1. Chapter 7
Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers

2. Learning Goals
Understand the three steps of target marketing, market segmentation, target marketing, and market positioning
Explore the major bases for segmenting consumer and business marketing strategy
Explain how companies identify attractive market segments and choose target marketing strategy
Discuss how companies position their products for maximum competitive advantage in the marketplace

3. Case Study Procter & Gamble
Sells multiple brands within the same product category for a variety of products
Brands feature a different mix of benefits and appeal to different segments
Has also identified different niches within certain segments
Product modifications are useful; Tide offers seven different product formulations to serve different niches’ needs
7 - 3

4. Learning Goals
Understand the three steps of target marketing, market segmentation, target marketing, and market positioning
Explore and discuss the major bases for segmenting consumer and business marketing strategy
Explain how companies identify attractive market segments and choose target marketing strategy
Discuss how companies position their products for maximum competitive advantage in the marketplace

5. Market Segmentation, Targeting, and Positioning
1. Identify bases for
segmenting the market
2. Develop segment profiles
Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments
Market Positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment

6. Definition Market Segmentation:
Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.
Goal 2: List and discuss major bases for segmentation

7. Learning Goals
Understand the three steps of target marketing, market segmentation, target marketing, and market positioning
Explore and discuss the major bases for segmenting consumer and business marketing strategy
Explain how companies identify attractive market segments and choose target marketing strategy
Discuss how companies position their products for maximum competitive advantage in the marketplace

8. Segmenting Consumer Markets
Geographical segmentation
Demographic segmentation
Most popular segmentation
Psychographic segmentation
Lifestyle, social class, and personality-based segmentation
Behavioral segmentation
Goal 2: List and discuss major bases for segmentation

9. Geographic Segmentation Variables
World region or country
U.S. region
State
City
Neighborhood
City or metro size
Density
Climate
Goal 2: List and discuss major bases for segmentation

10. Geographic Segmentation
This rate card shows leading magazines use geographic segmentation when charging advertisers.
The segment is male, young with less disposable income ( demographic) and very adventurous and busy (psychographic).
Positioning is “more for less.”

11. Demographic Segmentation Variables
Age
Gender
Family size
Family life cycle
Income
Occupation
Education
Religion
Race
Generation
Nationality
Goal 2: List and discuss major bases for segmentation

12. Demographic Segmentation Variables
Nutrition bars are targeted to varying demographics including men, women and children

13. Behavioral Segmentation Variables
Occasions
Benefits
User status
User rates
Loyalty status
Readiness stage
Attitude toward the product
Goal 2: List and discuss major bases for segmentation

14. Behavioral Segmentation Variables
This fridge with a built in TV is targeted to the owner who watches television in the kitchen and has a design that faces the fridge

15. Discussion Question
Based on the car examples on the following slide, how do car manufacturers use the following segments when marketing products?
Geographic
Demographic
Psychographic
Behavioral
Geographical segmentation – urban vs. rural (trucks)
Demographic segmentation – age, gender
Psychographic segmentation – Lifestyle (convertible, hummer) social class (affordable BMW so people feel higher class and personality-based segmentation (VW bugs)
Behavioral segmentation – Off-road usage (Land Rover)

16. Examples of Cars

17. Major Segmentation Variables for Business Markets
Demographic
Industry: Which industries should we serve?
Company size: What size companies should we serve?
Location: What geographical areas should we serve?
Operating Variables
Technology: What customer technologies should we focus on?
User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?
Customer capabilities: Should we serve customers needing many or few services?
Purchasing Approaches
Purchasing-function organization: Should we serve companies with highly centralized or decentralized purchasing organizations?
Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?
Situational factors
Urgency, specific application, size of order
Personal characteristics
Buyer-seller similarity, attitudes toward risk, loyalty

18. Segmenting International Markets
Geographic segmentation
Location or region
Economic factors
Population income or level of economic development
Political and legal factors
Type/stability of government, monetary regulations, amount of bureaucracy, etc.
Cultural factors
Language, religion, values, attitudes, customs, behavioral patterns
Goal 2: List and discuss major bases for segmentation

19. Requirements for Effective Segmentation
Measurable
Requirements for Effective Segmentation
Substantial
Size, purchasing power, profiles of segments can be measured.
Accessible
Segments must be large or profitable enough to serve.
Differentiable
Segments can be effectively reached and served.
Actionable
Segments must respond differently to different marketing mix elements
Must be able to attract and serve the segments by effective programs.

