Chapter 2 Segmentation, Targeting, and Positioning

Segmentation, Segmentation,

Targeting, Targeting,

and Positioningand Positioning

Chapter 2

Segmentation,

Targeting,

and Positioning

Snapshot From the Marketplace

To succeed in today’s highly fragmented marketplace, firms have to isolate key market segments and reach these segments with maximum possible impact.

Examples include innovative programs such as Facebook’s “Instant Personalization” and Kimberly-Clark’s “parentstages.”

Mass-Marketing Strategy

Is a philosophy that presumes consumers are uniform and that broad-appeal products and marketing programs suffice

Mass-Market Strategy (cont’d)

In 1908, Henry Ford’s mass-market strategy involved using economies of scale to produce the Model-T, a standardized, low-priced automobile.

His basic assumption: Customers have homogeneous preferences

Other examples of a mass-market strategy include early Coca-Cola and the Bell Telephone System

Ineffectiveness of Mass-Marketing

Consumers that comprise the marketplace are heterogeneous, consisting mostly of smaller niches of people, each with unique demographic and lifestyle characteristics.

Consequently, marketers employ strategies to match products to markets via separate marketing mixes.

Segmentation Examples

http://www.pg.com/en_US/brands/all_brands.shtml

http://www.tide.com/en-US/productLanding.jspx

www.nissanusa.com

Q. 1. Define Marketing Concept and Market

Orientation.

Marketing Concept

A market-focused, customer-oriented, coordinated marketing effort aimed at generating customer satisfaction as the key to satisfying organizational needs.

Market Orientation

The organizational generation of market intelligence pertaining to current and future consumer needs, dissemination of that intelligence across departments, and organization-wide responsiveness to that intelligence.

Q. 2. What are the various components of

the Market Orientation?

Market Orientation

Customer FocusMarket IntelligenceCoordinated marketingEnvironmental conditionsDegree of competitiveness in the industry

Q. 3. What are the three major steps in

segmenting consumer markets?

Segmenting Consumer Markets: The Product-Market Matching Strategy

The three components of the product-market matching strategy are: Market segmentation Market targeting Positioning

Product-Market Matching Strategy

Segmentation Act of dissecting the marketplace into submarkets

that require different marketing mixes

Targeting Process of reviewing market segments and deciding

which one(s) to pursue

Positioning Establishing a differentiating image for a product or

service in relation to its competition

No Market Segmentation

Segmented by Sex

Segmented by Age

Q. 4. Define Market Segmentation.

Segmentation

Segmentation Act of dissecting the marketplace into submarkets

that require different marketing mixes

Q. 5. What are the four basic segmentation

criteria?

I. Segmentation

Variables used to segment consumer markets: Geographic Demographic Psychographic Behavioral

Geographic Segmentation

Partitions the market based on climate, location, surroundings, and terrain

Example Clothing, food, and automobile manufacturers,

as well as the media—including electronic, print, and broadcast vehicles—often use geographic segmentation to accommodate the specific needs and interests of geographically dispersed customers

Demographic Segmentation

Partitions the market based on factors such as age, stage of the family life cycle, gender, race and ethnicity, as well as occupation

Demographic Segmentation (cont’d)

Age: A significant correlation exists between consumption of certain products/services and age (e.g., health-care products/services, insurance, and investments)

Stage of the family life cycle: Stages of the FLC determine demand for housing, furniture, appliances, children’s products and services, as well as long-distance phone services.

Demographic Segmentation (cont’d)

Gender: Important in the case of many products/services such as cosmetics, perfumes, clothing, and jewelry.

Race and ethnicity: Products/services targeted along ethnic lines range from clothing and cosmetics to foods and entertainment.

Occupation: A factor related to income, education, and employment status. Occupational breakdowns range from professional and technical workers to unskilled labor.

Geodemographic Segmentation

Partitions the market by considering data on small units of geography, such as neighborhoods, zip codes, or census tracts

Examples: PRIZM 66-cluster ESRI Tapestry organized into 12 Life Mode and 11

Urbanization summary groups Acxiom’s PersonicX household-level segmentation

system

Geodemographic Segmentation (cont’d)

How PRIZM is used: PRIZM reveals to clients, such as BMW and

AOL, who their customers are and where they reside by zip code, census tracts, and city blocks.

It provides consumption indices (potential) for a variety of product categories in various market regions.

Psychographic Segmentation

Partitions the market based on lifestyle and personality characteristics

Example Psychographic segmentation

can be accomplished by using AIO inventories—questionnaires that reveal consumers’ activities, interests, and opinions

Behavioral Segmentation

Partitions the market based on attitudes toward or reactions to a product and to its promotional appeals

Examples: Behavioral segmentation can be done on the basis of: Usage rate or quantity usually purchased Benefits sought from a product Degree of loyalty to a brand or a store Degree of sensitivity or responsiveness to

marketers’ promotional offers

II. Market Targeting

Once segmentation is complete, a portrait of the market known as a market profile emerges.

Market profile A portrait of the various market

segments and competitors’ positions in them relative to a specific product

Market Targeting (cont’d)

Marketing managers evaluate the various segments in the market profile. They then decide on how many and which one(s) to pursue.

This targeting decision is dependent on a firm’s financial resources as well as its production and marketing capabilities.

Q. 6. What three strategies are helpful in serving target markets?

Types of Market-Targeting Strategies

Undifferentiated Strategy The market is viewed as a single large homogeneous

domain where a single marketing mix suffices.

Multisegment Strategy The market is viewed as two or more segments requiring

different marketing mixes.

Concentration Strategy Focusing marketing effort on a single segment.

Undifferentiated Segmentation

Differentiated Segmentation or Multi-Segment Marketing

Concentrated Segmentationor Niche Marketing

Choosing Market Segments to Target

2-23

Targeting Considerations

Criteria a firm must consider before selecting market segment(s):

SizeMeasurabilityCompatibilityDefendability

PotentialAccessibilityStability

Q. 7. Define Positioning.

III. Positioning

Deciding how the organization wants the company and its brands to be perceived and evaluated by target markets.

Once marketers have segmented the market and selected the target, the product offering needs to be properly positioned.

A product’s position is the manner in which a product is perceived by consumers as compared to their perception of competitors’ offerings.

Positioning (cont’d)

The decision concerning the price to charge for the product/service, the promotional activities to employ, and the type of distribution channel selected to deliver the item to consumers, all affect the positioning of a brand in the marketplace.

Clothing Stores Target Wal-Mart Saks Fifth Avenue Kohl’s Dollar General Dillard's Sears Family Dollar Nordstrom Neiman Marcus JC Penney

Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.

Selecting a Unique Selling Proposition

A successful positioning strategy for many firms rests on the selection of a single benefit to emphasize in promotional messages for the brand.

Creating a brand personality is one of the primary goals of positioning.

Repositioning

Repositioning can take one or more of the following forms: Modifying an existing brand Targeting it to a new market segment Emphasizing new product uses and benefits Stressing different features with the intention

of boosting sales