BK Chapter009 BasicSTP

Market Segmentation,
Targeting, and Positioning

What are Markets?
• Market: people or institutions with

sufficient purchasing power, authority,
and willingness to buy
CHAPTER 9 Market Segmentation, Targeting, and Positioning
Types of Markets
o Consumer products - Products bought by

ultimate consumers for personal use
o Business products - Goods and services

purchased for use either directly or indirectly in
the production of other goods and services for
resale
Copyright © 2012 by South Western, a division of Cengage Learning. All rights reserved.
Requirements of a Markets
Need
+ Ability
Willingness
Authority
The Role of Market Segmentation
o Marketing strategies must be adjusted to meet

the needs of different consumer groups
o Market segmentation - Division of the total

market into smaller, relatively homogenous
groups
Why segment?
Most Most
efficient effective
Many Groups
of One
One Mass
Market
The Importance of Market Segmentation
 Markets have a variety of product

needs and preferences.
 Marketers can better define

customer needs.
 Decision makers can define objectives

and allocate resources more accurately.
No Market Segmentation
Segmented by Gender
Segmented by Age
Segmentation Process
• Marketers follow two methods to determine the

bases on which to identify markets:
– Segments are predefined by managers based
on their observation of the behavioral and
demographic characteristics of likely users
– Segments are defined by asking customers
which attributes are important and then
clustering the responses
Criteria for Effective Segmentation
Responsiveness
Accessibility
Measurability /
Identifiability
Substantiality
Bases for Segmenting Consumer Markets
Characteristics of individuals, groups, or

organizations used to divide a total market into
segments. (variables)
Bases for Segmentation
Geography
Demographics
Psychographics
Benefits Sought
Usage Rate
Geographic Segmentation
o Division of an overall market into homogenous groups

based on their locations
o Marketers look at total population, a variety of
economic variables, geographic indicators, and
migration patterns to determine market size
o Pay close attention to areas with quickly growing
populations to plan for the future
Demographic Segmentation
o Division of an overall market into

homogenous groups based on variables such
as gender, age, income, occupation, education,
sexual orientation, household size, and stage
in the family life cycle
Family Life Cycle
Age
Marital
Children
Status
Segmenting by Household Type
o Average household size in U.S. has decreased from 5.8

in 1790 to less than 3 today
o Households vary by lifestage and the presence or
absence of children
o Growing number of same-sex couples who share
households
Segmenting by
Income and Expenditure Patterns
o Engel’s laws
o As household income increases:
o A smaller percentage of expenditures goes for
food
oThe percentage spent on housing, household
operations, and clothing remains constant
oThe percentage spent on recreational and
educational items increases
What is Psychographic Segmentation?
o Division of a population into groups that have

similar attitudes, values, and lifestyles
o AIO statements - Items on lifestyle surveys that
describe various activities, interests, and
respondents’ opinions
Psychographic Segmentation
• Psychographic Segmentation: dividing a population into groups

that have similar psychological characteristics, and lifestyles.
• Lifestyle: people’s decisions about how to live their daily lives,
including family, job, social, and consumer activities
Usage Rate Segmentation
Dividing a market by the

amount of product bought
or consumed.
Bases for Segmenting Business Markets
Producers
Resellers
Government
Institutions
Company Buying
Characteristics Processes
Steps in Segmenting Markets
1 2 3 4 5 6
Select Choose Select Profile Select Design,
a market bases descriptors and target implement,
for for analyze markets maintain
study segmen- segments marketing
tation mix
Note that steps 5 and 6 are actually marketing activities that follow market segmentation (steps 1 through 4).
Product-Related Segmentation
o Division of a population into homogeneous groups

based on their relationships to a product
o Segmenting by benefits sought
o Segmenting by usage rates
o Segmenting by brand loyalty
o Using multiple segmentation bases
Targeting
o Choosing one or more

segments for which to
design your marketing
operations
Strategies for Reaching Target Markets
o Undifferentiated marketing
o Strategy that focuses on producing a single product and
marketing it to all customers; also called mass
marketing
o Differentiated marketing
o Strategy that focuses on producing several products and
pricing, promoting, and distributing them with different
marketing mixes designed to satisfy smaller segments
Undifferentiated Strategy
Single
Marketing
Mix
Organization
Target Market
Differentiated Strategy
Marketing Mix 1
Marketing Mix 2
Organization
Target Market
Concentrated Strategy
Single
Marketing
Mix
Organization
Target Market
Cannibalization
Cannibalization
Situation that occurs when

