Market Segmentation, Targeting, and Positioning for

Competitive Advantage

Deciding Who We Want to Mean

What to
Marketing Focuses on Customers
 Target Market
 A specific group of customers on whom an
organization focuses its marketing efforts
 Large or small customer groups
 Single or multiple product markets
 Single or multiple products
 Local to global markets
Components
of Strategic
Marketing

FIGURE 1.1
 Marketing Deals with Products,
Distribution, Promotion, and Price
 The Marketing Mix
 Four marketing activities—product,
distribution, promotion, and pricing—that a
firm can control to meet the needs of
customers within its target market
Product
Distribution Target
Promotion Market
Pricing
Marketing Mix Variables
The “4 P’s”
Goods, services, or ideas that satisfy
Product customer needs

The ready, convenient, and timely

Distribution availability of products

Activities that inform customers about

Promotion the organization and its products

Decisions and actions that establish

Pricing pricing objectives and policies and set
product prices
 Some Definitions
 Market Segmentation – is the process of dividing a
total market into groups, or segments, consisting of
people or organizations with relatively similar
product needs.
– The purpose is to enable a marketer to design a
marketing mix (mm) that more precisely matches
the needs of customers in the selected market
segments.
 A Market Segment - consists of individuals, groups,
or organizations with one or more similar
characteristics that cause them to have relatively
similar product needs.
Target Market Selection Process

FIGURE 7.1
 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 marketing mix (mm) directed at all consumers
(no segmentation, i.e.,Ford Model T )

Segment Marketing
Different marketing mix (mm) to one or more segments
(some segmentation, i.e. GM)
Today, Mass Marketers Rarely
Practice Mass Marketing
 In other words Mass Marketers do target
almost everyone, but they do not do it with
one marketing strategy
 They develop unique marketing strategies for
each major target market
 Product strategy does not equal marketing mix
strategy
 As we will see you can target the same
product to different segments using different
promotion, pricing, or distribution strategies
Mass Marketing
One mm for all

Segment Marketing
One or more mm targeted to
one or more segments

Niche Marketing
One or more mm targeted to
one or more sub-segments

Micro Marketing (1-1)

One or more mm targeted to
specific individuals or communities
The Classic Segmentation Variables for
Consumer Markets

FIGURE 7.3
 Demographic Variables
 Perhaps the most widely used and
most widely available
 “Objective”

 Often a proxy for harder to obtain

Psychographics
– College student and interest in education
– 50 year old and interest in retirement
funds
 Psychographics Variables
 Personality characteristics
 Marketers appeal to positive/favorable personal
characteristics to influence the purchase decision.
 Motives
 Marketers use individuals’ differing purchase
motives to segment a product market.
 Lifestyles
 Marketers segment markets according to how
individuals choose to spend their time in various
activities, their income, their interest and
opinions, and their education.
 Behaviorist
 Behaviorist often called “usage”
 Very straightforward - target your
users
 May be hard to get (surprisingly)

 80/20 rule (80% sales are to 20% of

your customers
 Ethical?

– Vodka targeting alcoholics?

 Geographic
 Ifyou are a regional firm then Geo
targeting is also self evident
 Some firms have regional product mix
(grocery stores and “ethnic” foods.
 Even national firms may target
regionally.
– Product may mean different things in
different parts of the country
– Coke or Pop or Soda and is it a breakfast
drink?
We Slice and Dice Segments
 Typically using more then one variable or type
of segmentation variable
– Use multiple Demographic Variables such as
age, gender, income &
– Use various Demographic, Psychographic,
Geographic, and Behaviorist Variables
 Art as much as science
– So can come up with different segments
using different variables and different
analytical/statistical techniques
Geodemographic Segmentation
 Marketing segmentation that clusters
people in pim code areas and smaller
neighborhood units based on lifestyle
(psychographic) and demographic
information
– (Combines Geographic and
Demographic info)
 Example are PRIZM and MicroVision
 Psychographics and
Demographics Variables

 VALS & VALS 2

 Based on values, lifestyles, and
demographic
 Therefore, combines
Psychographic and Demographic
variables
 VALS 2

Percentage
of Adults,
Classified by
VALS 2 Type,
Who
Participated
in Selected
Sports in
1996

FIGURE 7.6
Once We Have Our Segments
We Need to Target Them With a
Marketing Mix
 Three options:
– Undifferentiated
– Differentiated
– Concentrated
 Targeting Strategies

• The classic mass marketing, all things to all people approach

• Ignore segments
• One mm
• Rarely used today – Name an undifferentiated product?
FIGURE 7.2
FIGURE 7.2
 Differentiated Strategy (cont.)

