1. SEGMENTATION, TARGETING, AND POSITIONING
Product positioning
strategy
Bases for segmentation
Positioning
Targeting
Repositioning

2. SEGMENTATION, TARGETING, AND POSITIONING
IDENTIFYING
MEANINGFULLY
DIFFERENT GROUPS
OF CUSTOMERS
TARGETING
SELECTING WHICH
SEGMENT(S) TO
SERVE
PROUDCT
PRICE
POSITIONING
IMPLEMENTING
CHOSEN IMAGE AND
APPEAL TO CHOSEN
SEGMENT
PROMOTION
DISTRIBUTION

3. LEARNING OBJECTIVES
Identify different unique needs and expectations of different customer groups
Identify tradeoffs among strategies of serving different segments
Identify methods for selecting and targeting customer groups
Identify bases for implementing target selection through positioning

4. DEFINITIONS Segmentation:
“Aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.”
“The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.” (Text, p. 97)
Although not all these consumers are completely alike, they share relatively similar needs and wants.
Marketing action involves: efforts, resources, and decisions--product, distribution, promotion,
and price.

5. SEGMENTS--EXAMPLES (1)
Air Travel
Business/Executive: Inflexible; relatively price insensitive (Small number of people, but travel often)
Leisure Traveler/Student: Relatively flexible; very price sensitive (other methods of travel--e.g., bus, car, train--are feasible; travel may not be essential) (Very large segment)
Comfort Travelers: Comfort (e.g., space, food) important; willing to pay (Small segment)

6. SPECIFYING SEGMENTS
Variables involve descriptors such as age, gender, income, price sensitivity, brand loyalty, geographic location, usage rate, and involvement
Levels involve the different categories within each variable. For example, for age, levels might be 0-20, 21-30, 31-40, 41-55, 56-65, and 66+; for gender, male, female; for geographic location, Northeast, Southeast, Midwest, Southwest, West or urban, rural.
Segments are obtained by “crossing” the combinations—e.g., crossing gender (male, female) with brand loyalty (high, medium, low) gives six combinations (e.g., male, high; female, high; … male, medium; … female, low).

7. BASES FOR SEGMENTATION
Geographic
Demographic
Psychographic
Benefit Desired
Usage Rate
Scanner data based approaches

8. GEOGRAPHIC Regional differences Micro-segmentation
Climate and physical environment
Tastes
Campbell’s Soup
Lifestyle and values
Urban vs. rural areas
Micro-segmentation
Adaptation of retail store assortment to the specific area based on:
Residential demographics
Other characteristics (e.g., vicinity of a beach)
May be largely data-driven based on past sales (scanner data)

9. DEMOGRAPHICS Age Gender
Income—not generally a reliable predictor (willingness to spend is more useful)
Income ≠ willingness to spend!
Ethnicity
Family lifecycle stage

10. INCOME AND PRICE SENSITIVITY
Income and wealth are NOT reliable predictors of price sensitivity.
In order to be able to buy certain high priced items, a certain level of income or wealth is a necessary, but not sufficient, condition.
A book titled The Millionaire Next Door provides strong evidence that many wealthy people have developed wealth through frugality rather than high incomes.
Wealthier individuals will NOT necessarily choose higher priced options.
Therefore, segmenting on price sensitivity rather than income or wealth makes more sense.

11. THE WARC DATABASE: DEMOGRAPHICS AND CONSUMER BEHAVIOR

12. PSYCHOGRAPHICS Personality Motives Lifestyle Very difficult to measure
Limited empirical support
Motives
Lifestyle
Usually more practical than personality

13. USAGE RATE
“80/20” rule—20% of consumers may account for 80% of consumption (in many product categories)
Note that larger consumption rate segments may be subject to heavy competition
Reasons for targeting smaller segments
Reduced competition
Opportunity for growth

14. SCANNER DATA BASED METHODS OF SEGMENTATION
Price responsiveness
Price sensitivity (impact of current price on the likelihood of purchase and/or quantity purchased). The brand elasticity is greater than the product category elasticity.
Deal proneness (propensity to switch to a non-preferred brand when such a competing brand price promotes through sales, coupons, or other form of discount). [This is one form of limited brand loyalty]
Purchase acceleration (“stocking up” when an item is on deal—sale and/or coupon)
Non-price based brand switching
Variety seeking [Another form of limited brand loyalty]
Accommodation of preferences of different household members
Shopping practices
Purchase frequency (within product category) (as distinct from price responsiveness measures listed above)
Package size preference
Store and/or retail chain loyalty

15. BENEFITS SOUGHT Based on
Differences in arbitrary tastes (e.g., cola vs. non-cola drink)
Ideal point
Tradeoffs (e.g., taste vs. calories)
Usage situation (e.g., coffee for camping (instant) vs. higher quality for home brewing)

16. TARGETING: SELECTING SEGMENT(S) AND SPECIALIZING
“You can’t be all things to all people” ---> choose one or more groups.
Focus narrows scope of competition, but demands are greater.

17. IDENTIFYING TARGETS
Customer information “enhancement”—information from different sources integrated (e.g., real estate records, purchase lists, magazine subscription, credit records)
“Merge-purge”
Customer lists from different sources are combined with removal of duplicates

18. LISTS OF BUYERS FROM ONLINE/CATALOG MERCAHNTS MERGE PROCESS
MAGAZINE SUBSCRIPTIONS
NAMES AND ADDRESSES FROM ALL SOURCES USED
SURFER DUDE
SURFER’S SUPPLY
SURFER CHICK
SURF CITY
EXTREME SURFING
REMOVE DUPLICATES
SURFGEAR
CALIFORNIA SURFER
GENERAL LISTS (E.G., PHONE BOOK LISTINGS)
ORGANIZATION MEMBERSHIPS
NON-REDUNDANT FINAL LIST
SORORITY SURFERS OF AMERICA
SELECT RESIDENCES W/IN 2 BLOCKS OF BEACH
CALIFORNIA SURFERS’ ASSOC.
PURGE PROCESS
GEORGIA SURFER SOCIETY

19. SEGMENTATION, TARGETING, AND POSITIONING
PROUDCT
PRICE
PREMIUM
PREMIUM
POSITIONING
IMPLEMENTING
CHOSEN IMAGE AND
APPEAL TO CHOSEN
SEGMENT
LOW PRICE
BASIC
VALUE
DURABLE
DISTRIBUTION
PROMOTION
INTENSIVE
PRESTIGE
SELECTIVE
FUN
EXCLUSIVE
POWERFUL

20. REPOSITIONING
Repositioning: Changing established position may be difficult -- e.g.,
Sears
McDonald
Good sales;
poor everyday
values
Lunch; not dinner
Good for children

21. MULTIDIMENSIONAL SCALING
Consumer product perception is identified along two or more “dimensions”
Methods:
A priori specification of dimensions  respondents make judgments
Respondent rating of relative similarity of brands/product categories  statistical model identifies unnamed dimensions  dimensions are inferred from characteristics of items at different points

23. HIGH
Hershey’s
Toblerone
Dove Milk Chocolate
Ritter
Mr. Goodbar
M&M
HIGH
LOW
Snickers
Almond Joy
Kitkat
Mars
Reese’s
York
Smores
Heath
Butterfinger
Twix
LOW
Milky Way

24. SIMILARITY RATINGS 7 5 6 3 2 Snickers M&M Almond Joy Mr. Goodbar
1=“Not at all similar” =“Extremely Similar”
Logically, all candy bars are “extremely similar” to themselves. The shaded regions are redundant—only the order is varied.