MARKET SEGMENTATION, TARGETING, AND POSITIONING

Companies today recognize that they cannot appeal to all customers in the
marketplace, or at least not all customers the same way.
Customers are too numerous, too widely scattered, and too varied in
their needs and buying processes.
Most companies have moved away from mass marketing and toward target
marketing:
Identifying market segments;
Selecting one or more of them; and
Developing products and market programs tailored to each.

STEPS IN TARGET MARKETING

1. The first is market segmentation
Dividing a market into distinct groups who might require separate
products and/or marketing mixes (See Slide 4)
2. The second step is market targeting
Evaluating each segments attractiveness and selecting one or more of
the market segments (See Slide 5)
3. The third step is market positioning
Developing competitive positioning for the product and an appropriate
marketing mix (See Slide 6)
MARKET SEGMENTATION
Markets consist of buyers who differ in one or more ways. They may differ in
their wants, resources, locations, buying attitudes, and buying practices.

Because buyers have unique needs and wants, each is potentially a separate
market.

DIFFERENT WAYS IN SEGMENTING A MARKET

1. Geographic Segmentation

Geographic segmentation calls for dividing the market into

different geographic units, such as nations, states, regions, counties,
cities, or neighborhoods.
2.

3.

4.

Demographic Segmentation
Demographic segmentation consists of dividing the marketing
into groups based on demographic variables such as age, life cycle,
gender, income, occupation, education, religion, race, and nationality.
Demographic variables are the most popular bases for
segmenting customer groups (See Slide 5).
Psychographic Segmentation
Psychographic segmentation divides buyers into different
segments based on social class, lifestyle, or personality characteristics.
People in the same demographic group can have very different
psychographic characteristics.
Marketers also use personality variables to segment markets.
Behavioral Segmentation

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5.

In behavioral segmentation, buyers are divided into groups

based on their knowledge, attitude, and use or response to a product
(See Slide 6).
Using Multiple Segmentation Bases
Marketers rarely limit their segmentation analysis to only one or
a few variables only.
Rather, they often use multiple segmentation bases in an effort
to identify smaller, better-defined target groups.

DEMOGRAPHIC SEGMENTATION
Demographic characteristics must be known to assess the size of the market
and to reach it efficiently.
FACTORS TO CONSIDER IN DEMOGRAPHIC SEGMENTATION
a.
Age and Life-Cycle Stage

Consumer preferences change with age.

However, marketers must be careful to guard against

stereotypes when using age and life-cycle segmentation.
b.

Gender

Gender marketing is by no means simplistic.

Gender marketing is most effective when combined with lifestyle

and demographic information.

c.

Income segmentation

Income does not always predict which customers will buy a given
product or service.

BEHAVIORAL SEGMENTATION
Many marketers believe that behavioral variables are the best starting point
for building market segments.
FACTORS TO CONSIDER IN BEHAVIORAL SEGMENTATION
a. Occasion Segmentation
Buyers can be grouped according to occasions when they make a
purchase or use a product.
b. Benefits Sought
Buyers can also be grouped according to the product benefits they
seek.
Knowing the benefits sought by customers is useful in two ways:
First, managers can develop products with features that
provide the benefits their customers are seeking; and
Second, managers communicate more effectively with their
customers if they know what benefits they seek.
c. User Status
Many markets can be segmented into nonusers, former users,
potential users, first-time users, and regular users of a product.
d. Usage Rate
Markets can also be segmented into light, medium, and heavy
product users.
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e. Loyalty Status
A market can also be segmented on the basis of consumer loyalty.
A major reason for increasing customer loyalty is that loyal
customers are price insensitive compared to brand-shifting
patrons.
REQUIREMENTS OF EFFECTIVE SEGMENTATION
To be useful, market segments must have the following characteristics:
1. Measurability
The degree to which the segments size and purchasing power can be
measured.
2. Accessibility
The degree to which segments can be assessed and served.
3. Substantiality
The degree to which segments are large or profitable enough to serve
as markets.
4. Actionability
The degree to which effective programs can be designed for attracting
and serving segments.
EVALUATING MARKET SEGMENTS
When evaluating different market segments, a firm must look at three factors:
segment size and growth, segment structured attractiveness, and company
objectives and resources.
FACTORS IN EVALUATING MARKET SEGMENTS
1. Segment Size and Growth

A company must first collect and analyze data on current

segment sales growth rates and expected profitability for various
segments.
2.

3.

