1. Segmentation, Targeting & Positioning

2. Overview: Segmentation, Targeting & Positioning

3. Market Segmentation - Principles
Segmentation Variables
Geographic
Demographic
Psychographic
Behavioral
Other (anything!)
No single best way to segment a market.
Often best to combine variables and identify smaller, better-defined target groups.

4. Bases for Segmenting Consumer Markets
Market Segment: A group of customers who share a similar set of needs and wants
No single best way to segment a market.
Often best to combine variables and identify smaller, better-defined target groups.
Geographic segmentation
Demographic segmentation
Market segmentation divides a market into well-defined slices. A market segment consists of a group of customers who share a similar set of needs and wants. The marketer’s task is to identify the appropriate number and nature of market segments and decide which one(s) to target. The major segmentation variables—geographic, demographic, psychographic, and behavioral segmentation—are summarized in Table 9.1.
Psychographic segmentation
Behavioral segmentation

5. Geographic Segmentation
Divide markets into different geographic units.
Examples:
World Region or Country: North America, Western Europe, European Union, Pacific Rim, Mexico, etc.
Country Region: Pacific, Mountain, East Coast, etc.
City or Metro Size: New York, San Francisco
Population Density: rural, suburban, urban
Climate: northern, southern, tropical, semi-tropical

6. Demographic Segmentation
Use differences in:
age, gender, family size, family life cycle, income, occupation, education, race, and religion
Most frequently used segmentation variable
Ease of measurement and high availability
Usually the worst variables to use

7. Demographic Segmentation
Generation
Millennials (Gen Y)
Gen X
Baby Boomers
Silent Generation
Each generation or cohort is profoundly influenced by the times in which it grows up—the music, movies, politics, and defining events of that period. Members share the same major cultural, political, and economic experiences and often have similar outlooks and values. Marketers may choose to advertise to a cohort by using the icons and images prominent in its experiences. They can also try to develop products and services that uniquely meet the particular interests or needs of a generational target.
Although different age splits are used to define Millennials, or Gen Y, the term usually means people born between 1977 and Also known as the Echo Boomers, “digital native” Millennials have been wired almost from birth—playing computer games, navigating the Internet, downloading music, and connecting with friends via texting and social media. Although they may have a sense of entitlement and abundance from growing up during the economic boom and being pampered by their boomer parents, Millennials are also often highly socially conscious, concerned about environmental issues, and receptive to cause marketing efforts.
Often lost in the demographic shuffle, the 50 million or so Gen X consumers, named for a 1991 novel by Douglas Coupland, were born between 1964 and Gen Xers prize self-sufficiency and the ability to handle any circumstance. Technology is an enabler for them, not a barrier. Unlike the more optimistic, team-oriented Gen Yers, Gen Xers are more pragmatic and individualistic. As consumers, they are wary of hype and pitches that seem inauthentic.
Baby boomers are the approximately 76 million U.S. consumers born between 1946 and Though they represent a wealthy target, possessing $1.2 trillion in annual spending power and controlling three-quarters of the country’s wealth, marketers often overlook them. With many baby boomers approaching their 70s and even the last and youngest wave cresting 50, demand has exploded for products to turn back the hands of time.
Those born between 1925 and 1945—the “Silent Generation”—are redefining what old age means. To start with, many people whose chronological age puts them in this category don’t see themselves as old. Advertisers have learned that older consumers don’t mind seeing other older consumers in ads targeting them, as long as they appear to be leading vibrant lives. But marketers have learned to avoid clichés like happy older couples riding bikes or strolling hand in hand on a beach at sunset.

8. Geodemographic Segmentation
PRIZM, by Claritas
Organized by ZIP code
Based on U.S. Census data
Profiles on half a million U.S. neighborhoods
66 neighborhood types

9. Geoclustering captures the increasing diversity of the U.S. population. PRIZM has been used to answer questions such as: Which neighborhoods or zip codes contain our most valuable customers? How deeply have we already penetrated these segments? Which distribution channels and promotional media work best in reaching our target clusters in each area?

