Chapter 8: Market Segmentation, Targeting, and Positioning

Market Segmentation aggregates potential buyers into groups that have common
needs and will respond similarly to a marketing action
Market segments relatively homogenous groups of prospective buyers that result
from the market segmentation process
Product differentiation strategy of using different marketing mix activities to help
consumers perceive a product as being different and better than competing
products
Market product grid a framework relating the segments of a market to products or
marketing actions of the firm
One product and multiple segment markets -avoids extra cost of developing new
products
Multiple products and multiple segments markets can reduce quality and raise
prices
Mass customization tailoring goods or services to tastes of individual customers on
high volume scale

Build to order (BTO) manufacturing products only when there is an order

from a customer

Key to successful product differentiation and market segmentation strategies is

finding ideal balance between satisfying a customers individual wants and
achieving organizational synergy increased customer value achieved through
performing organizational functions marketing or manufacturing more efficiently.
Cannibalization new product stealing customers from old products
1. Group potential buyers into segments
Simplicity and cost effectiveness of assigning potential buyers to
segments
Potential for increased profits
Similarity of needs of potential buyers within a segment
Differences of needs of buyers among segments
Potential of a marketing action to reach a segment
Geographic segmentation based on where people live or work
Demographic segmentation gender, race, age, income, birth, occupation, NAICS
Psychographic segmentation personality, lifestyle
Behavioral segmentation where, what, how, when they buy

Usage rate quantity consumed or the number of store visits during a specific
period
80/20 rule idea that 80% of a firms sale are obtained from 20% of its customers
2. Group products to be sold into categories
3. Develop a market product grid and estimate the size of markets
Horizontal - identifying market segment marketing synergy
Vertical product grouping
Market size estimate in each cell
4. Select target market
Market size whether or not its worth investing
Expected growth
Competitive position
Cost of reaching the segment
Compatibility with the organizations objectives and resources
5. Take marketing actions to reach target market
Someone must develop and execute an action plan in the form of a
marketing program
Keeping an eye out for competition
Future strategies for company
Product positioning the place a product occupies in consumers minds based on
important features relative to competitive product
Product repositioning changing the place a product occupies in consumers minds
relative to competitive products
Head to head positioning competing directly with competitors on similar product
attributes in the same target market
Differentiation positioning seeking less competitive, smaller market niche in which
to locate a brand
Perpetual map a means of displaying the position of products or brands in
consumers minds
1.
2.
3.
4.

Identify important attributes

Discover how target customer rate competing products
Discover where attribute of product is in consumers mind
Reposition company in the minds of potential customers