Segmentation, Targeting,

and Positioning

Chapter 8
 Objectives

Be able to define the three steps

of target marketing: market
segmentation, target marketing,
and market positioning.
Understand the major bases for
segmenting consumer and
business markets.
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 Objectives

Know how companies identify

attractive market segments
and how they choose a target
marketing strategy.
Comprehend how companies
position their products for
maximum competitive
advantage.
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 Procter &
c Gamble

Sells multiple Has also identified

brands within the different niches
same product within certain
category for a segments
variety of products
Brands feature a Tide offers seven
different mix of different product
benefits and formulations to
appeal to different serve different
segments niches’ needs
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 Definition
Market Segmentation:
 Dividing a market into distinct
groups with distinct needs,
characteristics,
or behavior who
might require
separate products
or marketing
mixes.

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 Figure 8-1:
Steps in Market
Segmentation, Targeting,
and Positioning

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 Market Segmentation
Key Topics Geographical
segmentation
Segmenting  Marketing mixes are
customized
Consumer Markets geographically
Segmenting Demographic
Business Markets segmentation
Segmenting Psychographic
International segmentation
Markets Behavioral
Requirements for segmentation
Effective Using multiple
Segmentation segmentation variables
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Market Segmentation
Geographic
Segmentation Variables
World Region City or
or Country Metro Size
U.S. Region Neighborhood
State Density
City Climate
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 Discussion Question

Geographical climate is
a legitimate means of
segmentation for many
products or services.
Name several examples of
products for which need
(and demand) would vary
on a geographical basis.

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 Market Segmentation
Key Topics Geographical segments
Demographic
Segmenting segmentation
Consumer Markets  Most popular type
 Demographics are closely
Segmenting related to needs, wants
Business Markets and usage rates
Segmenting Psychographic
International segmentation
Markets Behavioral
Requirements for segmentation
Effective Using multiple
Segmentation segmentation variables
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Market Segmentation
Demographic
Segmentation Variables
Age Occupation
Gender Education
Family size Religion
Family life cycle Generation
Income Nationality
Race
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Corvallis map of income
distribtuion

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Salem Hispanic Population

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Portland Household Income

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Bend price of homes

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What type of demographic segmentation
is reflected by this ad?

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 Market Segmentation
Key Topics Geographic segments
Demographic
Segmenting segmentation
Consumer Markets Psychographic
Segmenting segmentation
Business Markets  Lifestyle, social class,
and personality-based
Segmenting segmentation
International Behavioral
Markets segmentation
Requirements for Using multiple
Effective segmentation
Segmentation variables
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Swatch targets
those with an
active lifestyle

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 Market Segmentation
Key Topics Geographic segments
Demographic
Segmenting segmentation
Consumer Markets Psychographic
Segmenting segmentation
Business Markets Behavioral
Segmenting segmentation
International  Typically done first
Markets
Using multiple
Requirements for segmentation
Effective
variables
Segmentation
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Market Segmentation
Behavioral
Segmentation Variables

Occasions Loyalty Status

Benefits Readiness Stage
User Status Attitude Toward
User Rates the Product

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Occasion segmentation: Altoids’ “Love
Tin” is a “curiously strong valentine”

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Checkout Direct
offers retailers &
manufacturers an
excellent method
of reaching
segments of
heavy users, as
well as users of
the direct
competition.

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 Market Segmentation
Key Topics Geographic segments
Demographic
Segmenting segmentation
Consumer Markets Psychographic
Segmenting segmentation
Business Markets Behavioral
Segmenting segmentation
International Using multiple
Markets
segmentation
Requirements for variables
Effective
 Prizm
Segmentation
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 Discussion Question

Visit PRIZM’s “You are

where you live”
website.
Enter the zip code(s) of
your choice.
Were you
surprised by
what you
found?
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Example Market segments for J.C.
Penney Conservative
 Size: 23% of population
16% of sales
 Age: 35-55 years old
 Values: Conservative
values satisfied with
present status
 Employment: Has job, or
career
 Income: Limited
disposable income
 Benefits sought: Price-
driven, reacts to sales,
wants easy care and
comfort, Not interested in
fashion, Defines value as
Price, Quality, Fashion

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Traditional
 Size: 38% of population
40% of total sales
 Age: 25-49 years old
 Values: Traditional values
Active, busy, independent,
self-confident
 Employment: Family-and
job/career-oriented
 Income: Considerable
income
 Benefits sought: Wants
traditional styling, seeks
clothes that last, Interested
in newness, Defines value
as Quality, Fashion, Price

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Update
 Size: 16% of
population 24% of
total sales
 Age: 25-49
 Values: Contemporary
values Active, busy,
independent, very self-
confident
 Employment: Family-
and job/ career-
oriented
 Income: considerable
income
 Benefits sought:
Wants newness in
color and style, Shops
often, Defines value as
Fashion, Quality, Price

