1. Targeting, and Positioning for Competitive Advantage
PRINCIPLES OF MARKETING
Eighth Edition
Philip Kotler and Gary Armstrong
Chapter 7
Market Segmentation,
Targeting, and Positioning
for Competitive Advantage

2. Steps in Segmentation, Targeting, and Positioning
This CTR corresponds to Figure 7-1 on p. 196 and relates to the material on pp. 196.
Steps in Segmentation, Targeting, and Positioning
6. Develop Marketing
Mix for Each Target Segment
Steps in Segmentation, Targeting, and Positioning
Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes.
Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them.
Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy.
Market Positioning. Market positioning is the process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer.
Discussion Note: The product's position is defined by how consumers view it on important attributes.
Market
Positioning
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
Targeting
3. Develop Measures
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market

3. Market Segmentation
Market segmentation is the process that companies use to divide large markets into small markets that can be reached more efficiently and effectively with products and services that match their unique needs.

4. Step 1. Market Segmentation Bases for Segmenting Consumer Markets
This CTR relates to Table 7-1 on p. 203 and the material on pp
Geographic
Nations, states,
regions or cities
Bases for Segmenting Consumer Markets
Geographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes.
Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation.
Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves.
Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude.
Demographic
Age, gender, family size and life cycle, or income
Psychographic
Social class, lifestyle, or personality
Behavioral
Occasions, benefits, uses, or responses

5. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Geographic segmentation divides the market into different geographical units such as nations, regions, states, counties, or cities.

6. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Demographic segmentation divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality

7. Market Segmentation
Age and life-cycle stage segmentation is the process of offering different products or using different marketing approaches for different age and life-cycle groups
Gender segmentation divides the market based on sex (male or female)

8. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality traits

9. Segmenting Consumer Markets
Market Segmentation
Segmenting Consumer Markets
Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product
Occasions
Benefits sought
User status
Usage rate
Loyalty status

10. Using Multiple Segmentation Bases
Market Segmentation
Using Multiple Segmentation Bases
Multiple segmentation is used to identify smaller, better-defined target groups
Geodemographic segmentation is an example of multivariable segmentation that divides groups into consumer lifestyle patterns (Also called intermarket)

11. Step 1. Market Segmentation Bases for Segmenting International Markets
This CTR relates to the discussion on pp
International Markets
Segmenting International Markets
Geographic Segmentation. This works well when proximity is the critical segmentation variable.
Economic Factors. Countries might be grouped by population income levels or by overall level of economic development.
Political and Legal Factors. Segmentation may be most appropriate in terms of the level of government stability, monetary regulations, receptivity to foreign firms, or the amount of bureaucracy encountered when conducting business.
Cultural Factors. Segmentation by common language, religion, or values might be the best way to proceed.
Intermarket Segmentation. This involves forming segments of consumer who have similar needs and buying behavior even though they are located in different countries.
Geographic
Economic
Political/
Legal
Cultural
Intermarket

12. Step 1. Market Segmentation Requirements for Effective Segmentation
Measurable
Effective Segmentation
This CTR relates to the material on pp. 215.
Step 1. Market Segmentation Requirements for Effective Segmentation
Accessible
Substantial
Size, purchasing power, profiles
of segments can be measured.
Requirements for Effective Segmentation
Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important.
Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer.
Substantiality. This refers to the degree to which the segments are large or profitable enough to service.
Actionability. This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues.
Segments must be effectively
reached and served.
Differential
Segments must be large or profitable enough to serve.
Actionable
Segments must respond differently to different marketing mix elements & actions.
Must be able to attract and serve the segments.

13. Step 2. Market Targeting Evaluating Market Segments
This CTR relates to the material on pp
Segment Size and Growth
Analyze sales, growth rates and expected profitability.
Segment Structural Attractiveness
Consider effects of: Competitors, Availability of Substitute Products and, the Power of Buyers & Suppliers.
Company Objectives and Resources
Company skills & resources relative to the segment(s).
Look for Competitive Advantages.
Evaluating Market Segments
Segment Size and Growth. The company must collect and analyze data on current dollar sales, projected sales-growth, and expected profit margins for each market segment.
Segment Structural Attractiveness. Long run attractiveness includes an assessment of current and potential competitors, the threats of substitutes, and the power of buyers and suppliers.
Company Objectives and Resources. The company’s resources and core business strengths should also fit well with the market segment opportunities.

