Segmentation,

Targeting, and Positioning

Business 1201, Fall 2006

Dr. Katherine Gallagher
Objectives
• To understand market segmentation, target
marketing, and market positioning
• To discuss the major approaches for segmenting
consumer markets
• To know how companies identify attractive
market segments and choose a target marketing
strategy
• To discuss how companies position their
products for maximum competitive advantage in
the marketplace
Procter & Gamble in Canada
• Four brands of laundry detergent
• Six brands of shampoo
• Five brands of soap
• Three brands of toilet paper, towels, tissues
• Two brands of dishwashing detergent
• Two brands of deodorant
• Two brands of cosmetics
• Two brands of skin care potions
• Two brands of fabric softener
Procter & Gamble in Canada
• P&G brands in the same category compete with
each other
– Why have several brands in one category?
– Why not concentrate resources on a single brand?
Procter & Gamble in Canada
• The laundry detergent market
– Everyone wants cleans clothes
– People also want other benefits:
• Economy
• Bleaching power
• Fabric softening
• Fresh smell
• Strength or mildness
• Lots of suds or not many suds
– People have different priorities with respect to these
benefits
Procter & Gamble in Canada
• Tide
– All-purpose family detergent that offers “powerful
cleaning for tough laundry”
• Cheer
– Color expert, “helps protect against fading, color
transfer, and fabric wear”
• Gain
– “A unique, fresh scent you’ll find irresistible”
• Ivory Snow
– “Gentle cleaning and care for baby items and fine
washables”
Steps in Market Segmentation,
Targeting, and Positioning
1. Market segmentation
– Define the market
– Identify bases for segmenting the market
– Develop segment profiles
1. Target marketing
– Determine attractiveness of each segment
– Select target segments
1. Market positioning
– Develop positioning for target segments
– Communicate the position
Market Segmentation Process
Step 1: Define the Market
• Narrow the market from “everybody” to
“possible customers”
• Screen out groups of people who would not
use this product no matter how good it is
Market Segmentation Process
Step 2: Apply Segmentation Variables
• Behavioral segmentation variables
– Benefits sought: the best starting point
• Group buyers according to the different benefits
they look for in the product class
– Use behavioral variables to describe people in
different benefit segments
• Occasions
• User status
• Usage rate
• Loyalty status
• Readiness stage
• Attitude toward product/brand
Market Segmentation Process
Step 2: Apply Segmentation Variables
• Geographic segmentation variables
– Use geographical units to describe people in different
benefit segments:
• World region or country
• Country region
• Community size
• Density
• Climate
Market Segmentation Process
Step 2: Apply Segmentation Variables
• Demographic segmentation variables
– Use demographic variables to describe people in
different benefit segments:
• Age
• Gender
• Family size
• Stage of family life cycle
• Income
• Occupation
• Education
• Religion
• Ethnic origin
Market Segmentation Process
Step 2: Apply Segmentation Variables
• Psychographic segmentation
– Use psychographic variables to describe people in
different benefit segments:
• Social class
• Lifestyle
• Personality
Requirements for
Effective Segmentation
• Not all segmentations are effective
• To be useful, segments must be:
– Measurable
– Accessible
– Substantial
– Differentiable
– Actionable
Target Marketing Process:
Step 1: Evaluate Each Segment
• Criteria
– Segment size and growth
• Current sales to this segment (all brands)
• Growth rates
• Expected profitability
– Segment structural attractiveness
• Number, strength, and aggressiveness of
competitors
• Number of substitute products
• Relative power of buyers
• Relative power of suppliers
Target Marketing Process:
Step 1: Evaluate Each Segment
– Company objectives and resources
• Fit with long-term objectives
• Ability to offer advantages over the competition
Target Marketing Process:
Step 2: Select Target Segments
• Decide which and how many segments to target
• Option 1: Market aggregation
– A single marketing program is used to reach the
entire market (mass marketing)
– Seldom used today, except for:
• Introduction of new-to-the-world products
• Product shortages

Marketing strategy Market

Target Marketing Process:
Step 2: Select Target Segments
• Option 2: Single segment strategy
– One marketing program is directed to a single market
segment
– Preferred by start-ups and small businesses
– Includes niche marketing

Segment A Segment B

Marketing strategy
Segment D Segment C
Target Marketing Process:
Step 2: Select Target Segments
• Option 3: Multiple segment strategy
– Use separate and distinct marketing programs
(product, price, distribution, communications) for
each selected segment

