Chapter 9Chapter 9

Market Market Segmentation, Segmentation, Targeting, and Targeting, and

PositioningPositioning

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Chapter ObjectivesChapter Objectives

1. Identify the essential components of a market.2. Outline the role of market segmentation in developing a

marketing strategy.3. Describe the criteria necessary for effective

segmentation.4. Explain each of the four bases for segmenting consumer

markets.5. Identify the steps in the market segmentation process.6. Discuss four basic strategies for reaching target

markets.7. Summarize the types of positioning strategies.8. Explain the reasons for positioning and repositioning

products.

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Selecting a Target MarketSelecting a Target Market

Before a marketing mix strategy can be implemented, the marketer must identify, evaluate, and select a target market.Market:Market: people or institutions with

sufficient purchasing power, authority, and willingness to buy

Target market:Target market: specific segment of consumers most likely to purchase a particular product

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Types of MarketsTypes of Markets

Consumer products:Consumer products: goods or services purchased by an ultimate consumer for personal use

Business products:Business products: goods or services purchased for use either directly or indirectly in the production of other goods and services for resale

The key to classification is to identify the purchaser and the reasons for buying the goods.

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P&G Courts Business CustomersP&G Courts Business CustomersWSJ 1/26/07WSJ 1/26/07

P&G struggles to find significant sales growth in consumer households

Expands its “Professional Division - sale to janitors, fast-food workers, maids, and launderers

Conducted marketing research at hotels and fast-food restaurants

U.S. market is $3.2 billion

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KC MasterpieceKC MasterpieceProduct Targeted

at Selected Consumers

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Cattlemen’sCattlemen’sProduct Targeted

at the Business Market: Comes in 1 and 5 Gallon Containers. Introduced more than 40 years ago to meet the special needs of foodservice operators

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The Role of Market SegmentationThe Role of Market Segmentation

Market SegmentationMarket SegmentationDivision of the total market into smaller, relatively homogeneous groups

No single marketing mix can satisfy everyone. Therefore, separate marketing mixes should be used for different market segments.

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No Market SegmentationNo Market Segmentation

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Segmented by SexSegmented by Sex

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Segmented by AgeSegmented by Age

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Figure 9.1Figure 9.1Serving the Hispanic-American Market

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Tom’s of MaineTom’s of MaineTargeting a

Specific Marketing Segment

Which segment?

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Criteria for Effective SegmentationCriteria for Effective Segmentation

Market segmentation cannot be used in all cases. To be effective, segmentation must meet the following basic requirements.The market segments must be measurable

in terms of both purchasing power and size.

Marketers must be able to effectively promote to and serve a market segment.

Market segments must be sufficiently large to be potentially profitable.

The number of segments must match the firm’s capabilities.

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Segmenting Consumer MarketsSegmenting Consumer Markets

Geographic Segmentation:Geographic Segmentation: Dividing an overall market into homogeneous groups on the basis of their locationsDoes not ensure that all consumers in a

location will make the same buying decision.

Help in identifying some general patterns.

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Figure 9.3Figure 9.3The 10 Largest Cities in the U.S.

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PampersPampersThis ad is an

example of geographic segmentation. Why?

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Urban Data ClassifiedUrban Data Classified by U.S. Government by U.S. GovernmentCore Based Statistical Area (CBSA) – at least one

urban area 10,000 or more populationMetropolitan Statistical Area (MSA) – urban center

population of 50,000 and area population of over 100,000

Micropolitan Statistical Area – at least one town 10,000 to 49,999 population

Consolidated Metropolitan Statistical Area (CMSA) – one of 25 urban giants

Primary Metropolitan Statistical Area (PMSA) – urbanized county or counties, one million or more population [Seattle, Tacoma, Bremerton]

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Using Geographic SegmentationUsing Geographic Segmentation Demand for some goods and services can

vary according to the geographic regionMost major brands get 40-80 percent of

their sales from what are called core regions

Climate is another important segmentation factorNorthern consumers, for example, eat

more soup than SouthernersSoutherners use more chlorine for their

swimming pools than Northern residents

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Figure 9.4Figure 9.4Geographic

Segmentation: The Importance of Suburban Homeowners’ Buying Habits

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KubotaKubotaSegmentation

by Residence Location

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Geographic Information Service (GIS):Geographic Information Service (GIS): computer technology that records several layers of data on a single mapSimplifies the job of analyzing

marketing information by placing data in a spatial format . . . The result of which is a geographic map overlaid with digital data about consumers in a particular area.

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Segmenting Consumer MarketsSegmenting Consumer Markets

Demographic Segmentation:Demographic Segmentation: dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycleU.S. Census Bureau

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Segmenting by GenderSegmenting by GenderMarketers must ensure that traditional

assumptions are not falseRecently, the lines have increasingly blurredSome companies market successfully to

both genders

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Segmenting by Age Segmenting by Age Identify market

segments on the basis of age

Products designed to meet the specific needs of certain age groups

Dole: Developing a Product Specifically for Children

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Tweens and TeensTweens and TeensRapidly growing marketSignificant purchasing powerCohert Effect

Tendency among members of a generation to be influenced and drawn together by significant events occurring during their key formative years, roughly 17 to 22 years of age

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Baby BoomersBaby BoomersBorn from 1946

until 1965.Nearly 42 percent

of U.S. adultsValues influenced

both by the Vietnam War and the career-driven era

Baby boomers over the age of 50 will have a total disposable income of $1 trillion

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Figure 9.6Figure 9.6MasterCard:

Appealing to Baby Boomers’ Nostalgia for Music

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SeniorsSeniorsBy 2025, 1 in 5 over

age 65 Median age is now

35.2 yearsLife expectancy is

74 for men and to 79 for women

Heads of households aged 55-plus control about three-quarters of the country’s total financial assets.