20. Learning Goals
Understand the three steps of target marketing, market segmentation, target marketing, and market positioning
Explore and discuss the major bases for segmenting consumer and business marketing strategy
Explain how companies identify attractive market segments and choose target marketing strategy
Discuss how companies position their products for maximum competitive advantage in the marketplace

21. Target Marketing Target Market
Consists of a set of buyers who share common needs or characteristics that the company decides to serve

22. 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

23. Kmart has been targeting the growing Hispanic Market
7 - 23

24. Target Marketing Strategies

25. Target Marketing A. Undifferentiated Marketing
Company
Marketing
Mix
Market
A. Undifferentiated Marketing
Company
Marketing Mix 1
Segment 1
Company
Marketing Mix 2
Segment 2
B. Differentiated Marketing
Company
Marketing Mix 3
Segment 3
Segment 1
Market coverage strategies
Company
Marketing
Mix
Segment 2
C. Concentrated Marketing
Segment 3

26. Target Marketing Strategies
Mass Marketing
“undifferentiated mktg”
Same product to all consumers
(no segmentation)
Target Marketing Strategies
Segmented Marketing
“differentiated mktg”
Different products to one or more segments
(some segmentation)
Segment Marketing
buyers differ in their wants, purchasing power, locations, buying attitudes, buying habits, etc.
no customization of offer to each customer
isolation of broad segments that make up a market
Segmentation ğ midpoint between mass marketing and individual marketing

27. Target Marketing Strategies
Niche Marketing
“concentrated mktg”
Different products to subgroups within segments
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)
Target Marketing Strategies
Niche Marketing : Niches can be identified by dividing a segment into subsegments or by defining a group seeking a distinctive mix of benefits
Niches are fairly small and attract one or a few competitors
Niche marketers understand their niches’ needs so well that their customers willingly pay a price premium
Both small and large companies can practice niche marketing
Local Marketing : Local marketing leads to ğ marketing programs tailored to the needs and wants of local customer groups
Those in favor of localizing a company’s marketing ğ see national advertising as wasteful since it fails to address local target groups
Those against local marketing ğ argue that it drives up manufacturing and marketing costs by reducing economies of scale
Individual Marketing : The ultimate level of segmentation leads to ğ “customized” or “one-to-one marketing”.
Technological developments ğ permit companies to return to customized marketing
Mass customization ğ the ability to produce on a mass basis individually designed products to meet each customer’s requirements
Local Marketing
Tailoring brands/ promotions to local customer groups
Individual Marketing
Tailoring products and programs to the needs of individual customers

28. Target Marketing Strategies
Niche Marketing
Niches can be identified by dividing a segment into subsegments or by defining a group seeking a distinctive mix of benefits
Niches are fairly small and attract one or a few competitors
Niche marketers understand their niches’ needs so well that their customers willingly pay a price premium
Both small and large companies can practice niche marketing

29. Target Marketing Strategies
Characteristics of an attractive niche:
The customers in the niche have a distinct set of needs
They will pay a premium to the firm best satisfying their needs
The nicher has the required skills to serve the niche in a superior fashion
The nicher gains certain economies through specialization
The niche has sufficient size, profit and growth potential

30. Target Marketing Strategies
Local Marketing
Local marketing leads to ğ marketing programs tailored to the needs and wants of local customer groups
Those in favor of localizing a company’s marketing ğ see national advertising as wasteful since it fails to address local target groups
Those against local marketing ğ argue that it drives up manufacturing and marketing costs by reducing economies of scale

31. Target Marketing Strategies
Individual Marketing
The ultimate level of segmentation leads to  “customized” or “one-to-one marketing”.
Technological developments  permit companies to return to customized marketing
Mass customization  the ability to produce on a mass basis individually designed products to meet each customer’s requirements

32. Choosing a Target Marketing Strategy
Considerations include:
Company resources
The degree of product variability
Product’s life-cycle stage
Market variability
Competitors’ marketing strategies

33. Target Marketing Socially Responsible Targeting
Some segments, especially children, are at special risk
Many potential abuses on the Internet, including fraud Internet shoppers
Controversy occurs when the methods used are questionable

34. Learning Goals
Understand the three steps of target marketing, market segmentation, target marketing, and market positioning
Explore and discuss the major bases for segmenting consumer and business marketing strategy
Explain how companies identify attractive market segments and choose target marketing strategy
Discuss how companies position their products for maximum competitive advantage in the marketplace

35. Positioning Positioning:
The place the product occupies in consumers’ minds relative to competing products
Typically defined by consumers on the basis of important attributes
Involves implanting the brand’s unique benefits and differentiation in the customer mind
Positioning maps that plot perceptions of brands are commonly used
Goal 4: Discuss how companies position their products

36. Positioning
Positioning the act of designing the company’s offering and image to occupy a distinctive place in the target market’s mind
Marketers must:
Plan positions to give their products the greatest advantage in selected target markets,
Design marketing mixes to create these planned positions.
Positioning maps that plot perceptions of brands are commonly used.

