Chapter Four Segmentation, Targeting and Positioning: TH TH

Slide 1.
1
2.1
Chapter Four
Segmentation, Targeting and
Positioning
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Lewis and Thornhill, Research Methods for Business Students, 5th Edition, © Mark Saunders, Philip Lewis and Adrian Thornhill 2009
Slide 1.2
2.2
Discuss
The meaning and importance of market
segmentation, targeting and positioning?
What are the basis of consumer buyer
segmentation?
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2.3
Introduction
Businesses may not be in a position to satisfy exact
requirements of each individual customer since
customers have different preferences. Therefore,
many companies adopt a strategy that is known as
target marketing. This strategy involves dividing the
market into segments and developing products or
services to these segments. To develop the best
marketing plans, managers, need to understand
what makes each segment unique and different.
Identifying and satisfying the right market segments
is often the key to marketing success.
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Slide 1.4
2.4
Effective target marketing requires

 Identify and profile distinct groups of buyers who
differ in their needs and preferences (market
segmentation)
 Select one or more market segments to enter
(market targeting)
 Establish and communicate the distinctive
benefits of the market offering (market
positioning)
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2.5
Bases of segmenting consumer markets

Market segmentation divides a market into
defined slices. A market segment consists of a
group of customers who share a similar set of
needs and wants. The marketers task is to identify
the appropriate number and nature of market
segments and decide which one(s) to target?
Two bases for segmenting consumer markets are
consumer characteristics and consumer responses.
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Slide 1.6
2.6
Meaning of Segmentation
A market segment consists of a group of customers

who share a similar set of needs and wants.
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2.7
Bases of Segmenting Consumer Markets
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2.8
Geographic Segmentation
• Divides a market into geographical units such as
nations, states, regions, counties, cities, or
neighborhoods.
• The company can operate in one or a few areas, or it can
operate in all but pay attention to local variations.
• Grass roots marketing – activities concentrate on
getting as close and personally relevant to individual
customers as possible.
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2.9
Demographic
Divide the market on variables such as age, family
size, family life cycle, gender, income, occupation,
education, religion, race, generation, nationality,
and social class.
Why is demographic variables so popular with
marketers?
Because they are often associated with
consumer needs and wants and easy to measure.
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2.10
Age and life cycle

Consumer wants and abilities changes with age. For
example Toothpaste brand such as Colgate offer three
main lines of products to target kids, adults, and older
consumers.
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2.11
Life stage
A person’s major concern, such as going through a
divorce, going into a second marriage, deciding to
buy a new home, and so on.
These life stages present opportunities for
marketers who can help people cope with the
major concerns.
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2.12
Gender
• Men and women have different attitudes and behave
differently, based partly on genetic makeup and partly on
socialization.
• Women tend to be more communal-minded and men more
self-expressive and goal- directed.
• Gender differentiation has long been applied in clothing,
hairstyling, cosmetics, and magazines.
• Male oriented markets and female oriented markets are
present.`
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2.13
Income
Income segmentation is a
long-standing practice in such
categories as automobiles,
clothing, cosmetics, financial
services, and travel. However,
income does not always
predict the best customers for
a given product.
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2.14
Generation
Each generation/cohort is profoundly influenced
by the times in which it grows up the music,
movies, politics, and defining events of that
period.
Members share the same major cultural, political,
and economic experiences and have similar
outlooks and values.
Marketers often advertise to a cohort by using the
icons and images prominent in its experiences. They
also try to develop products and services that
uniquely meet the particular interests or needs of a
generational target.
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2.15
Race and culture

Multicultural marketing is an approach recognizing that
different ethnic and cultural segments have sufficiently
different needs and wants to require targeted marketing
activities, and that a mass market approach is not refined
enough for the diversity of the marketplace.
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2.16
Psychographic Segmentation
Psychographics is the science of using psychology
and demographics to better understand consumers.
Market is divided into different groups on the basis
of psychological/personal traits, lifestyle, or values.
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2.17
Psychographic Segmentation: The VALS

Segmentation System
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2.18
VALS Framework
The four groups with higher resources are:
Innovators: successful, sophisticated, active, “take-
charge” people with high self-esteem. Purchases
often reflect cultivated tastes for relatively upscale,
niche-oriented products and services.
Thinkers: mature, satisfied, and reflective people
motivated by ideals and who value order, knowledge,
and responsibility. They seek durability,
functionality, and value in products.
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2.19
VALS Framework
Achievers: successful, goal-oriented people who
focus on career and family. They favor premium
products that demonstrate success to their peers.
Experiencers: young, enthusiastic, impulsive people
who seek variety of excitement. They spend a
comparatively high proportion of income on fashion,
entertainment, and socializing.
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2.20
VALS Framework
The four groups with lower resources are
Believers: conservative, conventional and traditional
people with concrete beliefs. They prefer familiar,
country made products, and are loyal to established
brands.
Strivers: trendy and fun-loving people who are
resource-constrained. They favor stylish products that
emulate the purchases of those with greater material
wealth.
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2.21
VALS Framework
Makers: practical, down-to-earth, self-sufficient
people who like to work with their hands. They seek
country made products with a practical or
functional purpose.
Survivors: elderly, passive people concerned about
change and loyal to their favorite brands.
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2.22
Behavioral segmentation
In behavioral segmentation, marketers divide buyers
into groups on the basis of their knowledge of, attitude
toward, use of, or response to a product.
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2.23
Needs and Benefits

