CHAPTER THREE

Focusing Marketing
Strategy with
Segmentation and
Positioning

For use only with

Perreault and McCarthy
texts.
© 2005 McGraw-Hill
Companies, Inc.
McGraw-Hill/Irwin www.mhhe.com/fourps
When we finish this lecture you should

1. Know about defining generic markets and

product-markets.
2. Know what market segmentation is and how
to segment product-markets into submarkets.
3. Know three approaches to market-oriented
strategy planning.
4. Know dimensions that may be useful for
segmenting markets.
5. Know a seven-step approach to market
segmentation that you can do yourself.
6. Know what positioning is--and why it is
useful.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Taking Advantage of Opportunities

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Exhibit 3-2
Search for Opportunities Can Begin by Understanding Markets

Selecting
target
marketing
approach

Segmenting Single
target
Narrowing down to into possible market
specific product-market target markets approach

One Homogeneous Multiple

All Some broad target
customer generic (narrow)
product- product- market
needs market market approach
markets

Combined
target
market
approach
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Naming Product Markets and Generic Markets

Customer
Customer
Product
Product Type
Type Needs
Needs

Product-Market
Product-Market
Definition
Definition

Geographic
Geographic Customer
Customer Type
Type
Area
Area

No Product Type in Generic Market Definition

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Interactive Exercise: Product-Market Definition

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

What Is the Product-Market?

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Exhibit 3-3
Market Segmentation Defines Possible Target Markets

Broad product-market (or generic market) name

goes here (The bicycle-riders product-market)

Submarket 1
(Exercisers) Submarket 3 Submarket 4
(Transportation riders) (Socializers)
Submarket 2
(Off-road
adventurers) Submarket 5
(Environmentalists)

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Exhibit 3-4
How Far Should the Aggregating Go?

B. Product-market showing
A.
Status dimension six segments
three segments

Dependability dimension
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Exhibit 3-5
Target Marketers Aim at Specific Targets

In a product-market area

A segmenter A combiner

Using single target Using multiple target Using combined target

market approach – can market approach – can market approach – can
aim at one submarket aim at two or more aim at two or more
with one marketing mix submarkets with different submarkets with the
marketing mixes same marketing mix

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Segmenting vs. Combining

Combiners
Combiners
Try
Try to
to Satisfy
Satisfy
Profit Is the “Pretty
“Pretty Well”
Well” Too
Too Much
Much
Balancing Combining
Combining Is
Is
Point Risky
Risky
Key
Key
Issues
Issues
Segment Segmenters
Segmenters
Segment or
or
Combine? Try
Try to
to Satisfy
Satisfy
Combine?
“Very
“Very Well”
Well”
Segmenting
Segmenting
May
May Produce
Produce
Bigger
Bigger Sales
Sales
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
What Dimensions Are Used to Segment Markets?

Qualifying
Qualifying Determining
Determining
Dimensions
Dimensions Dimensions
Dimensions

• Relevant to • Affect the

including a customer’s
customer type in a purchase of a
OR
product market product or brand
• Can be further
• Help identify “core
segmented
features”

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

What Are the Relevant Segmenting Dimensions?

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© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Determining vs. Qualifying Dimensions

Determining
Determining Determining
Determining
Dimensions
Dimensions May
May Dimensions
Dimensions May
May
Be
Be Very
Very Specific
Specific Change
Change

Key
Key Issues
Issues

Different
Different Qualifying
Qualifying
Dimensions
Dimensions For
For Dimensions
Dimensions AreAre
Different
Different Important
Important Too
Too
Submarkets
Submarkets
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Broader Issues in Selecting
Segmenting Dimensions

Ethical
Ethical Exploitation
Exploitation
Issues
Issues

Creates
Creates
Unnecessary
Unnecessary
Wants
Wants

Does
Does Harm
Harm

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

What Dimensions Are Used to Segment Markets?

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© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
What Dimensions Are Used to Segment Markets?

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Segmentation and Advertising

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What Dimensions Are Used to Segment Markets?

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© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Business-to-Business Segmentation

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Segmenting Product Markets

Name
Name Broad
Broad
Product-Market
Product-Market

List
List Customer
Customer Needs
Needs

Form
Form Homogeneous
Homogeneous
Submarkets
Submarkets
Identify
Identify
Determining
Determining Dimensions
Dimensions

Process
Process Name
Name Possible
Possible
for Product-Markets
Product-Markets
for
Segmenting
Segmenting Evaluate
Evaluate Product-Market
Product-Market
Product-Markets
Product-Markets Segments
Segments
Estimate
Estimate Size
Size of
of
Product-Market
Product-Market Segments
Segments

© 2004 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

More Sophisticated Techniques
May Help in Segmenting

Clustering
Clustering

Customer
Customer Database
Database

Customer
Customer Relationship
Relationship
Management
Management (CRM)
(CRM)
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Cluster Analysis

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© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Positioning

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© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Exhibit 3-12
An Example of Positioning

High moisturizing

Tone 7
Zest
4
Dove Lever 2000
5 2
Safeguard
Coast
Lux 8
Nondeodorant 3 Deodorant

1
Dial
Lifebuoy
Lava
6

low moisturizing
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Key Terms
• Market • Combiners
• Generic market • Segmenters
• Product market • Qualifying dimensions
• Market segmentation • Determining dimensions
• Segmenting • Clustering techniques
• Market segment • Customer relationship
• Single target market management (CRM)
approach • Positioning
• Multiple target market
approach
• Combined target
market approach
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin