Chapter Seven
Segmentation, Targeting,
and Positioning:
Building the Right Relationships
with the Right Customers
Roadmap: Previewing the Concepts
1. Define the three steps of target marketing:
market segmentation, market targeting,
and market positioning.
2. List and discuss the major bases for
segmenting consumer and business
markets.
3. Explain how companies identify attractive
market segments and choose a target
marketing strategy.
4. Discuss how companies position their
products for maximum competitive
advantage in the marketplace.
. 6-2
Case Study
P & G – Segments the Market
Strategy The Payoff
Sells multiple brands P&G generates revenues
within the same product in excessive of $4 billion in
category for detergents, U.S. laundry detergent
soaps, and other goods. market alone.
Each brand features a Tide has 34% share of
different mix of benefits powder and 24% share of
and appeals to a different liquid market segments.
segment. Combined, all P&G brands
Product modifications account for 75% share of
appeal to different niches powder and 55% share of
within certain segments. liquid detergent markets.
. 6-3
Steps in Target Marketing
Market segmentation
– Dividing a market into smaller groups of buyers
with distinct needs, characteristics, or behaviors
requiring separate products or marketing mixes.
Target marketing
– Evaluating each segment’s attractiveness and
selecting one or more to enter.
Market positioning
– Setting the competitive positioning for the
product and creating a detailed marketing mix.
. 6-4
Market Segmentation
Key variables:
– Geographic
– Demographic
– Psychographic
– Behavioral
No single way to segment a market.
May combine more than one variable to
better define segments.
. 6-5
Market Segmentation
Geographic:
– World region or country
– Region of country
– City or metro size
– Density or climate
. 6-6
Market Segmentation
Demographic:
– Age, gender, family size, family life cycle,
income, occupation, education, race,
religion, etc.
– The most popular bases for segmenting
customer groups.
– Easier to measure than most other types
of variables.
. 6-7
Market Segmentation
Age and Life-Cycle Stage:
– Example: P&G has different toothpastes
for different age groups.
– Avoid stereotypes in promotions.
– Promote positive messages.
. 6-8
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.
. 6-9
Market Segmentation
Psychographic:
– Social class
– Lifestyle
– Personality
. 6-10
Market Segmentation
Behavioral:
– Occasion segmentation
• Special promotions and labels for
holidays.
– (e.g., Hershey Kisses)
• Special products for special occasions.
– (e.g., Kodak disposable cameras)
. 6-11
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)
. 6-12
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
. 6-13
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.
– Geodemographic segmentation is
becoming more common.
. 6-14
Market Segmentation
Geodemographic:
– Claritas, Inc.
– Potential Rating Index for Zip Markets
(PRIZM)
– Based on U.S. Census data
– Profiles on 260,000 U.S. neighborhoods
– 62 clusters or types
. 6-15
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
. 6-16
Segmenting International
Markets
Factors used:
– Geographic location
– Economic factors
– Political and legal factors
– Cultural factors
Intermarket segmentation:
– Segments of consumers who have similar
needs and buying behavior even though
they are located in different countries.
. 6-17
Requirements for Effective
Segmentation
Measurable
Accessible
Substantial
Differentiable
Actionable
. 6-18
Evaluating Market Segments
Segment Size and Growth
– Analyze current segment sales, growth rates,
and expected profitability.
Segment Structural Attractiveness
– Consider competition, existence of substitute
products, and the power of buyers and
suppliers.
Company Objectives and Resources
– Examine company skills & resources needed to
succeed in that segment.
– Offer superior value and gain advantages over
competitors.
. 6-19
Target Marketing Strategies
Undifferentiated (mass) marketing
– Ignores segmentation opportunities
Differentiated (segmented) marketing
– Targets several segments and designs
separate offers for each
Concentrated (niche) marketing
– Targets one or a couple small segments
Micromarketing (local or individual
marketing)
. 6-20
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.
. 6-21
Choosing a Market Coverage
Strategy
Factors to consider:
– Company resources
– Product variability
– Product’s life-cycle stage
– Market variability
– Competitors’ marketing strategies
. 6-22
Socially Responsible Targeting
Smart targeting helps both companies and
consumers.
Target marketing sometimes generates
controversy and concern.
– Vulnerable and disadvantaged can be targeted.
– Cereal, cigarette, beer, and fast-food marketers
have received criticism.
– Internet has raised fresh concerns about
potential targeting abuses.
. 6-23
Positioning for Competitive
Advantage
Product’s position is the way the
product is defined by consumers on
important attributes, or as the place the
product occupies in consumers’ minds
relative to competing products.
– Perceptual position maps can help define
a brand’s position relative to competitors.
. 6-24
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.
. 6-25
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.
– Achieved via differentiation.
. 6-26
Identifying Possible
Competitive Advantages
Product differentiation
Services differentiation
Image differentiation
People differentiation
. 6-27
Choosing Right Competitive
Advantages
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
. 6-28
Overall Positioning Strategy
Full positioning of the brand is called
the brand’s value proposition.
Potential value propositions include:
– More for More
– More for the Same
– The Same for Less
– Less for Much Less
– More for Less
. 6-29
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.
. 6-30
Rest Stop: Reviewing the Concepts
1. Define the three steps of target
marketing: market segmentation, market
targeting, and market positioning.
2. List and discuss the major bases for
segmenting consumer and business
markets.
3. Explain how companies identify
attractive market segments and choose a
target marketing strategy.
4. Discuss how companies position their
products for maximum competitive
advantage in the marketplace.
. 6-31