MARKET SEGMENTATION AND PRODUCT POSITIONING

1. Analyze Consumer – Product Relationships

The first task in segmenting markets is to analyze consumer–product

relationships. This entails analysis of the affect and cognition, behavior, and
environments involved in the purchase/consumption process for the particular
product. There are three general approaches to this task. First, marketing
managers may brainstorm the product concept and consider what types of
consumers are likely to purchase and use the product and how they differ from
those less likely to buy. Second, focus groups and other types of primary
research can be used for identifying differences in attributes, benefits, and
values of various potential markets. Third, secondary research may further
investigate differences in potential target markets, determine the relative sizes
of those markets, and develop a better understanding of consumers of this or
similar products.

For many established product categories, considerable information is available

for analyzing various markets. For product categories like automobiles,
toothpaste, and many food products, various target markets are well
established. For example, the category of automobile buyers includes luxury,
sports, midsize, compact, and subcompact markets.

Within each of these markets, further analysis may offer insights into market
opportunities. For example, Porsche sought market growth when it introduced
the Boxster. The Porsche 911 was targeted to 45- to 60-year-old men with
household incomes of $225,000 or more. Although this is a highly profitable
market, it is relatively small and limited Porsche’s chances for growth. The
Boxster was introduced and targeted to 35- to 50-year-olds with household
incomes of $150,000 and priced well below the 911. It was designed to increase
sales to men but also to increase the percentage of Porsche sales to women
from 10 to 25 percent. More recently, the company introduced the Cayman S
with a base price of $60,000, between the 911 at $72,000 and the Boxster at
$55,000, to further segment the sports-luxury car market. Thus, Porsche’s
analysis of consumer–product relationship resulted in a strategy of introducing
new models to increase sales and profits.

For many products, the initial breakdown in markets is between the prestige
and mass markets. The prestige market seeks the highest-quality (and often
the highest priced) product available. Often particular products for consumers
in this market have very important meanings, such as expressions of good
taste, expertise, and status. Brands such as Rolex watches, Mercedes-Benz
automobiles, Hartmann luggage, and Gucci handbags are targeted to these
consumers.
The marketing strategies for these products generally involve selling them in
exclusive stores at high prices and promoting them in prestige media. For
consumers in this market, affect and cognition (feelings about and meaning of
the product), behavior (shopping activities), and environments (information and
store contact) differ from those of consumers in the mass market. Thus, the
initial analysis of consumer– product relationships has important implications
for all of the tasks involved in market segmentation and strategy development.

2. Investigate Segmentation Bases

There is no simple way to determine the best bases for segmenting markets. In
most cases, however, at least some initial dimensions can be determined from
previous purchase trends and managerial judgment. For example, suppose we
wish to segment the market for all-terrain vehicles. Several dimensions come to
mind for initial consideration: sex (male); age (18 to 35); lifestyle (outdoorsy);
and income level (perhaps $25,000 to $40,000). At a minimum, these variables
should be included in subsequent segmentation research.

Four specific types of segmentation are discussed next: benefit, psychographic,

person/situation, and geodemographic segmentation.

2.1 Benefit Segmentation

The belief underlying the benefit segmentation approach is that the benefits
people seek in consuming a given product are the basic reasons for the
existence of true market segments. This approach thus attempts to measure
consumer value systems and consumers’ perceptions of various brands in a
product class. The classic example of a benefit segmentation, provided by
Russell Haley, concerned the toothpaste market. Haley identified four basic
segments—Sensory, Sociable, Worrier, and Independent. Haley argued that
this segmentation could be very useful for selecting advertising copy, media,
commercial length, packaging, and new-product design. For example, colorful
packages might be appropriate for the Sensory segment, perhaps aqua
packages (to indicate fluoride) for the Worrier group, and gleaming-white
packages for the Sociable segment because of their concern with white teeth.
2.2 Psychographic Segmentation

Psychographic segmentation divides markets on differences in consumer

lifestyles. Generally, psychographic segmentation follows a post hoc model.
That is, consumers first are asked a variety of questions about their lifestyles
and then are grouped on the basis of the similarity of their responses.
Lifestyles are measured by asking consumers about their activities (work,
hobbies, vacations), interests (family, job, community), and opinions (about
social issues, politics, business). The activity, interest, and opinion (AIO)
questions in some studies are very general. In others, at least some questions
are related to specific products. Questions or attitude statements, designed to
identify personality traits, are also often included.

