chapter 5

Market Segmentation, Targeting and Positioning

Ch. 5 Objectives

• Understand the concepts: market segmentation, and target marketing. positioning

• Learn the advantages and disadvantages of target marketing

• Discuss segmentation criteria, strategies, and seg. bases

• Understand typical positioning strategies

What is a market?

• Individuals or organizations who:– Are willing, able, and capable of

purchasing a firm’s product– Segmentation is critical because

demand is often heterogeneous

Market Segmentation/Targeting

Market Segmentation is:• The process of dividing up the total market

into distinct subsets of customers with common needs or characteristics

Targeting is:• Selecting one or more segments that are

appropriate

Target Marketing

• Advantages– Easier analysis of potential and actual consumers– Tailoring of products to market– Assessment of demand potential– Identify competing products– Increased sales effectiveness

Target Marketing

• Disadvantages– Increased marketing costs– More complex strategy to implement– Narrow segmentation can impact brand loyalty– Ethics and stereotyping issues– Can hinder a “Global” Brand Image– Faux segmentation may be viewed cynically

• See Excedrin Migraine:

Market Criteria

• Segmentable markets are:– Heterogeneous– Measurable– Substantial– Actionable

• Companies must be able to respond to preferences with an appropriate marketing mix

– Accessible• Market must be efficiently reachable

Segmentation Variables

Situation Situation SegmentationSegmentation

Psychographic Psychographic SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Demographics

• Age • Income• Gender• Occupation• Education• Ethnicity• Family Life Cycle

Segmentation Variables

Situation Situation SegmentationSegmentation

Psychographic Psychographic SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Geographics

• By region of country• Micro-Beers do it• Campbell’s Soup does it• Frito-Lay does it:

Segmenting Consumer Markets

Situation Situation SegmentationSegmentation

Psychographic Psychographic SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Psychographic Segmentation

– Grouping customers together based on social class, lifestyles and psychological characteristics (attitudes, interests and opinions)

Segmenting Consumer Markets

Situation Situation SegmentationSegmentation

Psychographic Psychographic SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Benefits Sought

• Find (or create) a key benefit that the product satisfies

• Toothpaste Example:

Segmenting Consumer Markets

Situation Situation SegmentationSegmentation

Psychographic Psychographic SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Situation Segmentation

• Time of Year / Week, Event etc.

Segmenting Consumer Markets

Situation Situation SegmentationSegmentation

Psychographic Psychographic SegmentationSegmentation

Geographic Geographic SegmentationSegmentation

Behavior/UsageBehavior/Usage SegmentationSegmentation

Demographic Demographic SegmentationSegmentation

Benefits-SoughtBenefits-Sought SegmentationSegmentation

Light Users80%

Heavy Users20%

Behavior/Usage Segmentation

• Markets can be segmented by how often or how heavily consumers use a specific product– 80/20 Principle - 80% of revenue generated by 20% of

customers

Behavior/Usage Segmentation

80/20 true for many products• For Beer it’s 88% to 16%• Who are the heavy users?

ProductPositioning

How to Position Brands:

Positioning:

• “an image that a product projects in relation to competitive products and to the firm’s other products”

• Show MGD clip(s)• How is MGD differentiated?1) Product Attribute• It has something that others do not have• Whatever attributes seem important to

consumers• Key attribute may in reality be bogus...

7 Ways to Position (differentiate) a product

• Show Kia clip2) By Competitor• Show Similarity• Show Difference

7 Ways to Position (differentiate) a product

7 Ways to Position (differentiate) a product

3) By Cultural Symbol (brand marks)

TV Ad.

7 Ways to Position (differentiate) a product

4) By Price / Quality– Can be high or low (Generics)

5) By Product Class– Different type of product/service, but provides the

same or better benefits• Example: New AmTrak Acela service to NY

6) By Use or Application

Typically used to add uses of product and expands user base

7 Ways to Position (differentiate) a product

7) By Product User• Product is positioned for a particular group of users• List some potential target markets for cellular

phones:

Product Repositioning

• What is meant by Repositioning?• Why might a company want to do it? (4X)• Know any products that have been

repositioned?

Mountain Dew(The most successful re-position in history)

• What is MD’s current image/target market?

Mountain Dew(The most successful re-position in history)

• Remember MD’s initial positioning? (1968-Early 1970’s)

Mountain Dew(The most successful re-position in history)

Mountain Dew(The most successful re-position in history)

A rather unusual example of segmentation/positioning...