Chapter 04 - Market Segmentation, Targeting and Positioning

SEGMENTATION, MARKET TARGETING
AND BRAND POSITIONING

Chapter-4
LEARNING OBJECTIVES
 Define the major steps in designing a customer-driven marketing strategy: market
segmentation, targeting and positioning
 List and discuss the major bases for segmenting consumer
 Explain how companies identify attractive market segments and choose a market-
targeting strategy
 Discuss how companies differentiate and position their products for maximum
competitive advantage in the marketplace
CUSTOMER-DRIVEN MARKETING
STRATEGY
MARKET SEGMENTATION
• A market segment consists of a group of

customers who share a similar set of needs and
wants. The marketer’s task is to identify the
appropriate number and nature of market
segments and decide which one(s) to target.
• Dividing a market into smaller segments with
distinct needs, characteristics, or behavior that
might require separate marketing strategies or
mixes.
MARKET SEGMENTATION
MARKET SEGMENTATION
• We use two broad groups of variables to segment consumer markets.

• Some researchers define segments by looking at descriptive characteristics—geographic,
demographic, and psychographic—and asking whether these segments exhibit different
needs or product responses.
• Other researchers define segments by looking at behavioral considerations, such as
consumer responses to benefits, usage occasions, or brands, then seeing whether different
characteristics are associated with each consumer response segment.
SEGMENTING CONSUMER
MARKETS
GEOGRAPHIC SEGMENTATION
• Geographic segmentation calls for dividing the market into different
geographical units, such as nations, regions, states, counties, cities, or
even neighborhoods.
• A company may decide to operate in one or a few geographical areas or
operate in all areas but pay attention to geographical differences in needs
and wants.
DEMOGRAPHIC SEGMENTATION
• Demographic segmentation divides the market into segments based on
variables such as age, gender, family size, family life cycle, income,
occupation, education, religion, race, generation, and nationality.
• Demographic factors are the most popular bases for segmenting
customer groups. One reason is that consumer needs, wants, and usage
rates often vary closely with demographic variables.
• Another is that demographic variables are easier to measure than most
other types of variables.
• Some companies use age and life-
cycle segmentation, offering
different products or using different
marketing approaches for different
age and life-cycle groups.
• Age and life cycle can be tricky
variables. The target market for some
products may be the psychologically
young.
• People in the same part of the life cycle may still differ in their life stage.
Life stage defines a person’s major concern, such as going through a
divorce, going into a second marriage, taking care of an older parent,
deciding to cohabit with another person, buying a new home, and so on.
These life stages present opportunities for marketers who can help
people cope with the accompanying decisions.
• Gender segmentation is dividing a market into different
segments based on gender.
• Men and women have different attitudes and behave
differently, based partly on genetic makeup and partly on
socialization.
• Research shows that women have traditionally tended to be
more communal-minded and men more self-expressive and
goal-directed; women have tended to take in more of the data
in their immediate environment and men to focus on the part
of the environment that helps them achieve a goal.
• Gender differences are shrinking in some other areas as men
and women expand their roles.
• People in the same part of the life cycle may still differ in their life stage.
• Life stage defines a person’s major concern, such as going through a
divorce, going into a second marriage, taking care of an older parent,
deciding to cohabit with another person, buying a new home, and so on.
• The marketers of products and services such as automobiles, clothing,
cosmetics, financial services, and travel have long used income
segmentation. Many companies target affluent consumers with luxury
goods and convenience services.
PSYCHOGRAPHIC
SEGMENTATION
• Psychographic segmentation divides buyers into different segments
based on social class, lifestyle, or personality characteristics. People in
the same demographic group can have very different psychographic
characteristics.
PSYCHOGRAPHIC
SEGMENTATION
• Consumers are inspired by one of three primary motivations: Ideals,
Achievement, and Self-expression.
• Those primarily motivated by ideals are guided by knowledge and principles.
• Those motivated by achievement look for products and services that
demonstrate success to their peers.
• Consumers whose motivation is self-expression desire social or physical
activity, variety, and risk.
• Personality traits such as energy, self-confidence, intellectualism, novelty
seeking, innovativeness, impulsiveness, leadership, and vanity—in
conjunction with key demographics—determine an individual’s resources.
Different levels of resources enhance or constrain a person’s expression of his
or her primary motivation.
PSYCHOGRAPHIC
SEGMENTATION
BEHAVIORAL SEGMENTATION
• Behavioral segmentation divides buyers into segments based on their
knowledge, attitudes, uses, or responses to a product.
• Many marketers believe that behavior variables are the best starting
point for building market segments.
BEHAVIORAL SEGMENTATION: NEEDS
AND BENEFITS
• Not everyone who buys a product has the same needs or wants the same
benefits from it. Needs-based or benefit-based segmentation identifies
distinct market segments with clear marketing implications.
BEHAVIORAL SEGMENTATION: DECISION
ROLES
• People play five roles in a buying decision: Initiator, Influencer, Decider,
Buyer, and User.
• Recognition of different buying roles and identification of those who
play these roles for a given product or service are vital for effective
marketing.
• While developing marketing plans and communication strategies,
companies need to identify and specify the roles players in the
consumption system and the means and modalities of reaching out to
them.
BEHAVIORAL SEGMENTATION: USER AND
USAGE RELATED VARIABLES
OCCASION
 Buyers can be grouped according to occasions when they get the idea to
buy, actually make their purchase, or use the purchased item. Occasion
segmentation can help firms build up product usage.
USAGE
USER STATUS
• Markets can be segmented into user status (nonusers, ex-users, potential
users, first-time users, and regular users) of a product. Marketers want to
reinforce and retain regular users, attract targeted nonusers, and
reinvigorate relationships with ex-users.
USAGE
USAGE RATE
• Markets can also be segmented into light, medium, and heavy product
users. Heavy users are often a small percentage of the market but
account for a high percentage of total consumption.
BEHAVIORAL SEGMENTATION:
CUSTOMER LOYALTY
• A market can also be segmented by consumer loyalty. Consumers can
be loyal to brands (Surf Excel), stores (Agora), and companies (Apple).
Buyers can be divided into groups according to their degree of loyalty.
BEHAVIORAL SEGMENTATION: USER
AND USAGE
• Benefit segmentation requires finding the major benefits people look
for in a product class, the kinds of people who look for each benefit, and
the major brands that deliver each benefit.
• Example: The sensitive segment (Synsodyne), the healthy segment
(Pepsodent, White plus, Colgate), for fresh breath segment (Close up),
the economic toothpowder (Magic toothpowder), for cavity protection
(Creast) for whitening (Pepsodent whitening, Mediplus whitening etc.)
EFFECTIVE SEGMENTATION
CRITERIA
MARKET TARGETING
Evaluating Market Segments:
In evaluating different market segments, a firm must look at three factors:
• Segment size and growth
• Segment structural attractiveness, and
• Company objectives and resources.
MARKET TARGETING
Selecting Target Market Segments

