Segmentation, Targeting,
and Positioning
Chapter 8
Objectives
Be able to define the three steps
of target marketing: market
segmentation, target marketing,
and market positioning.
Understand the major bases for
segmenting consumer and
business markets.
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Objectives
Know how companies identify
attractive market segments
and how they choose a target
marketing strategy.
Comprehend how companies
position their products for
maximum competitive
advantage.
8- 2
Procter &
c Gamble
Sells multiple
brands within the
same product
category for a
variety of products
Brands feature a
different mix of
benefits and
appeal to different
segments
Has also identified
different niches
within certain
segments
Tide offers seven
different product
formulations to
serve different
niches’ needs
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Sure
Secret
Old Spice
8- 4
Definition
Market Segmentation:
 Dividing a market into distinct
groups with distinct needs,
characteristics,
or behavior who
might require
separate products
or marketing
mixes.
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Figure 8-1:
Steps in Market
Segmentation, Targeting,
and Positioning
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Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
Geographical
segmentation
 Marketing mixes are
customized
geographically
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
Using multiple
segmentation variables
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Market Segmentation
Geographic
Segmentation Variables
World Region
or Country
U.S. Region
State
City
City or
Metro Size
Neighborhood
Density
Climate
8- 8
Discussion Question
Geographical climate is
a legitimate means of
segmentation for many
products or services.
Name several examples of
products for which need
(and demand) would vary
on a geographical basis.
8- 9
Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
Geographical segments
Demographic
segmentation
 Most popular type
 Demographics are closely
related to needs, wants
and usage rates
Psychographic
segmentation
Behavioral
segmentation
Using multiple
segmentation variables
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Market Segmentation
Demographic
Segmentation Variables
Age
Gender
Family size
Family life cycle
Income
Race
Occupation
Education
Religion
Generation
Nationality
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Corvallis map of income
distribtuion
8- 12
Salem Hispanic Population
8- 13
Portland Household Income
8- 14
Bend price of homes
8- 15
What type of demographic segmentation
is reflected by this ad?
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Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
Geographic segments
Demographic
segmentation
Psychographic
segmentation
 Lifestyle, social class,
and personality-based
segmentation
Behavioral
segmentation
Using multiple
segmentation
variables
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8- 18
Swatch targets
those with an
active lifestyle
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Generation Y Trendsetters
top 15 brands
15. Red Stripe Jamaican beer
14. Vitamin Water
13. Converse
12. Volkswagen
11. Levi’s
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10. H&M clothing
stores
9. Target
8. American
Apparel
7. Adidas
6. Whole Foods
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5. Ben & Jerry’s
4. In-N-Out Burger
starts their employees out at $10 an hour -which made the trendsetters happier to eat
there, as opposed to some fast-food chains
where all the workers look miserable."
3. Jet Blue
"They loved everything about Jet Blue,
noting that the airline is much easier to
navigate, the flights are always cheap,
always one-way and don't have a lot of
weird special prices and restrictions,"
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2. Trader Joe’s
They liked that the company has a
dorky newsletter and makes their
employees wear silly Hawaiian
shirts.
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Apple
Outlaw Consulting, a San
Francisco research firm,
concluded that Generation Y
trendsetters are more drawn
to brands that speak to them
in a "straightforward and
stripped-down way, use
plain packaging, and avoid
excess
1.
8- 24
Outlaw surveyed 100 of what it calls its
"most forward trendsetter panelists" in
New York City, Los Angeles, San
Francisco and Miami, asking them which
companies they most respected, and why.
the preference for simplification, leanand-clean styling and all-in-one
convenience could be motivated by
environmental concerns. In other words,
as the "green lifestyle" is something more
and more people aspire to, the notion of
excess has fallen into disfavor
8- 25
Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
Geographic segments
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
 Typically done first
Using multiple
segmentation
variables
8- 26
Market Segmentation
Behavioral
Segmentation Variables
Occasions
Benefits
User Status
User Rates
Loyalty Status
Readiness Stage
Attitude Toward
the Product
8- 27
Occasion segmentation: Altoids’ “Love
Tin” is a “curiously strong valentine”
8- 28
Checkout Direct
offers retailers &
manufacturers an
excellent method
of reaching
segments of
heavy users, as
well as users of
the direct
competition.
8- 29
Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
Geographic segments
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
Using multiple
segmentation
variables
 Prizm
8- 30
Discussion Question
Visit PRIZM’s “You are
where you live”
website.
Enter the zip code(s) of
your choice.
Were you
surprised by
what you
found?
8- 31
Example Market segments for J.C.
Penney Conservative
 Size: 23% of population
16% of sales
 Age: 35-55 years old
 Values: Conservative
values satisfied with
present status
 Employment: Has job, or
career
 Income: Limited
disposable income
 Benefits sought: Pricedriven, reacts to sales,
wants easy care and
comfort, Not interested in
fashion, Defines value as
Price, Quality, Fashion
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Traditional
 Size: 38% of population
40% of total sales
 Age: 25-49 years old
 Values: Traditional values
Active, busy, independent,
self-confident
 Employment: Family-and
job/career-oriented
 Income: Considerable
income
 Benefits sought: Wants
traditional styling, seeks
clothes that last, Interested
in newness, Defines value
as Quality, Fashion, Price
8- 33
Update
 Size: 16% of
population 24% of
total sales
 Age: 25-49
 Values: Contemporary
values Active, busy,
independent, very selfconfident
 Employment: Familyand job/ careeroriented
 Income: considerable
income
 Benefits sought:
Wants newness in
color and style, Shops
often, Defines value as
Fashion, Quality, Price
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Example Toothpaste Benefit segments
Sensory
Segment
Sociable
Segment
Worrier
Segment
Independent
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Sensory Segment
Principle benefit
sought: Flavor and
product appearance
Demographic
strengths: Children
Special behavior
characteristics: Users
of spearmint-flavored
toothpaste
Brands: Colgate
Lifestyle
characteristics:
Hedonistic
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Sociable Segment
Principle benefit sought:
Brightness of teeth
Demographic strengths:
Teens, young people
Special behavior
characteristics:
Smokers
Brands: Macleans, Ultra
Brite
Lifestyle characteristics:
Active
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Worrier Segment
Principle benefit sought:
Decay prevention
Demographic strengths:
Large Families
Special behavior
characteristics: Heavy
users
Brands: Crest
Lifestyle characteristics:
Conservative
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Independent Segment
Principle benefit
sought: Price
Demographic
strengths: Men
Special behavior
characteristics:
Heavy users
Brands: Cheapest
Brand
Lifestyle
characteristics:
Value oriented
8- 39
Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
Demographic segmentation
 Industry, company size,
location
Operating variables
 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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Market Segmentation
Key Topics
Geographic segmentation
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Economic factors
Requirements for
Effective
Segmentation
 Location or region
 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,
behavioral patterns
8- 41
Market Segmentation
Key Topics
Segmenting
Consumer Markets
Segmenting
Business Markets
Segmenting
International
Markets
Requirements for
Effective
Segmentation
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
8- 42
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
8- 43
Figure 8-2:
Target Marketing
Strategies
8- 44
Target Marketing
Choosing a TargetMarketing Strategy
Requires Consideration of:





