Segmentation, Segmentation, Targeting, and Targeting, and

PositioningPositioning

Chapter 8Chapter 8

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Objectives

Be able to define the three steps Be able to define the three steps of target marketing: market of target marketing: market segmentation, target marketing, segmentation, target marketing, and market positioning.and market positioning.Understand the major bases for Understand the major bases for segmenting consumer and segmenting consumer and business markets.business markets.

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Objectives

Know how companies identify Know how companies identify attractive market segments attractive market segments and how they choose a target and how they choose a target marketing strategy.marketing strategy.Comprehend how companies Comprehend how companies position their products for position their products for maximum competitive maximum competitive advantage.advantage.

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Sells multiple brands Sells multiple brands within the same within the same product category for product category for a variety of productsa variety of productsBrandsBrands feature a feature a different mix of different mix of benefits and appeal benefits and appeal to different segmentsto different segments

Has also identified Has also identified different niches different niches withinwithin certain segments certain segments Tide offers seven Tide offers seven different product different product formulations to serve formulations to serve different niches’ different niches’ needsneeds

cProcter & GambleProcter & Gamble

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SureSureSecretSecretOld SpiceOld Spice

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Definition

Market Segmentation:Market Segmentation: Dividing a market into distinct Dividing a market into distinct

groups with distinct needs, groups with distinct needs, characteristics, characteristics, or behavior who or behavior who might require might require separate products separate products or marketing or marketing mixes.mixes.

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Figure 8-1: Steps in Market

Segmentation, Targeting, and Positioning

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Geographical Geographical segmentationsegmentation Marketing mixes are Marketing mixes are

customized geographicallycustomized geographicallyDemographic Demographic segmentationsegmentationPsychographic Psychographic segmentationsegmentationBehavioral segmentationBehavioral segmentationUsing multiple Using multiple segmentation variablessegmentation variables

Key TopicsKey Topics

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Market SegmentationGeographic Geographic

Segmentation VariablesSegmentation VariablesCity or City or Metro SizeMetro SizeNeighborhoodNeighborhoodDensityDensityClimateClimate

World Region World Region or Countryor CountryU.S. RegionU.S. RegionStateStateCityCity

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Geographical climate is Geographical climate is a legitimate means of a legitimate means of segmentation for many segmentation for many products or services.products or services.

Name several examples of Name several examples of products for which need products for which need (and demand) would vary (and demand) would vary on a geographical basis. on a geographical basis.

Discussion Question

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Geographical segmentsGeographical segmentsDemographic segmentationDemographic segmentation Most popular typeMost popular type Demographics are closely Demographics are closely

related to needs, wants and related to needs, wants and usage ratesusage rates

Psychographic Psychographic segmentationsegmentationBehavioral segmentationBehavioral segmentationUsing multiple Using multiple segmentation variablessegmentation variables

Key TopicsKey Topics

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Market SegmentationDemographic

Segmentation VariablesAgeAgeGenderGenderFamily sizeFamily sizeFamily life cycleFamily life cycleIncomeIncomeRaceRace

OccupationOccupationEducationEducationReligionReligionGenerationGenerationNationalityNationality

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Corvallis map of income distribtuion

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Salem Hispanic Population

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Portland Household Income

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Bend price of homes

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What type of demographic segmentation is reflected by this ad?

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Geographic segmentsGeographic segmentsDemographic Demographic segmentation segmentation Psychographic Psychographic segmentationsegmentation LifestyleLifestyle, social class, and , social class, and

personality-based personality-based segmentationsegmentation

Behavioral segmentationBehavioral segmentationUsing multiple Using multiple segmentation variablessegmentation variables

Key TopicsKey Topics

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Swatch targets those with an active lifestyle

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Generation Y Trendsetters top 15

brands15. 15. RedRed StripeStripe Jamaican Jamaican beerbeer 14. 14. VitaminVitamin WaterWater 13. 13. ConverseConverse 12. 12. VolkswagenVolkswagen11. 11. Levi’sLevi’s

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10. 10. H&MH&M clothing clothing storesstores

9. 9. TargetTarget8. 8. AmericanAmerican

ApparelApparel7. 7. AdidasAdidas6. 6. Whole FoodsWhole Foods

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5. 5. BenBen & & Jerry’sJerry’s4. In-N-Out 4. In-N-Out BurgerBurger

starts their employees out at $10 an hour -- starts their employees out at $10 an hour -- which made the trendsetters happier to eat which made the trendsetters happier to eat there, as opposed to some fast-food chains there, as opposed to some fast-food chains where all the workers look miserable."where all the workers look miserable."

