Market Segmentation, Targeting, and Positioning

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Chapter 9

• Market Segmentation, Targeting, and Positioning

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Chapter Objectives

• Identify the essential components of a market.
• Outline the role of market segmentation in
  developing a marketing strategy.
• Describe the criteria necessary for effective
  segmentation.
• Explain each of the four bases for segmenting
  consumer markets.
• Identify the steps in the market segmentation
  process.
• Discuss four basic strategies for reaching target
  markets.
• Summarize the types of positioning strategies.
• Explain the reasons for positioning and
  repositioning products.

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Selecting a Target Market

• Before a marketing mix strategy can be
  implemented, the marketer must identify,
  evaluate, and select a target market.
• Market people or institutions with sufficient
  purchasing power, authority, and willingness to
  buy
• Target market specific segment of consumers most
  likely to purchase a particular product

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Types of Markets

• Consumer products goods or services purchased by
  an ultimate consumer for personal use
• Business products goods or services purchased
  for use either directly or indirectly in the
  production of other goods and services for resale
• The key to classification is to identify the
  purchaser and the reasons for buying the goods.

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PG Courts Business CustomersWSJ 1/26/07

• PG struggles to find significant sales growth in
  consumer households
• Expands its Professional Division - sale to
  janitors, fast-food workers, maids, and
  launderers
• Conducted marketing research at hotels and
  fast-food restaurants
• U.S. market is 3.2 billion

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• KC Masterpiece
• Product Targeted at Selected Consumers

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• Cattlemens
• Product Targeted at the Business Market Comes
  in 1 and 5 Gallon Containers. Introduced more
  than 40 years ago to meet the special needs of
  foodservice operators

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The Role of Market Segmentation

• Market SegmentationDivision of the total market
  into smaller, relatively homogeneous groups
• No single marketing mix can satisfy everyone.
  Therefore, separate marketing mixes should be
  used for different market segments.

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No Market Segmentation
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Segmented by Sex
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Segmented by Age
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• Figure 9.1
• Serving the Hispanic-American Market

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• Toms of Maine
• Targeting a Specific Marketing Segment
• Which segment?

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Criteria for Effective Segmentation

• Market segmentation cannot be used in all cases.
  To be effective, segmentation must meet the
  following basic requirements.
• The market segments must be measurable in terms
  of both purchasing power and size.
• Marketers must be able to effectively promote to
  and serve a market segment.
• Market segments must be sufficiently large to be
  potentially profitable.
• The number of segments must match the firms
  capabilities.

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Segmenting Consumer Markets

• Geographic Segmentation Dividing an overall
  market into homogeneous groups on the basis of
  their locations
• Does not ensure that all consumers in a location
  will make the same buying decision.
• Help in identifying some general patterns.

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• Figure 9.3
• The 10 Largest Cities in the U.S.

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• Pampers
• This ad is an example of geographic segmentation.
  Why?

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• Urban Data Classified by U.S. Government
• Core Based Statistical Area (CBSA) at least one
  urban area 10,000 or more population
• Metropolitan Statistical Area (MSA) urban
  center population of 50,000 and area population
  of over 100,000
• Micropolitan Statistical Area at least one town
  10,000 to 49,999 population
• Consolidated Metropolitan Statistical Area (CMSA)
  one of 25 urban giants
• Primary Metropolitan Statistical Area (PMSA)
  urbanized county or counties, one million or more
  population Seattle, Tacoma, Bremerton

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• Using Geographic Segmentation
• Demand for some goods and services can vary
  according to the geographic region
• Most major brands get 40-80 percent of their
  sales from what are called core regions
• Climate is another important segmentation factor
• Northern consumers, for example, eat more soup
  than Southerners
• Southerners use more chlorine for their swimming
  pools than Northern residents

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• Figure 9.4
• Geographic Segmentation The Importance of
  Suburban Homeowners Buying Habits

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• Kubota
• Segmentation by Residence Location

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• Geographic Information Service (GIS) computer
  technology that records several layers of data on
  a single map
• Simplifies the job of analyzing marketing
  information by placing data in a spatial format .
  . . The result of which is a geographic map
  overlaid with digital data about consumers in a
  particular area.

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Segmenting Consumer Markets

• Demographic Segmentation dividing consumer
  groups according to characteristics such as sex,
  age, income, occupation, education, household
  size, and stage in the family life cycle
• U.S. Census Bureau

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• Segmenting by Gender
• Marketers must ensure that traditional
  assumptions are not false
• Recently, the lines have increasingly blurred
• Some companies market successfully to both genders

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• Segmenting by Age
• Identify market segments on the basis of age
• Products designed to meet the specific needs of
  certain age groups
• Dole Developing a Product Specifically for
  Children

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• Tweens and Teens
• Rapidly growing market
• Significant purchasing power
• Cohert Effect
• Tendency among members of a generation to be
  influenced and drawn together by significant
  events occurring during their key formative
  years, roughly 17 to 22 years of age

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• Baby Boomers
• Born from 1946 until 1965.
• Nearly 42 percent of U.S. adults
• Values influenced both by the Vietnam War and the
  career-driven era
• Baby boomers over the age of 50 will have a total
  disposable income of 1 trillion

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• Figure 9.6
• MasterCard Appealing to Baby Boomers Nostalgia
  for Music

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• Seniors
• By 2025, 1 in 5 over age 65
• Median age is now 35.2 years
• Life expectancy is 74 for men and to 79 for women
• Heads of households aged 55-plus control about
  three-quarters of the countrys total financial
  assets.

