Master in Marketing and Communication
Module 7
Segmentation, Targeting,
Differentiation and Positioning.
Lecture 7- slide 1
Customer-Driven Marketing Strategy:
Creating Value for Target Customers
Topic Outline
• Market Segmentation
• Market Targeting
• Differentiation and Positioning
Lecture 7- slide 2
Creating Value for Targeted Customers
Lecture 7- slide 3
Market Segmentation
Market segmentation is the process that
companies use to divide large
heterogeneous markets into small markets
that can be reached more efficiently and
effectively with products and services that
match their unique needs
Lecture 7- slide 4
Market Segmentation
•
•
•
•
Segmenting consumer markets
Segmenting business markets
Segmenting international markets
Requirements for effective segmentation
Lecture 7- slide 5
Segmenting consumer markets
Geographic
Demographic
Psychographic
Behavioral
Lecture 7- slide 6
Market Segmentation
Segmenting Consumer Markets
• Geographic segmentation divides the
market into different geographical units
such as nations, regions, states, counties,
or cities
Lecture 7- slide 7
Geographic segmentation
Consumer Markets
Lecture 7- slide 8
Geographic segmentation
Consumer Markets
• Tesco Metro
• Tesco Express
• One Stop
Lecture 7- slide 9
Market Segmentation
Segmenting Consumer Markets
Demographic segmentation
divides the market into
groups based on variables
such as age, gender, family
size, family life cycle, income,
occupation, education,
religion, race, generation,
and nationality
Lecture 7- slide 10
Market Segmentation
Demographic segmentation
Age and life-cycle stage segmentation is the
process of offering different products or using
different marketing approaches for different age
and life-cycle groups
Gender segmentation divides the market based on
sex (male or female)
Income segmentation divides the market into
affluent or low-income consumers
http://www.gurl.com/
Lecture 7- slide 11
Demographic Segmentation
Lecture 7- slide 12
Market Segmentation
Segmenting Consumer Markets
Psychographic segmentation
divides buyers into different
groups based on social class,
lifestyle, or personality traits
Lecture 7- slide 13
Market Segmentation
Segmenting Consumer Markets
Behavioral segmentation
divides buyers into groups
based on their knowledge,
attitudes, uses, or responses
to a product
• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status
Lecture 7- slide 14
Occasion Segmentation
Lecture 7- slide 15
Psycographic and Behavioural
segmentation
Lecture 7- slide 16
Market Segmentation
Using Multiple Segmentation Bases
Multiple segmentation is used to identify smaller,
better-defined target groups
Geodemographic segmentation is an example of
multivariable segmentation that divides groups
into consumer lifestyle patterns
Lecture 7- slide 17
Market Segmentation
Using Multiple Segmentation Bases
PRIZM NE classifies every American
household into 66 unique
segments organized into 14
different social groups.
• These groups segment people and
locations into marketable groups of
like-minded consumers that exhibit
unique characteristics and buying
behavior based on a host of
demographic factors
Lecture 7- slide 18
Calvin Klein uses several
layers of segmentation
Lecture 7- slide 19
Primary segmentation variables
for business markets
• Demographics: industry, company, location.
• Operating variables: technology, user/non user
status.
• Purchasing approaches: purchasing function
organisation, power structure, nature of existing
relationships, general purchase policies,
purchasing criteria.
• Situational factors: urgency, specific application,
size of order.
• Personal characteristics: buyer-seller similarity,
attitudes towards risk, loyalty.
Lecture 7- slide 20
Primary segmentation variables for business markets
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market
(Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation
Marketing: New methods for capturing business (New York: Harper Business, 1992).
Lecture 7- slide 21
Primary segmentation variables for business markets
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market
(Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation
Marketing: New methods for capturing business (New York: Harper Business, 1992).
Lecture 7- slide 22
Market Segmentation
Segmenting International markets
Geographic
location
Economic
factors
Politicallegal factors
Cultural
factors
Lecture 7- slide 23
Market Segmentation
Segmenting Business Markets
Intermarket segmentation divides
consumers into groups with similar needs
and buying behaviors even though they are
located in different countries
Lecture 7- slide 24
Developing market segments
• Research based exercise that incorporates several
stages:
– Qualitative research: Exploratory techniques to
determine motivations and attitudes.
– Quantitative research: Structured questionnaire to
gain information.
– Analysis: Factor and cluster analysis. Automatic
Interaction Detection and conjoint analysis.
– Validation: Statistical validation.
– Profiling: Distinguishing attitudes and behaviours.
