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Chapter
Chapter 44
Market Segmentation,
Targeting, and Positioning
for Competitive Advantage
Designing a Customer-Driven
Marketing Strategy

 Copyright 1999 Prentice Hall

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Chapter
Chapter objective
objective
1. Define the major steps in designing a customer
value–driven marketing strategy: market
segmentation, targeting, differentiation, and
positioning.
2. List and discuss the major bases for segmenting
consumer and business markets.
3. explain how companies identify attractive market
segments and choose a market-targeting
strategy.
4. Discuss how companies differentiate and
position their products for maximum competitive
advantage.

 Copyright 1999 Prentice Hall

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 Copyright 1999 Prentice Hall

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Basic
Basic concepts
concepts
Market segmentation
•Dividing a market into distinct groups of buyers who have different
needs, characteristics, or behaviors and who might require separate
marketing strategies or mixes.

Market targeting (targeting)

•Evaluating each market segment’s attractiveness and selecting one
or more segments to serve.

Differentiation
•Actually differentiating the market offering to create superior
customer value.

positioning
•Arranging for a market offering to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target
consumers.

 Copyright 1999 Prentice Hall

Steps
Steps in
in Segmentation,
Segmentation,
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Targeting,
Targeting, and
and Positioning
Positioning

6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
3. Develop Measures Targeting
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
1. Identify Bases Market Segmentation
for Segmenting the Market

 Copyright 1999 Prentice Hall

Step
Step 1.
1. Market
Market Segmentation
Segmentation
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Levels
Levels of
of Market
Market Segmentation
Segmentation
Mass
Mass Marketing
Marketing
Same
Same product
product to
to all
all consumers
consumers
(no
(no segmentation)
segmentation)

Segment
Segment Marketing
Marketing
Different
Different products
products to
to one
one or
or more
more segments
segments
(some
(some segmentation)
segmentation)

Niche
Niche Marketing
Marketing
Different
Different products
products to
to subgroups
subgroups within
within segments
segments
(( more
more segmentation)
segmentation)

Micromarketing
Micromarketing
Products
Products to
to suit
suit the
the tastes
tastes of
of individuals
individuals or
or locations
locations
(complete
(complete segmentation)
segmentation)

 Copyright 1999 Prentice Hall

Step
Step 1.
1. Market
Market Segmentation
Segmentation
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Bases
Bases for
for Segmenting
Segmenting Consumer
Consumer Markets
Markets
Geographic
Nations, states,
regions or cities

Demographic
Age, gender,
family size and life cycle,
or income

Psychographic
Social class, lifestyle,
or personality

Behavioral
Occasions, benefits,
uses, or responses

 Copyright 1999 Prentice Hall

Using
Using Multiple
Multiple Segmentation
Segmentation
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Bases:
Bases: Geodemographics
Geodemographics

 Copyright 1999 Prentice Hall

Step
Step 1.
1. Market
Market Segmentation
Segmentation
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Bases
Bases for
for Segmenting
Segmenting Business
Business Markets
Markets

Personal Demographics
Characteristics

Bases
Bases
for
for Segmenting
Segmenting
Situational Business
Business Operating
Factors Markets
Markets Characteristics

Purchasing
Approaches

 Copyright 1999 Prentice Hall

Step
Step 1.
1. Market
Market Segmentation
Segmentation
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Bases
Bases for
for Segmenting
Segmenting International
International Markets
Markets

Industrial
Industrial Markets
Markets

Political/
Political/
Geographic
Geographic Economic
Economic Legal
Legal

Cultural
Cultural Intermarket
Intermarket

 Copyright 1999 Prentice Hall

Step
Step 1.
1. Market
Market Segmentation
Segmentation
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Requirements
Requirements for
for Effective
Effective Segmentation
Segmentation

Measurable
Measurable • Size, purchasing power, profiles
of segments can be measured.

Accessible
Accessible • Segments must be effectively
reached and served.

Substantial
Substantial • Segments must be large or
profitable enough to serve.

Differential
Differential • Segments must respond
differently to different marketing
mix elements & actions.

Actionable
Actionable • Must be able to attract and serve
the segments.

 Copyright 1999 Prentice Hall

Step
Step 2.
2. Market
Market Targeting
Targeting
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Evaluating
Evaluating Market
Market Segments
Segments
• Segment Size and Growth
– Analyze sales, growth rates and expected profitability.

• Segment Structural Attractiveness

– Consider effects of: Competitors, Availability of Substitute
Products and, the Power of Buyers & Suppliers.

• Company Objectives and Resources

– Company skills & resources relative to the segment(s).
– Look for Competitive Advantages.

