CHAPTER 3

Market Segmentation, Targeting

and Positioning
LEARNING OUTCOMES
3.1 Market segmentation
3.1.1 Criteria for successful segmentation
3.1.2 Bases for segmenting consumer markets
3.2 Market targeting
3.2.1 Strategies for selecting target markets
3.3 Market positioning
3.3.1 Bases for positioning
LO 1 : Market segmentation
LO 1 : Market segmentation
Market
People or organizations with needs or wants and the ability and
willingness to buy.
Market segment
A subgroup of people or organizations sharing one or more
characteristics that cause them to have similar product needs.
Market segmentation
The process of dividing a market into meaningful, relatively similar,
and identifiable segments or groups.
LO 1 : Market segmentation

Criteria for successful segmentation

Substantiality: ☛ A segment must be large enough to warrant
developing and maintaining a special marketing mix. This criterion does
not necessarily mean that a segment must have many potential
customers.
Identifiability and measurability: ☛ Segments must be identifiable and
their size measurable. Data about the population within geographic
boundaries, the number of people in various age categories, and other
social and demographic characteristics are often easy to get, and they
provide fairly concrete measures of segment size.
LO 1 : Market segmentation

Criteria for successful segmentation

Accessibility: ☛ The firm must be able to reach members of targeted
segments with customized marketing mixes. Some market segments
are hard to reach—for example, senior citizens (especially those with
reading or hearing disabilities), individuals who don’t speak English,
and the illiterate.
Responsiveness: ☛ Markets can be segmented using any criteria that
seem logical. Unless one market segment responds to a marketing mix
differently from other segments, however, that segment need not be
treated separately.
LO 1 : Market segmentation
Bases for segmenting consumer markets
LO 1 : Market segmentation

Bases for segmenting consumer markets

Geographic segmentation
Segmenting markets by region of a country or the world, market size,
market density, or climate.
Demographic segmentation
Segmenting markets by age, gender, income, ethnic background, and
family life cycle.
Psychographic segmentation
Market segmentation on the basis of personality, motives, lifestyles,
and geodemographics.
LO 1 : Market segmentation

Bases for segmenting consumer markets

Benefit segmentation
The process of grouping customers into market segments according to
the benefits they seek from the product.
Usage-rate segmentation
Dividing a market by the amount of product bought or consumed.
80/20 principle A principle holding that 20 percent of all customers
generate 80 percent of the demand
LO 2 : Market targeting
Target market
A target market is a group of people or organizations for which an
organization designs, implements, and maintains a marketing mix
intended to meet the needs of that group, resulting in mutually
satisfying exchanges.
Because most markets will include customers with different
characteristics, lifestyles, backgrounds, and income levels, it is unlikely
that a single marketing mix will attract all segments of the market.
Thus, if a marketer wishes to appeal to more than one segment of the
market, it must develop different marketing mixes.
LO 2 : Market targeting
Strategies for selecting target markets
LO 2 : Market targeting
Strategies for selecting target markets
Undifferentiated targeting strategy
A marketing approach that views the market as one big market with no
individual segments and
Concentrated targeting strategy
A strategy used to select one segment of a market for targeting marketing
efforts.
Multi-segment targeting strategy
A strategy that chooses two or more well-defined market segments and
develops a distinct marketing mix for each.
LO 3 : Market positioning
Positioning
Developing a specific marketing mix to influence potential
customers’ overall perception of a brand, product line, or
organization in general.

Position
The place a product, brand, or group of products occupies in
consumers’ minds relative to competing offerings.
LO 3 : Market positioning
Bases for positioning
LO 3 : Market positioning

Bases for positioning

Attribute: A product is associated with an attribute, product feature, or
customer benefit. Kleenex has designed a tissue that contains
substances to kill germs in an effort to differentiate its product from
competing tissues.
Price and quality: This positioning base may stress high price as a signal
of quality or emphasize low price as an indication of value. Neiman
Marcus uses the high price strategy; Wal-Mart has successfully followed
the low-price and value strategy.
LO 3 : Market positioning

Bases for positioning

Use or application: Stressing uses or applications can be an effective
means of positioning a product with buyers.
Product user: This positioning base focuses on a personality or type of
user. Zale Corporation has several jewelry store concepts, each
positioned to a different user.
Product class: The objective here is to position the product as being
associated with a particular category of products; for example,
positioning a margarine brand with butter.
Competitor: Positioning against competitors is part of any positioning
strategy.