Lecture 7- slide 25
Market Segmentation
Requirements for Effective Segmentation
• To be useful, market segments must be:
Measurable
Accessible
Substantial
Differentiable
Actionable
Lecture 7- slide 26
Requirements for effective
segmentation
• Measurability
– Degree to which size, purchasing power and profits of a
market segment can be measured.
• Accessibility
– Degree to which a market segment can be reached and
served.
• Substantiality
– Degree to which a market segment is sufficiently large
or profitable.
• Actionability
– Degree to which effective programmes can be
designed for attracting and serving the given market
segment.
Lecture 7- slide 27
What is market targeting?
Market targeting involves evaluating
the various segments identified
during the segmentation process
and deciding how many and which
segments it can serve best.
Lecture 7- slide 28
Market Targeting
Selecting Target Market Segments
• Target market consists of a set of buyers
who share common needs or characteristics
that the company decides to serve
Lecture 7- slide 29
Market Targeting
Evaluating Market Segments
• Segment Size and Growth
– Analyze sales, growth rates and expected profitability.
• Segment Structural Attractiveness
– Consider effects of: Competitors, Availability of
Substitute Products and the Power of Buyers & Suppliers.
• Company Objectives and Resources
– Company skills & resources relative to the segment(s).
– Look for Competitive Advantages.
Lecture 7- slide 30
Target marketing strategies
Undifferentiated (or Mass) marketing
Differentiated (or Segment) marketing
Concentrated (or Niche) marketing
Micromarketing
Lecture 7- slide 31
Target marketing strategies
• Undifferentiated (or Mass) marketing: Assumes
market is homogenous and uses the same product,
promotion and distribution to all consumers.
• Differentiated (or Segment) marketing: Adapting a
company’s offerings so they more closely match the
needs of one or more segments.
• Concentrated (or Niche) marketing: Adapting a
company’s offerings to match the needs of one or
more sub-segments more closely where there is little
competition.
• Micromarketing: Marketing programmes tailored to
narrowly defined geographic, demographic,
psychographic behavioural segments.
Lecture 7- slide 32
Micro marketing
• Local Marketing
– Tailoring brands and promotions to the needs
and wants of local customer groups.
• Individual marketing
– Tailoring products and marketing programmes
to the needs and preferences of individual
customers.
• Mass customisation
– Preparing individually designed products and
communication on a large scale.
Lecture 7- slide 33
Marketing Differenziato – Colgate identifica diversi segmentitarget offrendo loro diversi tipi di dentifricio
Lecture 7- slide 34
Marketing Concentrato (o di Nicchia)
Morgan Cars serve una nicchia di mercato, producendo macchine
sportive tradizionali fatte a mano per baby boomers
Lecture 7- slide 35
Marketing individuale
Lecture 7- slide 36
Market Targeting
Target Marketing Strategies
Undifferentiated marketing targets the
whole market with one offer
– Mass marketing
– Focuses on common needs rather than what’s
different
Lecture 7- slide 37
Market Targeting
Target Marketing Strategies
Differentiated marketing targets several
different market segments and designs
separate offers for each
• Goal is to achieve higher sales and stronger
position
• More expensive than undifferentiated
marketing
Lecture 7- slide 38
Market Targeting
Target Market Strategies
• Concentrated marketing
targets a small share of a
large market
• Limited company resources
• Knowledge of the market
• More effective and efficient
Lecture 7- slide 39
Marketing Targeting
Target Market Strategies
Micromarketing is the practice of tailoring
products and marketing programs to suit
the tastes of specific individuals and
locations
– Local marketing
– Individual marketing
Lecture 7- slide 40
Market Targeting
Target Market Strategies
Local marketing involves tailoring brands and
promotion to the needs and wants of local
customer groups
• Cities
• Neighborhoods
• Stores
Lecture 7- slide 41
Market Targeting
Target Market Strategies
Individual marketing involves
tailoring products and
marketing programs to the
needs and preferences of
individual customers
• Also known as:
– One-to-one marketing
– Mass customization
– Markets-of-one marketing
Lecture 7- slide 42
Market Targeting
Choosing a Target Market
Depends on:
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies
Lecture 7- slide 43
Market Targeting
Socially Responsible Target Marketing
• Benefits customers with
specific needs
• Concern for vulnerable
segments
• Children
– Alcohol
– Cigarettes
– Internet abuses
Lecture 7- slide 44
Differentiation
• The company must also decide how it will serve
targeted customers - how it will differentiate itself
in the marketplace.
• The company must decide on a value
proposition, the set of benefits or values it
promises to deliver to consumers to satisfy their
needs.
• Value propositions differentiate one brand from
another and answer the question, “Why should I
buy your brand rather than a competitor’s?”