 Copyright 1999 Prentice Hall

Step
Step 2.
2. Market
Market Targeting/
Targeting/
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Selecting
Selecting Target
Target Market
Market Segments
Segments
Market
Market Coverage
Coverage Strategies
Strategies
Company
Company
Marketing
Marketing Market
Market
Mix
Mix

A. Undifferentiated Marketing
Company
Company
Marketing Segment
Segment 11
Marketing Mix
Mix11
Company
Company Segment
Segment 22
Marketing
MarketingMix
Mix22
Company
Company Segment
Segment 33
Marketing
Marketing Mix
Mix33
B. Differentiated Marketing

Segment
Segment 11
Company
Company
Marketing
Marketing Segment
Mix Segment 22
Mix
Segment
Segment 33
C. Concentrated Marketing
 Copyright 1999 Prentice Hall
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Market-Targeting
Market-Targeting Strategies
Strategies

 Copyright 1999 Prentice Hall

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Target market
•A set of buyers who share common needs or
characteristics that a company decides to serve.
Undifferentiated (mass) marketing
•A market-coverage strategy in which a firm decides
to ignore market segment differences and go after
the whole market with one offer.
Differentiated (segmented)
marketing
•A market-coverage strategy in which a firm targets
several market segments and designs separate
offers for each.

 Copyright 1999 Prentice Hall

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• Concentrated (niche) marketing: A
market-coverage strategy in which a
firm goes after a large share of one or a
few segments or niches.

• Micromarketing: Tailoring products

and marketing programs to the needs
and wants of specific individuals and
local customer segments; it includes
local marketing and individual
marketing.

 Copyright 1999 Prentice Hall

Step
Step 2.
2. Market
Market Targeting
Targeting
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Choosing
Choosing aa Market-Coverage
Market-Coverage
Strategy
Strategy
Company
Resources

Product
Variability

Product’s Stage
in the Product Life Cycle

Market
Variability

Competitors’
Marketing Strategies
 Copyright 1999 Prentice Hall
Step
Step 3.
3. Positioning
Positioning for
for Competitive
Competitive
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Advantage
Advantage
• Product’s Position - the place the product
occupies in consumers’ minds relative to
competing products; i.e. Volvo positions on
“safety”.
product position: The way a product is
defined by consumers on important
attributes—the place it occupies in
consumers’ minds relative to competing
products.
• Marketers must:
– Plan positions to give products the greatest advantage
– Develop marketing mixes to create planned positions

 Copyright 1999 Prentice Hall

 7-19
Step
Step 3.
3. Positioning
Positioning for
for Competitive
Competitive
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Advantage:
Advantage: Strategies
Strategies

Product
Product Product
Product
Class
Class Attributes
Attributes

Away
Away from
from Benefits
Benefits
Competitors
Competitors HH
GG
Offered
Offered
CC

A
A
DD
Against
Against aa E
E
B
Usage
Usage
B
Competitor
Competitor
FF
Occasions
Occasions

Users
Users

 Copyright 1999 Prentice Hall

Steps
Steps to
to Choosing
Choosing and
and Implementing
Implementing
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aa Positioning
Positioning Strategy
Strategy
• Step 1: Identifying a set of possible
differentiations that create competitive
advantage
• Step 2. Selecting the right competitive
advantage. choosing advantages on which
to build a position/for Competitive
Differentiation
• Step 3. selecting an overall positioning
strategy.

• Effectively communicating and delivering

the chosen position to the market.

 Copyright 1999 Prentice Hall

Developing
Developing Competitive
Competitive
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Differentiation
Differentiation
Product
Product Service
Service

Areas
Areas for
for Competitive
Competitive
Differentiation
Differentiation

Personnel
Personnel Image
Image

 Copyright 1999 Prentice Hall

Selecting
Selecting the
the Right
Right Competitive
Competitive
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Advantages
Advantages

Important
Important

Profitable
Profitable Criteria Distinctive
Distinctive
for
Determining
Which
Differences
Affordable
Affordable to Superior
Superior
Promote

Preemptive
Preemptive Communicable
Communicable

 Copyright 1999 Prentice Hall

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• In this chapter, you learned about the major

elements of a customer value–driven
marketing strategy: segmentation,
targeting, differentiation, and positioning.
• Marketers know that they cannot appeal to
all buyers in their markets—or at least not
to all buyers in the same way.
• Therefore, most companies today practice
target marketing— identifying market
segments, selecting one or more of them,
and developing products and marketing
mixes tailored to each.

 Copyright 1999 Prentice Hall