Chapter 7

Market Segmentation, Targeting,

and Positioning for Competitive
Advantage

1
What is Market Segmentation?

Market segmentation: The act of dividing a

market into smaller groups of buyers with
distinct needs, characteristics, or behaviors
who might require separate products and/or
marketing mixes.
How does market segmentation differ form
product differentiation?

2
 Steps in Market Segmentation,
Targeting, & Positioning (Fig. 7.1, p. 245)
Market
Market Segmentation
Segmentation
1.
1.Identify
Identifybases
basesfor
for
segmenting
segmentingthethemarket
market
2.
2.Develop
Developsegment
segmentprofiles
profiles

Market
Market Targeting
Targeting
3.
3.Develop
Developmeasure
measureof of
segment
segmentattractiveness
attractiveness
4.
4.Select
Selecttarget
targetsegments
segments

Market
Market positioning
positioning
5.
5.Develop
Developpositioning
positioningfor
for
target
targetsegments
segments
6.
6.Develop
Developaamarketing
marketing
mix
mixfor
foreach
eachsegment
segment 3
 Step 1. Market Segmentation
Levels of Market Segmentation
Through Market Segmentation, Companies Divide Large,
Heterogeneous Markets into Smaller Segments that Can be
Reached More Efficiently And Effectively With Products and
Services That Match Their Unique Needs.
Mass Marketing
Same product to all consumers
(no segmentation, i.e Coca-Cola)

Segment Marketing
Different products to one or more segments
(some segmentation, i.e. Marriott)
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 Step 1. Market Segmentation
Levels of Market
Segmentation
Niche Marketing
Different products to subgroups within segments
(more segmentation, i.e. Standard or Luxury SUV’s)
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)

Local Marketing Individual Marketing

Tailoring brands/ promotions to Tailoring products and programs
local customer groups, i.e Sears to the needs of individual
customers, i.e. Dell
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Step 1. Market Segmentation
Geographic Bases

World Region or Country

City or Metro Size

Density or Climate

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Step 1. Market Segmentation
Demographic Bases
Dividing the market into groups
based on variables such as:
 Age, Gender

 Family size or life cycle

 Income, Occupation

 Education
This video features an executive from Levi-Strauss
speaking the necessity of segmentation to meet the

 Religion
needs of customers in all age groups.

 Race
Click picture to play

 Generation Click to return

 Nationality

 http://yawyl.claritas.com/
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Family Life Cycle Advertising

Video cameras
are often
purchased by
young couples
with children.
 Ryka produces
sneakers that
meet the special
needs of
women’s feet.
Copyright 2007 by
Prentice Hall
 Toyota Scion
Targets Gen Y Consumers

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Inc.  Publishing as Prentice Hall
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 Step 1. Market Segmentation
Psychographic Bases
Divides Buyers Into Different Groups Based on:

Culture-oriented
Sports-oriented
Outdoor-oriented
Lif estyle Segmentation
Duck Head Targets
a casual student
lif estyle.

What types of
H student lifestyles

Compulsive, Gregarious,
do the following
companies target:

•Tommy Hilfiger?
•Gap?
•DKNY?

Authoritarian, Ambitious
•Pacific Sunwear? Click or press spacebar to return .

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 Values and Lifestyles (VALS) System
High Resources
Innovators High Innovation

Ideals Achivem. Self Expr.

Thinkers Achievers Experiencers

Believers Strivers Makers

VALS Web Site Survivors Low Resources

Low Innovation
VALS Types – Part 1
VALS Types – Part 2
 Step 1. Market Segmentation
Behavioral Bases
Dividing the market into
groups based on variables
such as:
 Occasions

 Benefits

 User status

 Usage rate

 Loyalty status

 Readiness stage

 Attitude toward product

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 Loyalty Status

Hard-core

Split loyals

Shifting loyals

Switchers
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Inc.  Publishing as Prentice Hall
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 The Brand Funnel Illustrates Variations in
the
Buyer-Readiness Stage
Aware
Ever tried
Recent trial
Occasional user
Regular user
Most often used

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Inc.  Publishing as Prentice Hall
8-17
Figure 8.3 Behavioral
Segmentation Breakdown

Copyright © 2009 Pearson Education,

Inc.  Publishing as Prentice Hall
8-18
 Band-aid
offers “flex”
as a
benefit to
consumers.

Copyright 2007 by
Prentice Hall
 Segmenting Business Markets

Demographics
Demographics Business
Marketers Use
Operating
Operating Variables
Variables Many of the Same
Consumer
Variables, Plus:
Purchasing
Purchasing Approaches
Approaches

Situational
Situational Factors
Factors

Personal
Personal Characteristics
Characteristics
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21
 Segmenting International
Markets
Geographic
Location

Factors Used
Cultural to Segment Economic
Factors International Factors
Markets

Political and
Legal Factors
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 Steps in Segmentation Process

Needs-based segmentation

Segment identification Marketing-Mix

Segment attractiveness Strategy

Segment profitability

Segment positioning

Segment acid test

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Inc.  Publishing as Prentice Hall
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Step 1. Market Segmentation
Requirements for Effective Segmentation
Measurable
Measurable • Size, purchasing power, profiles
of segments can be measured.

Accessible
Accessible • Segments can be effectively
reached and served.

Substantial
Substantial •Segments are large or profitable
enough to serve.
•Segments must respond
Differential
Differential differently to different marketing
mix elements & programs.

Effective programs can be

Actionable
•

Actionable designed to attract and serve

the segments.
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