1. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1 1 Segmentation, Targeting, and Positioning

2. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Objectives After reading this chapter you should be able to: 1.Appreciate the importance of market segmentation for specific consumer groups and realize that the targeting decision is the initial and most fundamental of all marcom decisions. 2.Understand the role of behavior segmentation in targeting consumer groups. 3.Describe the nature of psychographic segmentation. 4.Appreciate major demographic developments such as changes in the age structure of the population and ethnic population growth. 2

3. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter Objectives (cont’d) 5.Explain the meaning of geodemographics and understand the role for this form of targeting. 6.Recognize that any single characteristic of consumers—whether their age, ethnicity, or income level—likely is not solely sufficient for sophisticated marcom targeting. 7.Appreciate the concept and practice of brand positioning. 3

4. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Positioning McDonald’s versus Starbucks 4

5. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Major Steps in the Market Segmentation Process Following a consideration of customer needs and benefits sought, the following are the major steps in the market segmentation process: Market segmentation: Identify bases (e.g., behavior, demographics) to segment the market Develop profiles of resulting segments Market targeting: Develop measures of segment attractiveness Select the target segment(s) Market positioning: Develop positioning for each target segment Develop marketing mix for each target segment 5

6. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Segmentation Bases Behavior Segmentation Demographics Psychographics Geodemographics Measurable Consumer Characteristics 6

7. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.1: Classification of Four General Targeting Characteristics 7

8. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Behavior Segmentation Issues Behavior Segmentation Describe how people behave with respect to a particular product category or class of related products Assume that the best predictor of future behavior is past behavior Online Behavioral Targeting Tracks the online site-selection behavior of users so as to enable advertisers to serve targeted ads Privacy Concerns Technological advances increase the ability to serve consumers at the risk of invading their privacy 8

9. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.2: An Illustration of the Online Ad Process 9

10. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Psychographic Segmentation Psychographics Describe aspects of consumers’ psychological make-ups and lifestyles as they relate to buying behavior in a particular product category Attitudes Values Motivations 10

11. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Psychographic Profiles Customized Psychographic Profiles Are typically customized to the client’s specific product category Contain questionnaire items related to the unique characteristics of the product category General Purpose Psychographic Profiles Can be purchased as “off-the-shelf” psychographic data from services that develop psychographic profiles of people independently of any particular product or service 11

12. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Illustrative Statements Used In a Customized Banking-Related Psychographic Study 12

13. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Psychographic Study of Consumers’ Banking Practices Worried Traditionalists Bank Loyalists Secured Investors Thrifty Bankers Psychographic Segments of Banking Behaviors 13

14. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MindBase Segments 14

15. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MindBase Segments (Table 15.2 cont’d) 15

16. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.2: The 8 VALS Segments 16

17. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. VALS Psychographic Segments Successful, sophisticated, take-charge, with high self-esteem Innovators Mature, satisfied, comfortable and reflective; value order, knowledge, and responsibility, and motivated by ideals Thinkers Conservative, conventional with concrete beliefs based on traditional, established codes: family, religion, community, and the nation, motivated by ideals Believers Motivated by the desire for achievement have goal-oriented lifestyles and a deep commitment to career and family Achievers 17

18. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. VALS Psychographic Segments Trendy and fun loving, motivated by achievement out of concern about the opinions and approval of others Strivers Motivated by self-expression, young, enthusiastic, and impulsive consumers; quickly become enthusiastic about new possibilities, but are equally quick to cool Experiencers Motivated by self-expression; express themselves and experience the world by working on it, and have enough skills and energy to carry out their projects successfully Makers Live narrowly-focused lives with few resources with which to cope, often believe the world is changing too quickly, are comfortable with the familiar, and are primarily concerned with safety and security Survivors 18

19. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Geodemographic Segmentation Geodemographics Consumers who reside within geographic clusters such as zip codes or neighborhoods and also share demographic and lifestyle similarities Typical Clusters (PRIZM NE) Bohemian Mix White Picket Fences Suburban Pioneers 19

20. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Demographic Segmentation Age structure of the population Change in household composition Ethnic population developments Major Demographic Aspects 20

21. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Demographic Trends World Population Growth 6.95 billion (2012) to 8 billion (2025) to 9.5 billion (2050) Changing Age Structure in United States Median age will increase to 38 by 2025 More middle-aged Baby Boomers Fewer children, teenagers, and young adults due to decreased birthrates 21

22. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. World’s 25 Largest Countries as of 2011 22

23. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Population of the United States by Age Group, as of 2010 23

24. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Demographic Segments by Age Group Preschoolers (5 years or younger) Elementary-school-age children (6-11 years) Tweens (8-12 years) Teenagers (13-19 years) Millennial Generation or Generation Y Highly conformist, narcissistic, and fickle consumers Young adults (20-34 years) Generation X (Baby Busters) Yup & Comers, Bystanders, Playboys, and Drifters 24

25. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.4: An Appeal to Preschoolers’ Parents 25

26. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.5: An Appeal to Teenagers 26

27. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Demographic Segments: Age Middle-Aged (35-54 years) Younger baby boomers and older Gen Xers Target category for luxury goods and youth Mature Consumers (55 years or older) Are 25% of the total U.S. population Have highest discretionary income and most assets Census Bureau classification: Olders (55 to 64); Elders (65 to 74); and the Very Old (75 and over) Descriptive groups: Healthy Hermits, Ailing Outgoers, Frail Recluses, and Healthy Indulgers 27

28. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Ever-Changing American Household Household Defined An independent housing entity, either rental property or owned property. U.S. Households Growing in number, shrinking in size, and changing in character. Married couples with children younger than 18 now represent less than one-third of all households. Single-person and unrelated-person households are a growing market. 28

29. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethnic Population Developments Changes in the U.S. Melting Pot More diversity in the overall population Growth in all ethnic groups Implication for Marketers Need to devise marcom strategies to meet ethnic groups’ unique wants/needs 29

30. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethnic Groups’ Population Representation in the United States, 2000–2050 (in millions) 30

31. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethnic Population Developments African Americans Are of an average age that is considerably younger than that for Caucasians Are geographically-concentrated, with three- fourths of all African-Americans living in 16 states Tend to purchase prestige and name-brand products in greater proportion than do Caucasians Have spending power that totals nearly $1.1 trillion annually 31

32. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.6: African-American Models Appeal to African American Consumers 32

33. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethnic Population Developments (cont’d) Hispanic Americans (Latinos) Are the largest U.S. minority population segment Are not a single unified market Are underserved by current marketing efforts Are responsive to advertising in their dominant language 33

34. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Top 10 U.S. Hispanic Markets (estimates as of 2010) 34

35. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Ethnic Population Developments (cont’d) Asian-Americans Represent many nationalities Are the newest “hot” ethnic market Are better educated than average Have higher incomes than average Occupy more prestigious jobs Speak a variety of languages Are heavy users of the Internet Respond to marketing programs that reflect their values and lifestyles 35

36. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Market Targeting The 5 Criteria for Effective Segmentation: 1.Measurable 2.Substantial 3.Accessible 4.Differentiable 5.Actionable Target Market Selection Strategies: 1.Undifferentiated marketing 2.Differentiated marketing 3.Concentrated marketing 36

37. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.7: A Framework for Brand Positioning 37

38. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Benefit Positioning Functional Needs Symbolic Needs Experiential Needs Appealing to Consumer Needs 38

39. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Categories of Appeals to Consumer Needs Positioning communicates that the brand’s benefits are capable of solving consumers’ consumption-related problems Functional Needs Positioning attempts to associate brand ownership with a desired group, role, or self- image Symbolic Needs Positioning promotes brand’s extraordinary sensory value, or rich potential for cognitive stimulation Experiential Needs 39

40. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.8: Croc Advertisement Illustrating Appeal to Functional Needs 40

41. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.9: Dove Advertisement Illustrating Appeal to Experiential Needs 41

42. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Attribute Positioning Product-Related Non-Product Related: Usage and User Imagery Attribute Positioning 42

43. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.10: Highlander Advertisement Illustrating Product-Related Attribute Positioning 43

44. ©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 5.11: Ralph Lauren Advertisement Illustrating User Imagery Positioning 44