Chapter 3
Segmentation,
Segmentation,
Targeting,
Targeting,
and Positioning
and Positioning
Mass-marketing

A strategy that presumes there is one
undifferentiated market and that one
product will appeal to all consumers in that
market.
Advantages
 Lower cost
 One advertising campaign is needed
 One marketing strategy is developed
 Usually only one standardized product is
developed
Disadvantage
 It only works if all consumers have the same
needs, wants, desires, and the same
background, education and experience
Market matching strategy

Today, mass marketing has largely been
replaced by a three-step market matching
strategy
Market Matching Strategy
Market Matching
Segmentation
Targeting
Positioning
Market Matching Strategy

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Segmentation
Act of dissecting the marketplace into submarkets
that require different marketing mixes
Targeting
Process of reviewing market segments and deciding
which one(s) to pursue
Positioning
Establishing a differentiating image for a product or
service in relation to its competition
Market segmentation

The process of dividing a market into distinct
subsets (segments) of consumers with
common needs or characteristics and
selecting one or more to target with a distinct
marketing mix
Segmentation Variables
Segmentation Variables
Geographic
Geodemographic
Demographic
Behavioral
Psychographic


Marketers may use a single variable
Marketers may use two or more variables
Geographic Segmentation

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

Division of the market based on the location of the
target market
People living in the same area have similar needs
and wants that differ from those living in other areas
Climate
Population density
Taste
Micromarketing
Demographic Segmentation

Partitioning of the market based on factors
such as

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
age
gender
marital status
income
occupation
education
ethnicity
Age

Product needs and interests often vary with
consumers’ age
Age Effects

Occurrences due to chronological age
Cohort Effects

Based on the idea that people hold onto the
interests they learned to appreciate growing
up
Gender


Gender is frequently a distinguishing variable
Changes in the family and growth of the dualincome household have blurred some of the
lines
Marital Status

1.
2.
3.
4.

Marketers have identified specific marital
status groups, such as:
Singles
Divorced individuals
Single parents
Dual-income married couples
They then market products specifically
designed for one or more groups
Income, Education & Occupation



These three variables are often related and
therefore often used together as a measure
of one’s social class.
Income is commonly used because
marketers feel it is a strong indicator of ability
to pay for a particular product or service
Income is often combined with other
variables to narrow target markets:


With age to identify the important affluent elderly
With age and occupation to produce the yuppie
segment
Race and Ethnicity

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The size and purchasing power of minorities
make them an attractive target market
The size of the market is growing
dramatically relative to the “majority”
population
Targeting certain products (e.g., alcohol,
tobacco) to such groups raises ethical issues
Tobacco and the African American
Community


Why is there a concern about targeting
African Americans?
During the ’90s, youth smoking rates
increased sharply

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12.6% in 1991
22.7% in 1997
80% increase


After Native Americans, African Americans
have the highest rate of smokers of any
ethnic group in the US
African American men have the highest rate
of death from lung cancer of any ethnic group
in the US


81% of African American men who smoke and
contract lung cancer die
51% of white men who smoke and contract lung
cancer die

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Tobacco companies have clearly targeted African Americans
Brown & Williamson’s Kool brand
 used a cartoon character, the penguin Willie, that was popular
with black teens
 Has sponsored an annual jazz festival that attracts large black
audiences
In 1998 cigarette advertisements represented 60% of ad space in
black newspapers
Following the success of the movie “Malcolm X”, Star Tobacco
Co. introduced a new brand called “X,” packaged in the black,
red and green colors of the black nationalist movement
 Marketed in 20 states before pressure from the community forced
discontinuance of the brand
Geodemographic Segmentation


A hybrid segmentation scheme
Based on notion that people who live close to one
another are likely to have similar financial means,
tastes, preferences, lifestyles and consumption
habits

