Chapter Six
Segmentation, Targeting,
and Positioning:
Building the Right Relationships
with the Right Customers
Roadmap: Previewing the Concepts
1. Define the three steps of target marketing:
market segmentation, market targeting,
and market positioning.
2. List and discuss the major bases for
segmenting consumer and business
markets.
3. Explain how companies identify attractive
market segments and choose a target
marketing strategy.
4. Discuss how companies position their
products for maximum competitive
advantage in the marketplace.
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Case Study
P & G – Segments the Market
Strategy
The Payoff
 Sells multiple brands
within the same product
category for detergents,
soaps, and other goods.
 Each brand features a
different mix of benefits
and appeals to a different
segment.
 Product modifications
appeal to different niches
within certain segments.
 P&G generates revenues
in excessive of $4 billion in
U.S. laundry detergent
market alone.
 Tide has 34% share of
powder and 24% share of
liquid market segments.
 Combined, all P&G brands
account for 75% share of
powder and 55% share of
liquid detergent markets.
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Steps in Target Marketing
 Market segmentation
– Dividing a market into smaller groups of buyers
with distinct needs, characteristics, or behaviors
requiring separate products or marketing mixes.
 Target marketing
– Evaluating each segment’s attractiveness and
selecting one or more to enter.
 Market positioning
– Setting the competitive positioning for the
product and creating a detailed marketing mix.
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Market Segmentation
 Key variables:
– Geographic
– Demographic
– Psychographic
– Behavioral
 No single way to segment a market.
 May combine more than one variable to
better define segments.
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Market Segmentation
 Geographic:
– World region or country
– Region of country
– City or metro size
– Density or climate
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Market Segmentation
 Demographic:
– Age, gender, family size, family life cycle,
income, occupation, education, race,
religion, etc.
– The most popular bases for segmenting
customer groups.
– Easier to measure than most other types
of variables.
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Market Segmentation
 Age and Life-Cycle Stage:
– Example: P&G has different toothpastes
for different age groups.
– Avoid stereotypes in promotions.
– Promote positive messages.
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Market Segmentation
 Income:
– Identifies and targets the affluent for
luxury goods.
– People with low annual incomes can be a
lucrative market.
– Some manufacturers have different grades
of products for different markets.
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Market Segmentation
 Psychographic:
– Social class
– Lifestyle
– Personality
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Market Segmentation
 Behavioral:
– Occasion segmentation
• Special promotions and labels for
holidays.
– (e.g., Hershey Kisses)
• Special products for special occasions.
– (e.g., Kodak disposable cameras)
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Market Segmentation
 Behavioral:
– Benefits Sought
• Different segments desire different
benefits from products.
– (e.g., P&G’s multiple brands of laundry
detergents to satisfy different needs in the
product category)
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Market Segmentation
 Behavioral:
– User Status
• Nonusers, ex-users, potential users,
first-time users, regular users
– Usage Rate
• Light, medium, heavy
– Loyalty Status
• Brands, stores, companies
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Market Segmentation
 Best to use multiple approaches in
order to identify smaller, better-defined
target groups.
– Start with a single base and then expand
to other bases.
– Geodemographic segmentation is
becoming more common.
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Market Segmentation
 Geodemographic:
– Claritas, Inc.
– Potential Rating Index for Zip Markets
(PRIZM)
– Based on U.S. Census data
– Profiles on 260,000 U.S. neighborhoods
– 62 clusters or types
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Segmenting Business Markets
 Consumer and business markets use
many of the same variables for
segmentation.
 Business marketers can also use:
– Operating Characteristics
– Purchasing Approaches
– Situational Factors
– Personal Characteristics
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Segmenting International
Markets
 Factors used:
– Geographic location
– Economic factors
– Political and legal factors
– Cultural factors
 Intermarket segmentation:
– Segments of consumers who have similar
needs and buying behavior even though
they are located in different countries.
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Requirements for Effective
Segmentation
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



Measurable
Accessible
Substantial
Differentiable
Actionable
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Evaluating Market Segments
 Segment Size and Growth
– Analyze current segment sales, growth rates,
and expected profitability.
 Segment Structural Attractiveness
– Consider competition, existence of substitute
products, and the power of buyers and
suppliers.
 Company Objectives and Resources
– Examine company skills & resources needed to
succeed in that segment.
– Offer superior value and gain advantages over
competitors.
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Target Marketing Strategies
 Undifferentiated (mass) marketing
– Ignores segmentation opportunities
 Differentiated (segmented) marketing
– Targets several segments and designs
separate offers for each
 Concentrated (niche) marketing
– Targets one or a couple small segments
 Micromarketing (local or individual
marketing)
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Micromarketing
 Tailoring products and marketing
programs to suit the tastes of specific
individuals and locations.
– Local Marketing: Tailoring brands and
promotions to the needs and wants of
local customer groups—cities,
neighborhoods, specific stores.
– Individual Marketing: Tailoring products
and marketing programs to the needs and
preferences of individual customers.
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Choosing a Market Coverage
Strategy
 Factors to consider:
– Company resources
– Product variability
– Product’s life-cycle stage
– Market variability
– Competitors’ marketing strategies
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Socially Responsible Targeting
 Smart targeting helps both companies and
consumers.
 Target marketing sometimes generates
controversy and concern.
– Vulnerable and disadvantaged can be targeted.
– Cereal, cigarette, beer, and fast-food marketers
have received criticism.
– Internet has raised fresh concerns about
potential targeting abuses.
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Positioning for Competitive
Advantage
 Product’s position is the way the
product is defined by consumers on
important attributes, or as the place the
product occupies in consumers’ minds
relative to competing products.
– Perceptual position maps can help define
a brand’s position relative to competitors.
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Choosing a Positioning Strategy
 Identify a set of possible competitive
advantages on which to build a
position.
 Choose the right competitive
advantages.
 Select an overall positioning strategy.
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Identifying Possible
Competitive Advantages
 Key to winning target customers is to
understand their needs better than
competitors do and to deliver more
value.
 Competitive advantage – extent to
which a company can position itself as
providing superior value.
– Achieved via differentiation.
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Identifying Possible
Competitive Advantages
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

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Product differentiation
Services differentiation
Image differentiation
People differentiation
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Positioning Errors
 Underpositioning:
– Failing to really position the company at
all.
 Overpositioning:
– Giving buyers too narrow a picture of the
company.
 Confused Positioning:
– Leaving buyers with a confused image of a
company.
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Choosing Right Competitive
Advantages







Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
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Overall Positioning Strategy
 Full positioning of the brand is called
the brand’s value proposition.
 Potential value propositions include:
– More for More
– More for the Same
– The Same for Less
– Less for Much Less
– More for Less
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Communicating and Delivering
the Chosen Position
 Company must take strong steps to
deliver and communicate the desired
position to target consumers.
 The marketing mix efforts must support
the positioning strategy.
 Must monitor and adapt the position
over time to match changes in
consumer needs and competitors’
strategies.
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Rest Stop: Reviewing the Concepts
1. Define the three steps of target
marketing: market segmentation, market
targeting, and market positioning.
2. List and discuss the major bases for
segmenting consumer and business
markets.
3. Explain how companies identify
attractive market segments and choose a
target marketing strategy.
4. Discuss how companies position their
products for maximum competitive
advantage in the marketplace.
Copyright 2007, Prentice Hall, Inc.
6-32