• After evaluating different segments, the company must decide which and
how many segments it will target.
• A target market consists of a set of buyers who share common needs or
characteristics that the company decides to serve. Market targeting can
be carried out at several different levels.
MARKET TARGETING
MARKET TARGETING
• Using an undifferentiated marketing (or mass marketing) strategy, a
firm might decide to ignore market segment differences and target the
whole market with one offer.
• Such a strategy focuses on what is common in the needs of consumers
rather than on what is different.
• The company designs a product and a marketing program that will
appeal to the largest number of buyers..
MARKET TARGETING
• Using a differentiated marketing (or segmented marketing) strategy,
a firm decides to target several market segments and designs separate
offers for each.
• The reason of pursuing this market targeting strategy is that higher sales
and a stronger position within each segment can be the consequence.
• But differentiated marketing also increases the costs of doing business. A
firm usually finds it more expensive to develop and produce
• Most large companies follow the differentiated market targeting strategy.
For instance, a car company produces several different models of cars,
and often even offers different brands.
MARKET TARGETING
• Using a differentiated marketing (or segmented marketing) strategy,
a firm decides to target several market segments and designs separate
offers for each.
• The reason of pursuing this market targeting strategy is that higher sales
and a stronger position within each segment can be the consequence.
• Most large companies follow the differentiated market targeting strategy.
For instance, a car company produces several different models of cars,
and often even offers different brands.
MARKET TARGETING
• Using a concentrated marketing (or niche marketing) strategy,
instead of going after a small share of a large market, a firm goes after a
large share of one or a few smaller segments
• Through concentrated marketing, the firm achieves a strong market
position because of its greater knowledge of consumer needs in the
niches it serves and the special reputation it acquires.
• Following the concentrated market targeting strategy, the company
focuses on one or a few segments or niches in a market. The aim is then
to reach a large share in this segment or niche, instead of going after a
small share of a large market.
MARKET TARGETING
• 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.
• Micromarketing includes local marketing and individual marketing.
MARKET TARGETING
• Local marketing involves tailoring brands and promotions to the needs
and wants of local customer groups—cities, neighborhoods, and even
specific stores.
• For example, Walmart customizes its merchandise store by store to meet
the needs of local shoppers.
MARKET TARGETING
• Micromarketing becomes individual marketing—tailoring products