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Market research firms specialize in producing
computer-generated geodemographic market
“clusters” of consumers
They have clustered the nation’s >250,000
neighborhoods into lifestyle groupings based on
postal zip codes
Marketers use the cluster data for mail campaigns,
to select retail sites and merchandise mixes, to
locate banks and restaurants, etc.
“You Are Where You Live”.
Psychographic Segmentation

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Partitioning of the market based on lifestyle
and personality characteristics
Marketers use it to further refine a target
market
Its appeal lies in the vivid and practical
profiles of consumer segments that it can
produce
Accomplished by using AIO inventories
AIO Inventories
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AIO research seeks consumers’ responses to
a large number of statements that measure
Activities
Interests
Opinions
Examples of the use of psychographic
segmentation reflected in marketing
messages

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Kellogg’s targets health-conscious
consumers with brands such as Special K
and Product 19
Old Spice is targeting the active sports
lifestyle with High Endurance deodorant
Behavioral Segmentation

Partitioning of the market based on attitudes
toward or reactions to a product and to its
promotional appeals

1.
2.
3.
Behavioral segmentation can be done on
the basis of:
Usage rate
Benefits sought from a product
Loyalty to a brand or a store
1. Usage Rate

Differentiates between
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heavy users
medium users
light users
nonusers
In general, a relatively small number of heavy
users account for a disproportionately large
percentage of product usage
Targeting those heavy users is a common
marketing strategy
2. Benefit Segmentation


Marketers constantly attempt to identify the
single most important benefit of their product
that will be the most meaningful to
consumers
Changing lifestyles play a major role in
determining the product benefits that are
important to consumers and also provide
marketers with opportunities for new products
and services
3. Brand and Store Loyalty

The tendency of some consumers to
repeatedly select the same brand within a
given product category

A parallel tendency of some consumers to
repeatedly patronize a particular retail
establishment

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Marketers often try to identify the
characteristics of their brand-loyal customers
so they can target consumers with similar
characteristics in the larger population
Marketers also target consumers who show
no brand loyalty as a means of penetrating a
larger market
Marketers reward brand loyalty by offering
special benefits to frequent customers
Choosing Market Segments to Target

Once an organization has identified its most
promising market segments, it must decide whether
to target one segment or several segments

Each targeted segment will then receive a specially
designed marketing mix — i.e., a specially tailored
product, price, distribution network and/or
promotional campaign
Market Targeting Strategies
There are three basic types of strategies:
1. Undifferentiated
2. Multisegment (Differentiated)
3. Concentration (Niche)
1. Undifferentiated Strategy

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A strategy that ignores differences between
groups within a market and offers a single
marketing mix to the entire market
It works when a product is new to the market
and there is minimal or no competition
Advantages and Disadvantages

Economies in production and marketing

Vulnerability to competitors offering more
differentiated products and services to market
subsegments
2. Multisegment/Differentiated Strategy

Targeting two or more segments with different
marketing mixes for each
Advantages and disadvantages

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Minimizes risks, as losses in one segment
can be made up for in others
Unique product features allow for higher
prices
Increased costs for differentiated products
and marketing
3. Concentration/Niche Marketing
Strategy

Focus on one sub-market
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Greater knowledge of customers’ needs
Economies of scale
Entry of a strong competitor
Change in size or tastes of the segment
Positioning

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Deciding how the firm wants the company and
its brands to be perceived and evaluated by
target markets
Differentiating the product from other products of
the firm or its competition

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Positioning complements and is an integral
part of the company’s segmentation strategy
and selection of target markets
The same product can be positioned
differently to different market segments
The result of successful positioning is a
distinctive brand image on which consumers
rely in making product choices
Perceptual Mapping