Company resources
The degree of product variability
Product’s life-cycle stage
Market variability
Competitors’ marketing
strategies
8- 45
Target Marketing
Socially Responsible Targeting
 Some segments are at special risk:
Children
 Inner-city
minority
consumers
 Internet
shoppers

 Controversy occurs when the methods
used are questionable.
8- 46
Positioning
Positioning:
 The place the product
occupies in
consumers’ minds
relative to competing
products.
 Typically defined by
consumers on the
basis of important
attributes.
8- 47
Positioning
Choosing a Positioning Strategy:
 Identifying possible competitive
advantages -- many potential
sources of differentiation exist:
Products
 Services
 Channels
 People
 Image

8- 48
Porsche is
positioned on
the basis of
performance
and freedom.
8- 49
Positioning
Choosing a Positioning Strategy:
 Choosing the right competitive
advantage

How many differences to promote?
• Unique selling proposition
• Positioning errors to avoid

Which differences to promote?
8- 50
Positioning errors
Underpositioning
Overpositioning
ConfusedPositioning
8- 51
Positioning
Criteria for Meaningful Differences
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
8- 52
Figure 8-3:
Possible Value Propositions
8- 53
Discussion Question
View the ad at right.
Evaluate the level of
benefits and the price.
What value proposition
is being expressed?
8- 54
Positioning
Choosing a Positioning Strategy:
 Developing a positioning statement
Positioning
statements summarize the
company or brand positioning
EXAMPLE: To (target segment and
need) our (brand) is (concept) that
(point-of-difference).
 Communicating the chosen position
8- 55
Positioning
Choosing a Positioning Strategy:
 Communicating and delivering the
chosen position
Entire marketing mix must support the
chosen strategy
 May require changes to the product,
pricing, distribution or promotion.

8- 56