Segmentation, Targeting, and Positioning:

Building the Right Relationships with the Right

Customers
Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right
Customers

• Topic Outline

• Market Segmentation
• Different types of segmentation and marketing situations
• Target Marketing
• Positioning for Competitive Advantages
• Positioning map
• Market analysis
 Definition

- Market Segmentation:
+ Dividing a market into distinct groups with distinct needs, characteristics,
or behavior who might require separate products or marketing mixes.

International Marketing Prof. Dr. Thomas Laukamm 3/39

 The need for market
segmentation

- Marketers understand that they cannot

be all things to all people, all of the
time.
Buyers and markets are too complex and
diverse for one simple marketing
formula to adequately address the
needs of all.

International Marketing Prof. Dr. Thomas Laukamm 4/39

 Segmentation and
positioning

- Target marketing
+ Identifies market segments that are bite sized chunks that
organisations can manage.

- Market segmentation
+ Identifies markets with common traits.

- Market targeting
+ Process of evaluation of the selected segments and then deciding which
market segments to operate within.

- Market positioning
+ Process whereby marketers position the product to occupy a clear and
distinctive position relative to other competing products.
International Marketing Prof. Dr. Thomas Laukamm 5/39
 Market segmentation

- Markets are comprised of buyers and they

differ in wants, resources, locations and buying
patterns.

- Market segmentation is the process that

marketers use to divide up the market into
smaller segments that can be efficiently
addressed.

International Marketing Prof. Dr. Thomas Laukamm 6/39

 Market segmentation

Figure 10.1 Six steps in market segmentation, targeting and positioning

International Marketing Prof. Dr. Thomas Laukamm 7/39

 Market Segmentation

Topics - Geographical segmentation

+ Marketing mixes are customized
geographically
- Demographic segmentation
- Segmenting Consumer Markets + Most popular segmentation
- Segmenting Business Markets + Demographics are closely related to needs, wants and
usage rates
- Segmenting International Markets
- Psychographic segmentation
- Requirements for Effective + Lifestyle, social class, and personality- based
Segmentation segmentation
- Behavioral segmentation
+ Typically done first

International Marketing Prof. Dr. Thomas Laukamm 8/39

Market Segmentation

Topics - Demographic segmentation

+ Industry, company size, location
- Operating variables
- Segmenting Consumer Markets + Technology, usage status, customer capabilities
- Segmenting Business Markets - Purchasing approaches
- Segmenting International Markets - Situational factors
+ Urgency, specific application, size of order
- Requirements for Effective - Personal characteristics
Segmentation + Buyer-seller similarity, attitudes toward risk, loyalty

International Marketing Prof. Dr. Thomas Laukamm 9/39

 Market Segmentation

Topics - Geographic segmentation

+ Location or region
- Economic factors
- Segmenting Consumer Markets
+ Population income or level of economic development
- Segmenting Business Markets - Political and legal factors
- Segmenting International Markets + Type / stability of government, monetary regulations, amount
of bureaucracy, etc.
- Requirements for Effective - Cultural factors
Segmentation + Language, religion, values, attitudes, customs, behavioral
patterns

International Marketing Prof. Dr. Thomas Laukamm 10/39

Market Segmentation
Topics - Measurable
+ Size, purchasing power, and profile of segment
- Accessible
- Segmenting Consumer Markets + Can be reached and served
- Segmenting Business Markets - Substantial
- + Large and profitable enough to serve
Segmenting International Markets
- Differentiable
- Requirements for Effective + Respond differently
Segmentation - Actionable
+ Effective programs can be developed

International Marketing Prof. Dr. Thomas Laukamm 11/39

Levels of market segmentation

+ Mass marketing
• Assumes market is homogenous and uses the same product, promotion and distribution to all
consumers.
+ Segment marketing
• Adapting a company’s offerings so they more closely match the needs of one or more segments.
+ Niche marketing
• Adapting a company’s offerings to match the needs of one or more sub- segments more closely where
there is little competition.
+ Micro marketing
• Marketing programmes tailored to narrowly defined geographic, demographic, psychographic
behavioural segments.

International Marketing Prof. Dr. Thomas Laukamm 12/39

Micro marketing

 Local Marketing
o Tailoring brands and promotions to the needs and wants of local customer groups.
 Individual marketing
o Tailoring products and marketing programmes to the needs and preferences of individual
customers.
 Mass customisation
o Preparing individually designed products and communication on a large scale.

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 Market segmentation

- There is no single way of segmenting a market.

- Different market segmentation variables to develop the
most effective segmentation method.
- Major variables used are geographic, demographic,
psychographic and behavioural.

