Segmentation, Targeting, and Positioning

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Segmentation, Targeting, and Positioning

• Business 1201, Fall 2006
• Dr. Katherine Gallagher

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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

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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

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Procter Gamble in Canada

• PG brands in the same category compete with each
  other
• Why have several brands in one category?
• Why not concentrate resources on a single brand?

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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

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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 youll find irresistible
• Ivory Snow
• Gentle cleaning and care for baby items and fine
  washables

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Steps in Market Segmentation, Targeting, and
Positioning

• Market segmentation
• Define the market
• Identify bases for segmenting the market
• Develop segment profiles
• Target marketing
• Determine attractiveness of each segment
• Select target segments
• Market positioning
• Develop positioning for target segments
• Communicate the position

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Market Segmentation ProcessStep 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

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Market Segmentation ProcessStep 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

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Market Segmentation ProcessStep 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

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Market Segmentation ProcessStep 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

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Market Segmentation ProcessStep 2 Apply
Segmentation Variables

• Psychographic segmentation
• Use psychographic variables to describe people in
  different benefit segments
• Social class
• Lifestyle
• Personality

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Requirements for Effective Segmentation

• Not all segmentations are effective
• To be useful, segments must be
• Measurable
• Accessible
• Substantial
• Differentiable
• Actionable

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Target Marketing ProcessStep 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

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Target Marketing ProcessStep 1 Evaluate Each
Segment

• Company objectives and resources
• Fit with long-term objectives
• Ability to offer advantages over the competition

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Target Marketing ProcessStep 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
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Target Marketing ProcessStep 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 C
Segment D
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Target Marketing ProcessStep 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 C
Segment D
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Target Marketing ProcessStep 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

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Target Marketing ProcessStep 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

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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

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Positioning for Competitive Advantage

• A brands 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)

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Perceptual Positioning Maps

• Show consumer perceptions of competing brands on
  dimensions important to target consumers

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Perceptual Positioning MapFashion Retailers in
Seattle, WA
Very latest styles
Neiman-Marcus
The Limited
Saks
Bloomingdales
Macys
Nordstrom
Hit or Miss
No value focus
Value focus
Dress Barn
Gap
Garfinkels
Casual Corner
Marshall
LT
Britches
Hechts
Sears
K-mart
Woodward Lanthrop
JC Penney
Conservative styles
Talbots
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Perceptual Positioning MapFashion Retailers in
Seattle, WA
Very latest styles
Neiman-Marcus
The Limited
2
3
4
Saks
Bloomingdales
Macys
Nordstrom
Hit or Miss
Value focus
No value focus
Dress Barn
Gap
Garfinkels
Casual Corner
Marshall
LT
1
Britches
Hechts
5
Sears
K-mart
Woodward Lanthrop
JC Penney
Conservative styles
Talbots
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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

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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

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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

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Positioning Step 3 Selecting an Overall
Positioning Strategy

• Value proposition
• Answers the consumers question, Why should I
  buy your brand?
• Full mix of benefits on which the brand is
  positioned

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Positioning Step 3 Selecting an Overall
Positioning Strategy

• Possible value propositions

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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

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Positioning Step 4 Developing a Positioning
Statement

• Form
• To lttarget segment and needgt our ltbrandgt is
  ltconceptgt that ltpoint of differencegt.
• 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.

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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

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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

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Summary

• Market segmentation
• Define the market
• Identify bases for segmenting the market
• Develop segment profiles
• Target marketing
• Determine attractiveness of each segment
• Select target segments
• Market positioning
• Develop positioning for target segments
• Communicate the position