14. Step 2. Market Targeting Market Coverage Strategies
This CTR corresponds to Figure 7-4 on p. 217 and relates to the discussion on pp
Step 2. Market Targeting Market Coverage Strategies
Undifferentiated Marketing:
A strategy in which a firm decides to ignore market segment difference and target the whole market with one offer.
Differentiated Marketing:
A strategy in which a firm decides to target several market segments and design separate offers for each.
Market Coverage Strategies
Undifferentiated Marketing. This strategy uses the same marketing mix for the entire market. This strategy focuses on the common needs of the market rather than differences in it. Undifferentiated marketing provides economies of scale on product costs but may be limited in application.
Differentiated Marketing. This strategy targets several market segments and designs separate marketing mixes for each of them. Product and marketing variation also helps company image and may produce loyalty in consumers as they change segments.
Concentrated Marketing. This strategy commits a company to pursue a large share of one or more submarkets. Economies and segment knowledge and service are strengths of this approach but risk due to smaller market size is greater.

15. Local Marketing & individual Marketing
Step 2. Market Targeting Market Coverage Strategies
Concentrated Marketing (Niche) :
A segment within a segment.
A strategy in which a firm goes after a large share of one or a few segments or niches
Micromarketing
The practice of tailoring product and marketing program to the needs and wants of specific individuals and local customer groups.
Local Marketing & individual Marketing

16. Step 2. Market Targeting Choosing a Market-Coverage Strategy
This CTR relates to the discussion on pp
Company
Resources
Choosing a Market-Coverage Strategy
Factors to consider in choosing a market-coverage strategy include:
Company Resources. Sometimes the resources of a firm make a strategy decision fairly simple. For example, a small firm with limited resources is more likely to be successful implementing a concentrated strategy than a full coverage one.
Product Variability. The higher the degree of product variation or differentiation, the greater the likelihood that a differentiated or concentrated strategy will be necessary to meet consumer demands for choice.
Stage in Life Cycle. Introduction and early growth stages of the product life cycle are more likely to support single-version products. As the market matures, greater consumer numbers and a wider variety of tastes demand more differentiation.
Discussion Note: The cost of developing new products is often given as a reason for single-version rollouts. But it is important to remember that consumers don’t know how to use new products as well and so it makes sense to keep a product simple to help consumer learn about its benefits first and then let their experience with product use guide the introduction of additional features.
Market Variability. If taste differences in the market are small, then undifferentiated marketing is appropriate.
Competitor’s Marketing Strategies. Selecting a coverage strategy is not done in a vacuum. When the market is already served by competitor using a segmentation strategy, undifferentiated marketing is less likely to be successful. However, competitors using undifferentiated strategies may be vulnerable to a well-planned and executed differentiation strategy.
Product
Variability
Product’s Stage
in the Product Life Cycle
Competitors’
Marketing Strategies

17. Step 3. Positioning for Competitive Advantage
Product’s Position - the place the product occupies in consumers’ minds relative to competing products; i.e. Volvo positions on “safety”.
Marketers must:
Plan positions to give products the greatest advantage
Develop marketing mixes to create planned positions

18. Differentiation and Positioning
Identifying Possible Value Differences and Competitive Advantages
Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices

19. Differentiation and Positioning
Choosing the Right Competitive Advantage
Difference to promote should be:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable

20. Selecting the Right Competitive Advantages
Promoting Differences
This CTR relates to the material on pp
Discussion Note: The key to selecting the right competitive advantage is to develop a unique selling proposition (USP) for the product and stick to it.
Selecting the Right Competitive Advantages
Important
Profitable
Distinctive
Selecting the Right Competitive Advantage
Differences selected to promote competitive advantage should satisfy the following criteria:
Important. The difference must deliver a highly valued benefit to target buyers.
Distinctive. Competitors do not offer the difference, or the company offers the difference in a more distinctive way.
Superior. The difference should be superior to other ways that customers might obtain the same benefit.
Communicable. The difference is communicable and visible to buyers.
Preemptive. Competitors cannot easily copy the difference. This may be a result of innovative technology, production economies, distribution economies, and/or proprietary rights.
Affordable. Buyers in the target market must be able to pay for the difference.
Profitable. The difference must be profitable for the company to offer.
Criteria
for
Determining
Which
Differences to
Promote
Affordable
Superior
Communicable
Preemptive

21. Differentiation and Positioning
Selecting an Overall Positioning Strategy
Value proposition is the full mix of benefits upon which a brand is positioned

22. Differentiation and Positioning
Selecting an Overall Positioning Strategy
MORE FOR MORE
MORE FOR SAME
SAME FOR LESS
LESS FOR MUCH LESS
MORE FOR LESS

23. Steps to Choosing and Implementing a Positioning Strategy
Step 1. Identifying a set of possible competitive advantages: Competitive Differentiation.
Step 2. Selecting the right competitive advantage.
Step 3. Effectively communicating and delivering the chosen position to the market.