37. Perceptual Map in Positioning (Example of Theme Parks)
1.0
0.8
0.6
0.4
0.2
-0.2
-0.4
-0.6
-0.8
Economical
Fun rides
Exercise
Fantasy
Good food
Easy to reach
Educational,
animals
Little waiting
Live shows
Magic
Mountain
Japanese
Deer Park
Busch
Gardens
Knott’s
Berry
Farm
Lion
Country
Safari
Marineland
of the
Pacific
Disneyland

39. Positioning Topics Differentiation can be based on:
Products
Services
Channels
People
Image
Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Goal 4: Discuss how companies position their products

40. Identifying Possible Competitive Advantages
Product
Differentiation
(Features, Performance, Style & Design, or Attributes)
Services
Differentiation
(Delivery, Installation,
Repair Services, Customer
Training Services)
Image
Differentiation
(Symbols, Atmospheres, Events)
Personnel
Differentiation
(Hiring, Training Better People Than Competitors Do)

41. Product Differentiation
Form
Fea-
tures
Perfor-
mance
Quality
Conform-
ance
Quality
Dura-
bility
Relia-
bility
Repair-
ability
Style
Design

42. Services Differentiation
Ordering
Ease
Installation
Customer
Consulting
Miscellaneous
Services
Delivery
Customer
Training
Maintenance
& Repair

43. This UK company is differentiating its skin cleanser by using fresh fruits and vegetables as ingredients
The segment is male, young with less disposable income ( demographic) and very adventurous and busy (psychographic).
Positioning is “more for less.”
Source: Business Week

44. Positioning Topics Identifying possible competitive advantages
How many differences to promote?
Unique selling proposition
Several benefits
Which differences to promote? Criteria include:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
Topics
Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Goal 4: Discuss how companies position their products

45. Choosing the Right Competitive Advantages
Important
Profitable
Distinctive
Criteria
For Determining
Which Differences
To Promote
Superior
Affordable
Communicable
Unique Selling Proposition
Preemptive

46. Kohler is choosing to promote the distinctive features of its faucets
The segment is male, young with less disposable income ( demographic) and very adventurous and busy (psychographic).
Positioning is “more for less.”
7 - 46

47. Positioning
Topics
Value propositions represent the full positioning of the brand
Possible value propositions:
More for more
More for the same
More for less
The same for less
Less for much less
Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Goal 4: Discuss how companies position their products

48. What segment is being targeted? What is the positioning?
The segment is male, young with less disposable income ( demographic) and very adventurous and busy (psychographic).
Positioning is “more for less.”

49. Warehouse Clubs - Costco Less for Less Positioning
Began in 1983 in Seattle, WA
Current revenue of $42.5 billion
Carry branded merchandise at discount prices
Lowers cost through no frills retail outlets, buying direct from manufacturer and providing a private label
Broad group of competitors including other warehouse stores, grocery stores, pet stores, electronic chains
Source: Datamonitor

50. Warehouse Clubs - Costco Less for Less Positioning
Do customers mind the no-frills environment?
American Customer Satisfaction Index ranked Costco as the top specialty retailer in terms of customer satisfaction
Costco growing internationally including warehouses in UK, Japan, Canada and Mexico
Source: Datamonitor

51. Product Position Statement
Positioning statements summarize the company or brand positioning
For [target end user]
Who wants/needs [compelling reason to buy]
The [product name] is a [product category]
That provides [key benefit].
Unlike [main competitor],
The [product name] [key differentiation]

52. Communicating the Positioning
Companies must be certain to DELIVER their value propositions
Positions must be monitored and adapted over time
Goal 4: Discuss how companies position their products

53. Learning Goals
Understand the three steps of target marketing, market segmentation, target marketing, and market positioning
Explore and discuss the major bases for segmenting consumer and business marketing strategy
Explain how companies identify attractive market segments and choose target marketing strategy
Discuss how companies position their products for maximum competitive advantage in the marketplace