10. Psychographic Segmentation
Psychographic segmentation divides a market into different groups based on social class, lifestyle, or personality characteristics.
People in the same demographic classification often have very different lifestyles and personalities.

11. VALS Segmentation System
One of the most popular commercially available classification systems based on psychographic measurements is Strategic Business Insight’s (SBI) VALS™ framework. VALS is based on psychological traits for people and classifies U.S. adults into eight primary groups based on responses to a questionnaire featuring four demographic and 35 attitudinal questions. The VALS system is continually updated with new data from more than 80,000 surveys per year (see Figure 9.1).
The main dimensions of the VALS segmentation framework are consumer motivation (the horizontal dimension) and consumer resources (the vertical dimension). Consumers are inspired by one of three primary motivations: ideals, achievement, and self-expression. Those primarily motivated by ideals are guided by knowledge and
principles. Those motivated by achievement look for products and services that demonstrate success to their peers. Consumers whose motivation is self-expression desire social or physical activity, variety, and risk. Personality traits such as energy, self-confidence, intellectualism, novelty seeking, innovativeness, impulsiveness, leadership, and vanity—in conjunction with key demographics—determine an individual’s resources. Different levels of resources enhance or constrain a person’s expression of his or her primary motivation.

12. Behavioral Segmentation
Buyers grouped on the basis of their knowledge of, attitude toward, use of, or response to a product
Although psychographic segmentation can provide a richer understanding of consumers, some marketers fault it for being somewhat removed from actual consumer behavior.

13. Behavioral Segmentation
Occasion
Special promotions & labels for holidays.
Special products for special occasions.
Needs and Benefits
Different segments desire different benefits from the same products.
Loyalty Status
Nonusers, ex-users, potential users, first-time users, regular users.
Usage Rate
Light, medium, heavy.

14. Loyalty Status Segmentation
Hard-core
Split loyals
Shifting loyals
Switchers

15. Behavioral Segmentation Breakdown
Combining different behavioral bases can provide a more comprehensive and cohesive view of a market and its segments. Figure 9.3 depicts one possible way to break down a target market by various behavioral segmentation bases.

16. Requirements for Effective Segmentation
Segments must be
Measurable
Accessible
Substantial
Differentiable
Actionable
“Lefties” are hard to identify and measure, so few firms target this segment.

17. Evaluating Market Segments
Segment Size and Growth Potential
Sales, profitability and growth rates
Segment Structural Attractiveness
Competition, substitute products, buyers & supplier power, new entrants (Porter’s Five Forces)
Company Objectives and Resources
Core competencies
“What business do we want to be in?”

18. Targeting Market Segments
Possible Levels of Segmentation
Marketers have a range or continuum of possible levels of segmentation that can guide their target market decisions. As Figure 9.4 shows, at one end is a mass market of essentially one segment; at the other are individuals or segments of one person each. Between lie multiple segments and single segments.
With full market coverage, a firm attempts to serve all customer groups with all the products they might need. Only very large firms such as Microsoft (software market), General Motors (vehicle market), and Coca-Cola (nonalcoholic beverage market) can undertake a full market coverage strategy. Large firms can cover a whole market in two broad ways: through differentiated or undifferentiated marketing.
Multiple Segment Specialization With selective specialization, a firm selects a subset of all the possible segments, each objectively attractive and appropriate. There may be little or no synergy among the segments, but each promises to be a moneymaker. Keeping synergies in mind, companies can try to operate in supersegments rather than in isolated segments. A supersegment is a set of segments sharing some exploitable similarity. With product specialization, the firm sells a certain product to several different market segments. With market specialization, the firm concentrates on serving many needs of a particular customer group, such as by selling an assortment of products only to university laboratories.
With single-segment concentration, the firm markets to only one particular segment. Through concentrated marketing, the firm gains deep knowledge of the segment’s needs and achieves a strong market presence. It also enjoys operating economies by specializing its production, distribution, and promotion. If it captures segment
leadership, the firm can earn a high return on its investment. A niche is a more narrowly defined customer group seeking a distinctive mix of benefits within a segment. Marketers usually identify niches by dividing a segment into subsegments.
Individual Marketing The ultimate level of segmentation leads to “segments of one,” “customized marketing,” or “one-to-one marketing.” As companies have grown proficient at gathering information about individual customers and business partners (suppliers, distributors, retailers), and as their factories are being designed more flexibly, they have increased their ability to individualize market offerings, messages, and media. Mass customization is the ability of a company to meet each customer’s requirements—to prepare on a mass basis individually designed products, services, programs, and communications.

