SEGMENTATION, TARGETING AND

POSITIONING

Lecture Notes Idil Yaveroglu

WHEN TO SEGMENT MARKETS?
  What do these brands have in common?

  Whydoes P&G have all these different brand of

detergents?
P&G DETERGENT BRANDS

Tide: All purpose family detergent

“helps keep clothes looking like new”
Cheer: “color expert”
Bold: detergent with build in fabric softener
Gain: gives you clean, fresh smelling clothes
Era: “build in stain removers”
Dreft: “gentle for baby laundry”
Febreeze: eliminates worked in odors
Ivory snow: 99.9% pure – cleans gently
STEPS IN TARGET MARKETING
 Market Segmentation: The process of dividing
a market into smaller groups of buyers with
distinct needs and characteristics.
 Targeting: Evaluating each segment and
choosing one or more of the segments to
enter.
 Positioning: Arranging for a product to
occupy a clear, distinctive, and desirable
place relative to competing products in the
minds of target consumers.
WHAT IS MARKET SEGMENTATION?

Market Segmentation:
  Process of dividing a large market into
smaller target markets, or customer groups
with similar needs and/or desires

Market segments should:

(1)  have common needs and
(2)  respond similarly to a marketing action.
 THE “STP” APPROACH

Segment the market

• Identify homogenous segment that differs from other
segments
• Specify criteria that define segment

Assess attractiveness of the segment

• Determine size and potential of each segment

Select Target Segment(s)

• Determine which segment(s) to target
• Determine Target Market Strategies

Position the Product

• Decide on point of differentiation and try to create a
unique place in the consumers mind.
REQUIREMENTS FOR EFFECTIVE
SEGMENTATION
We should develop segments that meet the
following criteria:

 Measurable
  Size, purchasing power, and profile of segment
 Accessible
  Can be reached and served
 Substantial
  Large and profitable enough to serve
 Differentiable
  Respond differently
 Actionable
  Effective programs can be developed
BASES OF SEGMENTATION
  Geographic Segmentation
  Demographic Segmentation
  Age
  Gender
  Income
  Occupation
  Education…
  Psychographic Segmentation
  Behavioral Segmentation
  Occasions
  Benefits Sought Segmentation
  User Status
  Usage Rate
 GEOGRAPHIC SEGMENTATION

  When an organization
localizes its marketing
efforts to accommodate the
unique needs of specific
geographic regions

  Eg.
  Campbells varieties
  Starbucks stores
  Monopoly games
  Tastes
McDonald’s KöfteBurger
 
DEMOGRAPHIC SEGMENTATION
  Age
  GAP
 Baby GAP, GAP Kids,
GAP, GAP Maternity
  McDonalds
 Happy Meal
 Arch Deluxe

  Women +50
DEMOGRAPHIC SEGMENTATION
  Family
  Some products are
marketed to consumers
with special family
consideration
 Family Life Cycle
 Bachelor, marriage, married
with children, retired, etc.
DEMOGRAPHIC SEGMENTATION
  Gender
  IVillage.com
  Oxygen, Lifetime
DEMOGRAPHIC SEGMENTATION
 Income Level
  Some products are
marketed to consumers
with different income
levels
  Newman Marcus
InCircle Rewards
  American Express

  Dollar Tree stores

  Payless Shoe Stores

  Target “1 Spot”
DEMOGRAPHIC SEGMENTATION
  Education
  Some products are
marketed to consumers
with certain educational
levels
DEMOGRAPHIC SEGMENTATION
  Ethnicity
  Some products are
marketed to consumers
from specific ethnic
backgrounds
DEMOGRAPHIC SEGMENTATION - ETHNIC
PSYCHOGRAPHIC SEGMENTATION
  Grouping customers together based on social class,
lifestyles and psychological characteristics (attitudes,
interests and opinions)
  How time is spent
  Beliefs
  PRIZM analysis from Claritas
  SRI VALS segmentation
LIFESTYLE SEGMENTATION
  Bud or Bordauex?
  http://www.youtube.com/watch?
v=j_Rtl3Y4EuI&feature=BF&list=PLC6D871A2
A8C3C8EF&index=2
LIFESTYLE ANALYSIS OF THE BRITISH COSMETICS
MARKET

Cosmetic Lifestyle Segments

1. Self-aware: concerned about appearance, fashion, and exercise.
2. Fashion-direct: concerned about fashion and appearance, not
about exercise and sport.
3. Green goddesses: concerned about sport and fitness, less about
appearance.
4. Unconcerned: neutral attitudes to health and appearance.
5. Conscience-stricken: no time for self-realization, busy with family
responsibilities.
6. Dowdies: indifferent to fashion, cool on exercise, and dress for comfort.
LIFESTYLE ANALYSIS OF THE BRITISH COSMETICS
MARKET

Behaviors and Descriptors

Retail Outlets*
Cosmetic Blush
Use Use Miss Age† Social
Index Index Wallis Selfridge Etam C&A (15-44) Class ‡

Self-aware 162 188 228 189 151 102 51% 60%

Fashion-directed 147 166 153 165 118 112 43 56
Green goddesses 95 76 74 86 119 103 32 52
Unconcerned 82 81 70 89 74 95 44 64
Conscience-stricken 68 59 53 40 82 99 24 59
Dowdies 37 19 17 22 52 85 20 62

*100 = Average usage.