International Marketing Prof. Dr. Thomas Laukamm 14/39

 Market segmentation

Prof. Dr. Thomas Laukamm 15/39

Table 10.1 Market segmentation variables for consumer markets

Table 10.1 Market segmentation variables for consumer markets (continued)
International Marketing Prof. Dr. Thomas Laukamm 16/39
 Segmentation

- Geographic segmentation
+ Dividing a market into different geographical units such as countries, states, regions,
towns.
- Demographic segmentation
+ Age and life-cycle segmentation.
+ Ethnic segmentation.
+ Gender segmentation.
+ Income segmentation.
- Geo-demographics
+ Study of relationship between geographical location and demographics.
International Marketing Prof. Dr. Thomas Laukamm 17/39
 Segmentation

- Behavioural segmentation
+ Markets segmented based upon consumer knowledge, attitude, use or response to a product.
• Occasion segmentation
• Benefit segmentation
• User status
• Usage rate
• Loyalty status
• Buyer readiness stage
• Attitude towards product

International Marketing Prof. Dr. Thomas Laukamm 18/39

Benefit segmentation of the toothpaste market
Source: Adapted from Russell J. Haley, ‘Benefit segmentation: a decision-oriented research tool’, Journal of Marketing (July 1968), pp. 30–5; see also Haley, ‘Benefit segmentation: backwards and forwards’,
Journal of Advertising Research (February–March 1984), pp. 19–25; and Haley, ‘Benefit segmentation – 20 years later’, Journal of Consumer Marketing, 1 (1984), pp. 5–14.
International Marketing Prof. Dr. Thomas Laukamm 19/39
Segmenting business markets

20/39
Primary segmentation variables for business markets (continued)
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market (Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation
International
Marketing: Marketingfor capturing business (New York: Harper Business, 1992).
New methods Prof. Dr. Thomas Laukamm 21/39
Requirements for effective segmentation

- Measurability
+ Degree to which size, purchasing power and profits of a market segment can be measured.
- Accessibility
+ Degree to which a market segment can be reached and served.
- Substantiality
+ Degree to which a market segment is sufficiently large or profitable.
- Actionability
+ Degree to which effective programmes can be designed for attracting and serving the
given market segment.

International Marketing Prof. Dr. Thomas Laukamm 22/39

 Target Marketing

- Evaluating Market Segments

+ Segment size and growth
+ Segment structural attractiveness
• Level of competition
• Substitute products
• Power of buyers
• Powerful suppliers
+ Company objectives and resources

International Marketing Prof. Dr. Thomas Laukamm 23/39

 Target Marketing

- Target Marketing Strategies

+ Undifferentiated (mass) marketing
+ Differentiated (segmented) marketing
+ Concentrated (niche) marketing
+ Micromarketing (local or individual) marketing

International Marketing Prof. Dr. Thomas Laukamm 24/39

 Target Marketing
- Choosing a Target-Marketing Strategy Requires Consideration of:
+ Company resources
+ The degree of product variability
+ Product’s life-cycle stage
+ Market variability
+ Competitors’ marketing strategies

International Marketing Prof. Dr. Thomas Laukamm 25/39

Positioning

- Positioning:
+ The place the product occupies in consumers’ minds relative to
competing products.
+ Typically defined by consumers on the basis of important attributes.

International Marketing Prof. Dr. Thomas Laukamm 26/39

Positioning

- Choosing a Positioning Strategy:

+ Identifying possible competitive advantages
• Products, services, channels, people or image can be sources of differentiation.
+ Choosing the right competitive advantage
• How many differences to promote?
 Unique selling proposition
 Positioning errors to avoid
• Which differences to promote?

International Marketing Prof. Dr. Thomas Laukamm 27/39

Positioning

- Choosing a Positioning Strategy:

+ Selecting an overall positioning strategy
• More for More Value Proposition
• More for the Same Value Proposition
• The Same for Less Value Proposition
• Less for Much Less Value Proposition
• More for Less Value Proposition

International Marketing Prof. Dr. Thomas Laukamm 28/39

Positioning

- Choosing a Positioning Strategy:

+ Developing a positioning statement
• Positioning statements summarize the company or brand positioning
• EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-
of-difference).
+ Communicating the chosen position

International Marketing Prof. Dr. Thomas Laukamm 29/39

 Differentiating markets

- Value positioning
+ A range of positioning alternatives based on the value an offering delivers and its price.
• More for more
 Premium product and premium price, supported by a premium image. E.g. Mont Blanc pens
• More for the same
 Brand offering comparable quality at a lower price. E.g. Lexus versus the Mercedes-Benz.
• The same for less
 Value proposition e.g. Amazon.com
• Less for much less
 Trade off between luxury and necessity. E.g. Five star hotel versus a budget hotel. Lower performance for much lower cost.
• More for less
 No-name house brands versus the big brands.

International Marketing Prof. Dr. Thomas Laukamm 30/39

 Common and serious positioning errors

- Under-positioning
+ A positioning error referring to failure to position a company, its product or brand.
- Over-positioning
+ A positioning error referring to too narrow a picture of the company, its products or a brand being
communicated to target customers.
- Confused positioning
+ Leaves consumers with a confused image of the company, its product or brand.
- Implausible positioning
+ Making claims that stretch the perception of the buyers too far to be believed.

International Marketing Prof. Dr. Thomas Laukamm 31/39