Segmentation, Targeting, & Positioning

Market Segmentation

 Dividing a market into smaller groups of

buyers with distinct needs, characteristics, or
behaviours, who might require separate
products or marketing mixes
 The key is their response to a different
marketing mix
 If all consumers respond the same way, then
there should be no need to segment a
market
Market Segmentation

 Best to use multiple approaches in order to

identify smaller, better-defined target groups.

 Start with a single base and then expand to other

bases.
Bases for Segmenting
Consumer Markets

 Behavioral Segmentation
– Segments based on actual behavior or product usage
 Demographic Segmentation
– Segments based on demographic factors (e.g., gender,
age, income, education, etc.)
 Psychographic Segmentation
– Segments based on state-of-mind issues (e.g., motives,
attitudes, opinions, values, lifestyles, interests,
personality, etc.)
 Geographic Segmentation
– Segments based on geographic location
Market Segmentation Variables
 Geographic: dividing a
market into different
geographical units, such as
national, regional, local, city
size, density of population,
and climate
 Demographic: dividing the
market into groups based on
demographic variables such
as age,gender, family size/
life cycle, income,
occupation, education,
religion, and ethnic origin
 Psychographic: dividing a
market into different groups
based on social class,
lifestyle, or personality
characteristics
 Behavioural: dividing a
market into groups based on
purchase occasion, benefits
sought, user status, usage
rate, loyalty status,
readiness state, and attitude
towards the product
Market Segmentation

 Demographic:
– Age, gender, family size, income, occupation,
etc.
– The most popular bases for segmenting
customer groups.
– Easier to measure than most other types of
variables.
Market Segmentation

 Age and Life-Cycle Stage

– Example: P&G has different toothpastes for different age
groups.
– Avoid stereotypes in promotions
– Promote positive messages
Market Segmentation

 Gender
– Women make 90% of home improvement decisions.
– Women influence 80% of all household consumer
purchases.
Market Segmentation

 Income
– Identifies and targets the affluent for luxury goods.
– People with low annual incomes can be a lucrative
market.
– Some manufacturers have different grades of products
for different markets.
Market Segmentation

 Psychographic
– Social class
– Lifestyle
– Personality
Market Segmentation

 Behavioral
– Occasions:
 Special promotions and labels for holidays.
– (e.g.,Tour and travel packages for summer vacations)
 Special products for special occasions.
– (e.g., Kodak disposable cameras)
Market Segmentation

 Behavioral
– Benefits Sought:
 Different segments desire different benefits from products.
– (e.g., P&G’s multiple brands of laundry detergents to satisfy
different needs in the product category)
Market Segmentation
 Behavioral

– User Status: Nonusers, ex-users, potential

users, first-time users, regular users
– Usage Rate: Light, medium, heavy
– Loyalty Status: Brands, stores, companies
Market Segmentation

 Geographic:
– World region or country
– Region of country
– City or metro size
– Density or climate
– New term - Geodemography
Effective Segmentation

To be useful, market segments must be:

– Measurable: size, purchasing power, and profile
– Accessible: can be reached and served
– Substantial: large enough to profitably serve
– Differentiable: respond differently to a marketing mix
– Actionable: effective programs can be designed
Segments should be evaluated for:
– Size
– Growth characteristics
– Structural attractiveness
– Compatibility with company objectives and resources
Market Segmentation Strategies

 Traditional Approaches to Market

Segmentation
– Mass Marketing
– Differentiated Marketing
 Multisegment Approach
 Market Concentration Approach
– Niche Marketing
– Micro segment marketing
 Selecting Market Segments
Undifferentiated marketing

Company
Market
Marketing Mix

Differentiated marketing

Company
Segment 1
Marketing Mix 1
Company
Segment 2
Marketing Mix 2
Company
Segment 3
Marketing Mix 3

Concentrated marketing

Segment 1
Company
Segment 2
Marketing Mix
Segment 3

17 12/08/21
Figure 7-3
2004 Pearson Education Canada
Inc.
Mass Marketing Strategy
Multisegment Strategy
Market Concentration Strategy
Niche Marketing Strategy
Micromarketing

 Tailoring products and marketing programs to suit the tastes

of specific individuals and locations.
– Local Marketing: Tailoring brands and promotions to the needs
and wants of local customer groups—cities, neighborhoods,
specific stores.
– Individual Marketing: Tailoring products and marketing
programs to the needs and preferences of individual customers.
Micro-Market Segmentation

Local marketing: tailoring Individual marketing:

brands and promotions to
the needs and wants of
local customer groups-
cities, neighbourhoods,
and even specific stores
tailoring products and
marketing programs to the
needs and preferences of
individual customers

Mass customization: the process of creating customer-

unique value by designing products and services tailor-
made to individual needs, on a large scale
 Levels of Market Segmentation
Mass marketing Treats all customers the same

isolating broad segments &

Segment marketing adapting mktg to match 1+ segment

focusing on sub-segments that may

Niche marketing seek a special combination of benefits

tailoring products & mkt programs

Micromarketing to specific individuals & local groups

24 12/08/21 2004 Pearson Education Canada

Inc.
 Evaluating Market Segments

 Segment Size and Growth

– Analyze current segment sales, growth rates, and expected profitability.
 Segment Structural Attractiveness
– Consider effects of: competitors, existence of substitute products, and the
power of buyers & suppliers.
 Company Objectives and Resources
– Examine company skills & resources needed to succeed in that segment.
– Offer superior value & gain advantages over competitors.
Segmenting Business Markets

 Consumer and business marketers use many of the same variables

to segment their markets.
 Business buyers can be segmented geographically or by benefits
sought, user status, usage rate, or loyalty status.
 Additional variables unique to this market would be:
– business customer demographics (industry, company size)
– operating characteristics
– purchasing approaches
– situational factors, and
– personal characteristics.
Segmenting Business Markets