Psychographic segmentation studies often include hundreds of questions and

provide a tremendous amount of information about consumers. Thus,
psychographic segmentation is based on the idea that “the more you know and
understand about consumers, the more effectively you can communicate and
market to them.”

The number of psychographic segments in the U.S. or other countries varies

depending on the goal of the research and the level of specificity required by
the marketer. There is no “correct” number of psychographic segments or
“correct” number of lifestyles.

The best-known psychographic segmentation is called VALS™, which originally

stood for “values and lifestyles.” It was developed in the 1970s to explain
changing U.S. values and lifestyles. It has since been redone to enhance its
ability to predict consumer behavior. VALS™ is a product of SRI Consulting
Business Intelligence.

The VALS™ groups are arranged horizontally by three primary motivations

(Ideals, Achievement, and Self-expression) and vertically by high or low
resources. Resources include income, education, self-confidence, leadership
skills, and energy. Ideals-motivated Thinkers and Believers are driven by
knowledge and principles. Achievement-motivated Achievers and Strivers are
driven by a desire to demonstrate success to their peers. Self-expression–
motivated Experiencers and Makers are driven by a desire for social or physical
activity, variety, and risk taking. Innovators with extremely high resource levels
are very active consumers and are therefore difficult to place in one of the three
motivations. Survivors, on the opposite end of the resource spectrum, are not
active enough consumers to have a clearly defined motivational category.
Marketers purchase custom research data that show which VALS™ groups are
the primary buyers of specific products and services. This information is used
to select consumer targets for advertising or promotion. VALS™ types can also
be tied to a number of other consumer product and media databases including
Media mark Research Intelligence’s (MRI’s) “Survey of American Consumers.”
In addition, SRICBI offers Geo VALS™, which links VALS™ to local marketing
initiatives by identifying VALS™ consumer groups residing within a specific
block group or zip code.

2.3 Person/Situation Segmentation

Markets can often be divided on the basis of the usage situation in conjunction
with individual differences among consumers. This approach is known as
person/situation segmentation. For example, clothing and footwear markets
are divided not only on the basis of the consumer’s sex and size but also on
usage situation dimensions such as weather conditions, physical activities, and
social events. As another example, expensive china is designed for special
occasions; Corelle dinnerware is designed for everyday family use. One expert
argues, “In practice the product whose unique selling proposition (quality,
features, image, packaging, or merchandising) is not targeted for particular
people in particular usage situations is probably the exception rather than the
rule.” This approach combines not only the person and the situation but also
other important segmentation bases: benefits sought, product and attribute
perceptions, and marketplace behavior.

Operationally, this segmentation approach involves the following steps:

Step 1: Use observational studies, focus group discussions, and secondary

data to discover whether different usage situations exist and whether they are
determinant, in the sense that they appear to affect the importance of various
product characteristics.

Step 2: If step 1 produces promising results, undertake a benefit, product

perception, and reported market behavior segmentation survey of consumers.
Measure benefits and perceptions by usage situation as well as by individual
difference characteristics. Assess situation usage frequency by recall estimates
or usage-situation diaries.

Step 3: Construct a person/situation segmentation matrix. The rows are the

major usage situations, and the columns are groups of users identified by a
single characteristic or combination of characteristics.
Step 4: Rank the cells in the matrix in terms of their submarket sales volume.
The person/situation combination that results in the greatest consumption of
the generic product would be ranked first.

Step 5: State the major benefits sought, important product dimensions, and
unique market behavior for each nonempty cell of the matrix. (Some types of
people will never consume the product in certain usage situations.)

Step 6: Position your competitors’ offerings within the matrix. The

person/situation segments they currently serve can be determined by the
product feature they promote and other marketing strategies.

Step 7: Position your offering within the matrix on the same criteria.

Step 8: Assess how well your current offering and marketing strategy meet the
needs of the submarket compared to the competition’s offering.

Step 9: Identify market opportunities based on submarket size, needs, and

competitive advantage.

This approach incorporates all four of the major factors discussed in this text:
affect and cognition, behavior, environment, and marketing strategy. It thus
offers a more comprehensive analysis than many other approaches.