Not everyone who buys a product has the same needs
or wants the same benefits from it. Needs-based or
benefits-based segmentation is a widely used approach
because it identifies distinct market segments with
clear marketing implications.
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2.24
Needs and Benefits

Enthusiast: often buy luxury products and have
higher incomes.
Image seekers: they buy products to say who they
are, and they are willing to pay more to get what
they want.
Savvy shoppers: they love to shop and believe they
don’t have to spend a lot get a good product. They
are happy to use the bargain bin.
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2.25
Needs and Benefits

Traditionalist: they have very traditional values,
they like to buy brands they’ve heard of and from
businesses that they have been around a long time.
Satisfied buyers: not knowing much about the
product, they tend to buy the same brands.
Overwhelmed: a potentially attractive target
market, they find purchasing a product confusing.
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2.26
Decision roles
People play five roles in a buying decision:
Initiator,
Influencer,
Decider,
Buyer, and
User
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2.27
User and usage: real user and usage related

variables
Many marketers believe variables related to various

aspects of users or their usage are good starting points
for constructing market segments.
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2.28
What are the variables related to users?

Occasions: a time of day, week, month, year, or other well-
defined temporal aspects of a consumer’s life. Example: Air
travel is triggered by occasions related to business, vacation, or
family.
User status: every product has its nonusers, ex-users, potential
users, first-time users, and regular users. Example: Mothers-to-
be are potential users who will turn into heavy users.
Usage rate: it can be segmented into light, medium, and heavy
product users.
Buyer-Readiness stage: some people are unaware of the
product, some are aware, some are informed, some are
interested, some desire the product, and some intend to buy.
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2.29
What are the variables related to users?

 Loyalty status
Hard-core loyals: consumers who only buy one
brand all the time.
Split loyals: consumers who are loyal to two or
three brands.
Shifting loyals: consumers who shift loyalty from
one brand to another.
Switchers: consumers who show no loyalty to any
brand.
 Attitude: five consumer attitudes about products are
enthusiastic, positive, indifferent, negative, and hostile.
 Multiple bases: combination of different behavioral
bases.
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2.30
Behavioral Segmentation Breakdown
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2.31
Bases For Segmenting Business Markets

Business market can be segmented using some of
the same variables we use in consumer market for
example geography, benefit sought, and usage rate
but business market also use other variables.
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2.32
Segmenting for Business Markets
Demographic
Operating Variable
Purchasing Approaches
Situational Factor
Personal Characteristics
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2.33
Major Segmentation Variables for Business Markets

1. Demographic
• Industry: which industries should we serve?
• Company size: what size companies should we serve?
• Location: what geographical areas should we serve?
2. Operating Variables
• Technology: what customer technologies should we focus
on?
• User or nonuser status: should we serve heavy users,
medium users, light users, or nonusers?
• Customer capabilities: should we serve customers needing
many or few services?
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Slide 1.34
2.34

3. Purchasing Approaches
Purchasing-function organization: should we serve companies
with a highly centralized or decentralized purchasing
organization?
Power structure: should we serve companies that are
engineering dominated, financially dominated, and so on?
Nature of existing relationship: should we serve companies
with which we have strong relationships or simply go after the
most desirable companies?
General purchasing policies: should we serve companies that
prefer leasing? Service contract? Systems purchases? Sealed
bidding?
Purchasing criteria: should we serve companies that are seeking
quality? Service? Price?
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Slide 1.35
2.35

4. Situational Factors
• Urgency: should we serve companies that need
quick and sudden delivery or service?
• Specific application: should we focus on a certain
application of our product rather than all
applications?
• Size or order: should we focus on large or small
orders?
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2.36

5. Personal Characteristics
Buyer-seller similarity: should we serve
companies whose people and values are similar
to ours?
Attitude toward risk: should we serve risk-taking
or risk-avoiding customers?
Loyalty: should we serve companies that show
high loyalty to their suppliers?
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Slide 1.37
2.37
Flexible Market Offering

A flexible market offering consists of two parts:
Naked Solution: containing the product and service
elements that all segment members value, and
Discretionary Options: product some segment members
may value.
Example: an airline offers all economy passengers a
seat, small snack, and soft drinks, and charges extra for
alcoholic beverages and meals.
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Slide 1.38
2.38
Market Targeting
Once the firm has identified its market-segment
opportunities, it must decide how many and which
ones to target. Marketers are increasingly combining
several variables in an effort to identify smaller,
better-defined target groups.
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Slide 1.39
2.39
Steps in Segmentation Process

