topic 2: Market Segmentation and
product positioning

Markets are heterogeneous. Consumers differ in???:

 The benefits wanted (PREFERENCES)

 This is reflected in the Attribute valuation (e.g. Hotels ???)
 The amount they are able or willing to pay (price
sensitivity)
 Geographics, Demographics, psychographics ???
 Behavioral ???
 Usage and consumption frequency, consumption and purchase habits,
usage occasion, brand loyalty, …
E.g. Ice cream, cookies, coffee, beer, etc.:
Condensed milk??? Which behavioral variables did we mention?
 even the media they are exposed to …
Purchase and
Consumption habits
Some concepts:

Segmentation???:

Target markets???:

Positioning???:
 Fundamentals of Market segmentation:

 Grouping consumers by valuation of product

characteristics/attributes (PREFERENCES)

PRODUCTS ARE COMBINATIONS OF CHARACTERSTICS OR

ATTRIBUTES

“Microeconomic approach in Marketing”

Oranges and apples vs taste, nutritional facts,…

Apples Preferences

Oranges
 Fundamentals of Market segmentation:

 Grouping consumers by valuation of product

characteristics/attributes (PREFERENCES)

How do we obtain information on consumers’ preferences?

 We can ask every consumer to evaluate a set of attributes in

terms of ???
1. Its ideal level (e.g. sweetness, bitterness, temperature,
brightness,…)
2. Its importance (e.g. price, nutritional content, packaging,
color,…)
E.g.: Ideal levels of attributes:
Lets assume that the two basic attributes considered by consumers when
buying plain yogurts are ???
-
- Product formulation

We could ask every consumer to rate the ideal levels (1-7 semantic scale):

1.- Level of :

1 2 3 4 5 6 7

2.- Level of :

1 2 3 4 5 6 7
Antonio Ladrón de Guevara
 Market research (157 respondents)

The information can be included in a “preference map”.

The “ideal product” for each individual is plotted in a two-dimensional
map:

Ideal Yogurt
7 2

6 2 17 4 1

5
4 24 46 13 3

4 8 3

2 4 7 2

1 2 15
1 2 3 4 5 6 7

Antonio Ladrón de Guevara

The possible preference patterns are:

Homogeneous Diffused Clustered

preferences preferences preferences
 Segments

Ideal Yogurt

7 2

6 2 17 4 1

5
4 24 46
B13 3

4
A
8 3

2 4 7 2

1
C
2 15
1 2 3 4 5 6 7
Basic statistical analysis:

What variables characterize the segments? (statistical

significance). E.g.:
1.- Age

Age
B C A
2.- Gender

50% 50% 50%

f
m f m
f m

A B C
How do the consumer profiles vary for the different segments?

Market research studies include consumer characteristics that may be

relevant to determine the consumer’s representative profile for each segment

Segmentation Criteria:
Geographic (location, climate, local culture, etc…). e.g. ???

Demographic (e.g. age, gender, family life cycle, education, income,…) e.g.?

Psychographics (e.g. Social class, lifestyle…) e.g. ???

Behavioral (e.g. consumption frequency, consumption habits, purchasing

habits, consumption occasion, user category,..), benefits wanted e.g.?
 Some leading Low-calorie brands

Sveltesse (old spots)

https://www.youtube.com/watch?v=9oCXkCaHmRQ (UK 2005)
https://www.youtube.com/watch?v=xB7aRMtJfSw (Spain 2010)

Special K
https://www.youtube.com/watch?v=kvupoWAz7WY (1991 – Looking good)
https://www.youtube.com/watch?v=vkiWuZTi6Ao (2012 - Challenge)
https://www.youtube.com/watch?v=Hjjl4z_Z_NQ (2015 – Live in color)
https://www.youtube.com/watch?v=vGg_o3ttTFY (2017 – Own it)
https://www.youtube.com/watch?v=X94M8jyEWZ4 (2018 – Powering you)

Antonio Ladrón de Guevara

 Compare the image and
package design of the
following two well-known
Pepsis:
Diet Pepsi:

1983: https://www.youtube.com/watch?v=g5HsY04PB_Q
2012: https://www.youtube.com/watch?v=DBPsU1D7Gx4

Pepsi Max:

90’s https://www.youtube.com/watch?v=CaxWvTfHKbo
https://www.youtube.com/watch?v=260XXx7wgBE

2009: https://www.youtube.com/watch?v=rGKNy1_Lheg

2022: https://www.youtube.com/watch?v=EszFN1ij7ts
https://www.youtube.com/watch?v=ckby5hL5uDQ

Antonio Ladrón de Guevara

What is CLV???
 Lifestyle???

Nissan – Connected to the city

https://www.youtube.com/watch?v=nh6f7fEAqTU
vs
Land rover freelander
https://www.youtube.com/watch?v=bbC6VOz4Gik

Values???

https://www.youtube.com/watch?v=JNYjRmNCu9o
https://www.youtube.com/watch?v=iYhCn0jf46U
https://www.youtube.com/watch?v=koPmuEyP3a0
What is a martini???
Psychographic segmentation: Lifestyle, culture:
2009: http://www.youtube.com/watch?v=h0mK5yz3MJo&NR=1
2018: https://www.youtube.com/watch?v=zzVJJ1ieOqQ
Consumption occasion e.g.?
 Chocolate

Segment 1: cooking
 Chocolate

Segment 2: gift
 Chocolate

Segment 3: snack
Consumption occasion e.g.?

Wine, chocolate, travels, hotels, …

Consumption occasion e.g.?

Wine, chocolate, travels, hotels, … ???