and marketing programs to the needs and preferences of individual
customers.
• Individual marketing has also been labeled one-to-one marketing, mass
customization, and markets-of-one marketing.
• The widespread use of mass marketing has obscured the fact that for
centuries consumers were served as individuals: The tailor custom-made
a suit, the cobbler designed shoes for an individual, and the
cabinetmaker made furniture to order.
MARKET TARGETING
Choosing a Targeting Strategy
When choosing a market targeting strategy, the company should consider:
• The company’s resources. If resources are limited, a concentrated market
targeting strategy might make more sense.
• The degree of product variability. In case of uniform products, such as
apples or steel, undifferentiated marketing may be more suited. In case of
products that can vary in design (cars, cameras etc.), more narrow
differentiation and concentration is suitable.
MARKET TARGETING
• The product life cycle. When a company introduces a new product, it may be
helpful to launch only one version. Undifferentiated or concentrated
marketing might make most sense. In the mature stage, a segmented market
targeting may be appropriate.
• Market variability. If you talk about a kind of product where all buyers have
the same tastes, buy the same amounts etc., undifferentiated marketing makes
sense.
MARKET TARGETING
• Competitors’ marketing strategies. If competitors apply differentiated or
concentrated market targeting strategies, using undifferentiated marketing
may prove to be fatal. However, the firm might also gain an advantage by
using a different market targeting strategy than competitors, especially if it
can serve individual customers better by meeting their needs. Then, a
concentrated market targeting strategy or micromarketing will work best.
UNDERSTANDING POSITIONING
AND VALUE PROPOSITIONS
• Positioning is the act of designing a company’s offering and image to
occupy a distinctive place in the minds of the target market.2
• The goal is to locate the brand in the minds of consumers to maximize
the potential benefit to the firm.
• A good brand positioning helps guide marketing strategy by clarifying
the brand’s essence, identifying the goals it helps the consumer achieve,
and showing how it does so in a unique way. Everyone in the
organization should understand the brand positioning and use it as
context for making decisions.
UNDERSTANDING POSITIONING
AND VALUE PROPOSITIONS
• The full positioning of a brand is called the brand’s value proposition—the full mix
of benefits on which a brand is differentiated and positioned.
• It is the answer to the customer’s question “Why should I buy your brand?”
CHOOSING A COMPETITIVE
FRAME OF REFERENCE
• The competitive frame of reference defines which other brands a brand
competes with and which should thus be the focus of competitive
analysis.
• Decisions about the competitive frame of reference are closely linked to
target market decisions. Deciding to target a certain type of consumer
can define the nature of competition because certain firms have decided
to target that segment in the past (or plan to do so in the future) or
because consumers in that segment may already look to certain products
or brands in their purchase decisions.
FRAME OF REFERENCE
• IDENTIFYING COMPETITORS A good starting point in defining a
competitive frame of reference for brand positioning is category
membership—the products or sets of products with which a brand
competes and that function as close substitutes. It would seem a simple
task for a company to identify its competitors. PepsiCo knows Coca-
Cola’s Dasani is a major bottled-water competitor for its Aquafina brand
FRAME OF REFERENCE
• ANALYZING COMPETITORS Conduct a SWOT analysis that
includes a competitive analysis. A company needs to gather information
about each competitor’s real and perceived strengths and weaknesses.
IDENTIFYING POTENTIAL POINTS-OF-
DIFFERENCE AND POINTS-OF-PARITY
• POINTS-OF-DIFFERENCE Points-of-difference (PODs) are attributes or
benefits that consumers strongly associate with a brand, positively evaluate, and
believe they could not find to the same extent with a competitive brand.
• Strong brands often have multiple points-of-difference. Some examples are Apple
(design, ease-of-use, and irreverent attitude), Nike (performance, innovative
technology, and winning), and Southwest Airlines (value, reliability, and fun
personality).
• Creating strong, favorable, and unique associations is a real challenge, but an
essential one for competitive brand positioning. Although successfully positioning
a new product in a well- established market may seem particularly difficult,
Method Products shows that it is not impossible.
• Three criteria determine whether a brand association can truly function as a