 Consumer and business markets use many of the

same variables for segmentation.
 Business marketers can also use:
– Operating Characteristics
– Purchasing Approaches
– Situational Factors
– Personal Characteristics
Bases for Segmenting
Business Markets

 Type of Organization
 Organizational Characteristics
 Benefits Sought or Buying Processes
 Personal and Psychological
 Relationship Intensity
Segmenting International Markets

 Factors Used:
– Geographic location
– Economic factors
– Political and legal factors
– Cultural factors

 Intermarket Segmentation
Requirements for Effective
Segmentation

 Measurable
 Accessible
 Substantial
 Differentiable
 Actionable
Choosing a Market Coverage Strategy

Depends on:
 Company resources
 Degree of product variability
 Product life cycle stage
 Market viability
 Competitors’ marketing strategies
Market Targeting

 Market targeting:  Target market: a set of

– The process of buyers sharing common
evaluating each market needs or characteristics that
segment’s the company decides to
attractiveness, and serve
selecting one or more – May not be the largest
segments to enter segment
– The segment (s) that the
company can most
profitably serve
 Target Marketing Strategies

 Five basic strategies for target market

selection:
– (1) Single Segment Targeting-McD,
Volkswagen
– (2) Selective Targeting-Radio for youth
– (3) Mass Market Targeting-IBM, Coca Cola
– (4) Product Specialization-Maruti
– (5) Market Specialization-Bengal peerless
Basic Target Marketing Strategies
 Socially Responsible Marketing

 Smart targeting helps both companies and consumers.

 Target marketing sometimes generates controversy and
concern.
– Vulnerable and disadvantaged can be targeted.
– Cereal, cigarette and fast-food marketers have received criticism.
– Internet has raised fresh concerns about potential targeting abuses.
Market Positioning
 Market positioning:  Product position: the way
– Arranging for a product to
occupy a clear,
distinctive, and desirable
place relative to
competing products,
– In the minds of target
consumers,
– Formulating competitive
positioning for a product,
and creating a detailed
marketing mix
the product is defined by
consumers on important
attributes, relative to
competing products
– The “quicker-picker-
upper?”
– The “uncola?”
– “Great taste, less filling?”
Choosing a Positioning Strategy

 Differences need to be:

– Important
– Distinctive
– Superior
– Communicable
– Pre-emptive
– Affordable
– Profitable
 Unique Selling Proposition:
– choosing one attribute and aggressively promoting itself as
being the best on that benefit
 Value Proposition:
– The full mix of benefits on which a product/brand is
positioned
 Differentiation and Positioning

 Relative perception
 Process of creating favorable relative position:
– (1) Identification of target market
– (2) Determination of needs, wants, preferences and
benefits desired
– (3) Examination of competitors’ characteristics and
positioning
– (4) Comparison of product offerings with competitors
– (5) Identification of unique position
– (6) Development of a marketing program
– (7) Continual reassessment
 Differentiation and Positioning

 Differentiation Strategies
– Product Descriptors
 Product features
 Advantages
 Benefits
– Customer Support Services
– Image
 Positioning Strategies
– Strengthen the Current Position
– Repositioning
– Reposition the Competition
Using Product Descriptors
for Product Differentiation
Choosing a Positioning Strategy

 Identify a set of possible competitive advantages

on which to build a position.
 Choose the right competitive advantages.
 Select an overall positioning strategy.
Fundamental Positioning Themes

 Benefit Positioning

 User Positioning

 Competitive Positioning
Positioning for Competitive Advantage

 Product’s position is the way the product is

defined by consumers on important attributes.
 The place the product occupies in consumers’
minds relative to competing products.
Positioning for Competitive Advantage

 Competitive advantage: an advantage over competitors

gained by offering consumers greater value, either through
lower prices or by providing more benefits that justify higher
prices

 Three Important Steps:

– Identifying a set of possibly competitive advantages upon
which to build a position
– Choosing the right competitive advantages
– Selecting an overall positioning strategy
Identifying Possible Competitive
Advantages

 Key to winning target customers is to understand

their needs better than competitors do and to
deliver more value.
 Competitive advantage – extent to which a
company can position itself as providing superior
value.
Identifying Possible Competitive
Advantages

 Product differentiation
 Services differentiation
 Image differentiation
 People differentiation
Choosing Right Competitive
Advantages

 Important
 Distinctive
 Superior
 Communicable
 Preemptive
 Affordable
 Profitable
Communicating and Delivering the
Chosen Position

 Company must take strong steps to deliver and

communicate the desired position to target consumers.
 The marketing mix efforts must support the positioning
strategy.
 Must monitor and adapt the position over time to match
changes in consumer needs and competitors’ strategies.
Positioning Errors

 Under positioning:
– Failing to really position the company at all.
 Over positioning:
– Giving buyers too narrow a picture of the company.
 Confused Positioning:
– Leaving buyers with a confused image of a company.
 Doubtful Positioning:
– Finding it hard to believe the brand claims w.r.t product’s
features, or price
Repositioning

 Used to revive an ailing brand or fix a

lackluster new market entry
 Advertising themes and positioning can be
trendy and become outdated

 The challenge: Changing perceptions of a

brand forged over years of advertising.
Market Segmentation, Targeting, and Positioning
Identify bases for
segmenting market
Market
Segmentation
Develop profiles of
resulting segments

Develop measures of
segment attractiveness
Market
targeting
Select the
target segment(s)

Develop positioning
for each segment
Market
positioning
Develop marketing mix
for each segment
Figure 7-1