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Chapter Six
Segmentation, Targeting, and Positioning:
Building the Right Relationships with the Right Customers
Copyright 2007, Prentice Hall, Inc. 6-2
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.
Copyright 2007, Prentice Hall, Inc. 6-3
Strategy Sells multiple brands
within the same product category for detergents, soaps, and other goods.
Each brand features a different mix of benefits and appeals to a different segment.
Product modifications appeal to different niches within certain segments.
P & G – Segments the MarketP & G – Segments the MarketCase StudyCase Study
The Payoff P&G generates revenues
in excessive of $4 billion in U.S. laundry detergent market alone.
Tide has 34% share of powder and 24% share of liquid market segments.
Combined, all P&G brands account for 75% share of powder and 55% share of liquid detergent markets.
Copyright 2007, Prentice Hall, Inc. 6-4
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.
Copyright 2007, Prentice Hall, Inc. 6-5
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.
Copyright 2007, Prentice Hall, Inc. 6-6
Market Segmentation
Geographic:– World region or country– Region of country– City or metro size– Density or climate
Copyright 2007, Prentice Hall, Inc. 6-7
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.
Copyright 2007, Prentice Hall, Inc. 6-8
Market Segmentation
Age and Life-Cycle Stage:– Example: P&G has different toothpastes
for different age groups.– Avoid stereotypes in promotions.– Promote positive messages.
Copyright 2007, Prentice Hall, Inc. 6-9
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.
Copyright 2007, Prentice Hall, Inc. 6-10
Market Segmentation
Psychographic:– Social class– Lifestyle– Personality
Copyright 2007, Prentice Hall, Inc. 6-11
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)
Copyright 2007, Prentice Hall, Inc. 6-12
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)
Copyright 2007, Prentice Hall, Inc. 6-13
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
Copyright 2007, Prentice Hall, Inc. 6-14
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.
Copyright 2007, Prentice Hall, Inc. 6-15
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
Copyright 2007, Prentice Hall, Inc. 6-16
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
Copyright 2007, Prentice Hall, Inc. 6-17
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.
Copyright 2007, Prentice Hall, Inc. 6-18
Requirements for Effective Segmentation
Measurable Accessible Substantial Differentiable Actionable
Copyright 2007, Prentice Hall, Inc. 6-19
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.
Copyright 2007, Prentice Hall, Inc. 6-20
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)
Copyright 2007, Prentice Hall, Inc. 6-21
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.
Copyright 2007, Prentice Hall, Inc. 6-22
Choosing a Market Coverage Strategy
Factors to consider:– Company resources– Product variability– Product’s life-cycle stage– Market variability– Competitors’ marketing strategies
Copyright 2007, Prentice Hall, Inc. 6-23
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.
Copyright 2007, Prentice Hall, Inc. 6-24
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.
Copyright 2007, Prentice Hall, Inc. 6-25
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.
Copyright 2007, Prentice Hall, Inc. 6-26
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.
Copyright 2007, Prentice Hall, Inc. 6-27
Identifying Possible Competitive Advantages
Product differentiation Services differentiation Image differentiation People differentiation
Copyright 2007, Prentice Hall, Inc. 6-28
Positioning Errors
Underpositioning:– Failing to really position the company at
all. Overpositioning:
– Giving buyers too narrow a picture of the company.
Confused Positioning:– Leaving buyers with a confused image of a
company.
Copyright 2007, Prentice Hall, Inc. 6-29
Choosing Right Competitive Advantages
Important Distinctive Superior Communicable Preemptive Affordable Profitable
Copyright 2007, Prentice Hall, Inc. 6-30
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
Copyright 2007, Prentice Hall, Inc. 6-31
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.
Copyright 2007, Prentice Hall, Inc. 6-32
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.