sales of a new product cut into
sales of a firm’s existing
products.
STRATEGIES FOR REACHING
TARGET MARKETS
• No single, best choice strategy suits all
firms
• Determinants of a market-specific
strategy:
– Company resources
– Product homogeneity
– Competitors’ strategy
One-to-One Marketing
An individualized marketing method

that utilizes customer information to
build long-term, personalized, and
profitable relationships with each
customer.
- ‘share of customer’
Concentrated Marketing
o Focusing marketing efforts on satisfying a single

market segment; also called niche marketing
o Approach can appeal to small firms or to firms that
offer highly specialized goods and services
o Example: Peanut Butter & Co, which appeals to
peanut butter lovers
o Can backfire if competitors target the same niche or if
market decreases
Selecting and Executing a Strategy
o Basic determinants of marketing strategy:

o Company resources
o Product homogeneity
o Stage in the product lifestyle
o Competitors’ strategies
Product Positioning
o Positioning starts with a product. A Piece of

merchandise, a service, a company, an institution, or
even a person... But positioning is not what you do to
a product. Positioning is what you do to the mind of
the prospect. That is, you position the product in the
mind of the prospect.
Al Ries and Jack Trout (1981)
Positioning
o Placing a product at a certain point or location within a

market in the minds of prospective buyers
o Possible approaches
o Attributes
o Price/quality
o Competitors
o Application
o Product user/class
Positioning of
Procter & Gamble
Detergents
Market
Brand Positioning
Share
Tide Tough, powerful cleaning 31.1%
Cheer Tough cleaning, color protection 8.2%
Bold Detergent plus fabric softener 2.9%
Gain Sunshine scent and odor-removing formula 2.6%
Era Stain treatment and stain removal 2.2%
Dash Value brand 1.8%
Oxydol Bleach-boosted formula, whitening 1.4%
Solo Detergent and fabric softener in liquid form 1.2%
Dreft Outstanding cleaning for baby clothes, safe 1.0%
LO9
Ivory Snow Fabric & skin safety on baby clothes 0.7%
Ariel Tough cleaner, aimed at Hispanic market 0.1%
Perceptual Mapping
A means of displaying or graphing, in two

or more dimensions, the location of
products, brands, or groups of products in
customers’ minds.
Perceptual Maps
Corolla Celica Avalon Camry

Expensive
Sporty Conservative
Inexpensive
Product Positioning using perceptual maps
High moisturizing
Zest
Tone 7
4
Lever 2000
Dove
5 2
Safeguard
Coast
Lux 8
Nondeodorant 3 Deodorant
1
Dial
Lifebuoy
Lava
6
Low moisturizing
Repositioning
Changing consumers’
perceptions of a brand in relation
to competing brands.
Positioning and Product Differentiation

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Market Segmentation,

Targeting, and Positioning

• Market: people or institutions with

o Consumer products - Products bought by

o Business products - Goods and services

The Role of Market Segmentation

o Marketing strategies must be adjusted to meet

o Market segmentation - Division of the total

The Importance of Market Segmentation

 Markets have a variety of product

 Marketers can better define

 Decision makers can define objectives

• Marketers follow two methods to determine the

Criteria for Effective Segmentation

Bases for Segmenting Consumer Markets

Characteristics of individuals, groups, or

Bases for Segmentation

o Division of an overall market into homogenous groups

o Division of an overall market into

Family Life Cycle

Segmenting by Household Type

o Average household size in U.S. has decreased from 5.8

What is Psychographic Segmentation?

o Division of a population into groups that have

• Psychographic Segmentation: dividing a population into groups

Usage Rate Segmentation

Dividing a market by the

Steps in Segmenting Markets

o Division of a population into homogeneous groups

o Choosing one or more

Strategies for Reaching Target Markets

Situation that occurs when

An individualized marketing method

o Focusing marketing efforts on satisfying a single

Selecting and Executing a Strategy

o Basic determinants of marketing strategy:

o Positioning starts with a product. A Piece of

o Placing a product at a certain point or location within a

A means of displaying or graphing, in two

Corolla Celica Avalon Camry

Positioning and Product Differentiation

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