3. Jet Blue3. Jet Blue"They loved everything about Jet Blue, "They loved everything about Jet Blue, noting that the airline is much easier to noting that the airline is much easier to navigate, the flights are always cheap, navigate, the flights are always cheap, always one-way and don't have a lot of always one-way and don't have a lot of weird special prices and restrictions," weird special prices and restrictions,"

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2. Trader Joe’s2. Trader Joe’sThey liked that the company has a dorky newsletter They liked that the company has a dorky newsletter and makes their employees wear silly Hawaiian shirts. and makes their employees wear silly Hawaiian shirts.

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1.1. AppleAppleOutlaw Consulting, a San Outlaw Consulting, a San

Francisco research firm, Francisco research firm, concluded that Generation Y concluded that Generation Y trendsetters are more drawn trendsetters are more drawn to brands that speak to them to brands that speak to them in a "straightforward and in a "straightforward and stripped-down way, use plain stripped-down way, use plain packaging, and avoid excesspackaging, and avoid excess

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Outlaw surveyed 100 of what it calls its Outlaw surveyed 100 of what it calls its "most forward trendsetter panelists" in "most forward trendsetter panelists" in New York City, Los Angeles, San New York City, Los Angeles, San Francisco and Miami, asking them which Francisco and Miami, asking them which companies they most respected, and why. companies they most respected, and why. the preference for simplification, lean-the preference for simplification, lean-and-clean styling and all-in-one and-clean styling and all-in-one convenience could be motivated by convenience could be motivated by environmental concerns. In other words, environmental concerns. In other words, as the "green lifestyle" is something more as the "green lifestyle" is something more and more people aspire to, the notion of and more people aspire to, the notion of excess has fallen into disfavor excess has fallen into disfavor

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Geographic segmentsGeographic segmentsDemographic Demographic segmentation segmentation Psychographic Psychographic segmentationsegmentationBehavioral segmentationBehavioral segmentation Typically done firstTypically done first

Using multiple Using multiple segmentation variablessegmentation variables

Key TopicsKey Topics

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Market SegmentationBehavioral Behavioral

Segmentation VariablesSegmentation Variables

OccasionsOccasionsBenefitsBenefitsUser StatusUser StatusUser RatesUser Rates

Loyalty StatusLoyalty StatusReadiness StageReadiness StageAttitude Toward Attitude Toward the Productthe Product

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Occasion segmentation: Altoids’ “Love Tin” is a “curiously strong valentine”

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Checkout Direct offers retailers & manufacturers an excellent method of reaching segments of heavy users, as well as users of the direct competition.

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Geographic segmentsGeographic segmentsDemographic Demographic segmentation segmentation Psychographic Psychographic segmentationsegmentationBehavioral segmentationBehavioral segmentationUsing multiple Using multiple segmentation variablessegmentation variables PrizmPrizm

Key TopicsKey Topics

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Visit PRIZM’s “You are Visit PRIZM’s “You are where you live” where you live” website.website.Enter the zip code(s) of Enter the zip code(s) of your choice. your choice.

Were you Were you surprised by surprised by what you what you found? found?

Discussion Question

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Example Market segments for J.C. Penney Conservative Size: 23% of population 16% Size: 23% of population 16%

of salesof sales Age: 35-55 years oldAge: 35-55 years old Values: Conservative values Values: Conservative values

satisfied with present statussatisfied with present status Employment: Has job, or Employment: Has job, or

careercareer Income: Limited disposable Income: Limited disposable

incomeincome Benefits sought: Price-Benefits sought: Price-

driven, reacts to sales, driven, reacts to sales, wants easy care and wants easy care and comfort, Not interested in comfort, Not interested in fashion, Defines value as fashion, Defines value as Price, Quality, FashionPrice, Quality, Fashion