† Read as “_________ percent of this group is between 15 and 44.”
‡ Read as “_________ percent of this group is in the working and lower middle class.”
BEHAVIORAL SEGMENTATION
OCCASIONS
CUSTOMER NEEDS/
BENEFITS-SOUGHT SEGMENTATION
  Marketscan be
segmented based on
the benefits that
consumers desire
from using a specific
product
USAGE RATE SEGMENTATION
 Markets can be segmented by how often or how
heavily consumers use a specific product
  80/20 Principle - 80% of revenue generated by 20% of
customers

Light Users
80%
Heavy Users
20%
EVALUATING MARKET SEGMENTS
  Segment size and growth
  Competitive position
  Cost of reaching the segment

  Compatibility with the organization’s objectives

and resources

… The next step is to decide on which and how

many segments to target…
 TARGETING: TARGET PROFITABLE
SEGMENTS
Current Profitability

Current
customers / Poor Marginal High
Potential
customers
Steer to more Steer to more Nurture/
Future profitability/ profitability/ Primary
Profit High
Future Target Future Target Target
Potential
Divest/ Steer to more Retain/
Low Avoid profitability/ Secondary
Avoid Target

Source: Rakesh Niraj, Jahendra Gupta, & Chakravarthi Narasimhan (2001), “Customer
Profitability in a Supply Chain,” Journal of Marketing, 65 (July), 1-16.
TARGET MARKETING STRATEGIES
 Undifferentiated Marketing (Mass Marketing): A single marketing mix for
the entire market.
Marketing Entire
Mix Market

 Differentiated/Segment Marketing:
  Multi-segment Marketing: Separate marketing mixes for two or more segments
of Marketing
the market Market
Mix 1 Segment 1
Marketing Market
Mix 2 Segment 2

  Niche Marketing: A single marketing mix for one segment of the market.
Marketing Market
Mix Segment

 Individual Marketing: A marketing mix customized for an individual or

organization.
Marketing
Individual
Mix
WHAT DO THEY HAVE IN COMMON?
  Estee Lauder
  Aveda

  Clinique

  Prescriptives

  Origins

  MAC
LarMer
  Bobbi Brown

  Bumble and Bumble

  Flirt!
UNDIFFERENTIATED (MASS) MARKETING

  Anorganization
develops one strategy
appropriate for all
members of the total
market
SEGMENT MARKETING

  Niche marketing:
When an organization
concentrates its
marketing efforts on
a smaller segment of
a larger market
SEGMENT MARKETING
  Multi-segment
Marketing:
  An organization
targets multiple
market segments and
develops segment
specific mixes
POSITIONING
  Position– the way the product is defined by
consumers on important attributes - the place an
offering occupies in consumers’ minds on
important attributes relative to competing
products.

  Repositioning – changing the place an offering

occupies in a consumer’s mind relative to
competitive products.
  Volvo  “safety”
  Mercedes  “luxury”

  BMW  “Performance”

  Dunkin Donuts  coffee for the average Joe

  Starbucks  an experience for the gourmet coffee

drinker
  Coca Cola  “Coke side of life”

  Avis  “We’re #2, we try harder”

  Nike  “Just do it” – for the athlete in all of us

  Bose  design and sound quality

EFFECTIVE POSITIONING
  Identify relevant set of competitive products serving a
target market
  Identify the set of determinant attributes that define the
“product space” in which positions of current offerings are
located.
  Collect information from a sample of customers and
potential customers about perceptions of each product on
the determinant attributes.
  Determine brands current location (position) in the
product space
  Determine customers most preferred combination of
determinant attributes
  Examine the fit between preferences of market segments
and current position of brands
  Identify positions where new brands might be placed
  Write positioning statement or value proposition to guide
development and implementation of marketing strategy.
PERCEPTUAL MAP
VALUE CURVE
  Value curves indicate how products within a
category compare in terms of the level – high or
low – of as many attributes as are relevant.
CHOOSING A POSITIONING STRATEGY
  Identifycompetitive advantage – an advantage
over competitors gained by offering greater
customer value, either by having lower prices or
providing more benefits that justify higher prices.
  These points of differentiation can be related to
product, services, channels, people or image.
  Burger King: Grilled instead of McDonald’s fried
burgers
  IKEA: “Commitment-free furniture” ; “Low price with
meaning”
  Swatch: Plastic watches with variety and low price
  BoseBose

Bose Superior sound and design

MacBook Air  Thinnest
Apple  Design and simplicity
“We’ll be right over”
DIESEL – “Irreverent, imperfect, daring, fun”
VALUE PROPOSITIONS
  Simple statements of positioning.
  How a brand will create differentiated value for
target segments and what positions it wants to occupy
in those segments.
  Follow form of:
  To (target group and need) our (Brand) is (concept) that
(point-of-difference).
  Examples:
  To busy professionals who need to stay organized, Palm
Pilot is an electronic organizer that allows you to back up
files on your PC more easily and reliably than competitive
products.
  To young, active soft-drink consumers who have little time
for sleep, Red Bull is the soft drink that gives you more
energy than any you can stay alert and keep going even
when you haven’t been able to get a good night’s sleep.
REPOSITIONING
REPOSITIONING

  TheMarlboro Man
increased sales by
3,241% in 1955 to
$5 billion. In 1954
the brand's U.S.
share stood at less
than 1%.
SUMMARY