Segment Structural Attractiveness

A segment might have desirable size and growth and still not
offer attractive profits.
The company must examine several major structural factors
that affect long-run segment attractiveness.

For example, a segment is less attractive if it already

contains many strong and aggressive competitors.
Company Objectives and Resources
All companies must consider their own objectives and
resources in relation to available segments.
Some attractive segments can be dismissed quickly because
they do not mesh with the companys long-run objectives.

SELECTING MARKET SEGMENTS

After evaluating different segments, the company must decide which and how
many segments to serve.
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STRATEGIES IN SELECTING MARKET SEGMENTS

1. Undifferentiated Marketing
Using an undifferentiated marketing strategy, a company ignores
market segmentation differences and goes after the entire market with
one market offer.
It focuses on what is common in the needs of consumers rather than on
differences.
Undifferentiated marketing provides cost economies.
Most contemporary marketers have strong doubts about
the strategy in todays competitive environment.
It is difficult to develop a product and brand that will satisfy all or
even most consumers.
2. Differentiated Marketing
Using a differentiated marketing strategy, a company targets several
market segments and designs separate offers for each.
Differentiated marketing typically produces more total sales than
undifferentiated marketing.
3. Concentrated Marketing
Concentrated marketing, is especially appealing to companies with
limited resources.
Instead of going for a small share of a large market, the firm pursues a
large share of one or a few small markets.
POSITIONING STRATEGY

Once a company has chosen its target market segments, it must decide what
positions to occupy in those segments.

A products position is the way the product is defined by consumers on

important attributesthe place the product occupies in consumers minds
relative to competing products.

The positioning task consists of three steps:

1. Identifying a set of possible competitive advantages on which to build a
position.
2. Selecting the right competitive advantages.
3. Effectively communicating and delivering the chosen position to a carefully
selected target market.
WAYS TO DIFFERENTIATE

A hospitality company or a visitor destination must differentiate its

products/services from those of competitors
Differentiation can occur by physical attributes, service, personnel, location,
or image.

1. Physical Attribute Differentiation

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Restaurants such as Chez Panisse in Berkeley, Lidias in Kansas City,

and the chain Chipotle Mexican Grill use natural/organic foods to
differentiate themselves.

2. Service Differentiation
For example, Sheraton, Shangri-La, and other hotels provide an in-room
check-in service. Red Lobster takes call aheads.
3. Personnel Differentiation
Companies can gain a strong competitive advantage through hiring
and retaining better people than their competitors.
4. Location Differentiation
Location can provide a strong competitive advantage.
5. Image Differentiation
Even when competing offers look the same, buyers may perceive a
difference based on company or brand image.
Thus, hospitality companies need to work to establish images that
differentiate them from competitors.
POSITIONING ERRORS

As companies increase the number of claims for their brands, they risk
disbelief and a loss of clear positioning.

TYPES OF POSITIONING ERROR

1. Underpositioning
Failing ever to position the company at all.
2. Overpositioning
Giving buyers too narrow a picture of the company.
3. Confused positioning
Leaving buyers with a confused image of a company.
PRODUCT/SERVICE DIFFERENTIATION
Not all brand differences are meaningful or worthwhile.
Not every difference makes a good differentiator.
Each difference has the potential to create company costs as well as
customer benefits.
Therefore, a hospitality company or a visitor destination must carefully select
the ways in which it will distinguish itself from competitors.

A difference is worth establishing to the extent that it satisfies the

following criteria:
a. Important
The difference delivers a highly valued benefit to target buyers.
In the case of a visitor destination, personal safety has become a
top benefit.
b. Distinctive

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Competitors do not offer the difference, or the company can

offer it in a more distinctive way.

c. Superior
The difference is superior to other ways that customers might
obtain the same benefit.
d. Communicable
The difference is communicable and visible to buyers.
e. Preemptive
Competitors cannot easily copy the difference.
f. Affordable
Buyers can afford to pay for the difference.
g. Profitable
The company can introduce the difference profitability.
PERCEPTUAL MAPPING
Perceptual mapping, a research tool, is sometimes used to measure a brands
position.
This slide (Slide #14) is an example of hotels plotted on the attributes of price
and perceived service.
On this map we see there is a correlation between service and price; as
price goes up, so does service.

Perceptual maps can also be developed using consumers perceptions of a

number of product attributes.
Increased competition or an ineffective positioning strategy can make
repositioning necessary.
Perceptual maps provide data supporting the need for repositioning.

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