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Example Toothpaste Benefit segments

Sensory
Segment
Sociable
Segment
Worrier
Segment
Independent
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 Sensory Segment
Principle benefit
sought: Flavor and
product appearance
Demographic
strengths: Children
Special behavior
characteristics: Users
of spearmint-flavored
toothpaste
Brands: Colgate
Lifestyle
characteristics:
Hedonistic

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 Sociable Segment
Principle benefit sought:
Brightness of teeth
Demographic strengths:
Teens, young people
Special behavior
characteristics:
Smokers
Brands: Macleans, Ultra
Brite
Lifestyle characteristics:
Active

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 Worrier Segment
Principle benefit sought:
Decay prevention
Demographic strengths:
Large Families
Special behavior
characteristics: Heavy
users
Brands: Crest
Lifestyle characteristics:
Conservative

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 Independent Segment
Principle benefit
sought: Price
Demographic
strengths: Men
Special behavior
characteristics:
Heavy users
Brands: Cheapest
Brand
Lifestyle
characteristics:
Value oriented

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 Market Segmentation
Key Topics Demographic segmentation
 Industry, company size,
location
Segmenting
Operating variables
Consumer Markets  Technology, usage status,
Segmenting customer capabilities
Business Markets Purchasing approaches
Segmenting Situational factors
International  Urgency, specific
application, size of order
Markets
Personal characteristics
Requirements for  Buyer-seller similarity,
Effective attitudes toward risk, loyalty
Segmentation
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 Market Segmentation
Key Topics Geographic segmentation
 Location or region

Segmenting Economic factors

 Population income or level of
Consumer Markets economic development
Segmenting Political and legal factors
Business Markets  Type / stability of
Segmenting government, monetary
regulations, amount of
International bureaucracy, etc.
Markets Cultural factors
Requirements for  Language, religion, values,
Effective attitudes, customs,
Segmentation behavioral patterns

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 Market Segmentation
Key Topics Measurable
 Size, purchasing power, and
profile of segment
Segmenting
Accessible
Consumer Markets  Can be reached and served
Segmenting Substantial
Business Markets  Large and profitable enough
Segmenting to serve

International Differentiable
 Respond differently
Markets
Actionable
Requirements for
 Effective programs can be
Effective developed
Segmentation
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 Target Marketing

Evaluating Market Segments

 Segment size and growth
 Segment structural attractiveness
 Level of competition
 Substitute products
 Power of buyers
 Powerful suppliers

 Company objectives and resources

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 Figure 8-2:
Target Marketing
Strategies

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 Target Marketing
Choosing a Target-
Marketing Strategy
Requires Consideration of:
 Company resources
 The degree of product variability
 Product’s life-cycle stage
 Market variability
 Competitors’ marketing
strategies

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 Target Marketing
Socially Responsible Targeting
 Some segments are at special risk:
 Children
 Inner-city
minority
consumers
 Internet
shoppers
 Controversy occurs when the methods
used are questionable.
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Positioning
Positioning:
 The place the product
occupies in
consumers’ minds
relative to competing
products.
 Typically defined by
consumers on the
basis of important
attributes.

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 Positioning
Choosing a Positioning Strategy:
 Identifying possible competitive
advantages -- many potential
sources of differentiation exist:
 Products
 Services
 Channels
 People
 Image

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Porsche is
positioned on
the basis of
performance
and freedom.

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 Positioning

Choosing a Positioning Strategy:

 Choosing the right competitive
advantage
 How many differences to promote?
• Unique selling proposition
• Positioning errors to avoid
 Which differences to promote?

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 Positioning errors

Under-
positioning
Over-
positioning
Confused-
Positioning

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 Positioning
Criteria for Meaningful Differences

Important Distinctive
Superior Communicable
Preemptive Affordable
Profitable
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 Figure 8-3:
Possible Value Propositions

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 Discussion Question

View the ad at right.

Evaluate the level of

benefits and the price.

What value proposition

is being expressed?

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 Positioning

Choosing a Positioning Strategy:

 Developing a positioning statement
Positioning statements summarize the
company or brand positioning
EXAMPLE: To (target segment and
need) our (brand) is (concept) that
(point-of-difference).
 Communicating the chosen position

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 Positioning

Choosing a Positioning Strategy:

 Communicating and delivering the
chosen position
 Entire marketing mix must support the
chosen strategy
 May require changes to the product,
pricing, distribution or promotion.

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 BusinessNow

Zoots Video Clip

Zoots Drycleaning
has adapted its
service to meet the
needs of its target
market and reflect
Click the picture above to play video its positioning.
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