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
A spatial picture of how consumers view
products or brands within a market
Allows marketers to determine how their
product appears in relation to competitive
brands
Enables them to see gaps in in positioning of
all brands in the product class to identify
areas in which consumer needs are not being
met
A visual profile of how consumers perceive a number of pain
relievers on the two dimensions of effectiveness vs. gentleness.
Effectiveness
More
Tylenol
Extra-Strength Tylenol
Bufferin
Nuprin
Motrin
Advil
Anacin
Bayer
Excedrin
Private Label Aspirin
Aleve
Actron Orudis
Less
Gentleness to Stomach
More
Repositioning

Marketers may be forced to reposition
products due to competition or a changing
environment
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Modifying an existing brand
Targeting it to a new market segment
Emphasizing new product uses and benefits
Stressing different features with the intention
of boosting sales
Selected Psychographic/Demographic Characteristics
of the PC Magazine Subscriber
Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.
DEMOGRAPHICS
SEX (BASE 990)
Men
Women
AGE
Under 25
25 - 34
35 - 44
45 - 54
55 - 64
65 or older
Mean age
Percent
86
13
5
18
29
31
12
5
44.1
PSYCHOGRAPHICS Percent
USE A COMPUTER
100
At home
96
At work
89
On vacation/traveling
46
SELECTED USE OF
COMPUTER
Word Processing
96
Connect to Internet
86
E-mail
84
For work
80
Accounting/record keeping 75
Reference
68
Recreation/games
66
DEMOGRAPHICS
EDUCATION
Some college or less
Graduate college
Education beyond
college graduate
Percent
27
27
46
EMPLOYMENT STATUS
Employed by someone else 68
Self-employed
21
Other
11
PSYCHOGRAPHICS Percent
PORTABLE DEVICES USED
WHEN TRAVELING ON
BUSINESS
Laptop/notebook
computer
57
Cellular phone
47
Beeper or pager
30
Personal Digital Assistant/
electronic organizer
14
DEMOGRAPHICS
Percent
OCCUPATION/BUSINESS
DEPT.
Computer relatedprofessional
22
Senior or corporate
management
16
Engineering-related
professional
13
Administrative/
manufacturing,
accounting, finance,
purchasing, advertising,
marketing, sales
26
Others
23
PSYCHOGRAPHICS Percent
TRAVEL FOR
BUSINESS/PLEASURE
Business Travel
5 or more days per month 31
5 or more nights away
from home per month
17
Pleasure/Vacation Travel
15 or more days per year 37
Mean number of days
per year
15.5
MEMBER OF
FREQUENT FLYER
PROGRAMS
90
DEMOGRAPHICS
Percent
INCOME
Under $30,000
7
$30,000 - $49,999
15
$50,000 - $74,999
24
$75,000 - $99,999
19
$100,000 or more
24
Mean income
$87,700
PRIMARY RESIDENCE
Own
74
Rent
18
Other
3
No answer
5
PSYCHOGRAPHICS Percent
FINANCIAL SERVICES
Currently own
Mutual funds
48
Stocks
44
Bonds
24
Life insurance/annuities
44
Currently use
Brokerage services
36
On-line investment
services
16
Retirement/financial
planning
41
RESPONSE OF SELECTED
CONSUMER
PSYCHOGRAPHIC
STATEMENTS
Percent
Research before choose
brand of new product
to buy
Other people ask my opinion
about which computer
products to buy
Usually buy products based
on quality, not price
Prefer products that are
latest in new technology
Among group I am one of
first to try new product
41
41
26
26
19
SELECTED
SPORTS/ACTIVITES
PLAYED/PARTICIPATED IN
PAST YEAR
Percent
Walking/running/jogging 63
Exercise/fitness/weight
training
44
Bicycling
7
Swimming
37
Golf
27
Fishing
23
Boating/sailing
19
Skiing
19
Tennis
14
HOBBIES/OTHER ACTIVITIES
PARTICIPATED IN
Percent
Listen to music
77
Reading
61
Going to movies
60
Surfing the Internet
50
Games-videos on
computer
48
Gardening
32
Going to the theater
32
Cooking
30
Photography
30
Collecting stamps/coins
11
Sewing needlecraft
6