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Chapter 7

Market Segmentation, Targeting, and Positioning for Competitive Advantage

Steps in Market Segmentation, Targeting, and Positioning (Fig. 7.1)

1. Identify bases for segmenting the market 2. Develop segment profiles

Market Segmentation

Market Targeting

3. Develop measure of segment attractiveness 4. Select target segments 5. Develop positioning for target segments 6. Develop a marketing mix for each segment

Market positioning

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.
Same product to all consumers

Mass Marketing

(no segmentation, i.e Coca-Cola)

Different products to one or more segments

Segment Marketing

(some segmentation, i.e. Marriott)

Step 1. Market Segmentation Levels of Market Segmentation

Different products to subgroups within segments

Niche Marketing

(more segmentation, i.e. Standard or Luxury SUVs)

Products to suit the tastes of individuals and locations

(complete segmentation)

Local Marketing
Tailoring brands/ promotions to local customer groups, i.e Sears

Individual Marketing
Tailoring products and programs to the needs of individual customers, i.e. Dell

Step 1. Market Segmentation

Geographic Segmentation

World Region or Country

City or Metro Size

Density or Climate

Step 1. Market Segmentation

Demographic Segmentation
Dividing the market into groups based on variables such as: Age Gender Family size or life cycle Income Occupation Education Religion Race Generation Nationality

Step 1. Market Segmentation

Psychographic Segmentation
Divides Buyers Into Different Groups Based on:

Step 1. Market Segmentation

Behavioral Segmentation
Dividing the market into groups based on variables such as: Occasions Benefits User status Usage rate Loyalty status Readiness stage Attitude toward product

Segmenting Business Markets

Demographics Operating Variables Purchasing Approaches Situational Factors Personal Characteristics

Business Marketers Use Many of the Same Consumer Variables, Plus:

Segmenting International Markets

Geographic Location

Cultural Factors

Factors Used to Segment International Markets

Economic Factors

Political and Legal Factors


Step 1. Market Segmentation

Requirements for Effective Segmentation
Measurable Accessible Substantial Differential
Size, purchasing power, profiles

of segments can be measured.

Segments can be effectively

reached and served.

Segments are large or

profitable enough to serve.

Segments must respond

differently to different marketing mix elements & programs.

Effective programs can be


designed to attract and serve the segments.


Discussion Connections
Take another look at Figure 7-2. Can you identify specific companies, other than the examples already discussed, that practice each level of segmentation? Using the segmentation bases youve just read about, segment the U.S. footwear market.
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Describe each of the major segments and sub segments.


Step 2. Market Targeting

Evaluating Market Segments
Segment Size and Growth
Analyze current sales, growth rates and expected profitability for various segments.

Segment Structural Attractiveness

Consider effects of: competitors, availability of substitute products and, the power of buyers & suppliers.

Company Objectives and Resources

Company skills & resources needed to succeed in that segment(s). 13 Look for Competitive Advantages.

Step 2. Market Targeting

Market Coverage Strategies
Company Marketing Mix Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3
A. Undifferentiated Marketing


Segment 1 Segment 2 Segment 3

B. Differentiated Marketing

Company Marketing Mix

C. Concentrated Marketing

Segment 1 Segment 2 Segment 3


Step 2. Market Targeting

Choosing a Market-Coverage Strategy
Company Resources
Product Variability Products Stage in the Life Cycle Market Variability Competitors Marketing Strategies

Socially Responsible Target Marketing

Smart targeting helps companies and consumers alike. Target marketing sometimes generates controversy and concern.
Disadvantaged and vulnerable can be targeted. Cigarette, beer, and fast-food marketers have received criticism in the past. Internet has come under attack because of the loose boundaries and lack of control in marketing practices.

Discussion Connection
At the last Discussion Connection, you segmented the U.S. footwear market.
Now, pick two companies that serve this market and describe their segmentation and targeting strategies. Can you come up with one that targets many different segments versus another that focuses on only one or a few segments?

How does each company you choose differentiate its marketing offer and image? How has each done a good job of establishing this differentiation in the minds of targeted consumers?

Step 3. Choosing a Positioning Strategy

Products Position - the way the product is defined by consumers on important attributes the place the product occupies in consumers minds relative to competing products. Marketers must:
Plan positions to give their products the greatest advantage in selected target markets, Design marketing mixes to create these planned positions.

Step 3. Choosing a Positioning Strategy

Step 1. Identifying Possible Competitive Advantages Step 2. Selecting the Right Competitive Advantage
Step 3. Communicating and Delivering the Chosen Position

Identifying Possible Competitive Advantages

Key to winning and keeping customers is to understand their needs and buying processes better than competitors do and deliver more value. Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits, that justify competitive advantage,

Identifying Possible Competitive Advantages

Product Differentiation i.e. Features, Performance, Style & Design, or Attributes
Image Differentiation i.e. Symbols, Atmospheres, Events

Services Differentiation i.e. Delivery, Installation, Repair Services, Customer Training Services
Personnel Differentiation i.e. Hiring, Training Better People Than Competitors Do

Choosing the Right Competitive Advantages

Important Profitable

Criteria For Determining Which Differences To Promote






Selecting an Overall Positioning Strategy (Fig. 7.4)

More More More for More The same More for the same Less More for Less The same for less Less for much less

The Same Less


Communicating and Delivering the Chosen Position

Once position is chosen, company must take strong steps to deliver and communicate the desired position to target consumers. All the companys marketing mix must support the positioning strategy. Positioning strategy must be monitored and adapted over time to match changes in consumer needs and competitors strategies.

Review of Concept Connections

Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major levels of market segmentation and bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a market-coverage strategy. Discuss how companies can position their products for maximum competitive advantage in the marketplace.