• Need-based segmentation: group customers into
segments based on similar needs and benefits.
• Segment identification: for each needs-based
segment, determine which demographics, lifestyles,
and usage behaviors make the segment distinct and
identifiable (actionable).
• Segment attractiveness: using predetermined
segment attractiveness criteria (such as market
growth, competitive intensity, and market access),
determine the overall attractiveness of each segment.
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Slide 1.40
2.40
Steps in Segmentation Process

Segment profitability: determine segment profitability.
Segment positioning: for each segment, create a “value
proposition” and product-price positioning strategy
based on that segment’s unique customer needs and
characteristics
Segment acid test: create “segment storyboard” to test
the attractiveness of each segment’s positioning strategy.
Market mix strategy: expand segment positioning
strategy to include all aspects of the marketing mix:
product, price, promotion, and place.
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2.41
Effective Segmentation Criteria

Measurable: the size, purchasing power, and
characteristics of the segments can be measured.
Substantial: the segments are profitable enough to serve.
Accessible: the segments can be effectively reached and
served.
Differentiable: the segments are conceptually
distinguishable and respond differently to different
marketing-mix elements and programs.
Actionable: effective programs can be formulated for
attracting and serving the segments.
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2.42
Forces that determine the intrinsic long-run

attractiveness of a market segment (Michael Porter)
• Threat of intense segment rivalry
• Threat of new entrants
• Threat of substitute products
• Threat of buyers’ growing bargaining power
• Threat of suppliers’ growing bargaining power
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2.43
Evaluating and Selecting the Market Segments

A firm must look at two factors: the segment’s
overall attractiveness and the company’s objectives
and resources.
Marketers have a range or continuum of possible
levels of segmentation that can guide their target
market decisions.
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Slide 1.44
2.44

 Full market coverage: a firm attempts to serve all
customer groups with all the products they might
need. Only very large firms such as Microsoft
(software market), General Motors (vehicle market),
and Coca- cola (nonalcoholic beverage market) can
undertake the full market coverage strategy.
Large firms can cover a who market into two ways:
through undifferentiated or differentiated marketing.
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Slide 1.45
2.45
 Multiple Segment Specialization: a firm selects a

subset of all the possible segments, each objectively
attractive and appropriate.
There may be a little or no synergy among the segments,
but each promises to be a money maker.
Two types: product specialization and market specialization
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2.46
Multiple Segment Specialization

Product specialization: the firm sells a certain
product to different market segments. For example a
microscope manufacturer sells to universities,
government, and commercial laboratories.
Market specialization: the firm concentrates on
serving many needs of a particular customer group.
Example a microscope manufacturer sells only to
universities. The firm gains a strong reputation among
this customer group.
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Slide 1.47
2.47
 Single-segment Concentration: the firm markets to

onlyone particularsegment
Example: Porsche concentrates on the sports car
market and Volkswagen on the small-car market.
 Individual Marketing: “Segments of one”,
“Customized marketing”, or “One to one
marketing”.
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Slide 1.48
2.48
Positioning Products
Positioning is the act of designing a company’s offering
and image to occupy a distinctive place in the minds of
the target market.
Positioning starts with a product. A piece of
merchandise, a service, a company, an institution, or
even a person... But positioning is not what you do to a
product. Positioning is what you do to the mind of the
prospect. That is, you position the product in the mind
of the prospect.
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2.49
Product Positioning Dimensions
Product Attributes / Differences / Benefits
Product User/Usage
By Association
Problem Solution
Against a Competitor / Away from Competitors +
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2.50
Perceptual Mapping
A means of displaying or graphing, in two or more
dimensions, the location of products, brands, or groups
of products in customers’ minds.
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2.51
Repositioning
Changing consumers’ perceptions of a brand in relation

to competing brands.
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2.52
END
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Chapter Four Segmentation, Targeting and Positioning: TH TH

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Chapter Four Segmentation, Targeting and Positioning: TH TH

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Slide 1.

Effective target marketing requires

Bases of segmenting consumer markets

A market segment consists of a group of customers

Bases of Segmenting Consumer Markets

Age and life cycle

Race and culture

Psychographic Segmentation: The VALS

Needs and Benefits

Needs and Benefits

Needs and Benefits

User and usage: real user and usage related

Many marketers believe variables related to various

What are the variables related to users?

What are the variables related to users?

Behavioral Segmentation Breakdown

Bases For Segmenting Business Markets

Segmenting for Business Markets

Major Segmentation Variables for Business Markets

Major Segmentation Variables for Business Markets

Major Segmentation Variables for Business Markets

Major Segmentation Variables for Business Markets

Flexible Market Offering

Steps in Segmentation Process

Steps in Segmentation Process

Effective Segmentation Criteria

Forces that determine the intrinsic long-run

Evaluating and Selecting the Market Segments

Evaluating and Selecting the Market Segments

Evaluating and Selecting the Market Segments

 Multiple Segment Specialization: a firm selects a

Multiple Segment Specialization

Evaluating and Selecting the Market Segments

 Single-segment Concentration: the firm markets to

Product Positioning Dimensions

Product Attributes / Differences / Benefits

Against a Competitor / Away from Competitors +

Changing consumers’ perceptions of a brand in relation

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