Segmentation, Targeting & Positioning

Overview: Segmentation, Targeting & Positioning

Why do this?
 Market Segmentation - Principles
• Segmentation Variables
– Geographic
– Demographic
– Psychographic
– Behavioral
– Other (anything!)
• No single best way to segment a market.
• Often best to combine variables and identify smaller, better-
defined target groups.
 Geographic Segmentation
• Divide markets into different geographic units.

• Examples:
– World Region or Country: North America, Western
Europe, European Union, Pacific Rim, Mexico, etc.
– Country Region: Pacific, Mountain, East Coast, etc.
– City or Metro Size: New York, San Francisco
– Population Density: rural, suburban, urban
– Climate: northern, southern, tropical, semi-tropical
 Demographic Segmentation
• Use Differences in:
– age, gender, family size, family life cycle, income,
occupation, education, race, and religion

– Most frequently used segmentation variable

• Ease of measurement and high availability.

– Usually the worst variable to use.

Psychographic Segmentation

Psychographic segmentation
divides a market into
different groups based on
social class, lifestyle, or
personality characteristics.

People in the same demographic classification

often have very different lifestyles and personalities.
 Behavioral Segmentation
• Occasion
– Special promotions &
labels for holidays.
– Special products for
special occasions.
• Benefits Sought
– Different segments
desire different benefits
from the same products.
• Loyalty Status
– Nonusers, ex-users,
potential users, first-
time users, regular
users.
• Usage Rate
– Light, medium, heavy.
Loyalty Status Segmentation

Hard-core

Split loyals

Shifting loyals

Switchers
User & Loyalty Status Segmentation
 Geodemographic Segmentation
• PRIZM, by Claritas
– Organized by ZIP code
– Based on U.S. Census data
– Profiles on 260,000+ U.S. neighborhoods
– 62 clusters or types
Claritas’ Prizm
Requirements for Effective Segmentation

Segments must be
– Measurable
– Accessible
– Substantial
– Differentiable
“Lefties” are hard to
identify and measure, so
few firms target this
– Actionable
segment.
 Evaluating Market Segments

• Segment Size and Growth Potential

– Sales, profitability and growth rates
• Segment Structural Attractiveness
– Competition, substitute products,
– buyers & supplier power, new
entrants (Porter’s Five Forces)
• Company Objectives and
Resources
– Core competencies
– “What business do we want to be
in?”
Targeting Segments - Overview
Market Preference Patterns
Undifferentiated (Mass) Marketing
– Ignores segmentation opportunities
Differentiated (Segmented) Marketing
– Targets several segments
and designs separate offers
for each.

– Coca-Cola (Coke, Sprite, Diet Coke,

etc.)
– Procter & Gamble (Tide, Cheer,
Gain, Dreft, etc.)
– Toyota (Camry, Corolla, Prius, Scion,
etc.)
 Question du Jour

Should the same company produce and market brands

that compete with each other?
 Niche Marketing
– Targets one or a couple small segments
– Niches have very specialized interests
 Micromarketing
• Tailoring products and marketing programs to suit
the tastes of specific individuals and/or locations.
 Flexible Marketing Offerings

• “Naked”/Core solution • Discretionary options

– Product and service – Some segment
elements that all members value
segment members – Options may carry
value additional charges
Patterns of Target Market Selection:
Product x Market Matrices
 Socially Responsible Targeting

• Controversies and concerns

– Targeting the vulnerable and
disadvantaged
• Cereal, Cigarettes, Alcohol, Fast-food

– The “Catch-22” of Targeting

• Psychological Reactance
• Failure to target seen as prejudice
 Positioning

The place a product occupies in consumers’

minds relative to competing products.
Positioning Example

eBay’s positioning: No
matter what “it” is, you
can find “it” on eBay!
 Positioning Example

To (target segment and need) our (brand) is a

(concept) that (point-of-difference).

“To busy mobile professionals who need to

always be in the loop, Blackberry is a wireless
connectivity solution that allows you to stay
connected to people and resources while on
the go more easily and reliably than the
competing technologies.”
 Positioning Maps: Luxury SUVs
Price vs. Orientation Dimensions
 Positioning Strategy
• Competitive advantages
• Points of Parity
• Points of Difference => Differentiation

Positioning results from differentiation and

competitive advantages.

Positioning may change over time.

 Sources of Differentiation

– Product Design
– Quality
– Additional Services
– Image
– People (Staff)
– Price
– Other

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Choosing the Right Competitive Advantages

• The best competitive advantages are…

– Important
– Distinctive
– Superior
– Communicable
– Pre-emptive
– Affordable (to company and consumer)
– Profitable

Moral: Avoid meaningless differentiation.

 Positioning Errors
• Under-positioning:
– Not positioning strongly enough.

• Over-positioning:
– Giving buyers too narrow a picture of the product.

• Muddled Positioning:
– Leaving buyers with a confused image of the product.
Generic Product Positions
& Value Propositions
 Question du Jour

Which is more important: Product or Positioning?

 In-class Activity
• Describe how each of the following brands,
companies, or products is positioned:
 In-class Activity, Part 2
• Choose one of the companies/brands and…
– Identify relevant direct competitors
– Choose the two dimensions that are most
important to consumers
– Develop a perceptual positioning map
– Are there any opportunities in this category?
 In-class Activity, Part 3
• Choose a company and invent a segmentation scheme for
that company’s customers using the variables we discussed in
class.