Market-Based Management
Chapter 5
Market Segmentation,
Targeting and Positioning
Market segmentation overview
• Why do we need to segment markets
in the first place?
• Because mkts are seldom
homogeneous
• Thus people have much different
tastes, etc.
Criteria for Effective Segmentation
Segments must be:
• Measurable - in terms of purchasing power
and size.
• Reachable - can promote to and serve seg.
effectively.
• Profitable - large enough with sufficient
disposable income to be profitable to serve.
• Match Capabilities - segment must fit with
firm cap’s in process tech., dist., mktg., etc.
3
Segmenting by Characteristics of
People:
• Geographic Segmentation
• Psychographic
 Social
class, Lifestyle, Personality.
• Demographic
 Age,
Sex, Occupation, Education
Segmenting Organizational Mkts by
Firm Characteristics:
Needs & Preferences Segmentation:
• Usually the best way
• Benefits sought/problems solved.
 e.g.
Price, Image, Value
• Attitudes toward product
• Perceptions of product/svc.
Segmenting by Other Behaviorial
Aspects:
• Product usage
• Brand loyalty
• Customer Satisfaction
Needs Based Segmentation:
• For each segment considered, we
develop a profile based on the
needs and benefits sought
 Done
by surveys usually
• But these are not readily
observable in many cases.
• So we need a way to identify these
target consumers.
Thus, by linking to demos, we hit
can develop a profile of the seg.
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There Are Two Basic Approaches to
Marketing Products
• Undifferentiated
• Differentiated
Undifferentiated Marketing
• Works in Mkts Where Overriding
Concern/Need Is Common Among All
Consumers.
• Can Be Efficient
 One
Product for All
• Most Marketers Find This Does Not
Work Very Well
Differentiated Marketing
• Develop Unique Products for Each
Market Segment
• Position Them to the Customers in
That Segment
• Develop the Marketing Mix to match
the position.
Differentiating a Product Offering.
• Product

Features, Performance, Durability, Reliability, Style, Benefits
Received
• Service

Delivery, Installation, Customer Training, Consulting Services,
Maintenance and Repair
• Personnel

Competence (Skill/Knowledge), Courteous, Credible, Trustworthy,
Reliable ,Consistent, Responsive
• Image

Product Must Relate to a Strong Image Producing Thing or Idea
(Ideas, Symbols, People, Events)
Next Step is to Identify Positioning
Concepts for Each Target Segment
• What Is Positioning?
• Positioning Is the Relationship of
Products to Positions in the
Consumers Mind.
• We Want Our Users/Consumers to
Understand What Our Product Is and
What It Stands For.
• Product Ladder Exercise for Colas
15
Criteria for Position Selection
• Differences Must Be







Important to Buyers
Distinctive
Superior to Other Products Which Satisfy This Need
Communicable
Not Easily Copied
Affordable
Profitable for firm
Other Factors
• The Product Itself Must Be Right
• Price must be right.
• The Image It Coveys Must Fit the
Position
• Media Support Must Carry the Same
Message
Positioning Approaches
• Position Against the competition.

Avis "Were Number Two, We Try Harder“
• Use Competition's Features Against
Them

7-Up
"the Uncola“
• New, Unoccupied Position

Apple “Works Better, Hip, Cool“
• Reposition the Competition

Advil Repositioning Tylenol
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Chapter 6
Competitor Analysis
and Sources of Advantage
19
Competitive Analysis
• The search to understand
competitor’s advantages and
disadvantages
20
Five Forces Comparison
21
Sources of Competitive Advantage
22
Cost Advantage
• Variable and Fixed Costs
 Scale
effects
 Scope effects
 Learning effects
• Strong cost advantage is a barrier to
entry
23
Cost and Volume
Cost ($)
Avg. costs decrease as
firm increases volume
LRAC A
LRAC B
LRAC A ‘
Firm A moves
from A to A’
due to
learning and
reinvestment
What should
Firm B do?
Volume24
Profit Impact of Differentiation (which
we’ve already covered) Advantages.
25
Differentiation
• Increases avg. costs
• Also increases profitability due to:
 Pricing
power of meeting customer needs
better than competitors.
• Builds Loyalty – barrier to entry
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Marketing Advantage
• Mostly about branding:
 Building
associations in the mind of the buyer
that are:
 Unique
 Positive
 Strong
• Builds barrier to entry.
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Also important to know customer views
of competitors
• Brand Mapping
28
Portfolio Analysis
• Looks at business competitive
position and market attractiveness
based on share.
• Looks at multiple SBUs.
• Helps provide strategic direction for
a firm’s SBUs.
BCG Growth-Share Matrix
Stars
Prob. Child
Cash Cows
Dogs
R&D
Low
Mkt
Growth
Rate
10
High 1.0
Low 0.1
Competitive Position (Share Ratio)
Expanded Portfolio Analysis
GE Market Attractiveness - Bus. Position
Mkt Attractiveness:
Low
High
Med.
High
Business
Position:
Ability To Med.
Compete
Low
Evaluating the Ability to Compete
• Size
• Growth
• Share by Seg.
• Cust. Loyalty
• Margins
• Distribution
• Tech. Skills
• Patents
• Marketing
• Flexibility
• Culture
• Firm Capabilities
Market Attractiveness
• Size
• Growth
• Cust. Sat. Level
• Competition:


How much
How intense
• Price Levels
• Profitability
• Technology
• Gov’t Regs.
• Sensitivity to
Economic Trends
Strategies for GE Matrix.
• Invest to Hold
• Invest to Penetrate
• Invest to Rebuild
• Selective Investment
• Low Investment
• Divest.
Break Time
6.25 minutes
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