Segmentation, Targeting & Positioning

Overview: Segmentation, Targeting & Positioning

Why do this?

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, betterdefined 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 segmentation divides a market into different groups based on social class, lifestyle, or personality 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.

‡ Loyalty Status
± Nonusers, ex-users, potential users, firsttime users, regular users.

‡ Benefits Sought
± Different segments desire different benefits from the same products.

‡ Usage Rate
± Light, medium, heavy.

Loyalty Status Segmentation

Hard-core Split loyals Shifting loyals Switchers

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.

Evaluating Market Segments
‡ 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?

Targeting Segments - Overview

Market Preference Patterns

Undifferentiated (Mass) Marketing
± Ignores segmentation opportunities

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.

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

Socially Responsible Targeting
‡ 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

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

Positioning Example

eBay¶s positioning: No matter what ³it´ is, you can find ³it´ on eBay!

Positioning Example
To (target segment and need) our (brand) is a (concept) that (point-of-difference).
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 SUVs Price vs. Orientation Dimensions

Positioning Strategy
‡ Competitive advantages ‡ Points of Parity ‡ Points of Difference => Differentiation Positioning results from differentiation and competitive advantages. Positioning may change over time.

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.

Positioning Errors
‡ 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.

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