Market Segmentation,

Targeting and Positioning

It must design customer-driven marketing strategies that build the right relationships with the right customers.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
• Instead of scattering their marketing efforts
(the “shotgun” approach), firms are
focusing on the buyers who have greater
interest in the values they create best (the
“rifle” approach).

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Steps in Market Segmentation,
Targeting, and Positioning
Market Segmentation
1. Identify bases for
segmenting the market
2. Develop segment profiles

Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments

Market Positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
• Market segmentation involves dividing a market into smaller groups
of buyers with distinct needs, characteristics, or behaviors who might
require separate products or marketing mixes.
• Market targeting (or targeting) consists of evaluating each market
segment’s attractiveness and select one or more market segments to
enter.
• Differentiation involves actually differentiating the firm’s market
offering to create superior customer value. Positioning consists of
arranging for a market offering to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target
consumers.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 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.

Mass Marketing
Same product to all consumers
(no segmentation, i. e. a commodity)

Segment Marketing
Different products to one or more segments
(some segmentation, i.e. Marriott)

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 1. Market Segmentation
Geographic Segmentation
Geographic segmentation calls for dividing the market into
different geographical units such as nations, regions, states,
counties, cities, or even neighborhoods.
International

National

Regional/City

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
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

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 1. Market Segmentation
Psychographic Segmentation
Divides Buyers Into Different Groups Based on:
Psychographic segmentation divides buyers into different groups based on
social class, lifestyle, or personality characteristics. People in the same demographic group can have very
different psychographic makeups.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 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
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
• Behavioral segmentation divides buyers into groups based on their
knowledge, attitudes, uses, or responses to a product.
• OCCASIONS Buyers can be grouped according to occasions when
they get the idea to buy, actually make their purchase, or use the
purchased item.
• Benefit segmentation requires finding the major benefits people look
for in the product class, the kinds of people who look for each benefit,
and the major brands that deliver each benefit.
• USER STATUS Markets can be segmented into nonusers, ex-users,
potential users, first-time users, and regular users of a product. For
example, blood banks cannot rely only on regular donors. They must
also recruit new first-time donors and remind ex-donors each will
require different marketing appeals.
• USAGE RATE Markets can also be segmented into light, medium and
heavy product users.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
• LOYALTY STATUS A market can also be
segmented by consumer loyalty. Consumers
can be loyal to brands (Tide), stores
(Nordstrom), and companies (Toyota).

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
• Evaluating Market Segments
• In evaluating different market segments, a firm must look at three
factors: segment size and growth, segment structural attractiveness,
and company objectives and resources.
• The company also needs to examine major structural factors that effect
long-run segment attractiveness. A segment is less attractive if it
already contains many strong and aggressive competitors. The
existence of many actual or potential substitute products may limit
prices and the profits that can be earned in a segment. The relative
power of buyers also affects segment attractiveness. Buyers with
strong bargaining power relative to sellers will try to force prices
down, demand more services, and set competitors against one another-
all at the expense of seller profitability. Finally, a segment may be less
attractive if it contains powerful suppliers who can control prices or
reduce the quality or quantity of ordered goods and services.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
• Undifferentiated Marketing
• Using an undifferentiated marketing (or mass-marketing) strategy, a
firm might decide to ignore market segment differences and target the
whole market with one offer. This mass-marketing strategy focuses on
what is common in the needs of consumers rather than on what is
different.
• Differentiated Marketing Using a differentiated marketing (or
segmented marketing) strategy, a firm decides to target several
market segments and designs separate offers for each. General
Motors ties to produce a car for every “purse, purpose, and
personality.”
• Concentrated Marketing
• A third market-coverage strategy, concentrated marketing (or
niche marketing), is especially appealing when company resources
are limited.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 1. Market Segmentation
Segments must respond differently to different marketing mix
elements & programs
Requirements for effective segmentation

• Size, purchasing power, profiles

Measurable of segments can be measured.

• Segments can be effectively

Accessible reached and served.

• Segments are large or profitable

Substantial enough to serve.

• Effective programs can be

designed to attract and serve
Actionable
the segments.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Evaluating Market Segments

• Segment size and growth

• Segment structural attractiveness
• Company objectives and resources

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 2. Market Targeting
Market Coverage Strategies
A. Undifferentiated Marketing
Company
Marketing Market
Mix
B. Differentiated
Company Marketing
Marketing Mix 1 Segment 1
Company
Segment 2
Marketing Mix 2
Company
Segment 3
Marketing Mix 3
C. Concentrated Marketing
Company Segment 1
Marketing Segment 2
Mix
Segment 3

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 3: Positioning for Competitive
Advantage
• Product’s 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

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Positioning Strategies
• Positioning by specific product attributes
• Positioning by benefits
• Positioning for user category
• Positioning for usage occasion
• Positioning against another competitors
• Positioning against another product
class
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Steps to Choosing and Implementing
a Positioning Strategy
• Step 1. Identifying Possible Competitive
Advantages: Competitive Differentiation.
• Step 2. Selecting the Right Competitive
Advantage: Unique Selling Proposition
(USP).
• Step 3. Communicating and Delivering
the Chosen Position.