2.4 Geodemographic Segmentation

One problem with many segmentation approaches is that although they

identify types or categories of consumers, they do not identify specific
individuals or households within a market. Geodemographic segmentation
identifies specific households in a market by focusing on local neighborhood
geography (such as zip codes) to create classifications of actual, addressable,
mappable neighborhoods where consumers live and shop. One geodemographic
system created by Claritas, Inc., is called PRIZM NE, which stands for
“Potential Ranking Index of ZIP Markets—New Evolution.” The system classifies
every U.S. neighborhood into one of 66 segments on the basis of social group
and lifestyle stage. Each group and segment is based on zip codes,
demographic information from the U.S. Census, and information on product
use, media use, and lifestyle preferences. The PRIZM NE system includes maps
of different areas that rank neighborhoods on their potential to purchase
specific products and services. The PRIZM NE segmentation is available on
major marketing databases from leading providers such as ACNielsen,
Arbitron, Gallup, IRI, J. D. Powers, Mediamark, and Nielsen Media Research.
The PRIZM NE system is based on the assumptions that consumers in
particular neighborhoods are similar in many respects and that the best
prospects are those who actually use a product or other consumers like them.
Marketers use PRIZM NE to better understand consumers in various markets,
what they are like, where they live, and how to reach them. These data help
marketers with target market selection, direct marketing campaigns, site
selection, media selection, and analyzing sales potential in various areas. You
can learn more about geodemography by visiting Claritas’s Web site at
www.claritas.com and www.mybestsegments.com.

3. Develop Product Positioning

By this time, the firm should have a good idea of the basic segments of the
market that potentially could be satisfied with its product. The next step
involves product positioning: positioning the product relative to competing
products in the minds of consumers. A classic example of positioning is the
7UP “Uncola” campaign. Before this campaign, Seven-Up had difficulty
convincing consumers that the product could be enjoyed as a soft drink and
not just as a mixer. Consumers believed colas were soft drinks, but they
apparently did not think of 7UP in this way. By promoting 7UP as the Uncola,
the company positioned it both as a soft drink that could be consumed in the
same situations as colas and as an alternative to colas. This positioning was
very successful.

The key objective of positioning strategy is to form a particular brand image in

consumers’ minds. This is accomplished by developing a coherent strategy that
may involve all of the marketing mix elements. There are at least five
approaches to positioning strategy: positioning by attribute, by use or
application, by product user, by product class, and by competitors.

3.1 Positioning by Attribute

Probably the most frequently used positioning strategy is positioning by

attribute: associating a product with an attribute, a product feature, or a
customer feature. Consider imported automobiles. Hyundai emphasizes low
price. Volvo has stressed safety and durability, showing commercials of crash
tests and citing statistics on the average long life of its cars. Fiat, in contrast,
has made a distinct effort to position itself as a European car with European
craftsmanship. BMW has emphasized handling and engineering efficiency,
using the tag line “the ultimate driving machine” and showing BMW
performance capabilities at a racetrack.

A new product can also be positioned with respect to an attribute that

competitors have ignored. Paper towels had emphasized absorbency until Viva
stressed durability, using demonstrations supporting the claim that Viva
“keeps on working.” Bounty paper towels are positioned as being “microwave
safe” with dyes that do not come off in microwave ovens.

Sometimes a product can be positioned in terms of two or more attributes

simultaneously. In the toothpaste market, Crest became a dominant brand
with positioning as a cavity fighter, a claim supported by a medical group
endorsement. Aim, however, achieved its 10 percent market share by
positioning in terms of two attributes, good taste and cavity prevention.
Aquafresh was introduced by Beecham as a gel/paste that offers both cavity-
fighting and breath-freshening benefits.

The price/quality attribute dimension is commonly used for positioning

products as well as stores. In many product categories, some brands offer more
in terms of service, features, or performance—and a higher price is one signal
to the customer of this higher quality. For example, Curtis-Mathes TVs are
positioned as high-priced, high quality products. Conversely, other brands
emphasize low price and good quality.

In general-merchandise stores, Neiman Marcus, Bloomingdale’s, and Saks

Fifth Avenue are near the top of the price/quality scale. Below them are
Macy’s, Robinson’s, Bullock’s, Rich’s, Filene’s, and so on. Stores such as Target
and JCPenney are positioned below these but above discount stores such as
Kmart or Shopko. Interestingly, JCPenney and Sears have both upgraded their
positions to avoid competing directly with successful discount and warehouse
stores such as Walmart.

3.2 Positioning by Use or Application

Another strategy is positioning by use or application. For many years,

Campbell’s soup was positioned for use at lunchtime and advertised
extensively over noontime radio. Now many Campbell’s soups are positioned for
use in sauces and dips or as ingredients in main dishes. AT&T has positioned
long-distance calling by particular uses. For example, the “reach out and touch
someone” campaign positioned long distance calls as a method of
communicating with loved ones.