Lecture 7- slide 45
Differentiation and Positioning
Selecting an Overall Positioning Strategy
Value proposition
is the full mix of
benefits upon
which a brand is
positioned
Lecture 7- slide 46
Differentiation and Positioning
Product position is the way
the product is defined by
consumers on important
attributes—the place
the product occupies in
consumers’ minds
relative to competing
products
–
–
–
Perceptions
Impressions
Feelings
Lecture 7- slide 47
Differentiation and Positioning
• Positioning means arranging for a product to
occupy a clear, distinctive and desirable
place in customers’ minds, relative to
competition.
Lecture 7- slide 48
Differentiation and Positioning
Choosing a Differentiation and Positioning
Strategy
• Identifying a set of possible competitive
advantages to build a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy
• Developing a positioning statement
Lecture 7- slide 49
Differentiation and Positioning
Identifying Possible Value Differences and
Competitive Advantages
Competitive advantage is an advantage over
competitors gained by offering consumers
greater value, either through lower prices
or by providing more benefits that justify
higher prices
Lecture 7- slide 50
Sources of differentiation
Product
Services
Channels
People
Image
Lecture 7- slide 51
Differentiating markets (1)
• Product differentiation
–
–
–
–
–
–
–
–
–
Features and benefits
Quality
Performance
Innovation
Consistency
Reliability
Style and design
Durability
Repairability
Lecture 7- slide 52
Differentiating markets (2)
• Services differentiation
–
–
–
–
–
–
Delivery
Installation
Repair services
Customer training services
Consulting services
Speed of service
Lecture 7- slide 53
Differentiating markets (3)
• People differentiation
– Hiring
– Training
– Customer focused
• Image differentiation
– Images that reflect the ‘soul’ or ethos of the
company
Lecture 7- slide 54
Positioning strategies (1)
• Product attributes
– Nokia’s 6600 ‘Zoom in’.
• Technical items
– BMW breathable fresh air filters.
• Benefits offered
– Crest toothpaste reduces cavities.
• Usage occasions
– Kit Kat, ‘have a break’.
• Users
– Johnson & Johnson changing focus to incorporate adults as
frequent users of their gentle Baby Shampoo.
• Activities
– Omega, the ‘first and only watch on the moon’.
• Personalities
– Tiger Woods for Nike
Lecture 7- slide 55
Positioning strategies (2)
• Cult positioning
– Harry Potter books.
• Origin
– Perrier ‘bottled at source’.
• Positioned with synergistic products and brands
– Bentley and Breitling.
• Positioned against competitors
– Dell and Compaq versus IBM
• Positioned away from competitors
– 7-Up the number 1 ‘Un-cola’.
• Product class membership
– ‘I can’t believe it’s not butter’, the vegetable fat spread, is
clearly positioned against butter.
Lecture 7- slide 56
Differentiation and Positioning
Choosing the Right Competitive Advantage
Difference to promote should be:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
Lecture 7- slide 57
Criteria for choosing which
differences to promote
• Features and benefits must be important to the
consumer.
• Must be distinctive from the competition.
• Must deliver superior quality or service.
• Difference must be communicable and visible to
buyers.
• Pre-emptive and competitors unable to replicate.
• Affordable: buyers can afford to pay for the
difference.
• Profitable: the company can introduce the
difference profitably.
Lecture 7- slide 58
Choosing and implementing a
positioning strategy
USP
ESP
Lecture 7- slide 59
Choosing and implementing a
positioning strategy
• Ad man Rosser Reeves states that every company
should have a unique selling proposition (USP).
– The USP is the unique product benefit that a firm
aggressively promotes in a consistent manner to its target
market. The benefit usually reflects functional superiority:
best quality, best services, lowest price, most advanced
technology.
• Difficulty of maintaining functional superiority forces
firms to attempt a more emotional influence by
developing an emotional selling proposition (ESP).
Lecture 7- slide 60
Factual approach
Lecture 7- slide 61
Emotional approach
Lecture 7- slide 62
Positioning Map
Positioning maps
show consumer
perceptions of
their brands
versus competing
products on
important buying
dimensions
Lecture 7- slide 63
Positioning map Chocolate Market in the UK
Lecture 7- slide 64
Positioning map - car brands
Lecture 7- slide 65
Positioning Statement
• To (target segment and need) our (brand) is
(concept) that (point of difference)
Web link
Lecture 7- slide 66
Mountain Dew’s
positioning statement
To young, active soft-drink
consumers who have little
time to sleep, Mountain
Dew is the soft drink that
gives you more energy than
any other brand because it
has the highest level of
caffeine.
Lecture 7- slide 67
Communication and Delivering the
Chosen Position
Choosing the
positioning is
often easier than
implementing the
position.
Lecture 7- slide 68