1 Segmentation Bottomline l What is segmentation and why is it important? l Bases for segmentation l Choosing a segmentation strategy l What is Positioning and why is it critical?

2 Clinton vs Dole: The Politics of Segmentation

3 Levels of Market Segmentation Mass Marketing (Shotgun Approach) Model T Increasing Competition, Improved production techniques Fragmentation of markets Segment Marketing Information revolution Flex and JIT Manufacturing Credit-technology Individual Marketing (Rifle Approach) Segments of “one” Information technology and addressability National Bicycle, McGraw Hill

4 Definition l Segmentation is the process of dividing the market into groups based upon important consumer characteristics. l Why Segment? l What is relevant? What properties should segments have?

5 Why Segment? l Better focus on customer needs l Promotes new product ideas (Dockers, Levis 505 and 900) l Helps develop effective marketing mix strategy (Dockers --men reminiscing baby boomers, retail merchandising) l Allocation of marketing resources to different products depending upon segment attractiveness.

6 Properties l With-in group homogeneity but heterogeneity across groups. l Accessibility l Segment is such that the company can best serve them vis-vis competition. (Gerber’s and pre-school kids food). l Economic viability

7 Bases for Segmentation Geographic l Regionalizing to accommodate local tastes (Maxwell House stronger flavored in the west). Demographic: l What consumer characteristics are? (Age, Gender, Income…) Psychographics : l Why do consumers buy? »Lifestyle: Hathaway »Personality Pillsbury Doughboy »Social Class

8 Bases for Segmentation Behavioral l Usage occasions »Kodak single-use cameras from underwater use to baby pictures l Usage Rates »80-20 rule, eg., beer drinkers. l Loyalty Status »Hard-core loyals: A A A A A A »Switchers: A B E A D B »Variety Seekers A B C B A C B l Benefit Segmentation l How do you implement psychographic and behavioral segmentation e.g., for media buying »key role of demographics

9 Product Positioning l Positioning = Segmentation + Differentiation l Slotting your product in the consumer’s mind. »Who am I? Why buy me? “Positioning starts with the product….But Positioning is not what you do to the product. Positioning is what you do to the mind of the prospect” - Ries and Trout The Positioning Statement: “Product/Brand is »unique and most important claim »among all (competitive frame) »because (support)

10 Positioning Strategies l Against competition »7Up the Uncola, Wendy’s Where is the Beef? l Position with the competition »Exclusive Club Strategy, e.g., the Big Three for followers l Grab an Unoccupied Position l Using your endowment »Number One Position