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Traditional Size: 38% of population Size: 38% of population

40% of total sales40% of total sales Age: 25-49 years oldAge: 25-49 years old Values: Traditional values Values: Traditional values

Active, busy, independent, Active, busy, independent, self-confidentself-confident

Employment: Family-and Employment: Family-and job/career-orientedjob/career-oriented

Income: Considerable Income: Considerable incomeincome

Benefits sought: Wants Benefits sought: Wants traditional styling, seeks traditional styling, seeks clothes that last, Interested clothes that last, Interested in newness, Defines value in newness, Defines value as Quality, Fashion, Priceas Quality, Fashion, Price

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Update Size: 16% of population Size: 16% of population

24% of total sales24% of total sales Age: 25-49Age: 25-49 Values: Contemporary Values: Contemporary

values Active, busy, values Active, busy, independent, very self-independent, very self-confidentconfident

Employment: Family-Employment: Family-and job/ career-orientedand job/ career-oriented

Income: considerable Income: considerable incomeincome

Benefits sought: Wants Benefits sought: Wants newness in color and newness in color and style, Shops often, style, Shops often, Defines value as Defines value as Fashion, Quality, PriceFashion, Quality, Price

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Example Toothpaste Benefit segments

Sensory Sensory SegmentSegmentSociable Sociable SegmentSegmentWorrier Worrier SegmentSegmentIndependentIndependent

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Sensory SegmentPrinciple benefit sought: Principle benefit sought: Flavor and product Flavor and product appearanceappearanceDemographic strengths: Demographic strengths: Children ChildrenSpecial behavior Special behavior characteristics: Users characteristics: Users of spearmint-flavored of spearmint-flavored toothpastetoothpasteBrands: ColgateBrands: ColgateLifestyle characteristics: Lifestyle characteristics: Hedonistic Hedonistic

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Sociable SegmentPrinciple benefit sought: Principle benefit sought: Brightness of teethBrightness of teethDemographic strengths: Demographic strengths: Teens, young peopleTeens, young peopleSpecial behavior Special behavior characteristics: Smokerscharacteristics: SmokersBrands: Macleans, Ultra Brands: Macleans, Ultra BriteBriteLifestyle characteristics: Lifestyle characteristics: ActiveActive

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Worrier SegmentPrinciple benefit sought: Principle benefit sought: Decay preventionDecay preventionDemographic strengths: Demographic strengths: Large FamiliesLarge FamiliesSpecial behavior Special behavior characteristics: Heavy characteristics: Heavy usersusersBrands: CrestBrands: CrestLifestyle characteristics: Lifestyle characteristics: ConservativeConservative

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Independent SegmentPrinciple benefit Principle benefit sought: Pricesought: PriceDemographic Demographic strengths: Menstrengths: MenSpecial behavior Special behavior characteristics: characteristics: Heavy usersHeavy usersBrands: Cheapest Brands: Cheapest BrandBrandLifestyle Lifestyle characteristics: characteristics: Value orientedValue oriented

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Demographic segmentationDemographic segmentation Industry, company size, locationIndustry, company size, location

Operating variablesOperating variables Technology, usage status, Technology, usage status,

customer capabilitiescustomer capabilitiesPurchasing approachesPurchasing approachesSituational factorsSituational factors Urgency, specific application, Urgency, specific application,

size of ordersize of orderPersonal characteristicsPersonal characteristics Buyer-seller similarity, attitudes Buyer-seller similarity, attitudes

toward risk, loyaltytoward risk, loyalty

Key TopicsKey Topics

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

Geographic segmentationGeographic segmentation Location or regionLocation or region

Economic factorsEconomic factors Population income or level of Population income or level of

economic developmenteconomic developmentPolitical and legal factorsPolitical and legal factors Type / stability of government, Type / stability of government,

monetary regulations, amount of monetary regulations, amount of bureaucracy, etc.bureaucracy, etc.

