1. Week 5 –
On Line
Market Segmentation, targeting and Positioning for Competitive Advantage

2. A Market is...
(1) people or organizations with (2) needs or wants, and with (3) the ability and (4) the willingness to buy. A group of people that lacks any one of these characteristics is not a market.
Notes:
All markets share several characteristics, as outlined on this slide.
Within a market, a market segment is a subgroup of people or organizations with one or more common characteristics that cause them to have similar product needs.
Market segmentation is the division of a market into meaningful, identifiable segments or groups.

3. Steps in 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

4. Definition: Market Segmentation
Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

5. The Importance of Market Segmentation
Markets have a variety of product needs and preferences
Marketers can better define customer needs
Decision makers can define objectives and allocate resources more accurately
Competitive
Advantage
Notes:
Until the 1960s, market segmentation was not used extensively. Consider Coca-Cola with its one product aimed at the entire soft drink market. Today over a dozen different products are marketed to different market segments.
Market segmentation plays a key role in the marketing strategy of organizations, with the benefits as described on this slide, leading to competitive advantage.

6. Segmentation Bases Characteristics of individuals, groups,
or organizations used
to divide a total market
into segments.
(variables)

7. The Concept of Market Segmentation
Notes:
Exhibit 7.1 illustrates the concept of market segmentation, using age and gender as the bases.
Discussion/Team Activity:
Discuss other ways of segmenting the market in addition to age and gender.

8. Step 1. Market Segmentation Requirements for Effective Segmentation
Measurable
Accessible
Substantial
Size, purchasing power, profiles
of segments can be measured.
Differentiable
Segments can be effectively
reached and served.
Actionable
Segments are large or profitable enough to serve.
Segments must respond differently to different marketing mix elements & programs.
Effective programs can be designed to attract and serve the segments.

9. Geographic Segmentation
World Region or Country
City or Metro Size
Density or Climate

10. Market Segmentation Demographic
Dividing the market into groups based on variables such as:
Age
Gender
Family size or life cycle
Income
Occupation
Education
Religion
Race
Generation
Nationality
Most Popular Bases & Easiest to Measure

11. Bases for Psychographic Segmentation
On Line
Psychographic Segmentation
Personality
Motives
Lifestyles
Geodemographics
On Line
Martha Stewart Living
Good Housekeeping
Use psychographic segmentation to classify the kinds of consumers who would be interested in the products offered by Martha Stewart and Good Housekeeping on-line.
Notes:
Demographic segmentation provides the “skeleton,” but psychographic segmentation adds “meat to the bones.”
Personality reflects a person’s traits, attitudes, and habits. Consider the personality types that describe segmented Porsche buyers. These are described on the next slide and in Exhibit 7.3.
Motives: Carmakers appeal to customers with status-related motives, whereas baby products appeal to emotional motives.
Lifestyles and geodemographics are described on subsequent slides.

12. Taxonomy of Porsche Buyers
Notes:
1. Segmentation of Porsche buyers.

13. Multi-bases Segmentation
Claritas
Notes:
Lifestyle segmentation divides people into groups according to how time is spent, the importance of things around them, beliefs, and socioeconomic characteristics such as income and education.
For example, Harley-Davidson divides its customers into seven lifestyle segments, ranging from arrogant troublemakers to classy capitalists with wealth.

14. Step 1. Market Segmentation Behavioral Segmentation
Dividing the market into groups based on variables such as:
Occasions
Benefits
User status
Usage rate
Loyalty status
Readiness stage
Attitude toward product

15. Benefit Segmentation of the Snack-Food Market
Notes:
Exhibit 7.4 shows the six benefit segments of the snack-food market.
Discussion/Team Activity:
Discuss advertisements of snack foods that appeal to different benefit segments of the snack-food market.

16. Segmenting International Markets
Geographic
Location
Factors Used to Segment International Markets
Economic
Factors
Cultural
Factors
Political and Legal Factors

17. Step 2. Market Targeting Evaluating Market Segments
Segment Size and Growth
Analyze current sales, growth rates and expected profitability for various segments.
Segment Structural Attractiveness
Consider effects of: competitors, availability of substitute products and, the power of buyers & suppliers.
Company Objectives and Resources
Company skills & resources needed to succeed in that segment(s).
Look for Competitive Advantages.

18. Step 2. Market Targeting Market Coverage Strategies
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
Segment 1
Company
Marketing
Mix
Segment 2
B. Differentiated Marketing
Segment 3
C. Concentrated Marketing

19. Undifferentiated Targeting Strategy
Advantages:
Potential savings on production and marketing costs
Disadvantages:
Unimaginative product offerings
Company more susceptible to competition
Notes:
The first firm in an industry sometimes uses an undifferentiated strategy. Consider Coca-Cola when it had a single product and a single size of its original soft drink.

20. Multisegment Targeting Strategy
Advantages:
Greater financial success
Economies of scale
Disadvantages:
High costs
Cannibalization

21. Cannibalization
Situation that occurs when sales of a new product cut into sales of a firm’s existing products.

22. Concentrated Targeting Strategy
Advantages:
Concentration of resources
Meets narrowly defined segment
Small firms can compete
Strong positioning
Disadvantages:
Segments too small, or changing
Large competitors may market to niche segment

23. Socially Responsible Target Marketing
Smart targeting helps companies and consumers alike.
Target marketing sometimes generates controversy and concern.
Disadvantaged and vulnerable can be targeted.
Cigarette, beer, and fast-food marketers have received criticism in the past.
Internet has come under attack because of the loose boundaries and lack of control in marketing practices.

24. Step 3. Choosing a Positioning Strategy
Product’s Position - the way the product is perceived by consumers on important attributes
Marketers must:
Plan positions to give their products the greatest advantage in selected target markets,
Design marketing mixes to create these planned positions.

25. Step 3. Choosing a Positioning Strategy
Step 1. Identifying Possible Competitive Advantages
Step 2. Selecting the Right Competitive Advantage
Step 3. Communicating and Delivering the Chosen Position

26. Choosing the Right Competitive Advantage
Important
Profitable
Distinctive
Criteria
For Determining
Which Difference
To Promote
Superior
Affordable
Communicable
Unique Selling Proposition
Preemptive

27. Communicating and Delivering the Chosen Position
Company must take strong steps to deliver and communicate the desired position to target consumers.
All the company’s marketing mix must support the positioning strategy.
Positioning strategy must be monitored and adapted over time to match changes.

28. Positioning of Procter & Gamble Detergents
Notes:
Exhibit 7.8 describes the positioning of eleven different laundry detergents made by Procter & Gamble.
Positioning assumes that consumers compare products on the basis of important features.
Discussion/Team Activity:
1. Select other families of products made by companies. What is each product’s unique positioning?

29. Perceptual Mapping
A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds.

30. Perceptual Map and Positioning Strategy for Levi Strauss Products
Notes:
Exhibit 7.9 shows Levi’s brands and subbrands, based on price and fashion style.
Discussion/Team Activity:
What is the target market and marketplace perception of some of Levi’s brands? What are Levi’s strengths in the marketplace? What are Levi’s weaknesses? How can Levi’s use perceptual mapping to enhance its product strategy?