Products can have multiple positioning strategies, although increasing the

number involves difficulties and risks. Often a positioning-by-use strategy
represents a second or third position designed to expand the market. Thus,
Gatorade, introduced as a summer beverage for athletes who need to replace
body fluids, attempted to develop a winter positioning strategy as the beverage
to drink when one is ill and the doctor recommends drinking plenty of fluids.
Similarly, Quaker Oats attempted to position a breakfast food as a natural
whole-grain ingredient for recipes. Arm & Hammer has successfully positioned
its baking soda as an odor-destroying agent in refrigerators.

3.3 Positioning by Product User

Another approach is positioning by product user or a class of users. Revlon’s

Charlie cosmetics line was positioned by associating it with a specific lifestyle
profile. Johnson & Johnson increased its market share from 3 to 14 percent
when it repositioned its shampoo from a product used for babies to one used
by people who wash their hair frequently and therefore need a mild shampoo. A
similar strategy was used to get adults to use Johnson’s Baby Lotion.

Miller High Life, once the “champagne of bottled beers,” was purchased by the
upper class and had an image of being a woman’s beer. Philip Morris
repositioned it as a beer for the “heavily beer-drinking, blue-collar working
man.” Miller’s Lite beer used convincing beer-drinking personalities to position
it as a beer for the heavy beer drinker who dislikes that “filled-up feeling.” In
contrast, earlier efforts to introduce low-calorie beers positioned with respect to
the low-calorie attribute were dismal failures. Miller’s positioning strategies are
in part why it moved up to the number two brewing company in the United
States during that period.

3.4 Positioning by Product Class

Some critical positioning decisions involve positioning by product class. For

example, Maxim freeze-dried coffee was positioned with respect to regular and
instant coffee. Some margarines are positioned with respect to butter. A maker
of dried milk introduced an instant breakfast drink positioned as a breakfast
substitute and a virtually identical product positioned as a meal substitute for
those on diets. Caress soap, made by Lever Brothers, was positioned as a bath
oil product rather than a soap. The 7UP example we discussed earlier is also
an example of positioning by product class. Recently dates have been
positioned as the “wholesomely sweet alternative to raisins” in television
commercials.

3.5 Positioning by Competitors

In most positioning strategies, an explicit or implicit frame of reference is the

competition (positioning by competitors) . Often the major purpose of this type
of positioning is to convince consumers that a brand is better than the market
leader (or another well-accepted brand) on important attributes. Positioning
with respect to a competitor is commonly done in advertisements in which a
competitor is named and compared. For example, Burger King ads argued that
McDonald’s burgers had less beef and did not taste as good as Burger King’s
because McDonald’s product was not flame broiled. Both Pepsi and Coke have
run comparative ads claiming their brand tastes better than the other one.

3.6 Positioning Maps

One way to investigate how to position a product is by using a positioning map.

A positioning map is a visual depiction of consumers’ perceptions of
competitive products, brands, or models. It is constructed by surveying
consumers about various product attributes and developing dimensions and a
graph indicating the relative positions of competitors.

Positioning maps can give marketers a sense of how consumers perceives their
brands relative to competitors and suggest positioning strategies.

4. Select Segmentation Strategy

After the analysis in the previous stages is completed, the appropriate

segmentation strategy can be considered. There are four basic alternatives.
First, the firm may decide not to enter the market. Analysis to this stage may
reveal there is no viable market niche for the product, brand, or model. Second,
the firm may decide not to segment but to be a mass marketer.

This may be the appropriate strategy in at least three situations:

1. When the market is so small that marketing to a portion of it is not

profitable.

2. When heavy users make up such a large proportion of the sales volume that
they are the only relevant target.

3. When the brand is dominant in the market and targeting to a few segments
would not benefit sales and profits.

Third, the firm may decide to market to only one segment. Fourth, the firm
may decide to market to more than one segment and design a separate
marketing strategy for each.

In any case, marketers must have some criteria on which to base segmentation
strategy decisions. Three important criteria are that a viable segment must be
measurable, meaningful, and, marketable.

1. Measurable. Marketers must be able measure the segment’s size and

characteristics. For example, one difficulty with segmenting on the basis of
social class is that the concept and its divisions are not clearly defined and
measured. Alternatively, income is much easier to measure.
2. Meaningful. A meaningful segment is one that is large enough to have
sufficient sales and growth potential to offer long-run profits.

3. Marketable. A marketable segment is one that can be reached and served

profitably.

Segments that meet these criteria are viable markets for the product. The
marketer must now give further attention to the marketing mix.

(Source: Peter, J. Paul & Olson, Jerry, “Consumer Behavior and Marketing
Strategy” 9th Edition, 2010)