Market Segmentation, Targeting, and Positioning

Market Segmentation

Market segmentation involves aggregating prospective buyers into groups

that:
1. Have common needs, and
2. Will respond similarly to the marketing action

Key Concept:
Homogenous within / Heterogeneous between

Implies Product Differentiation

1. Between companies
2. Within companies

Targeting

Selecting and directing a marketing program toward one or more specific

groups of consumers (market segments)

Steps in Segmentation and Targeting

• Form prospective buyers into segments

• Form products to be sold into groups
• Develop a market-product grid and estimate market sizes
• Select Target markets
• Take marketing action to reach target markets
Criteria for Effective Segmentation
Should we segment?
• Potential for increased profit and ROI
(i.e., substantiality)
• Similarity of needs of potential buyers within a segment; differences
of needs of buyers between segments
(i.e., differentially responsive)
• Simplicity and cost of assigning potential buyers to segments
(i.e., measurability)
• Feasibility of a marketing action to reach a segment
(i.e., accessibility)
Bases for Segmenting Consumer Markets

• Customer Characteristics:
• Geographics
• Demographics
• Psychographics

• Buying Situations:
• Benefits Sought
• Usage Rate

Bases for Segmenting Business Markets

• Location
• NAICS Code
• Number of Employees

Steps in Segmentation and Targeting

• Form prospective buyers into segments

• Form products to be sold into groups
• Develop a market-product grid and estimate market sizes
• Select Target markets
• Take marketing action to reach target markets

Market-product grid for pillows for three different segments of sleepers

Products
Medium
Markets Soft Pillow Pillow Firm Pillow
L M S
Stomach sleepers
M L M
Back sleepers
S M L
Side sleepers

Key: L, Large market; M, medium market; S, small market

Criteria for Selecting Target Markets
Which consumers should we target?
• Size
• Expected Growth
• Competitive Position
• Cost of Reaching Segment
• Compatibility with organizational objectives and resources

Target Market Strategies

• Market Aggregation
• Single Segment Concentration
• Multiple-Segment Targeting

Aggregation Strategy

Mass marketing, undifferentiated market

• single product
• one pricing structure
• one distribution system
• one promotional program …for the entire market
• not very common (e.g., table salt)
• minimizes costs, inventory

Single Segment Strategy

One segment within total market (e.g., Rolls-Royce)

• allows market penetration (in-depth)
• can use limited resources
• large competitors may leave smaller companies alone
(for awhile!--e.g., Celestial Seasonings)
• risky (all eggs in one basket)
• may be difficult to expand

Multiple Segment Strategy

Two or more groups of potential customers identified as target markets

• separate marketing mix for each segment
• different or same versions of original product
• General Motors
• Evian
 • may be more expensive:
• production
• advertising
• Distribution

Selecting a target market for a fast-food restaurant next to a metropolitan college

Products: Meals
Between- After- Dinner
meal Dinner
Markets Breakfast Lunch Snack
snack
Student
Dormitory O S L O L
Apartment S L L S S
Day commuter O L M S O
Night commuter O O S L M

Nonstudent
Faculty or staff O L S S O
Live in area O S M M S
Work in area S L O S O

Key: L, Large market; M, medium market; S, small market; O, no market

Advertising actions to reach specific student segments

Products: Meals
Between-meal After- Dinner
snack Dinner Snack
Markets Lunch

S L O L
Dormitory students S
L L S
Apartment students
L M O
Day commuter students S
O S M
Night commuter students

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Product Positioning
• The place a product occupies in consumer’s minds on important
attributes relative to competitive offerings

• What our brand stands for in the product category

• A set of associations a consumer has with the brand-- similarities and

differences with others

Perceptual Mapping

A graph showing the relationship among different product offerings with

respect to certain product attributes

Repositioning

Changing the place a product offering occupies in a consumer’s mind

relative to competitive offerings

GM’s Perceptual Maps

A. Consumer perceptions B. Potential change in goals

in 1982 [o] and GM goals from 1990 [ ] to 2000
for 1990 [ ]
High Price
High Price Cadillac
 
Cadillac ?
o  
Buick
Buick € ?
Oldsmobile Oldsmobil 
o ?
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ž Saturn
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(1990)
Low Price Low Price