Chapter 7

Segmentation, Targeting and

Positioning
Why does P&G have all these different brands of detergents?
Why not just one brand?
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: “built-in stain removers”
Dreft: “gentle for baby laundry”
Febreze: eliminates worked in odors
Ivory snow: 99.9% pure – cleans gently
Colgate Product Range
Steps in Developing a Marketing Strategy
• 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 target.
• 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.
 Costs and Benefits of Segmentation

Segmentation generates extra costs in every phase of the business!

• larger research and planning costs
• costs of production are higher
• communication costs per contact are higher

Therefore, segmentation must:

• increase sales and/or support higher prices
ospecific needs are better satisfied (perceived value is higher)
omarketing communications are more effective
• or increase cost efficiency
o"waste coverage" is avoided
 Requirements for Effective Segmentation

We should aim to 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 for Segmenting Customers

Geographic
Nations, regions,
cities, zip codes. Demographic
Age, gender, family size
and life cycle, income.

Behavioral
Need / Benefit Based: Benefits sought, needs
Psychographic Behavior Based: Occasions, usage rate, loyalty
Social class, lifestyle, Decision Making: Involvement, expertise
personality.
 Geographic Segmentation
• When an organization localizes its marketing efforts to
accommodate the unique needs of specific geographic regions
- Knorr Soup
- Fast Food Menus
 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
 Demographic Segmentation
• Income Level
• Some products are marketed to
consumers with different income
levels
• Beymen vs Boyner
• Macro vs Migros
• Banana Rebublic / Gap / Old Navy
 Demographic Segmentation
• Ethnicity
• Some products are marketed to
consumers from specific ethnic
backgrounds
 Psychographic Segmentation
• Grouping customers together based on social class, lifestyles
and psychological characteristics (attitudes, interests and
opinions)
• How time is spent
• Beliefs
• Socioeconomic characteristics
• Bud or Bordeaux?
 Behavioral Segmentation

• Need Based (Benefits sought)

• Loyalty status
• Occasions
• User status (Non Users/ First time users / Regulars/
Ex-users)
• Usage rate (Light / Medium / Heavy)
 Behavioral Segmentation
Benefits-Sought

• Markets can 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%
 Occasions
• Buyers can be grouped according to occasions
when they get the idea to buy, actually make
their purchase, or use the purchased item.
 Advantages / Disadvantages
Geographic/ Psychographic /
Demographic Behavioral
Segmentation Segmentation

• Easy to measure • Difficult to measure

• May not predict sales • May predict sales (especially
(Too much variability) behavioral)
• May be limiting • Dynamic / can provide
competitive advantage
 Segmentation: Business Markets

CONSUMER BUSINESS
General Characteristics
Geographic: Region, city, metro/rural Location
Demographic: Age, Income Size, Industry, Plant
Psychographic: Values & Lifestyle Industry & corporate
culture

Market Related Behaviors

Needs/benefits: Needs, Benefits Technical
requirements
Behavior: Usage level, loyalty Usage, loyalty
 Developing Segment Profiles

Profiling:
who are they?
what are the age, income, education, household size, media
habits etc.?
Example: Air Travel Segment Profiles
• Business/Executive:
Inflexible; relatively price insensitive (Small number of
people, but travel often)
• Leisure Traveler/Student:
Relatively flexible; very price sensitive (other methods of
travel--e.g., bus, car, train--are feasible; travel may not
be essential) (Very large segment)
• Comfort Travelers:
Comfort (e.g., space, food) important; willing to pay
(Small segment)
 Evaluating Market Segments
• Attractiveness of the segment
- Growth, profitability, size
- Cost of reaching the segment

• Competitive reaction
- Strong competitors? / New Entrants?

• Fit with company strength

- How do the needs of the customers in the segment fit with your company
- Compatibility with company objectives and resources.

FOCUS YOUR RESOURCES ON THE SEGMENT WHERE YOUR ADDED

VALUE IS THE GREATEST!
 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 the market

Marketing Market
Mix 1 Segment 1
Marketing Market
Mix 2 Segment 2

• Concentrated (Niche) Marketing: A single marketing mix for one segment of the market (When an
organization concentrates its marketing efforts on a smaller segment of a larger market)

Marketing Market
Mix Segment

• Individual (Micro) Marketing: A marketing mix customized for an individual or organization.

Marketing
Individual
Mix
 Positioning
• Product Position: The way the product is defined by consumers on
important attributes -- the place the product occupies in consumers’
minds relative to competing products.
• Consumers’ actual perception may be different than firm’s intended
strategy.

• Positioning: Arranging or influencing the product position. It

involves:
• Implanting the brand’s unique benefits & differences in consumers’ minds
• Designing & executing a marketing program to affect target consumers’
perceptions of your product on important attributes -- based on consumer
needs & relative to competitors
 Positioning

• Choose a positioning strategy:

1. Identify a set of possible competitive advantages on which to differentiate
(points of difference; sources of differentiation)
• Product, Service, Channels, People, Image

2. Select the right competitive advantage to promote:

• How many differences to promote (Unique Selling Proposition?)
• Which differences to promote (Important, distinctive, superior, communicable,
preemptive, affordable, profitable)

• Communicate the chosen positioning effectively

 Differentiation

Product differentiation – brands are differentiated based on

features, performance, style or design
Services differentiation – brands are differentiated by services that
accompany product
Channel differentiation – competitive advantage is gained over
channels coverage, expertise, and performance
People differentiation – hiring and training better people than
competitors
Brand Image differentiation –differentiating based on overall brand
image
MacBook Air  Thinnest
Apple  Design and simplicity
DIESEL – “Irreverent, imperfect, daring, fun”
 Value Proposition
• How a brand will create differentiated value for target segments
and what positions it wants to occupy in those segments.
What is the Value Proposition?
 Developing a Positioning Statement

To (target segment or need) our (brand) is (concept) that (point of

difference).

• “To busy professionals who need to stay organized, our 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,
Mountain Dew is the soft drink that gives you more energy than any other
brand because it has the highest level of caffeine. With Mountain Dew you
can stay alert and keep going even when you haven’t been able to get a good
night’s sleep.”
 Perceptual Mapping
A mean of displaying, in two dimensions, the location of brands in
the minds of consumers (as consumers perceive them)

• Which dimensions are important to consumers in the product

class?
oThis gives you the map’s dimensions.

• How do consumers perceive our brands and competitors’ brands

on these dimensions?
oThis gives you the product locations on the map.

Brands perceived as similar are located close to each other

Brands perceived as dissimilar are further apart
 Perceptual Mapping
e.g. Brand beliefs for “healthy” :
ID Rama Sana Becel Tastiness
1 3 4 5
2 3 5 5
3 3 5 5
4 2 5 5
5 2 5 7
6 2 3 6  Sana
7 2 3 5
8 4 5 6  Rama  Kalbim
9 2 5 5 Health
10 3 5 3
11 2 5 2  Becel
12 2 5 3
13 4 4 4
14 2 3 5
15 3 5 4
16 5 5 6
17 4 2 6
18 3 2 6
19 5 2 6
20 5 2 6
3 4 5  average
 Perceptual Mapping: Applications
• Who are our competitors?
• On what dimensions do we compete?
• Where to introduce new products?
• You also need to be aware of consumer preferences
• Look for locations with relatively more consumers but limited competition
• Product Repositioning