Marketing strategy A
Segment A Segment B
Marketing strategy B

Marketing strategy C Segment D Segment C

Target Marketing Process:
Step 2: Select Target Segments
• Option 4: Micromarketing
– Focus products and marketing programs on specific
individuals and local customer groups
• Local marketing: focus is on local customer groups
(cities, neighborhoods, even specific stores)
• Individual marketing: focus is on specific
individuals
Target Marketing Process:
Step 2: Select Target Segments
• Factors to consider in choosing a target market
strategy
– Company resources
– Degree of product variability
– Stage of the product life cycle
– Market variability
– Competitors’ marketing strategies
Socially Responsible
Target Marketing
• Do NOT target:
– Vulnerable or disadvantaged consumers with
potentially harmful products
– Vulnerable or disadvantages consumers with
deceptive tactics
– Children with adult products
Positioning for
Competitive Advantage
• A brand’s position is the way consumers define
the brand on important attributes, relative to
competing products
• Consumers position brands with or without the
help of marketers
• Marketers must plan positions that will give their
brands the greatest competitive advantage in the
selected target segment(s)
Perceptual Positioning Maps
• Show consumer perceptions of competing
brands on dimensions important to target
consumers
 Perceptual Positioning Map:
Fashion Retailers in Seattle, WA
Very latest
styles
Neiman-Marcus
The Limited
Saks
Bloomingdale’s Macy’s
Nordstrom
Hit or Miss
No value focus Value focus
Garfinkels Dress Barn Gap
Casual Corner
L&T Marshall
Britches Hecht’s
K-mart Sears
JC Penney Woodward
& Lanthrop
Conservative
Talbots
styles
 Perceptual Positioning Map:
Fashion Retailers in Seattle, WA
Very latest
styles
Neiman-Marcus
The Limited
2 3
Saks 4
Bloomingdale’s Macy’s
Nordstrom
Hit or Miss
No value focus Value focus
Garfinkels Dress Barn Gap
Casual Corner
L&T Marshall
1 Britches 5 Hecht’s
K-mart Sears
JC Penney Woodward
& Lanthrop
Conservative
styles Talbots
Positioning Step 1: Identify
Possible Competitive Advantages
• Must understand target customer preferences
better than competitors do and deliver a product
that meets those preferences
• Possible points of differentiation
– Product differentiation
– Services differentiation
– Channel differentiation
– People differentiation
– Image differentiation
Positioning Step 2: Choosing the
Right Competitive Advantages
• How many differences to promote
– Only one
– More than one
• Three major positioning errors
– Underpositioning
– Overpositioning
– Confused positioning
Positioning Step 2: Choosing the
Right Competitive Advantages
• Which differences to promote
– Important to target customers
– Distinctive from the competition
– Superior than the competition
– Communicable to target customers
– Not easily copied by competitors
– Affordable – delivers value for cost
– Profitable for the company
Positioning Step 3: Selecting an
Overall Positioning Strategy
• Value proposition
– Answers the consumer’s question, “Why should I buy
your brand?”
– Full mix of benefits on which the brand is positioned
Positioning Step 3: Selecting an
Overall Positioning Strategy
• Possible value propositions
Price

More The same Less

More More More

More for for the for
more same less
Benefits

The same
The same for
less

Less
Less for
much less
Positioning Step 3: Selecting an
Overall Positioning Strategy
• More for more positioning
• More for the same positioning
• The same for less positioning
• Less for much less positioning
• More for less positioning
Positioning Step 4: Developing a
Positioning Statement
• Form:
– To <target segment and need> our <brand> is
<concept> that <point of difference>.
• Examples:
– To busy professionals who need to stay organized,
Palm Pilot is an electronic organizer that allows you to
back up your 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.
Positioning Step 5: Communicating
and Delivering the Chosen Position
• All marketing mix elements must support the
positioning strategy
– All marketing mix elements must help build a
consistent and believable position
A Few Notes about Positioning
• It is easier to come up with a good positioning
strategy than it is to implement it
• Establishing or changing a position takes a long
time; but positions that have taken years to build
can be quickly lost
• It is important to maintain a good position through
consistent performance and communication
• Positions must be closely monitored over time,
and adapted to changing consumer preferences
and competitors’ strategies; but avoid abrupt
changes
Summary
1. Market segmentation
– Define the market
– Identify bases for segmenting the market
– Develop segment profiles
1. Target marketing
– Determine attractiveness of each segment
– Select target segments
1. Market positioning
– Develop positioning for target segments
– Communicate the position