CHAPTER 6: MARKET SEGMENTATION,

TARGETING AND POSITIONING

6.1 Market segmentation:
6.1.1 Definition and the importance of segmentation
6.1.2 Segmenting consumer market
6.1.3 Segmenting business market
6.1.4 Requirements for effective segmentation

6.2 Market targeting:
6.2.1 Definition
6.2.2 Evaluating market segments
6.2.3 Market targeting strategies

6.3 Market positioning
6.3.1 Definition
6.3.2 Positioning maps
6.3.3 Choosing a Differentiation and Positioning Strategy
 Target marketing and the STP process

STP is a three-step approach to building a target marketing
strategy. STP stands for:

Step 1: Segment your market.

• 

Step 2: Target your best customers.

• 

Step 3: Position your offering.

• 
6.1. Market segmentation
6.1.1 Definition and the importance of segmentation:

Market segmentation is dividing a market into smaller segments

with distinct needs, characteristics, or behaviors that might require
separate marketing strategies/marketing mixes.
 6.1. Market segmentation
6.1.1 Definition and the importance of segmentation:

Q&A: Why market segmentation?

 6.1. Market segmentation
6.1.1 Definition and the importance of segmentation:

Reasons for market segmentation:

ü  Buyers are too numerous, and varied in their needs and buying
practices.

ü  The companies cant appeal to all buyers in the marketplace, or at
least not to all buyers in the same way.

ü  Helps companies learn the structure of the market and discover

the “market holes” – niche market (where there are demands not
satisfied yet)


6.1. Market segmentation
6.1.2 Segmenting consumer market:

Criteria:

Ø Geographical
Ø Demographical
Ø Psychographic
Ø Behavioral
Ø Using multiple criteria
 6.1. Market segmentation

6.1.2. Segmenting Consumer Market:

Geographic Demographic Psychographic Behavioral

Divides the
Divides the
market into Divides buyers Divides buyers into
market into groups based on: into different groups based on:
different groups based on:
•  age
geographical § Social class •  Occasions
•  gender
units such as: § Lifestyle,
•  family size, •  Benefit sought
•  nations § Personality traits
•  family life cycle •  User status
•  regions
•  income, •  User rate
•  states, •  Loyalty status
•  countries, •  Occupation,
•  cities, •  Education,
•  Neighborhood •  religion,
•  Population
•  density •  race,
•  Climate. •  Generation
•  nationality
 6.1. Market segmentation
6.1.2 Segmenting consumer market:
 6.1. Market segmentation
6.1.2 Segmenting consumer market:

Ø Geographical

 6.1. Market segmentation
6.1.2 Segmenting consumer market:

Ø  Demographic

Demographic segmentation is the most popular segmentation

method because consumer needs, wants, and usage often vary
closely with demographic variables that are easier to measure
than other types of variables.


 6.1. Market segmentation
6.1.2 Segmenting consumer market:

Ø  Demographic

 6.1. Market segmentation
6.1.2 Segmenting consumer market:

Ø  Demographic

 6.1. Market segmentation
6.1.2 Segmenting consumer market:

 6.1. Market segmentation
6.1.2 Segmenting consumer market:

Ø  Using Multiple Segmentation criteria

Marketers rarely limit their segmentation analysis to only one or a
few variables only. Rather, they often use multiple segmentation
bases in an effort to identify smaller, beXer-defined target groups.

Examples:

§  Geodemographic segmentation is an example of multivariable
segmentation that divides groups into consumer lifestyle paXerns.

§  Banks may not only identify a group of wealthy, retired adults but
also, within that group, distinguish several segments based on their
current income, assets, savings and risk preferences, housing, and
lifestyles.
6.1. Market segmentation
6.1.3 Segmenting business market:

B u s i n e s s b u ye r s c a n b e s e g m e n t e d g e o g r a p h i c a l l y,
demographically (industry, company size), or by benefits sought,
user status, usage rate, and loyalty status.