point-of- difference: desirability, deliverability, and differentiability. Some key
considerations follow.
• Desirable to consumer. Consumers must see the brand association as
personally relevant to them. Select Comfort made a splash in the mattress
industry with its Sleep Number beds, which allow consumers to adjust the
support and fit of the mattress for optimal comfort with a simple numbering
index. Consumers must also be given a compelling reason to believe and an
understandable rationale for why the brand can deliver the desired benefit.
Mountain Dew may argue that it is more energizing than other soft drinks and
support this claim by noting that it has a higher level of caffeine.
• Three criteria determine whether a brand association can truly function as a point-of-
difference: desirability, deliverability, and differentiability. Some key considerations
follow.
• Deliverable by the company. The company must have the internal resources and
commitment to feasibly and profitably create and maintain the brand association in
the minds of consumers. The product design and marketing offering must support the
desired association. Does communicating the desired association require real changes
to the product itself or just perceptual shifts in the way the consumer thinks of the
product or brand? Creating the latter is typically easier. General Motors has had to
work to overcome public perceptions that Cadillac is not a youthful, modern brand
and has done so through bold designs, solid craftsmanship, and active, contemporary
images.
• Three criteria determine whether a brand association can truly function
as a point-of- difference: desirability, deliverability, and differentiability.
Some key considerations follow.
• Differentiating from competitors. Finally, consumers must see the
brand association as distinctive and superior to relevant competitors. In
the crowded energy drink category, Monster has become a nearly $2
billion brand and a threat to category pioneer Red Bull by differentiating
itself on its innovative 16-ounce can and an extensive line of products
targeting nearly every need state related to energy consumption
• POINTS-OF-PARITY Points-of-parity (POPs), on the other hand, are attribute or
benefit associations that are not necessarily unique to the brand but may in fact be
shared with other brands. These types of associations come in three basic forms:
category, correlational, and competitive.
• Category points-of-parity are attributes or benefits that consumers view as essential to
a legitimate and credible offering within a certain product or service category. In other
words, they represent necessary—but not sufficient— conditions for brand choice.
Consumers might not consider a travel agency truly a travel agency unless it is able to
make air and hotel reservations, provide advice about leisure packages, and offer
various ticket payment and delivery options. Category points-of-parity may change over
time due to technological advances, legal developments, or consumer trends, but to use
a golfing analogy, they are the “greens fees” necessary to play the marketing game.
• Correlational points-of-parity are potentially negative associations that
arise from the existence of positive associations for the brand. One
challenge for marketers is that many attributes or benefits that make up
their POPs or PODs are inversely related. In other words, if your brand
is good at one thing, such as being inexpensive, consumers can’t see it as
also good at something else, like being “of the highest quality.”
Consumer research into the trade-offs consumers make in their
purchasing decisions can be informative here. Below, we consider
strategies to address these trade-offs.
• Competitive points-of-parity are associations designed to overcome
perceived weaknesses of the brand in light of competitors’ points-of-
difference. One good way to uncover key competitive points-of-parity is
to role-play competitors’ positioning and infer their intended points-of-
difference. Competitor’s PODs will, in turn, suggest the brand’s POPs.
• POINTS-OF-PARITY VERSUS POINTS-OF-DIFFERENCE For an offering
to achieve a point-of-parity on a particular attribute or benefit, a sufficient number
of consumers must believe the brand is “good enough” on that dimension. There is
a zone or range of tolerance or acceptance with points-of-parity. The brand does
not literally need to be seen as equal to competitors, but consumers must feel it
does well enough on that particular attribute or benefit. If they do, they may be
willing to base their evaluations and decisions on other factors more favorable to
the brand. A light beer presumably would never taste as good as a full-strength
beer, but it would need to taste close enough to be able to effectively compete.
• Often, the key to positioning is not so much achieving a point-of-difference as