19. Market Preference Patterns

20. Undifferentiated (Mass) Marketing
Ignores segmentation opportunities

21. Differentiated (Multi-Segment) Marketing
Targets several segments and designs separate offers for each.
Coca-Cola (Coke, Sprite, Diet Coke, etc.)
Procter & Gamble (Tide, Cheer, Gain, Dreft, etc.)
Toyota (Camry, Corolla, Prius, Scion, etc.)

22. Question du Jour
Should the same company produce and market brands that compete with each other?

23. Niche Marketing Targets one or a couple small segments
Niches have very specialized interests

24. Micromarketing
Tailoring products and marketing programs to suit the tastes of specific individuals and/or locations.

25. Socially Responsible Targeting
Controversies and concerns
Targeting the vulnerable and disadvantaged
Cereal, Cigarettes, Alcohol, Fast-food
The “Catch-22” of Targeting
Psychological Reactance
Consumers resist being labeled
Failure to target seen as prejudice

26. Positioning
The place a product occupies in consumers’ minds relative to competing products.

27. Value proposition
Table 10.1 shows how three companies—Hertz, Volvo, and Domino’s—have defined their value proposition through the years with their target customers.

28. Competitive Frame of Reference
Defines which other brands a brand competes with and which should thus be the focus of competitive analysis
Identifying and analyzing competitors
Decisions about the competitive frame of reference are closely linked to target market decisions. Deciding to target a certain type of consumer can define the nature of competition because certain firms have decided to target that segment in the past (or plan to do so in the future) or because consumers in that segment may already look to certain products or brands in their purchase decisions.
A good starting point in defining a competitive frame of reference for brand positioning is category membership—the products or sets of products with which a brand competes and that function as close substitutes. The range of a company’s actual and potential competitors, however, can be much broader than the obvious. Using the market approach, we define competitors as companies that satisfy the same customer need. Chapter 2 described how to conduct a SWOT analysis that includes a
competitive analysis. A company needs to gather information about each competitor’s real and perceived strengths
and weaknesses. Once a company has identified its main competitors and their strategies, it must ask: What is each competitor seeking in the marketplace? What drives each competitor’s behavior?

29. Positioning Strategy Competitive advantages Points of Parity
Points of Difference => Differentiation
Positioning results from differentiation and competitive advantages.
Positioning may change over time.

30. Points-of-Difference
Points-of-difference (PODs)
Attributes/benefits that consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand
Associations that make up points-of-difference can be based on virtually any type of attribute or benefit. Strong brands often have multiple points-of-difference.

31. Sources of Differentiation
Product Design
Quality
Additional Services
Image
People (Staff)
Price
Other

32. Choosing the Right Competitive Advantages
The best competitive advantages are…
Important
Distinctive
Superior
Communicable
Pre-emptive
Affordable (to company and consumer)
Profitable
Moral: Avoid meaningless differentiation.