Business marketers also use some additional variables, such as
customer operating characteristics, purchasing approaches,
situational factors, and personal characteristics.

←Geographic variables (location)
←Demographics (industry, company size)
←Customer-Operating characteristics
←Purchasing approaches
←Situational factors
←Personal characteristics


6.1. Market segmentation
6.1.3 Segmenting business market:

Examples:


§ American Express targets businesses in 3 segments: merchants,
corporation, and small business. It has developed distinct
marketing programs for each segment.

§ Starbucks has developed distinct marketing programs for each

of its two business segments: the office coffee segment and the
food service segment.
 6.1 Market segmentation

6.1.4. Requirements for effective segmentation:

To be useful, market segments must be:

Measurable Accessible Substantial

Differentiable Actionable
 6.1 Market segmentation

6.1.4. Requirements for effective segmentation:

To be useful, market segments must be:

ü  Measurable: Examples include the size, purchasing power,
and profiles of the segments
ü  Accessible: Refers to the fact that the market can be
effectively reached and served
ü  Substantial: Refers to the fact that the markets are large and
profitable enough to serve
ü  Differentiable: Refers to the fact that the markets are
conceptually distinguishable and respond differently to
marketing mix elements and programs
ü  Actionable: Refers to the fact that effective programs can be
designed for aXracting and serving the segments

6.2. Market targeting
6.2.1 Definition:
Target market consists of a set of buyers who share common
needs or characteristics that the company decides to serve.

Market Targeting: the process of selecting the market
segment or segments to enter and matching a specialized
marketing mix with the needs of the chosen segment(s).
 6.2. Market targeting

6.2.2. Evaluating market segments:
The purpose of evaluating market segments is to understand how aXractive a
segment is in fulfilling a company’s objectives.
Segment Company
Segment size structural objectives and
and growth attractiveness resources

Ø  “ R i g h t s i z e a n d Porter’s 5 forces: A company should only

growth” is a relative enter segments in
Ø  Competitors
matter which it can create
Ø  New entrants superior customer
Ø  The largest, fastest- value and gain
Ø  Substitute products
growing advantages over its
segments are not Ø  Power of buyers competitors.
always the most
Ø  Powerful suppliers
attractive ones for
every company
6.2. Market targeting

6.2.3. Market targeting strategies
6.2. Market targeting

6.2.3 Market targeting strategies

Undifferentiated marketing

Undifferentiated marketing (or mass
marketing) targets the whole market with one
offer.
Ø Mass marketing
Ø Focuses on common needs rather than what’s different
Ø  The company designs a product and a marketing
program that will appeal to the largest number of buyers.
6.2. Market targeting
6.2.3 Market targeting strategies

Undifferentiated marketing

6.2. Market targeting
6.2.3 Market targeting strategies

Differentiated marketing

Differentiated marketing (or segmented

marketing) targets several different market
segments and designs separate offers for each.

Ø  Goal is to achieve higher sales and stronger position

Ø  More expensive than undifferentiated marketing: segments

requires extra marketing research, forecasting, sales

analysis, promotion planning, and channel
management
6.2. Market targeting
6.2.3 Market targeting strategies

Differentiated marketing
6.2. Market targeting
6.2.3 Market targeting strategies

Concentrated marketing


Concentrated marketing (or niche marketing)
targets a large share of one or a few segments
or niches.

Ø  Greater knowledge of consumer needs

Ø  More effective and efficient marketing mix programs.