achieving points-of-parity!
DIFFERENTIATION AND
POSITIONING
The differentiation and positioning task consists of three steps:
• Identifying a set of differentiating competitive advantages on which to
build a position,
• Choosing the right competitive advantages, and
• Selecting an overall positioning strategy.
DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and Competitive Advantages
• An advantage over competitors gained by offering greater customer
value, either by having lower prices or providing more benefits that
justify higher prices is called competitive advantage.
• To find points of differentiation, marketers must think through the
customer’s entire experience with the company’s product or service. An
alert company can find ways to differentiate itself at every customer
contact point. It can differentiate along the lines of product, services,
channels, people, or image.
DIFFERENTIATION AND
POSITIONING
Product differentiation
• Through product differentiation, brands can be differentiated on features,
performance, or style and design.
DIFFERENTIATION AND
POSITIONING
Services differentiation
• Some companies gain services differentiation through speedy,
convenient, or careful delivery.
DIFFERENTIATION AND
POSITIONING
Channels differentiation
• Firms that practice channel differentiation gain competitive advantage
through the way they design their channel’s coverage, expertise, and
performance.
DIFFERENTIATION AND
POSITIONING
People differentiation
• Companies can also gain a strong competitive advantage through people
differentiation—hiring and training better people than their competitors
do.
DIFFERENTIATION AND
POSITIONING
Image differentiation.
• Even when competing offers look the same, buyers may perceive a
difference based on company or brand image differentiation. A company
or brand image should convey a product’s distinctive benefits and
positioning. Developing a strong and distinctive image calls for
creativity and hard work.
PERCEPTUAL MAP
• PERCEPTUAL MAPS For choosing specific benefits as POPs and
PODs to position a brand, perceptual maps may be useful. Perceptual
maps are visual representations of consumer perceptions and
preferences. They provide quantitative pictures of market situations and
the way consumers view different products, services, and brands along
various dimensions. By overlaying consumer preferences with brand
perceptions, marketers can reveal “holes” or “openings” that suggest
unmet consumer needs and marketing opportunities.
PERCEPTUAL MAP
• For example, Figure 10.1(a) shows a hypothetical perceptual map for a beverage category. The
four brands—A, B, C, and D—vary in terms of how consumers view their taste profile (light
versus strong) and personality and imagery (contemporary versus modern). Also displayed on
the map are ideal point “configurations” for three market segments (1, 2, and 3).
• The ideal points represent each segment’s most preferred (“ideal”) combination of taste and
imagery. Consumers in Segment 3 prefer beverages with a strong taste and traditional imagery.
Brand D is well positioned for this segment because the market strongly associates it with both
these benefits.
• Given that none of the competitors is seen as anywhere close, we would expect Brand D to
attract many of the Segment 3 customers. Brand A, on the other hand, is seen as more balanced
in terms of both taste and imagery.
• Unfortunately, no market segment seems to really desire this balance. Brands B and C are better
positioned with respect to Segments 2 and 3, respectively.
PERCEPTUAL MAP
DIFFERENTIATION AND POSITIONING
Which Differences to Promote?
A difference is worth establishing to the extent that it satisfies the
following criteria:
• Important: The difference delivers 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.
Which Differences to Promote.
A difference is worth establishing to the extent that it satisfies the
following criteria:
• 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.
Selecting an Overall Positioning Strategy
• The full positioning of a brand is called the brand’s value proposition—
the full mix of benefits on which a brand is differentiated and positioned.
• It is the answer to the customer’s question “Why should I buy your
brand?”
Developing a Positioning Statement
• A statement that summarizes company or brand positioning. It takes this
form: To (target segment and need) our (brand) is (concept) that (point
of difference).
• Positioning Statement

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SEGMENTATION, MARKET TARGETING

AND BRAND POSITIONING

• A market segment consists of a group of

• We use two broad groups of variables to segment consumer markets.

Selecting Target Market Segments

• Micromarketing becomes individual marketing—tailoring products

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