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Segmenting by Segmenting by Ethnic GroupEthnic GroupBy 2050, nearly

half of the population of the US will belong to nonwhite minority groups.

The three largest and fastest-growing racial/ethnic groups in the US are African Americans, Hispanics, and Asian Americans.

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Ethnic Group SegmentationEthnic Group SegmentationHispanicAfrican AmericansAsian AmericansNative AmericansPeople of Mixed Race

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Figure 9.7Figure 9.7Breakdown of U.S. Minority Populations

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Family Life Cycle Family Life Cycle Stages Stages SegmentationSegmentationThe process of

family formation and dissolution

Life stage, not age per se, is the primary determinant of many consumer purchases

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Figure 9.8Figure 9.8Segmenting

by Family Life Cycle Stage

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Segmenting by Household TypeSegmenting by Household TypeToday’s U.S. households are very diverse

Married couples and their childrenBlended by divorce or loss of spouseHeaded by single parent, same-sex

parents, grandparents

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Segmenting by Income and Expenditure Segmenting by Income and Expenditure PatternsPatternsEngel’s Laws,Engel’s Laws, as family income increases:

A smaller percentage of expenditures go for food

The percentage spent on housing and household operations and clothing remains constant

The percentage spent on other items (such as recreation and education) increases

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Figure 9.9Figure 9.9Princess Cruise

Lines Targets People with Large Disposable Incomes

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JaguarJaguarSegmentation

based on income

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Demographic Segmentation Abroad Demographic Segmentation Abroad Obtaining the data necessary for global

demographic segmentation is often difficult

Many countries do not operate regularly scheduled census programs For example, the most recent census

of Holland is now over 20 years old, and Germany skipped its census from 1970 to 1987

Daily life cycle data is difficult to apply in global demographic segmentation efforts

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Psychographic Segmentation Psychographic Segmentation Divides a population into groups that have

similar psychological characteristics, values, and lifestyles

Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities

The most common method for developing psychographic profiles of a population is to conduct a large-scale surveyAIO statements describe activities,

interests, and opinionsVALS and VALS 2 [eight categories]

“Values and Lifestyles”

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Psychographic Segmentation of Global Psychographic Segmentation of Global MarketsMarkets like those done by Roper Starch can paint useful pictures of the residents of various countriesRoper found six psychographic consumer

segments that are common to 35 nationsStriversDevoutsAltruistsIntimatesFun seekersCreatives

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Using Using Psychographic Psychographic SegmentationSegmentation Psychographic

profiles produce rich descriptions of potential target markets

Greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers

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Figure 9.11Figure 9.11Appealing to

Intimates and Fun Seekers

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Product-Related SegmentationProduct-Related SegmentationDividing a consumer population into homogeneous groups based on characteristics of their relationships to the product Can take the form of segmenting based on:

Benefits that people seek when they buy a product

Usage rates for a product [80/20 principle]

Consumers’ brand loyalty toward a product

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BenefitsBenefitsFocuses on the

attributes that people seek in a good or service and the benefits that they expect to receive from that good or service

Groups consumers into segments based on what they want a product to do for them

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EclipseEclipseSegmenting

by Benefits Sought

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Usage RatesUsage RatesSegmenting by grouping people according

to the amounts of a product that they buy and use

Markets often divided into heavy-user, moderate-user, and light-user segments

The 80/20 principle (“Praedo’s Law”) holds that a big percentage of a product’s revenues (roughly 80%) comes from a relative small, loyal percentage (around 20%) of total customers

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Brand LoyaltyBrand LoyaltySegmenting consumers grouped according

to the strength of brand loyalty felt toward a product

Frequent flyer programs of airlines and many hotels

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Using Multiple Segmentation BasesUsing Multiple Segmentation BasesIncrease accuracy in reaching the right

marketsCombine multiple bases

Geographic and DemographicProduct-related with income and

expenditure patterns

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The Market Segmentation ProcessThe Market Segmentation Process

Develop a Relevant Profile for each Segment

Forecast Market Potential

Forecast Probable Market Share

Select Specific Market Segments

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Strategies for ReachingStrategies for ReachingTarget MarketsTarget Markets

Undifferentiated Marketing:Undifferentiated Marketing: when a firm produces only one product or product line and promotes it to all customers with a single marketing mix

Differentiated Marketing:Differentiated Marketing: when a firm produces numerous products and promotes them with a different marketing mix designed to satisfy smaller segments

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Concentrated Marketing (niche Concentrated Marketing (niche marketing):marketing): when a firm commits all of its marketing resources to serve a single market segment

Micromarketing:Micromarketing: involves targeting potential customers at a very basic level, such as by ZIP code, specific occupation, lifestyle, or individual household

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Differentiated MarketingProcter and

Gamble Practicing Differentiated Marketing

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Selecting and Executing a StrategySelecting and Executing a StrategyNo single, best choice strategy suits all

firmsDeterminants of a market-specific strategy:

Company resourcesProduct homogeneityStage in the product life-cycleCompetitors’ strategy

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Positioning:Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ mindsAttributesPrice/qualityCompetitorsApplicationProduct userProduct class

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Positioning mapPositioning mapGraphic illustration that shows differences in consumers’ perceptions of competing products

RepositionReposition Marketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products

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Hypothetical Competitive Positioning Map for Selected Retailers

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End Of Chapter End Of Chapter NineNine