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

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

3. Steps in Segmentation, Targeting, and Positioning
This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196.
Steps in Segmentation, Targeting, and Positioning
6. Develop Marketing
Mix for Each Target Segment
Market
Positioning
Steps in Segmentation, Targeting, and Positioning
Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes.
Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them.
Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy.
Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer.
Discussion Note: The product's position is defined by how consumers view it on important attributes.
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
Targeting
3. Develop Measures
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market

4. Steps in market segmentation, targeting and positioning
Identify bases for segmenting the market
Develop segment profiles
Target Marketing
Develop measure of segment attractiveness
Select target segments
Market Positioning
Develop positioning for target segments
Develop a marketing mix for each segment
Goal 1: Learn the three steps of target marketing

5. 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: Understand the major bases for segmentation

6. Step 1. Market Segmentation Bases for Segmenting Consumer Markets
This CTR relates to Table 7-1 on p. 203 and the material on pp
Step 1. Market Segmentation Bases for Segmenting Consumer Markets
Geographic
Nations, states,
regions or cities
Demographic
Bases for Segmenting Consumer Markets
Geographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes.
Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation.
Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves.
Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude.
Age, gender, family size and life cycle, or income
Psychographic
Social class, lifestyle, or personality
Behavioral
Occasions, benefits, uses, or responses

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

8. Geographic Segmentation Variables
World region or country
U.S. region
State
City
Neighborhood
City or metro size
Density
Climate
Goal 2: Understand the major bases for segmentation

9. Demographic Segmentation Variables
Age
Gender
Family size
Family life cycle
Income
Occupation
Education
Religion
Race
Generation
Nationality
Goal 2: Understand the major bases for segmentation

10. Behavioral Segmentation Variables
Occasions
Benefits
User Status
Attitude Toward the Product
User Rates
Loyalty Status
Readiness Stage
Goal 2: Understand the major bases for segmentation

11. Using Multiple Segmentation Bases: Geodemographics
This CTR combines text and extra-textual information and relates to material on pp
Using Multiple Segmentation Bases: Geodemographics
Geodemographics
Geodemographics combine demographic, geographic, psychographic, and behavioristic segmentation variables to identify markets for products much more narrowly than other segmentation strategies. Geodemographics lends itself best to marketing mix strategies utilizing technological innovation to reach consumers with product information. The two marketing areas that benefit most from geodemography are direct marketing via mail and telephone and computer-based marketing.
Direct Marketing. The direct marketing industry benefits from increasingly specific information on potential customers. Use of telephones and postal mailings without prior qualification of leads is generating grass roots movements for regulation. Geodemography makes it more likely that direct marketers will contact more people who have already expressed an interest in the product or are very likely, statistically speaking, to appreciate information on a relevant product for their geodemographic group. In discussion, you may want to raise questions about the role of marketing ethics in generating and using these increasingly specific databases.
Computer-based Marketing. Millions of people now subscribe to computer shopping services such as AMERICA ON-LINE and PRODIGY that provides consumers with on-line information and services via their personal computer and modem. PC Consumers can bank, order from catalogs, receive information, check stock prices and do trades -- all right at their desktop. While the user requests information on-line, mainframe computers track their information search patterns and record orders and requests for more detailed information to create more databases segmentation.

12. Step 1. Market Segmentation Bases for Segmenting Business Markets
This CTR corresponds to Table 7-3 on p. 213 relates to the material on pp
Step 1. Market Segmentation Bases for Segmenting Business Markets
Personal
Characteristics
Demographics
Major Segmentation Variables for Business Markets
Demographics. Industry segmentation focuses on which industries buy the product. Company size can be used. Geographic location may be used to group businesses by proximity.
Operating Variables. Business markets can be segmented by technology (what customer technologies should we focus on?), user/nonuser status (heavy, medium, light), or customer capabilities (those needing many or few services).
Purchasing Approaches. Five approaches are possible. Segmentation can be by purchasing function organization (centralized or decentralized), power structure (selecting companies controlled by a functional specialty), the nature of existing relationships (current desirable customers or new desirable customers), general purchase policies (focus on companies that prefer some arrangements over others such as leasing, related support service contracts, sealed bids), or purchasing criteria (focus on noncompensatory criteria such as price, service, or quality).
Situational Factors. Situational segmentation may be based upon urgency (such as quick delivery needs), specific application (specific uses for the product) or size of order (few large or many small accounts).
Personal Characteristics. Personal comparisons can lead to segmentation by buyer-seller similarity (companies with similar personnel and values), attitudes toward risk (focus on risk-taking or risk-avoiding companies), or loyalty (focus on companies that show high loyalty to their suppliers.
Bases
for Segmenting
Business
Markets
Situational
Factors
Operating
Characteristics
Purchasing
Approaches