33. Points-of-Parity Points-of-parity (POPs)
Attribute/benefit associations that are not necessarily unique to the brand but may in fact be shared with other brands
Regardless of the source of perceived weaknesses, if, in the eyes of consumers, a brand can “break even” in those areas where it appears to be at a disadvantage and achieve advantages in other areas, it should be in a strong—and perhaps unbeatable—competitive position. Consider the introduction of Miller Lite beer—the first major light beer in North America.

34. Positioning Example
To (target segment and need) our (brand) is a (concept) that (point-of-difference).
“To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.”

35. Perceptual Maps
Michael Porter urged companies to build a sustainable competitive advantage. Competitive advantage is a company’s ability to perform in one or more ways that competitors cannot or will not match. But few competitive advantages are inherently sustainable. At best, they may be leverageable. A leverageable advantage is one that a company can use as a springboard to new advantages, much as Microsoft has leveraged its operating system to Microsoft Office and then to networking applications. In general, a company that hopes to endure must be in the business of continuously inventing new advantages that can serve as the basis of points-of-difference.
Any product or service benefit that is sufficiently desirable, deliverable, and differentiating can serve as a point-of-difference for a brand. The obvious, and often the most compelling, means of differentiation for consumers are benefits related to performance (Chapters 13 and 14). For choosing specific benefits as POPs and PODs to position a brand, perceptual maps may be useful. Perceptual maps are visual representations of consumer perceptions and preferences. They provide quantitative pictures of market situations and the way consumers view different products, services, and brands along various dimensions. By overlaying consumer preferences with brand perceptions, marketers can reveal “holes” or “openings” that suggest unmet consumer needs and marketing opportunities. Many marketing experts believe a brand positioning should have both rational and emotional components. In other words, it should contain points-of-difference and points-of-parity that appeal to both the head and the heart. A person’s emotional response to a brand and its marketing will depend on many factors. An increasingly important one is the brand’s authenticity.

36. Generic Product Positions & Value Propositions

37. Communicating POPs and PODs
Negatively correlated attributes/benefits
Low price vs. high quality
Taste vs. low calories
Powerful vs. safe
Ubiquitous vs. exclusive
Varied vs. simple
One common challenge in positioning is that many of the benefits that make up points-of-parity and points-of-difference are negatively correlated. ConAgra must convince consumers that Healthy Choice frozen foods both taste good and are good for you. Unfortunately, consumers typically want to maximize both the negatively correlated attributes or benefits. Much of the art and science of marketing consists of dealing with trade-offs, and positioning is no different. The best approach clearly is to develop a product or service that performs well on both dimensions.

38. Brand-positioning bull’s-eye
Once they have fashioned the brand positioning strategy, marketers should communicate it to everyone in the organization so it guides their words and actions. One helpful schematic with which to do so is a brand-positioning bull’s-eye. “Marketing Memo: Constructing a Brand Positioning Bull’s-eye” outlines one way marketers can formally express brand positioning without skipping any steps.

39. Positioning Errors Under-positioning: Over-positioning:
Not positioning strongly enough.
Over-positioning:
Giving buyers too narrow a picture of the product.
Muddled Positioning:
Leaving buyers with a confused image of the product.

40. Which is more important: Product or Positioning?
Question du Jour
Which is more important: Product or Positioning?

41. In-class Activity
Describe how each of the following brands, companies, or products is positioned:

42. In-class Activity, Part 2
Choose one of the companies/brands and…
Identify 2-3 of their closest competitors
Choose the two dimensions that are most important to consumers in this product line
Develop a perceptual positioning map based on the above information
Are there any opportunities in this category?

43. In-class Activity – Developing a Segmentation Scheme
Develop a PSYCHOGRAPHIC/BEHAVIORAL/USAGE segmentation scheme for each of the following types of consumers.
Segment the market into three or more substantive groups.
Be sure to think of the key psychological/behavioral/usage drivers of consumption.
Name your segments – the more creative, the better!
Consumers
Travelers
Movie Goers
Diners
“Green” Consumers
Smartphone Users
Grocery Store Shoppers