Holidays vs. Business

Segmentation based on the user category:

Non potential
Non users
Potential

Category
Ex. users

Users New us.

frequency
Regular
loyalty
https://www.youtube.com/watch?v=ajjHu2sMW_k
 Frequency
https://www.youtube.com/watch?v=cU1Udpd4Rbo

https://www.youtube.com/watch?v=QLAfY8e1Y_A

Brand Loyalty

https://www.youtube.com/watch?v=KLboTERT1JM
 Graphical Tecnhiques
Maps:
1.- Perceptual Maps (For segments and brand
positioning)

Profiles:
2.- Segment Profiles (For segments)
3.- Product Profiles (For brand positioning)
 1.- Perceptual Maps:
Ideal Products:
Consumers evaluate the ideal levels or relative
importance of attributes (Preference maps). The different
segments are located according to the preferred
combination of attributes
 1.1.- Ideal levels of attributes:

E.g. 2: The American beer market ???

1.- ???

1 2 3 4 5 6 7

2.- ???

1 2 3 4 5 6 7
The American Beer Market

#8

#9
#5 #7
#2
#3

#4 #1
Ideal
#6 products
(segments)
 1.- Perceptual Maps:
1.- Ideal Products:
Consumers evaluate the ideal levels or relative
importance of attributes (Preference maps). The different
segments are located according to the preferred
combination of attributes

2.- Existing “product Positioning”:

Consumers evaluate the perceived levels of attributes for
the established brands. Each product is positioned in the
map, according to the average perceived levels

3.- New product evaluation

 Some examples of Perceptual Maps
The American Beer Market
Product repositioning: New Free Damm
https://www.youtube.com/watch?v=XX1nvb0BPuQ
Brands

#8
Miller
#9
#5 ??? #7
Falstaff
Pabst Hamm #2
#3
Blatz Schlitz
Meister Brau
Budweiser
#4 #1
Ideal
#6 products
(segments)
1.2.- Evaluat. of the relative importance of attributes:

Taste:
Not Very
Important important

1 2 3 4 5 6 7
Price:
Not Very
Important important

1 2 3 4 5 6 7

Attribute xxx:
Not Very
Important important

1 2 3 4 5 6 7

Limitations of this scaling technique ???

Constant sum scale

Clustering
techniques to
group similar
consumers !!!
???
Euclidean distance: d(a,b)= [(x1(b)-x1(a)) 2 + (x2(b)-x2(a))2 + (x3(b)-x3(a))2 ….](1/2)

Ideal Yogurt

Very creamy 7 2
yogurt (9% fat)
6 2 a
17 4 1

5 b
4 24 46 13 3

4 8 3

2 4 7 2

Not creamy 1 2 15
(0% fat) 1 2 3 4 5 6 7
(Unsweet.) (Very sweet)
Constant sum scale

d(A,B)= [(x1(A)-x1(B)) 2 + (x2(A)-x2(B))2 + (x3(A)-x3(B))2 ….](1/2)

Consumer A Consumer B (A-B) (A-B)2

3 7 -4 16
10 11 -1 1
8 10 -2 4
0 0 0 0
32 35 -3 9
8 5 3 9
25 22 3 9
14 10 4 16
100 100 64

D(AB)=8
Constant sum scale

d(A,B)= [(x1(A)-x1(B)) 2 + (x2(A)-x2(B))2 + (x3(A)-x3(B))2 ….](1/2)

Consumer A Consumer C (A-C) (A-C)2

3 20 -17 289
10 15 -5 25
8 20 -12 144
0 0 0 0
32 8 24 576
8 5 3 9
25 22 3 9
14 10 4 16
100 100 1068

D(AB)=32,68
2.- Segment profiles

???
AVERAGE RESPONSES OF THE THREE SEGMENTS
2.- Segment profiles

AVERAGE RESPONSES OF THE THREE SEGMENTS

 Segment
profiles
0 10 20 30 40 50 60

Bitterness

Hop flavours

Fragance

Country where brewed

Price

Alcohol

Aftertaste

Package design
 Perceptual maps
with more than 2 attributes

(Principal component analysis)

(Factor analysis)
2

1
 2
60 9
3

7 1
 2
17 4
3

9 1
 2
5 7
3

53
1
2

1
3.- Brand profile (Brand positioning)
Perceived association of attributes in existing brands:
Bipolar scales:

a.- Semantic differential scales:

Brand XXX is
Not reliable Very reliable

1 2 3 4 5 6 7 8 9 10

b.- LIKERT SCALES

Quality of brand XXX is high
Completely Completely
disagree agree

1 2 3 4 5 6 7 8 9 10
 E.g.:

Adhesive market

Adhesive lines:

vs
 Product-line evaluation
(1-10 scale: completely disagree / agree)

Pritt Uhu
Conveys confidence
Is of high quality
Is for special uses only
Is only for sticking paper
Is somehow likeable
Glues reliably

???
Is of great strength
Is a well-known brand
Is for general purposes
Is usually reasonably priced
Is sold everywhere
Offers all adhesives you need
Is more for children
Is more from the office
Offers useful adhesives
Has a well-structured range
Is something for experts
Is clean in use
 Segmentation, positioning and planning:

Market segmentation Marketing positioning

1.- Identify customer 1.- Identify differential

needs and segment advantage for each
the market group
HOW? 2.- Product
2.- Develop profiles development
of resulting
segments

Marketing planning
Target Marketing
1.- Formulate the
marketing mix
1.- Evaluate
attractiveness of each
segment 2.- Develop marketing
plan for each segment
Criteria??

2.- Select target 3.- Implementation and

segments control