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Product Differentiation
• Physical attributes
• Service differentiation
• Personnel differentiation
• Location
• Image differentiation

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
Which differences to promote?
• Important to customers
• Distinctive
• Superior
• Communicable to customers
• Preemptive
• Affordable
• Profitable

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Perceptual Map
Positioning
map of
service level
versus
price. Source:
Lovelock,
Services
Marketing,
Prentice Hall

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Perceptual Map
Live shows 1.0
Easy to reach Little waiting
Good food 0.8
Fantasy Educational,
0.6 animals
Exercise Marineland
0.4
Fun rides Knott’s of the
Berry 0.2
Japanese Pacific
Disneyland Farm Deer Park

-1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6
-0.2
Magic Lion
Mountain -0.4 Country
Busch Safari
-0.6 Gardens
-0.8 Economical
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 creaminess

sweetness

Homogeneous Preference
-no natural segments
-all buyers have same preference

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 creaminess

sweetness

Diffused Preference
-no pattern (…or poor research)
-take center position

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 creaminess

sweetness

Clustered Preference
-natural segments
-increases as number of competitors increases

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
Slide 3-7 Figure 3.1 Bases for Market Segmentation

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Psychographic

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Geographic Segmentation

The reason why we study geographic segmentation is

because WHERE people live has a big effect on their
consumption patterns.

Additionally, WHERE people live in a city is also a

reflection of their income level and we can make
certain assumptions about their ABILITY TO SPEND
based upon their address.

This helps people plan store locations and the location

of other services.
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Geographic Segmentation

Climate:

winter equipment and recreation are effected by

geographic location

you will sell more snow shovels in Northern Ontario

than southern Ontario , BUT, population in Northern
Ontario is very small

clothing purchases are also effected by

climate/geography

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Demographic Segmentation

Demographic Segmentation is the most common

approach to Market Segmentation
Variables are:
• age
• gender (male/female)
• income
• occupation
• education
• household (family
Marketing for Hospitality - style)
and Tourism, 3e size ©2003 Pearson Education, Inc. 31
Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Demographic Segmentation

Demographic Segmentation is the most common

approach to Market Segmentation
Variables are:
• gender (male/female)
•gender is an obvious way to divide the market into
segments since so many products are gender-specific
• clothing
• medical products
• sports products/services
• entertainment Examples ??
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Segmented by Sex

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Segmented by Age

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Demographic Segmentation

Demographic Segmentation is the most common

approach to Market Segmentation
Variables are:
age
• age is another obvious way to divide the market into
segments since so many products are based upon
“time of life”
• diapers for babies
• toys for children
• entertainment for “over 19”
Examples ??
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Demographic Segmentation

age
• also, people have different consumption patterns at
different ages
•eg. Milk products
• children and teens drink a lot of milk
• adults don’t
• older adults need calcium, but don’t drink milk
(they take pills)

Examples ??
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Benefit Segmentation

“It is based on the Attributes (characteristics) of

products, as seen by the customers”

example, people buy something because it

causes a benefit
ie. Diet coke - less sugar, lose weight
ie. Extra white toothpaste, whiter teeth, better smile

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Benefit Segmentation of the Toothpaste Market
Benefit Segmentation
Segment Name
The
The Sensory The Independent
Segment Sociables The Workers Segment

Principal benefit sought Flavour, product Brightness Decay Price

appearance of teeth prevention
Demographic strengths Children Teens, young Large families Men
people
Special behavioural Users of Smokers Heavy users Heavy users
characteristics spearmint-
flavoured
toothpaste
Brands disproportionately Colgate, MacLean’s, Crest Brands
flavoured Stripe Plus White, on sale
Ultra Brite
Personality characteristics High self- High High High
involvement sociability hypochondriasis autonomy
Lifestyle characteristics Hedonistic Active Conservative Value-
oriented

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 1. Market Segmentation
Requirements for Effective Segmentation

Measurable • Size, purchasing power, profiles

of segments can be measured.

Accessible • Segments must be effectively

reached and served.

Substantial • Segments must be large or

profitable enough to serve.

Differential • Segments must respond

differently to different marketing
mix elements & actions.

Actionable • Must be able to attract and serve

the segments.
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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 2. Market Targeting
Evaluating Market Segments

• Segment Size and Growth

– Analyze sales, growth rates and expected profitability.

• Segment Structural Attractiveness

– Consider effects of: Competitors, Availability of Substitute
Products and, the Power of Buyers & Suppliers.

• Company Objectives and Resources

– Company skills & resources relative to the segment(s).

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Step 3. Positioning for Competitive
Advantage
• Product’s Position - the place the product occupies in
consumers’ minds relative to competing products; i.e. Volvo
positions on “safety”.

• Marketers must:
– Plan positions to give products the greatest advantage
– Develop marketing mixes to create planned positions

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Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458
 Target the Mass Market versus the
Individual Consumer
Mass
Market
Niche Micro-
marketing The
Individual

Personal-
Micro- ization
Standardized Niche marketing
Marketing
Marketing
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Marketing for Hospitality and Tourism, 3e ©2003 Pearson Education, Inc. 43
Philip Kotler, John Bowen, James Makens Upper Saddle River, NJ 07458