Segmentation, Segmentation,

Targeting, Targeting,

and Positioningand Positioning

Chapter 3

Segmentation,

Targeting,

and Positioning

Mass-marketing

A strategy that presumes there is one undifferentiated market and that one product will appeal to all consumers in that market.

Advantages Lower cost One advertising campaign is needed One marketing strategy is developed Usually only one standardized product is

developed

Disadvantage It only works if all consumers have the same

needs, wants, desires, and the same background, education and experience

Market matching strategy

Today, mass marketing has largely been replaced by a three-step market matching strategy

PositioningSegmentation

Market Matching Strategy

Market Matching

Targeting

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

Market segmentation

The process of dividing a market into distinct subsets (segments) of consumers with common needs or characteristics and selecting one or more to target with a distinct marketing mix

Segmentation Variables

Segmentation Variables

Geographic

Demographic Psychographic

BehavioralGeodemographic

Marketers may use a single variable Marketers may use two or more variables

Geographic Segmentation

Division of the market based on the location of the target market

People living in the same area have similar needs and wants that differ from those living in other areas

Climate Population density Taste Micromarketing

Demographic Segmentation

Partitioning of the market based on factors such as age gender marital status income occupation education ethnicity

Age

Product needs and interests often vary with consumers’ age

Age Effects

Occurrences due to chronological age

Cohort Effects

Based on the idea that people hold onto the interests they learned to appreciate growing up

Gender

Gender is frequently a distinguishing variable Changes in the family and growth of the dual-

income household have blurred some of the lines

Marital Status Marketers have identified specific marital

status groups, such as:

1. Singles

2. Divorced individuals

3. Single parents

4. Dual-income married couples They then market products specifically

designed for one or more groups

Income, Education & Occupation These three variables are often related and

therefore often used together as a measure of one’s social class.

Income is commonly used because marketers feel it is a strong indicator of ability to pay for a particular product or service

Income is often combined with other variables to narrow target markets: With age to identify the important affluent elderly With age and occupation to produce the yuppie

segment

Race and Ethnicity The size and purchasing power of minorities

make them an attractive target market The size of the market is growing

dramatically relative to the “majority” population

Targeting certain products (e.g., alcohol, tobacco) to such groups raises ethical issues

Tobacco and the African American Community Why is there a concern about targeting

African Americans? During the ’90s, youth smoking rates

increased sharply 12.6% in 1991 22.7% in 1997 80% increase

After Native Americans, African Americans have the highest rate of smokers of any ethnic group in the US

African American men have the highest rate of death from lung cancer of any ethnic group in the US 81% of African American men who smoke and

contract lung cancer die 51% of white men who smoke and contract lung

cancer die

Tobacco companies have clearly targeted African Americans Brown & Williamson’s Kool brand

used a cartoon character, the penguin Willie, that was popular with black teens

Has sponsored an annual jazz festival that attracts large black audiences

In 1998 cigarette advertisements represented 60% of ad space in black newspapers

Following the success of the movie “Malcolm X”, Star Tobacco Co. introduced a new brand called “X,” packaged in the black, red and green colors of the black nationalist movement Marketed in 20 states before pressure from the community forced

discontinuance of the brand

Geodemographic Segmentation

A hybrid segmentation scheme Based on notion that people who live close to one

another are likely to have similar financial means, tastes, preferences, lifestyles and consumption habits

Market research firms specialize in producing computer-generated geodemographic market “clusters” of consumers

They have clustered the nation’s >250,000 neighborhoods into lifestyle groupings based on postal zip codes

Marketers use the cluster data for mail campaigns, to select retail sites and merchandise mixes, to locate banks and restaurants, etc.

“You Are Where You Live”.

Psychographic Segmentation

Partitioning of the market based on lifestyle and personality characteristics

Marketers use it to further refine a target market

Its appeal lies in the vivid and practical profiles of consumer segments that it can produce

Accomplished by using AIO inventories

AIO Inventories AIO research seeks consumers’ responses to

a large number of statements that measure Activities Interests Opinions

Examples of the use of psychographic segmentation reflected in marketing messages Kellogg’s targets health-conscious

consumers with brands such as Special K and Product 19

Old Spice is targeting the active sports lifestyle with High Endurance deodorant

Behavioral Segmentation

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

Behavioral segmentation can be done on the basis of:

1. Usage rate

2. Benefits sought from a product

3. Loyalty to a brand or a store

1. Usage Rate Differentiates between

heavy users medium users light users nonusers

In general, a relatively small number of heavy users account for a disproportionately large percentage of product usage

Targeting those heavy users is a common marketing strategy

2. Benefit Segmentation Marketers constantly attempt to identify the

single most important benefit of their product that will be the most meaningful to consumers

Changing lifestyles play a major role in determining the product benefits that are important to consumers and also provide marketers with opportunities for new products and services

3. Brand and Store Loyalty The tendency of some consumers to

repeatedly select the same brand within a given product category

A parallel tendency of some consumers to repeatedly patronize a particular retail establishment

Marketers often try to identify the characteristics of their brand-loyal customers so they can target consumers with similar characteristics in the larger population

