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Chapter 7:Market Segmentation, Targeting, and Positioning for Competitive Advantage

“You cannot be all things to all people”

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Market Segmentation ProcessMarket Segmentation The division of the overall market into

groups with common characteristics

Market Targeting The act of evaluating and selecting one or

more segments to serve

Market Positioning Occupying a specific place in the minds of

customers within target markets Differentiating your product/service from

those of competitors

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Steps in Market Segmentation, Targeting, and Positioning (Fig. 7.1)

Market Segmentation

1. Identify bases for segmenting the market2. Develop segment profiles

Market Targeting3. Develop measure of segment attractiveness4. Select target segments

Market positioning5. Develop positioning for target segments6. Develop a marketing mix for each segment

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Step 1. Market SegmentationLevels of Market SegmentationThrough 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 Coca-Cola)

Segment MarketingDifferent products to one or more segments

(some segmentation, i.e. Marriott)

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Niche MarketingDifferent products to subgroups within segments

(more segmentation, i.e. Standard or Luxury SUV’s)

MicromarketingProducts to suit the tastes of individuals and locations

(complete segmentation)

Step 1. Market SegmentationLevels of Market Segmentation

Local Marketing

Tailoring brands/ promotions to local customer groups, i.e

Sears

Individual Marketing

Tailoring products and programs to the needs of

individual customers, i.e. Dell

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Density or Climate

City or Metro Size

World Region or Country

Step 1. Market SegmentationGeographic Segmentation

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Step 1. Market SegmentationDemographic 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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Step 1. Market SegmentationPsychographic Segmentation

Divides Buyers Into Different Groups Based on:

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Step 1. Market SegmentationBehavioral 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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• Size, purchasing power, profiles of segments can be measured.

• Segments can be effectively reached and served.

• Segments are large or profitable enough to serve.

Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• Segments must respond differently to different marketing mix elements & programs.• Effective programs can be designed to attract and serve the segments.

Step 1. Market SegmentationRequirements for Effective Segmentation

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Discussion ConnectionsTake another look at Figure 7-2. Can you identify specific companies, other than the examples already discussed, that practice each level of segmentation?Using the segmentation bases you’ve just read about, segment the cell-phone market.

Describe each of the major segments and sub segments.

F igu re 7 -2

Te xt p age 24 6

Cli ck o r pres s spa ceba r to r eturn

MassMarke tin g Se gm entMarke tin g Ni cheMarke tin g Micro ma rket ing

NoSe gme ntati on

Co mpl eteSe gme ntati on

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Step 2. Market TargetingEvaluating Market Segments

Segment Size and Growth Analyze current sales, growth rates and

expected profitability for various segments.

Segment Structural Attractiveness Consider effects of: competitors, availability

of substitute products and, the power of buyers & suppliers.

Company Objectives and Resources Company skills & resources needed to

succeed in that segment(s). Look for Competitive Advantages.

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Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

Segment 1Segment 1

Segment 2Segment 2

Segment 3Segment 3

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing

Mix

CompanyMarketing Mix 1

CompanyMarketing Mix 1

CompanyMarketing Mix 2

CompanyMarketing Mix 2

CompanyMarketing Mix 3

CompanyMarketing Mix 3

MarketMarket

A. Undifferentiated Marketing

B. Differentiated Marketing

C. Concentrated Marketing

Step 2. Market TargetingMarket Coverage Strategies

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Socially Responsible Target Marketing

Smart targeting helps companies and consumers alike.Target marketing sometimes generates controversy and concern. Disadvantaged and vulnerable can be

targeted. Cigarette, beer, and fast-food marketers

have received criticism in the past. Internet has come under attack because of

the loose boundaries and lack of control in marketing practices.

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Discussion ConnectionAt the last Discussion Connection, you segmented the cell-phone market. Now, pick two companies that serve this market

and describe their segmentation and targeting strategies.

Can you come up with one that targets many different segments versus another that focuses on only one or a few segments?

How does each company you choose differentiate its marketing offer and image?How has each done a good job of establishing this differentiation in the minds of targeted consumers?

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Step 3. Choosing a Positioning Strategy

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,

Design marketing mixes to create these planned positions.

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Positioning The objective of positioning is to

create a distinctive place in customers’ mind.

In the end, positioning is determined by the customer, not by the company.

Three Elements in True Positioning: Who You Are (Creating an Image) How You Are Different From

Competition (Differentiation) How You Can Satisfy Their Needs &

Wants (Communicating Benefits)

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SIX POSITIONING APPROACHES

POSITIONING BY PRODUCT FEATURES POSITIONING BY BENEFITSPOSITIONING FOR USER CATEGORYPOSITIONING FOR USAGE OCCASIONPOSITIONING AGAINST ANOTHER COMPETITORPOSITIONING AGAINST ANOTHER PRODUCT CLASS OR VIS-A-VIS THE COMPETITION

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Step 3. Choosing a Positioning Strategy

Step 1. Identifying Possible

Competitive Advantages

Step 2. Selecting the Right

Competitive Advantage

Step 3. Communicating and

Delivering the Chosen Position

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Identifying Possible Competitive Advantages

Key to winning and keeping customers is to understand their needs and buying processes better than competitors do and deliver more value.Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits, that justify competitive advantage,

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ServicesDifferentiationi.e. Delivery, Installation,

Repair Services, Customer

Training Services

Product Differentiationi.e. Features,

Performance, Style & Design, or Attributes

ImageDifferentiationi.e. Symbols, Atmospheres,

Events

Personnel Differentiation

i.e. Hiring, Training Better People Than

Competitors Do

Identifying Possible Competitive Advantages

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CriteriaFor Determining

Which DifferencesTo Promote

AffordableAffordable SuperiorSuperior

ProfitableProfitable

PreemptivePreemptive

DistinctiveDistinctive

ImportantImportant

CommunicableCommunicable

Choosing the Right CompetitiveAdvantages

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Selecting an Overall Positioning Strategy (Fig. 7.4)

Morefor

More

Morefor thesame

More for

Less

The samefor less

Less formuchless

Price

More The same LessMore

The Same

Less

Ben

efi

ts

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Communicating and Delivering the Chosen Position

Once position is chosen, company must take strong steps to deliver and communicate the desired position to target consumers.All the company’s marketing mix must support the positioning strategy.Positioning strategy must be monitored and adapted over time to match changes in consumer needs and competitor’s strategies.

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Review of Concept Connections

Define the three steps of target marketing: market segmentation, market targeting, and market positioning.List and discuss the major levels of market segmentation and bases for segmenting consumer and business markets.Explain how companies identify attractive market segments and choose a market-coverage strategy.Discuss how companies can position their products for maximum competitive advantage in the marketplace.