13. Segmenting Business Markets
Demographic segmentation
Industry, company size, location
Operating variables
Technology, usage status, customer capabilities
Purchasing approaches
Situational factors
Urgency, specific application, size of order
Personal characteristics
Buyer-seller similarity, attitudes toward risk, loyalty
Goal 2: Understand the major bases for segmentation

14. Step 1. Market Segmentation Bases for Segmenting International Markets
This CTR relates to the discussion on pp
Industrial Markets
Segmenting International Markets
Geographic Segmentation. This works well when proximity is the critical segmentation variable.
Economic Factors. Countries might be grouped by population income levels or by overall level of economic development.
Political and Legal Factors. Segmentation may be most appropriate in terms of the level of government stability, monetary regulations, receptivity to foreign firms, or the amount of bureaucracy encountered when conducting business.
Cultural Factors. Segmentation by common language, religion, or values might be the best way to proceed.
Intermarket Segmentation. This involves forming segments of consumer who have similar needs and buying behavior even though they are located in different countries.
Geographic
Economic
Political/
Legal
Cultural
Intermarket

15. 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: Understand the major bases for segmentation

16. Step 1. Market Segmentation Requirements for Effective Segmentation
Measurable
Effective Segmentation
This CTR relates to the material on pp. 215.
Step 1. Market Segmentation Requirements for Effective Segmentation
Accessible
Substantial
Size, purchasing power, profiles
of segments can be measured.
Differential
Segments must be effectively
reached and served.
Requirements for Effective Segmentation
Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important.
Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer.
Substantiality. This refers to the degree to which the segments are large or profitable enough to service.
Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues.
Segments must be large or profitable enough to serve.
Actionable
Segments must respond differently to different marketing mix elements & actions.
Must be able to attract and serve the segments.

17. Requirements for Effective Segmentation
Measurable
Size, purchasing power, and profile of segment
Accessible
Can be reached and served
Substantial
Large and profitable enough to serve
Differentiable
Respond differently
Actionable
Effective programs can be developed
Goal 2: Understand the major bases for segmentation

18. Step 2. Market Targeting Evaluating Market Segments
This CTR relates to the material on pp
Segment Size and Growth
Analyze sales, growth rates and expected profitability.
Segment Structural Attractiveness
Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.
Company Objectives and Resources
Company skills & resources relative to the segment's).
Look for Competitive Advantages.
Evaluating Market Segments
Segment Size and Growth. The company must collect and analyze data on current dollar sales, projected sales-growth, and expected profit margins for each market segment.
Segment Structural Attractiveness. Long run attractiveness includes an assessment of current and potential competitors, the threats of substitutes, and the power of buyers and suppliers.
Company Objectives and Resources. The company’s resources and core business strengths should also fit well with the market segment opportunities.

19. Target Marketing Target Market
Consists of a set of buyers who share common needs or characteristics that the company decides to serve
Goal 3: Know how companies identify and target attractive segments

20. Step 2. Market Targeting Market Coverage Strategies
This CTR corresponds to Figure 7-4 on p. 217 and relates to the discussion on pp
Company
Marketing
Mix
Market
Company
Marketing Mix 1
Segment 1
Company
Marketing Mix 2
Segment 2
A. Undifferentiated Marketing
Company
Marketing Mix 3
Segment 3
Market Coverage Strategies
Undifferentiated Marketing. This strategy uses the same marketing mix for the entire market. This strategy focuses on the common needs of the market rather than differences in it. Undifferentiated marketing provides economies of scale on product costs but may be limited in application.
Differentiated Marketing. This strategy targets several market segments and designs separate marketing mixes for each of them. Product and marketing variation also helps company image and may produce loyalty in consumers as they change segments.
Concentrated Marketing. This strategy commits a company to pursue a large share of one or more submarkets. Economies and segment knowledge and service are strengths of this approach but risk due to smaller market size is greater.
Segment 1
Company
Marketing
Mix
Segment 2
B. Differentiated Marketing
Segment 3
C. Concentrated Marketing

