CHAPTER 6 Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers

Roadmap: Previewing the Concepts Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace. Copyright 2007, Prentice-Hall Inc.

P&G – Segments the Market Strategy Sells multiple brands within the same product category for detergents, soaps, and other goods. Each brand features a different mix of benefits and appeals to a different segment. Product modifications appeal to different niches within certain segments. The Payoff P&G generates revenues of $4+ billion in U.S. laundry detergent market. Tide has 34% share of powder and 24% share of liquid market segments. Combined, all P&G brands account for 75% share of powder and 55% share of liquid detergent markets. Copyright 2007, Prentice-Hall Inc.

Figure 6-1 Steps in Segmentation, Targeting, and Positioning Copyright 2007, Prentice-Hall Inc.

Market Segmentation Geographic, demographic, psychographic, and behavioral variables are used in segmentation. There is no single way to segment a market. Often best to combine more than one variable in order to identify smaller, better-defined target groups. Copyright 2007, Prentice-Hall Inc.

Geographic Variables Geographic segmentation divides a market into different geographic units. Variables and breakdowns include: World Region or Country: North America, Western Europe, Pacific Rim, Mexico, etc. Country Region: Pacific, Mountain, etc. City or Metro Size: defined numerically Density: rural, suburban, urban Climate: northern, southern Copyright 2007, Prentice-Hall Inc.

Demographic Variables Differences in age, gender, family size, family life cycle, income, occupation, education, race, and religion can be used to segment markets. Frequently used in segmentation. Easier to measure than most other types of variables. Copyright 2007, Prentice-Hall Inc.

Demographic Targeting by Age Marketing in Action Demographic Targeting by Age Crest targets adults with the ad and product on the left, and children with the ad and product on right. Copyright 2007, Prentice-Hall Inc.

Psychographic Variables Psychographic segmentation divides a market into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic classification often have very different lifestyles. Copyright 2007, Prentice-Hall Inc.

Lifestyle Market Analyst Marketing in Action Lifestyle Market Analyst Using the Lifestyle Market Analyst, marketers can identify other interests that appeal to those consumers who enjoy a particular lifestyle, as well as the demographics of those consumers. Market profiles of each DMA provide lifestyle information as well. http://www.srds.com/frontMatter/ips/lifestyle/sample.html Copyright 2007, Prentice-Hall Inc.

Behavioral Variables Segmentation by Occasion Benefits Sought Special promotions & labels for holidays. Special products for special occasions. Benefits Sought Different segments desire different benefits from products. User Status Nonusers, ex-users, potential users, first-time users, regular users. Usage Rate Light, medium, heavy. Loyalty Status Brands, stores, companies. Copyright 2007, Prentice-Hall Inc.

Let’s Talk! Nestle has implemented an occasion segmentation strategy during the Christmas season by marketing special flavors of Coffeemate that complement the holidays. What other brands COULD develop their own special products or packaging for holidays or other occasions? Copyright 2007, Prentice-Hall Inc.

Segmenting by Benefits Sought Marketing in Action Segmenting by Benefits Sought Citicards’ various products offer different benefits: – rewards – establishing credit – small business benefits – no frills value https://www.citibank.com/us/cards/index.jsp Copyright 2007, Prentice-Hall Inc.

Geodemographic Segmentation Claritas, Inc. Potential Rating Index for Zip Markets (PRIZM) Based on U.S. Census data Profiles on 260,000 U.S. neighborhoods 62 clusters or types Copyright 2007, Prentice-Hall Inc.

PRYSM Interactive Tutorial Marketing in Action PRYSM Interactive Tutorial Click the link below: http://www.usatoday.com/news/nation/2003-12-16-who-we-are-examples_x.htm Select, “Who we are. Redefining our demographics” underneath the “Beyond Words” heading. Screen at left will appear and tutorial will load and run automatically. Copyright 2007, Prentice-Hall Inc.

Marketing in Action PRYSM Zip Code Lookup Lookup your zip code and learn more about the PRYSM clusters describing people where you live! http://www.claritas.com/MyBestSegments/Default.jsp Copyright 2007, Prentice-Hall Inc.

Segmenting Business Markets Consumer and business markets use many of the same variables for segmentation. Business marketers can also use: Operating Characteristics Purchasing Approaches Situational Factors Personal Characteristics This American Express ad targets small businesses. Copyright 2007, Prentice-Hall Inc.

Segmenting International Markets Factors used: Geographic location Economic factors Political and legal factors Cultural factors Intermarket segmentation: Segments of consumers who have similar needs and buying behavior even though they are located in different countries. Copyright 2007, Prentice-Hall Inc.

Intermarket Segmentation Marketing in Action Intermarket Segmentation Teens show surprising similarity no matter where in the world they live. For instance, this teen could live almost anywhere. Thus, many companies target teenagers with worldwide marketing campaigns. Copyright 2007, Prentice-Hall Inc.

Requirements for Effective Segmentation Measurable Accessible Substantial Differentiable Actionable “Lefties” are hard to identify and measure, thus few firms tailor their offers to this group. “Anything Left Handed” is an exception. Copyright 2007, Prentice-Hall Inc.

