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

Micromarketing
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

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

Positioning Example

eBays 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).
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

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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.