Marketers also target consumers who show no brand loyalty as a means of penetrating a larger market

Marketers reward brand loyalty by offering special benefits to frequent customers

Choosing Market Segments to Target Once an organization has identified its most

promising market segments, it must decide whether to target one segment or several segments

Each targeted segment will then receive a specially designed marketing mix — i.e., a specially tailored product, price, distribution network and/or promotional campaign

Market Targeting Strategies

There are three basic types of strategies:

1. Undifferentiated

2. Multisegment (Differentiated)

3. Concentration (Niche)

1. Undifferentiated Strategy

A strategy that ignores differences between groups within a market and offers a single marketing mix to the entire market

It works when a product is new to the market and there is minimal or no competition

Advantages and Disadvantages Economies in production and marketing

Vulnerability to competitors offering more differentiated products and services to market subsegments

2. Multisegment/Differentiated Strategy Targeting two or more segments with

different marketing mixes for each

Advantages and disadvantages Minimizes risks, as losses in one segment

can be made up for in others Unique product features allow for higher

prices

Increased costs for differentiated products and marketing

3. Concentration/Niche Marketing Strategy

Focus on one sub-market

Greater knowledge of customers’ needs Economies of scale

Entry of a strong competitor Change in size or tastes of the segment

Positioning

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

Differentiating the product from other products of the firm or its competition

Positioning complements and is an integral part of the company’s segmentation strategy and selection of target markets

The same product can be positioned differently to different market segments

The result of successful positioning is a distinctive brand image on which consumers rely in making product choices

Perceptual Mapping

A spatial picture of how consumers view products or brands within a market

Allows marketers to determine how their product appears in relation to competitive brands

Enables them to see gaps in in positioning of all brands in the product class to identify areas in which consumer needs are not being met

A visual profile of how consumers perceive a number of pain relievers on the two dimensions of effectiveness vs. gentleness.

Eff

ect

ive

ne

ss Tylenol

Extra-Strength Tylenol

Bufferin

NuprinMotrin AdvilAnacin

BayerExcedrinPrivate Label Aspirin Aleve

OrudisActron

Gentleness to Stomach MoreLess

More

Repositioning

Marketers may be forced to reposition products due to competition or a changing environment

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

Selected Psychographic/Demographic Characteristics of the PC Magazine Subscriber

Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.

DEMOGRAPHICSDEMOGRAPHICS PercentPercent

SEX (BASE 990)Men 86Women 13

PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent

USE A COMPUTER 100At home 96At work 89On vacation/traveling 46AGE

Under 25 525 - 34 1835 - 44 2945 - 54 3155 - 64 1265 or older 5Mean age 44.1

SELECTED USE OF COMPUTERWord Processing 96Connect to Internet 86E-mail 84For work 80Accounting/record keeping 75Reference 68Recreation/games 66

DEMOGRAPHICSDEMOGRAPHICS PercentPercent PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent

EDUCATIONSome college or less 27Graduate college 27Education beyond college graduate 46

EMPLOYMENT STATUSEmployed by someone else 68Self-employed 21Other 11

PORTABLE DEVICES USED WHEN TRAVELING ON BUSINESSLaptop/notebook computer 57Cellular phone 47Beeper or pager 30Personal Digital Assistant/ electronic organizer 14

DEMOGRAPHICSDEMOGRAPHICS PercentPercent PSYCHOGRAPHICSPSYCHOGRAPHICS PercentPercent

OCCUPATION/BUSINESS DEPT.Computer related- professional 22Senior or corporate management 16Engineering-related professional 13Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales 26Others 23

TRAVEL FOR BUSINESS/PLEASUREBusiness Travel5 or more days per month 315 or more nights away from home per month 17Pleasure/Vacation Travel15 or more days per year 37Mean number of days per year 15.5

MEMBER OF FREQUENT FLYER PROGRAMS 90

DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent

INCOMEUnder $30,000 7$30,000 - $49,999 15$50,000 - $74,999 24$75,000 - $99,999 19$100,000 or more 24Mean income $87,700

PRIMARY RESIDENCEOwn 74Rent 18Other 3No answer 5

FINANCIAL SERVICESCurrently ownMutual funds 48Stocks 44Bonds 24Life insurance/annuities 44Currently useBrokerage services 36On-line investment services 16Retirement/financial planning 41

RESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC STATEMENTS Percent

Research before choose brand of new product to buy 41Other people ask my opinion about which computer products to buy 41Usually buy products based on quality, not price 26Prefer products that are latest in new technology 26Among group I am one of first to try new product 19

Walking/running/jogging 63Exercise/fitness/weight training 44Bicycling 7Swimming 37Golf 27Fishing 23Boating/sailing 19Skiing 19Tennis 14

SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN PAST YEAR Percent

Listen to music 77Reading 61Going to movies 60Surfing the Internet 50Games-videos on computer 48Gardening 32Going to the theater 32Cooking 30Photography 30Collecting stamps/coins 11Sewing needlecraft 6

HOBBIES/OTHER ACTIVITIES PARTICIPATED IN Percent