Chapter 8

Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers
Copyright 2008 Pearson Education Canada Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. Define the three steps of target marketing: market segmentation, target marketing, and market 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 target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Case Study Art Gallery of Ontario - AGO

Targeting critical segments is critical for the AGO to survive. The 30 to 40-year old urban professionals may be one of the few segments with enough money to support cultural institutions. However, this Me Generation is unphilantropic relative to their wealth. They want cars, houses, big jewellery. Potential donors in this cohort have a desire for interaction, involvement, and meaningful comment on art as well on the AGOs tactics. Create a distinct position to attract these younger donors. New program: New Founders initiative In return for their support, donors would be invited to small dinner parties and exclusive tours of exhibitions. The program has been a resounding success.
8-3 Principles of Marketing, Seventh Canadian Edition

Copyright 2008 Pearson Education Canada

Learning Goals
1. Define the three steps of target marketing: market segmentation, target marketing, and market 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 target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Segmentation, Targeting, and Positioning

Market segmentation: dividing market into distinct groups with distinct needs, characteristics, or behaviours, who might require separate products or marketing mixes Target marketing: choosing which group(s) to appeal to Market positioning: creating a clear, distinctive, and desirable position in the target consumers mind, relative to competition

Copyright 2008 Pearson Education Canada

8-5

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. Define the three steps of target marketing: market segmentation, target marketing, and market 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 target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Segmenting Consumer Markets

Geographical segmentation Demographic segmentation
Most popular bases for segmenting consumer markets

Psychographic segmentation
Lifestyle, social class, and personality-based segmentation

Behavioural segmentation
Occasions, benefits sought, user status, usage rate, loyalty status.

Using multiple segmentation bases

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Principles of Marketing, Seventh Canadian Edition

Geographic Segmentation Variables

World region or country U.S. region State City Neighborhood City or metro size Density Climate

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Principles of Marketing, Seventh Canadian Edition

Demographic Segmentation Variables

Age Gender Family size Family life cycle Income Occupation Education Religion Race Generation Nationality

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Principles of Marketing, Seventh Canadian Edition

Behavioural Segmentation Variables

Occasions Benefits User status User rates Loyalty status Readiness stage Attitude toward the product

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Discussion Question
Based on the car examples on the following slide, how do car manufacturers use the following segments when marketing products?
Geographic Demographic Psychographic behavioural
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Copyright 2008 Pearson Education Canada

Principles of Marketing, Seventh Canadian Edition

Segmenting Business Markets

Geographic segmentation Demographic segmentation
Industry, company size, location

Operating characteristics
Technology, usage status, customer capabilities

Purchasing approaches Situational factors

Urgency, specific application, size of order

Personal characteristics
Buyer-seller similarity, attitudes toward risk, loyalty

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Principles of Marketing, Seventh Canadian Edition

Segmenting International Markets

Geographic segmentation
Location or region

Economic factors
Population income or level of economic development

Political and legal factors

Type/stability of government, monetary regulations, amount of bureaucracy, etc.

Cultural factors
Language, religion, values, attitudes, customs, behavioural patterns

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Principles of Marketing, Seventh Canadian Edition

Segmenting International Markets

Intermarket segmentation
Forming segments of consumers who have similar needs, even though they live in different countries

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Principles of Marketing, Seventh Canadian Edition

Segmenting Markets Effectively

Measurable
Size, purchasing power, and profile of segment

Accessible
Can be reached and served

Substantial
Large and profitable enough to serve

Differentiable
Respond differently

Actionable
Effective programs can be developed

Copyright 2008 Pearson Education Canada

8-15

Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. Define the three steps of target marketing: market segmentation, target marketing, and market 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 target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Target Marketing
Target Market
Consists of a set of buyers who share common needs or characteristics that the company decides to serve

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Target Marketing
Evaluating Market Segments
Segment size and growth Segment structural attractiveness
Level of competition Substitute products Power of buyers Powerful suppliers

Company objectives and resources

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Target Marketing Strategies

Undifferentiated (mass) marketing:
Market coverage strategy that ignores market segment differences and targets the whole market with one offer

Differentiated (segmented) marketing:

Market coverage strategy that targets several market segments and designs separate offers for each

Concentrated (niche) marketing:

Market coverage strategy in which a company pursues a large share of one or a few submarkets

Micromarketing:
The practice of tailoring products and marketing programs to the needs/wants of specific individuals and local customer groups Includes: local marketing and individual marketing

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Principles of Marketing, Seventh Canadian Edition

Choosing a Target Marketing Strategy

Considerations include:
Company resources The degree of product variability Products life-cycle stage Market variability Competitors marketing strategies

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Principles of Marketing, Seventh Canadian Edition

Target Marketing
Socially Responsible Targeting
Some segments, especially children, are at special risk Spillover from adult to children markets Many potential abuses on the Internet, including fraud Internet shoppers Products of questionable benefit Controversy occurs when the methods used are questionable
Copyright 2008 Pearson Education Canada 8-21 Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. Define the three steps of target marketing: market segmentation, target marketing, and market 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 target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Positioning
The way the product is defined by consumers on
important attributes - the place the product occupies in consumers minds relative to competing products relative to competing products Involves implanting the brands unique benefits and differentiation in the customer mind Perceptual positioning maps show perceptions of brands on important buying dimensions

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Principles of Marketing, Seventh Canadian Edition

Choosing a Positioning Strategy

Identifying Possible Competitive Advantages Choosing the right competitive advantage Selecting an Overall Positioning Strategy Differentiation can be based on:
Products Services Channels People Image

Copyright 2008 Pearson Education Canada

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Principles of Marketing, Seventh Canadian Edition

Choosing a Positioning Strategy

Identifying Possible Competitive Advantages Choosing the right competitive advantages Selecting an Overall Positioning Strategy How many differences to promote?
Unique selling proposition Several benefits

Which differences to promote? Criteria include:

Important Distinctive Superior Communicable Preemptive Affordable Profitable

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Principles of Marketing, Seventh Canadian Edition

Choosing a Positioning Strategy

Identifying Possible Competitive Advantages Choosing the right competitive advantages Selecting an Overall Positioning Strategy Value propositions represent the full positioning of the brand Possible value propositions:
More for more More for the same More for less The same for less Less for much less

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Principles of Marketing, Seventh Canadian Edition

WestJets Value Proposition: Less for Much Less

Founded in 1996 to provide low-fare air travel across western Canada Specializes in serving the VFR market (people visiting friends and relatives). Main competitor: the family car People would choose to fly rather than drive if offered low fares One type of plane, offers basic in-flight service (no meals, no movies), single class service, no baggage transfer services with other airlines, etc. However: less service for less money is defined as fewer amenities for a lower fare, not less customer service. Generates $1 billion in revenues

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Principles of Marketing, Seventh Canadian Edition

Developing a Positioning Statement

A positioning statement summarizes the company or brand positioning EXAMPLE: To (target segment and need) our (brand) is (concept) that (point-of-difference)

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Principles of Marketing, Seventh Canadian Edition

Communicating and Delivering the Chosen Position

Companies must take strong steps to deliver and communicate the desired position to target consumers The marketing mix efforts must support the positioning strategy Positions must be monitored and adapted over time to match changes in consumer needs and competitors strategies
Copyright 2008 Pearson Education Canada 8-29 Principles of Marketing, Seventh Canadian Edition

Learning Goals
1. Define the three steps of target marketing: market segmentation, target marketing, and market 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 target marketing strategy 4. Discuss how companies position their products for maximum competitive advantage in the marketplace

Copyright 2008 Pearson Education Canada

8-30

Principles of Marketing, Seventh Canadian Edition