21. 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
Goal 3: Know how companies identify and target attractive segments

22. Target Marketing Selecting Target Market Segments
Undifferentiated (mass) marketing
Differentiated (segmented) marketing
Concentrated (niche) marketing
Micromarketing (local or individual)
Goal 3: Know how companies identify and target attractive segments

23. Choosing a Target Marketing Strategy
Considerations include:
Company resources
The degree of product variability
Product’s life-cycle stage
Market variability
Competitors’ marketing strategies
Goal 3: Know how companies identify and target attractive segments

24. 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
Goal 3: Know how companies identify and target attractive segments

25. Step 3. Positioning for Competitive Advantage
Product’s Position - the place the product occupies in consumers’ minds relative to competing products; i.e. Volvo positions on “safety”.
Marketers must:
Plan positions to give products the greatest advantage
Develop marketing mixes to create planned positions

26. Step 3. Positioning for Competitive Advantage: Strategies
Product Positioning
This CTR relates to the material on pp. 220.
Step 3. Positioning for Competitive Advantage: Strategies
Product
Class
Product
Attributes
Away from
Competitors
Benefits
Offered
Market Positioning Strategies
A product's position is the way the product is defined by consumers on important attributes. More directly, product position is the place the product occupies in the consumers’ minds relative to competing products.
Discussion Note: Students may need prompting to realize that marketers don’t control the product’s position, consumers do. The strategies discussed below represent the inputs marketers make to influence how the consumer ultimately determine the product’s position.
A product's position can be based on a number of variables including:
Product Attributes. This positions the product on unique or distinguishing features it possesses such as a low price, unique technology, versatility or other features.
Benefits Offered. Positioning can be based upon the specific value provided.
Usage Occasions. The product usage associated can with special occasions or values ("Andre for the Holidays")
Users. A product can be positioned to its most important users (Miller Beer's heavy user positioning, "Tastes Great Less Filling")
Against a Competitor. This strategy is appropriate for substitutes that cost less.
Away from Competitors. This positions the product as unique in some respect and/or worth it.
Product Class. The company may vary positioning as needed in relation to one or more competitors. B A E D C H G F
Against a
Competitor
Usage
Occasions
Users

27. Developing Competitive Differentiation
Product
Service
Developing Competitive Differentiation
Positioning for Competitive Advantage
This CTR relates to the discussion on pp
Areas for Competitive
Differentiation
Competitive Advantage
Competitive Advantage is created by differentiating the product from those of competitors. Key areas for competitive differentiation include:
Product Differentiation. This can be based upon features or performance.
Teaching Tip: Drive a Hyundai and a Lexus on the same afternoon to experience performance differentiation.
Services Differentiation. This may come from delivery, installation, repair, or training advantages.
Teaching Tip: Does anyone think that television cable service would not improve if there were more than one cable provider per area?
Personnel Differentiation. This is derived from a superior workforce.
Teaching Tip: Surely students appreciate their experience in your class versus those marketing classes at that other school in state?
Image Differentiation. This can be generated from effective use of symbols in association with product consumption.
Teaching Tip: Examples of effective use of symbols include Prudential Securities, “Rock Solid - Market Wise” and Merrill Lynch “Bullish on America.”
Personnel
Image

28. 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’s mind.
Positioning maps that plot perceptions of brands are commonly used.
Goal 4: Realize how companies position their products

29. Choosing a Positioning Strategy
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: Realize how companies position their products

30. Market Segmentation 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
Identifying possible competitive advantages
Choosing the right competitive advantage
Choosing a positioning strategy
Goal 4: Realize how companies position their products

31. Market Segmentation Topics Identifying possible competitive advantages
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: Realize how companies position their products

32. Developing a Positioning Statement
Positioning statements summarize the company or brand positioning
EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference)
Goal 4: Realize how companies position their products

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