Evaluating Market Segments Segment Size and Growth Analyze current segment sales, growth rates, and expected profitability. Segment Structural Attractiveness Consider competition, existence of substitute products, and the power of buyers & suppliers. Company Objectives and Resources Examine company skills & resources needed to succeed in that segment. Offer superior value & gain advantages over competitors. Copyright 2007, Prentice-Hall Inc.

Figure 6-2 Target Marketing Strategies Copyright 2007, Prentice-Hall Inc.

Target Marketing Strategies Undifferentiated (mass) marketing Ignores segmentation opportunities Such products rarely succeed for long in the American marketplace. Differentiated (segmented) marketing Targets several segments and designs separate offers for each. Coca-Cola, Procter & Gamble (soaps and detergents), and Toyota are a few examples. Copyright 2007, Prentice-Hall Inc.

Target Marketing Strategies Concentrated (niche) marketing Targets one or a couple small segments Niches have very specialized interests Copyright 2007, Prentice-Hall Inc.

Concentrated Marketing Marketing in Action Concentrated Marketing Small businesses can reap large returns from niche marketing. This profitable Web site offers access to artistic e-cards on a subscription basis. www.jacquielawson.com/ Copyright 2007, Prentice-Hall Inc.

Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, specific stores. Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers. Copyright 2007, Prentice-Hall Inc.

Choosing a Targeting Strategy Factors to consider: Company resources Product variability Product’s life-cycle stage Market variability Competitors’ marketing strategies Copyright 2007, Prentice-Hall Inc.

Socially Responsible Targeting Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern. Vulnerable and disadvantaged can be targeted. Cereal, cigarette, beer, and fast-food marketers have received criticism. Internet has raised fresh concerns about potential targeting abuses. Copyright 2007, Prentice-Hall Inc.

Product Positioning A product’s position is the way the product is defined by consumers on important attributes, or as the place the product occupies in consumers’ minds relative to competing products. Perceptual position maps can help define a brand’s position relative to competitors. Copyright 2007, Prentice-Hall Inc.

Marketing in Action Positioning eBay’s positioning is simple: No matter what “it” is, you can find “it” on eBay! The “it” print and TV ads reflect different types and categories of goods, reinforcing this position. www.ebay.com Copyright 2007, Prentice-Hall Inc.

Figure 6-3 Positioning Map: Large Luxury SUVs Copyright 2007, Prentice-Hall Inc.

Choosing a Positioning Strategy Identify a set of possible competitive advantages on which to build a position. Choose the right competitive advantages. Select an overall positioning strategy. Copyright 2007, Prentice-Hall Inc.

Identifying Possible Competitive Advantages Key to winning target customers is to understand their needs better than competitors do and to deliver more value. Competitive advantage – extent to which a company can position itself as providing superior value. Achieved via differentiation. Copyright 2007, Prentice-Hall Inc.

Sources of Competitive Advantages Differentiation can be achieved by means of: Products Services Image People Which form of differentiation is promoted in the ad at right? Copyright 2007, Prentice-Hall Inc.

Positioning Errors Underpositioning: Overpositioning: Failing to really position the company at all. Overpositioning: Giving buyers too narrow a picture of the company. Confused Positioning: Leaving buyers with a confused image of a company. Copyright 2007, Prentice-Hall Inc.

Choosing the Right Competitive Advantages Not all brand differences are meaningful and worthwhile, nor do all differences make a good differentiator. Each difference has the potential to create company COSTS as well as consumer value. The best competitive advantages are those that meet seven key criteria. Important Distinctive Superior Communicable Preemptive Affordable Profitable Copyright 2007, Prentice-Hall Inc.

Positioning and Pampers Marketing in Action Positioning and Pampers Video Snippet Procter & Gamble markets Pampers and hundreds of other brands. Review this video snippet to learn more about the P&G method of positioning. www.pg.com Copyright 2007, Prentice-Hall Inc.

Figure 6-4 Possible Value Propositions Copyright 2007, Prentice-Hall Inc.

Value Propositions Marketing in Action Diaka Vodka is positioned as the world's most expensive vodka, due to its unique diamond filtration process. Nearly one hundred diamonds of up to one carat in size are used to filter the spirit, resulting in a Vodka with unsurpassed clarity and smoothness. What value proposition would you expect Diaka’s advertising to promote? Copyright 2007, Prentice-Hall Inc.

Positioning Statements Marketing in Action Positioning Statements To (target segment and need) our (brand) is a (concept) that (point-of-difference). “To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to day, people, and resources while on the go, more easily and reliably than the competing technologies.” Copyright 2007, Prentice-Hall Inc.

Communicating and Delivering the Chosen Position Company must take strong steps to deliver and communicate the desired position to target consumers. The marketing mix efforts must support the positioning strategy. Must monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies. Copyright 2007, Prentice-Hall Inc.

Let’s Talk! Take a look at the ad shown at right. How is the brand being positioned? What is its value proposition? Copyright 2007, Prentice-Hall Inc.

Rest Area: Reviewing the Concepts Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace. Copyright 2007, Prentice-Hall Inc.