Ø  Can be highly profitable but involves higher- than-normal risks

6.2. Market targeting
6.2.3 Market targeting strategies

Concentrated marketing

6.2. Market targeting
6.2.3. Market targeting strategies

Micromarketing
Micromarketing is the practice of tailoring products and
marketing programs to suit the tastes of specific individuals and
locations. Rather than seeing a customer in every individual,
micro marketers see the individual in every customer.
Ø Local marketing: tailoring brands and promotions to the needs and wants
of local customer groups—cities, neighborhoods, and even specific stores
Ø Individual marketing: tailoring products and marketing programs to the
needs and preferences of individual customers—also called
one-to-one marketing, customized marketing, and markets-of-one
marketing.
6.2. Market targeting
6.2.3. Market targeting strategies

Local marketing

Benefits of local marketing:
– Increased marketing effectiveness in competitive markets
– More customer-specific offerings

Challenges of local marketing:
– Increased manufacturing and marketing costs
– Less economy of scale
– Logistics
– Dilution of company image

6.2. Market targeting
6.2.3. Market targeting strategies

Local marketing

6.2. Market targeting
6.2.3. Market targeting strategies

Individual marketing
6.3. Market positioning
6.3.1. Definition

Product positioning is the way the product is defined by

consumers on important aXributes - the place the product
occupies in consumers’ minds relative to competing products.

Example:

q Toyota is positioned on economy

q Mercedes is positioned on luxury

q BMW is positioned on performance

q Volvo is positioned on safety

6.3. Market positioning
6.3.1. Definition

Effective positioning means determining:

ü What consumers currently think about the product,
especially in relation to competing products?
ü What the marketer wants consumers to think about the
product?
ü Which positioning strategy will elevate the consumers’
current product image to the desired product image?

6.3. Market positioning
6.3.1. Definition

The positioning strategy must determine where a company
wants to go and specify how to get there by positioning the
product according to any of the following ways:

– Price/Quality
– Product AXributes
– Symbol
– Product User
– Product Class
– Competition

6.3. Market positioning
6.3.3. Positioning maps:

Positioning maps show consumer perceptions of their
brands versus competing products on important buying
dimensions.



6.3. Market positioning
6.3.3. Choosing a Differentiation and Positioning Strategy:

1. Identifying a 3. Selecting an
set of possible 2. Choosing
the right overall
competitive competitive positioning
advantages to strategy
advantages
build a position
6.3. Market positioning
6.3.4. Choosing a Differentiation and Positioning Strategy:

Identifying Possible Value Differences and Competitive Advantages

Identifying a set of possible competitive advantages to
build a position by providing superior value from:

– Product differentiation
– Service differentiation
– Channels
– People
– Image

Competitive advantage is an advantage over competitors
gained by offering consumers greater value, either
through lower prices or by providing more benefits that
justify higher prices.
6.3. Market positioning
6.3.4. Choosing a Differentiation and Positioning Strategy:

Choosing the Right Competitive Advantage

Ø How many differences to promote?
Ø Which difference to promote?

A difference to promote should be:

• Important: Delivering a highly valued benefit to target buyers.
• Distinctive: Competitors do not offer the difference, or the company
can offer it in a more distinctive way.
• Superior: The difference is superior to other ways that customers
might obtain the same benefit.
• Communicable: The difference is communicable and visible to
buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.
6.3. Market positioning
6.3.4. Choosing a Differentiation and Positioning Strategy:

Selecting an Overall Positioning Strategy


Value proposition is the full mix of benefits upon which a brand is
positioned.

– More for more
– More for the same
– Same for less
– Less for much less
– More for less

It is the answer to the customer’s question: “Why should I buy your
brand?”

6.3. Market positioning
6.3.4. Choosing a Differentiation and Positioning Strategy:
Selecting an Overall Positioning Strategy

6.3. Market positioning
6.3.4. Choosing a Differentiation and Positioning Strategy:
Selecting an Overall Positioning Strategy

Possible value propositions:

v More for More: providing the most upscale product or service
and charging a higher price to cover the higher costs.
v More for the Same: introducing a brand offering comparable
quality but at a lower price.
v The Same for Less: offering the same for less.
v Less for Much Less: Products that offer less and therefore cost
less.
v More for Less: Offer more benefits but at a lower price.