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• Segmenting by Ethnic Group
• By 2050, nearly half of the population of the US
  will belong to nonwhite minority groups.
• The three largest and fastest-growing
  racial/ethnic groups in the US are African
  Americans, Hispanics, and Asian Americans.

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• Ethnic Group Segmentation
• Hispanic
• African Americans
• Asian Americans
• Native Americans
• People of Mixed Race

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• Figure 9.7
• Breakdown of U.S. Minority Populations

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• Family Life Cycle Stages Segmentation
• The process of family formation and dissolution
• Life stage, not age per se, is the primary
  determinant of many consumer purchases

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• Figure 9.8
• Segmenting by Family Life Cycle Stage

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• Segmenting by Household Type
• Todays U.S. households are very diverse
• Married couples and their children
• Blended by divorce or loss of spouse
• Headed by single parent, same-sex parents,
  grandparents

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• Segmenting by Income and Expenditure Patterns
• Engels Laws, as family income increases
• A smaller percentage of expenditures go for food
• The percentage spent on housing and household
  operations and clothing remains constant
• The percentage spent on other items (such as
  recreation and education) increases

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• Figure 9.9
• Princess Cruise Lines Targets People with Large
  Disposable Incomes

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• Jaguar
• Segmentation based on income

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• Demographic Segmentation Abroad
• Obtaining the data necessary for global
  demographic segmentation is often difficult
• Many countries do not operate regularly scheduled
  census programs
• For example, the most recent census of Holland is
  now over 20 years old, and Germany skipped its
  census from 1970 to 1987
• Daily life cycle data is difficult to apply in
  global demographic segmentation efforts

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• Psychographic Segmentation
• Divides a population into groups that have
  similar psychological characteristics, values,
  and lifestyles
• Lifestyle peoples decisions about how to live
  their daily lives, including family, job, social,
  and consumer activities
• The most common method for developing
  psychographic profiles of a population is to
  conduct a large-scale survey
• AIO statements describe activities, interests,
  and opinions
• VALS and VALS 2 eight categories Values and
  Lifestyles

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• Psychographic Segmentation of Global Markets like
  those done by Roper Starch can paint useful
  pictures of the residents of various countries
• Roper found six psychographic consumer segments
  that are common to 35 nations
• Strivers
• Devouts
• Altruists
• Intimates
• Fun seekers
• Creatives

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• Using Psychographic Segmentation
• Psychographic profiles produce rich descriptions
  of potential target markets
• Greater detail aids in matching a companys image
  and its offerings with the types of consumers who
  are likely purchasers

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• Figure 9.11
• Appealing to Intimates and Fun Seekers

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• Product-Related SegmentationDividing a consumer
  population into homogeneous groups based on
  characteristics of their relationships to the
  product
• Can take the form of segmenting based on
• Benefits that people seek when they buy a product
• Usage rates for a product 80/20 principle
• Consumers brand loyalty toward a product

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• Benefits
• Focuses on the attributes that people seek in a
  good or service and the benefits that they expect
  to receive from that good or service
• Groups consumers into segments based on what they
  want a product to do for them

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• Eclipse
• Segmenting by Benefits Sought

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• Usage Rates
• Segmenting by grouping people according to the
  amounts of a product that they buy and use
• Markets often divided into heavy-user,
  moderate-user, and light-user segments
• The 80/20 principle (Praedos Law) holds that a
  big percentage of a products revenues (roughly
  80) comes from a relative small, loyal
  percentage (around 20) of total customers

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• Brand Loyalty
• Segmenting consumers grouped according to the
  strength of brand loyalty felt toward a product
• Frequent flyer programs of airlines and many
  hotels

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• Using Multiple Segmentation Bases
• Increase accuracy in reaching the right markets
• Combine multiple bases
• Geographic and Demographic
• Product-related with income and expenditure
  patterns

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The Market Segmentation Process

• Develop a Relevant Profile for each Segment
• Forecast Market Potential
• Forecast Probable Market Share
• Select Specific Market Segments

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Strategies for ReachingTarget Markets

• Undifferentiated Marketing when a firm produces
  only one product or product line and promotes it
  to all customers with a single marketing mix
• Differentiated Marketing when a firm produces
  numerous products and promotes them with a
  different marketing mix designed to satisfy
  smaller segments

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• Concentrated Marketing (niche marketing) when a
  firm commits all of its marketing resources to
  serve a single market segment
• Micromarketing involves targeting potential
  customers at a very basic level, such as by ZIP
  code, specific occupation, lifestyle, or
  individual household

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• Differentiated Marketing
• Procter and Gamble Practicing Differentiated
  Marketing

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• Selecting and Executing a Strategy
• No single, best choice strategy suits all firms
• Determinants of a market-specific strategy
• Company resources
• Product homogeneity
• Stage in the product life-cycle
• Competitors strategy

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• Positioning a marketing strategy that
  emphasizes serving a specific market segment by
  achieving a certain position in buyers minds
• Attributes
• Price/quality
• Competitors
• Application
• Product user
• Product class

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• Positioning mapGraphic illustration that shows
  differences in consumers perceptions of
  competing products
• Reposition Marketing strategy to change the
  position of its product in consumers minds
  relative to the positions of competing products

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Hypothetical Competitive Positioning Map for
Selected Retailers
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End Of Chapter Nine