• The firm decides to target several separate segments and designs

separate marketing strategies for each
• GM’s “a car for every purpose, purse, and personality” vs. Fords one
car for every purpose for every purse for every personality”
• Typically, for most firms, this means you go for a small share of the
larger, total aggregate market (one or two mm for one or two
segments (out of maybe six or seven)
 Concentrated Marketing

• The firm goes for a large share of a single (or very few) segments.
• Scorpio vs. Scoda
• Can be niched or larger

FIGURE 7.2
 IT IS CRITICAL TO
UNDERSTAND THAT
 Mass marketers do not often practice
mass marketing today
 They practice differentiated marketing

 They likely do not change the product

to appeal to different segments
 They change price, place, and
promotion
Stereotyping vs. Marketing

Does marketing “discriminate?”

Target Market Selection Process

Focus of Sept. 27

Focus for today FIGURE 7.1

 Recall: 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 marketing mix (mm) directed at all consumers
(no segmentation, i.e.,Ford Model T )

Segment Marketing
Different marketing mix (mm) to one or more segments
(some segmentation, i.e. GM)
 And That Today, Mass
Marketers Rarely Practice Mass
Marketing
 In other words Mass Marketers do target almost
everyone, but they do not do it with one marketing
strategy
 They develop unique marketing strategies for each
major target market
 Product strategy does not equal marketing mix
strategy
 As we will see you can target the same product to
different segments using different promotion,
pricing, or distribution strategies
Mass Marketing
One mm for all

Segment Marketing
One or more mm targeted to
one or more segments

Niche Marketing
One or more mm targeted to
one or more sub-segments

Micro Marketing (1-1)

One or more mm targeted to
specific individuals or communities
 The Classic Segmentation
Variables for Consumer Markets

FIGURE 7.3
 Some Definitions
 Market Segmentation – dividing a market into
smaller groups of buyers with distinct needs,
characteristics, or behaviors who might require
separate products OR marketing mixes (mm).
 Market Targeting – evaluating each segments

attractiveness and selecting one or more to enter.

 Market Positioning – setting the competitive

positioning for the product and creating a detailed

mm.
- Terms often used often interchangeably, esp.
targeting and positioning
 Step 1: Identify The
Appropriate Targeting Strategy
Three Basic Targeting Strategies:
– Undifferentiated
– Differentiated
– Concentrated
 Targeting Strategies

 Classic mass marketing, all things to all people

approach
 Ignore segments
 One mm for all customers
 Rarely used today – Name an undifferentiated
product?
 Differentiated Strategy (cont.)
 The firm targets
several separate
segments and designs
separate marketing
strategies for each
– GM’s “a car for every
purpose, purse, and
personality”
– vs. Fords one car for every
purpose for every purse for
every personality”
For most firms, this means they go for a small
share of the larger, total aggregate market (one
or two mm for one or two segments (out of
maybe six or seven)
 Concentrated Marketing

 The firm goes for a large share of a single

(or very few) segments
– Jeep vs. GM
 Can be niched or larger
 IT IS CRITICAL TO
UNDERSTAND THAT
 Mass marketers do not often practice
mass marketing today
 They practice differentiated marketing

 Often they do not change the product

to appeal to different segments
 They change price, place, and
promotion
 Having ID’ed the Targeting
Strategy and Determined
Segmentation Variables
 We develop different segment profiles
 Evaluate these for profitability
 And select the target markets we want to enter
 Finally We Position
Market
MarketSegmentation
Segmentation(ID) (ID)
2.
2. Determine
Determinewhich
which
segmentation
segmentationvariables
variablesto
touse
use
3.
3. Develop
Developmarket
marketsegment
segment profiles
profiles
Market
Market Targeting
Targeting(Evaluate)
(Evaluate)
4.
4. Evaluate
Evaluaterelevant
relevant market
marketsegments
segments
5.
5. Select
Selecttarget
target markets
markets
Market
MarketPositioning
Positioning(Enter)
(Enter)
Having Finished the
•• Develop
Developpositioning
positioning
for
for target
targetsegments
segments
Target Market Selection
Process We Act!
•• Develop
Developaamarketing
marketing
mix
mixforforeach
eachsegment
segment
 How Does McDonald’s Practice
Market Positioning?
 Product essentially same (no Indian Big Mac)
 Promotion (specific promotion campaigns
aimed at the Indian market
 Place (urban stores, suburban stores, express
stores, etc.)
 Price (junior discounts)