Segmentation, Targeting & Positioning

Why do this?

Overview: Segmentation, Targeting & Positioning

Market Segmentation - Principles

• Segmentation Variables– Geographic– Demographic– Psychographic– Behavioral – Other (anything!)

• No single best way to segment a market.• Often best to combine variables and identify smaller, better-

defined target groups.

Geographic Segmentation

• Divide markets into different geographic units.

• Examples:– World Region or Country: North America, Western

Europe, European Union, Pacific Rim, Mexico, etc.– Country Region: Pacific, Mountain, East Coast, etc. – City or Metro Size: New York, San Francisco– Population Density: rural, suburban, urban– Climate: northern, southern, tropical, semi-tropical

Demographic Segmentation

• Use Differences in:– age, gender, family size, family life cycle, income,

occupation, education, race, and religion

– Most frequently used segmentation variable• Ease of measurement and high availability.

– Usually the worst variable to use.

Psychographic Segmentation

Psychographic Psychographic segmentation divides a segmentation divides a

market into different market into different groups based on social groups based on social

class, lifestyle, or class, lifestyle, or personality personality

characteristics.characteristics.People in the same demographic classification often have very different lifestyles and personalities.

Behavioral Segmentation

• Occasion– Special promotions &

labels for holidays.– Special products for

special occasions.

• Benefits Sought– Different segments

desire different benefits from the same products.

• Loyalty Status – Nonusers, ex-users,

potential users, first-time users, regular users.

• Usage Rate – Light, medium, heavy.

Loyalty Status Segmentation

Switchers

Shifting loyals

Split loyals

Hard-core

User & Loyalty Status Segmentation

Geodemographic Segmentation

• PRIZM, by Claritas– Organized by ZIP code– Based on U.S. Census data– Profiles on 260,000+ U.S. neighborhoods– 62 clusters or types

Claritas’ Prizm

Requirements for Effective Segmentation

Segments must be

– Measurable– Accessible– Substantial– Differentiable– Actionable

“Lefties” are hard to identify and measure, so few firms target this segment.

• Segment Size and Growth Potential– Sales, profitability and growth rates

• Segment Structural Attractiveness– Competition, substitute products, – buyers & supplier power, new

entrants (Porter’s Five Forces)• Company Objectives and

Resources– Core competencies– “What business do we want to be

in?”

Evaluating Market Segments

Targeting Segments - Overview

Market Preference Patterns

– Ignores segmentation opportunities

Undifferentiated (Mass) Marketing

Differentiated (Segmented) Marketing

– Targets several segments and designs separate offers for each.

– Coca-Cola (Coke, Sprite, Diet Coke, etc.)

– Procter & Gamble (Tide, Cheer, Gain, Dreft, etc.)

– Toyota (Camry, Corolla, Prius, Scion, etc.)

Question du Jour

Should the same company produce and market brands that compete with each other?

Niche Marketing

– Targets one or a couple small segments– Niches have very specialized interests

• Tailoring products and marketing programs to suit the tastes of specific individuals and/or locations.

Micromarketing

Flexible Marketing Offerings

• “Naked”/Core solution– Product and service

elements that all segment members value

• Discretionary options– Some segment

members value– Options may carry

additional charges

Patterns of Target Market Selection: Product x Market Matrices

• Controversies and concerns

– Targeting the vulnerable and disadvantaged• Cereal, Cigarettes, Alcohol, Fast-food

– The “Catch-22” of Targeting• Psychological Reactance • Failure to target seen as prejudice

Socially Responsible Targeting

The place a product occupies in consumers’ minds relative to competing products.

Positioning

eBay’s positioning: No matter what “it” is, you can find “it” on eBay!

Positioning Example

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

Positioning Example

“To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.”

Positioning Maps: Luxury SUVsPrice vs. Orientation Dimensions

• Competitive advantages• Points of Parity• Points of Difference => Differentiation

Positioning results from differentiation and competitive advantages.

Positioning may change over time.

Positioning Strategy

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Sources of Differentiation

– Product Design– Quality– Additional Services – Image– People (Staff)– Price– Other

Choosing the Right Competitive Advantages

• The best competitive advantages are…

– Important– Distinctive– Superior– Communicable– Pre-emptive– Affordable (to company and consumer)– Profitable

Moral: Avoid meaningless differentiation.

• Under-positioning:– Not positioning strongly enough.

• Over-positioning:– Giving buyers too narrow a picture of the product.

• Muddled Positioning:– Leaving buyers with a confused image of the product.

Positioning Errors

Generic Product Positions & Value Propositions

Question du Jour

Which is more important: Product or Positioning?

In-class Activity

• Describe how each of the following brands, companies, or products is positioned:

In-class Activity, Part 2

• Choose one of the companies/brands and…– Identify relevant direct competitors– Choose the two dimensions that are most

important to consumers– Develop a perceptual positioning map– Are there any opportunities in this category?

In-class Activity, Part 3

• Choose a company and invent a segmentation scheme for that company’s customers using the variables we discussed in class.

In-class Activity – Developing a Segmentation Scheme

• Develop a PSYCHOGRAPHIC/USAGE segmentation scheme for each of the following types of consumers.– Segment the market into three or more substantive groups.– Be sure to think of the key psychological/usage drivers of consumption.– Name your segments – the more creative, the better!

• Consumers– Vacationers– Internet Users– Restaurant Patrons– Eco-friendly product consumers– Smartphone Users– Grocery Store Shoppers