Cultural factorsCultural factors Language, religion, values, Language, religion, values,

attitudes, customs, behavioral attitudes, customs, behavioral patternspatterns

Key TopicsKey Topics

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Market Segmentation

Segmenting Segmenting Consumer MarketsConsumer MarketsSegmenting Segmenting Business MarketsBusiness MarketsSegmenting Segmenting International MarketsInternational MarketsRequirements for Requirements for Effective SegmentationEffective Segmentation

MeasurableMeasurable Size, purchasing power, and profile Size, purchasing power, and profile

of segmentof segmentAccessibleAccessible Can be reached and served Can be reached and served

SubstantialSubstantial Large and profitable enough to Large and profitable enough to

serveserveDifferentiableDifferentiable Respond differentlyRespond differently

ActionableActionable Effective programs can be Effective programs can be

developeddeveloped

Key TopicsKey Topics

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Target Marketing

Evaluating Market SegmentsEvaluating Market Segments Segment size and growthSegment size and growth Segment structural attractivenessSegment structural attractiveness

Level of competitionLevel of competition Substitute productsSubstitute products Power of buyersPower of buyers Powerful suppliersPowerful suppliers

Company objectives and resourcesCompany objectives and resources

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Figure 8-2: Target Marketing

Strategies

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Target Marketing

Choosing a Target-Choosing a Target-Marketing Strategy Marketing Strategy Requires Consideration of:Requires Consideration of: Company resourcesCompany resources The degree of product variabilityThe degree of product variability Product’s life-cycle stageProduct’s life-cycle stage Market variabilityMarket variability Competitors’ marketing Competitors’ marketing

strategiesstrategies

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Target Marketing

Socially Responsible Targeting Socially Responsible Targeting Some Some segmentssegments are at are at specialspecial risk: risk:

ChildrenChildren Inner-city minority consumersInner-city minority consumers Internet Internet

shoppers shoppers Controversy occurs when the methods Controversy occurs when the methods

used are questionable.used are questionable.

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Positioning

Positioning:Positioning: The place the product The place the product

occupies in occupies in consumers’ minds consumers’ minds relative to competing relative to competing products.products.

Typically defined by Typically defined by consumers on the consumers on the basis of important basis of important attributes.attributes.

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Positioning

Choosing a Positioning Strategy:Choosing a Positioning Strategy: Identifying possible competitive Identifying possible competitive

advantages -- many potential advantages -- many potential sources of differentiation exist:sources of differentiation exist: ProductsProducts ServicesServices ChannelsChannels PeoplePeople ImageImage

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Porsche is positioned on the basis of performance and freedom.

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Positioning

Choosing a Positioning Strategy:Choosing a Positioning Strategy: Choosing the right competitive Choosing the right competitive

advantageadvantage How many differences to promote?How many differences to promote?

• Unique selling propositionUnique selling proposition• Positioning errors to avoidPositioning errors to avoid

Which differences to promote?Which differences to promote?

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Positioning errors

Under-Under-positioningpositioningOver-Over-positioningpositioningConfused-Confused-PositioningPositioning

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PositioningCriteria for Meaningful DifferencesCriteria for Meaningful Differences

ImportantImportantSuperiorSuperiorPreemptivePreemptive

DistinctiveDistinctiveCommunicableCommunicableAffordableAffordable

ProfitableProfitable

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Figure 8-3: Possible Value Propositions

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View the ad at right.View the ad at right.

Evaluate the level of Evaluate the level of benefits and the price. benefits and the price.

What value proposition What value proposition is being expressed?is being expressed?

Discussion Question

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Positioning

Choosing a Positioning Strategy:Choosing a Positioning Strategy: Developing a positioning statementDeveloping a positioning statement

Positioning statements summarize the Positioning statements summarize the company or brand positioningcompany or brand positioning

EXAMPLE: To EXAMPLE: To (target segment and (target segment and need)need) our our (brand)(brand) is is (concept)(concept) that that (point-of-difference)(point-of-difference)..

Communicating the chosen positionCommunicating the chosen position

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Positioning

Choosing a Positioning Strategy:Choosing a Positioning Strategy: Communicating and delivering the Communicating and delivering the

chosen positionchosen position Entire marketing mix must support the Entire marketing mix must support the

chosen strategy chosen strategy May require changes to the product, May require changes to the product,

pricing, distribution or promotion. pricing, distribution or promotion.