1. SEGMENTATION, TARGETING, AND POSITIONING
Product positioning
strategy
Bases for segmentation
Positioning
Targeting
Repositioning

2. Text, Exhibit 9.1: The Segmentation, Targeting, and Positioning Process
Establish strategy or objectives
Evaluate segment attractiveness
Identify and develop positioning strategy
Use segmentation methods
Select target market
SEGMENTATION
TARGETING
POSITIONING

3. SEGMENTATION, TARGETING, AND POSITIONING
IDENTIFYING
MEANINGFULLY
DIFFERENT GROUPS
OF CUSTOMERS
TARGETING
SELECTING WHICH
SEGMENT(S) TO
SERVE
PROUDCT
PRICE
POSITIONING
IMPLEMENTING
CHOSEN IMAGE AND
APPEAL TO CHOSEN
SEGMENT
PROMOTION
DISTRIBUTION

4. LEARNING OBJECTIVES
Identify different unique needs and expectations of different customer groups
Identify tradeoffs among strategies of serving different segments
Identify methods for selecting and targeting customer groups
Identify bases for implementing target selection through positioning

5. DEFINITIONS Segmentation:
“Aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.”
“The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.”
Although not all these consumers are completely alike, they share relatively similar needs and wants.
Marketing action involves: efforts, resources, and decisions--product, distribution, promotion,
and price.

6. SEGMENTS--EXAMPLES (1)
Air Travel
Business/Executive: Inflexible; relatively price insensitive (Small number of people, but travel often)
Leisure Traveler/Student: Relatively flexible; very price sensitive (other methods of travel--e.g., bus, car, train--are feasible; travel may not be essential) (Very large segment)
Comfort Travelers: Comfort (e.g., space, food) important; willing to pay (Small segment)

7. SPECIFYING SEGMENTS
Variables involve descriptors such as age, gender, income, price sensitivity, brand loyalty, geographic location, usage rate, and involvement
Levels involve the different categories within each variable. For example, for age, levels might be 0-20, 21-30, 31-40, 41-55, 56-65, and 66+; for gender, male, female; for geographic location, Northeast, Southeast, Midwest, Southwest, West or urban, rural.
Segments are obtained by “crossing” the combinations—e.g., crossing gender (male, female) with brand loyalty (high, medium, low) gives six combinations (e.g., male, high; female, high; … male, medium; … female, low).

8. BASES FOR SEGMENTATION
Geographic (technically part of demographics)
Demographic
Psychographic
Benefit Desired
Behavioral
Loyalty
Scanner data based approaches

9. GEOGRAPHIC (technically a case of demographic segmentation)
Regional differences
Climate and physical environment
Tastes
Campbell’s Soup
Lifestyle and values
Urban vs. rural areas
Micro-segmentation
Adaptation of retail store assortment to the specific area based on:
Residential demographics
Other characteristics (e.g., vicinity of a beach)
May be largely data-driven based on past sales (scanner data)

10. DEMOGRAPHICS Age Gender
Income—not generally a reliable predictor (willingness to spend is more useful)
Income ≠ willingness to spend!
Ethnicity
Family lifecycle stage

11. INCOME AND PRICE SENSITIVITY
Income and wealth are NOT reliable predictors of price sensitivity.
In order to be able to buy certain high priced items, a certain level of income or wealth is a necessary, but not sufficient, condition.
A book titled The Millionaire Next Door provides strong evidence that many wealthy people have developed wealth through frugality rather than high incomes.
Wealthier individuals will NOT necessarily choose higher priced options.
Therefore, segmenting on price sensitivity rather than income or wealth makes more sense.
Important distinction!

12. SOME DEMOGRAPHIC TARGETS
The George Foreman Grill—infomercial initially featured footage of his boxing career, which was not of interest to much of his target market (women). Instead, a subsequent version featured pictures with his family.
“Free Style Cruising” at Norwegian Cruise Lines: Do what you want when you want. Cruises had historically been more regimented, and catered in large part to “the newly wed and the nearly dead”—honeymooning couples and senior citizens. In attempting to appeal to families, the experience was made more flexible.

13. THE WARC DATABASE: DEMOGRAPHICS AND CONSUMER BEHAVIOR

14. PSYCHOGRAPHICS Personality Motives Lifestyle Very difficult to measure
Limited empirical support
Motives
Lifestyle
Usually more practical than personality

15. BEHAVIORAL
Usage rate
Loyalty
Other scanner data based methods

16. USAGE RATE
“80/20” rule—20% of consumers may account for 80% of consumption (in many product categories)
Note that larger consumption rate segments may be subject to heavy competition
Reasons for targeting smaller segments
Reduced competition
Opportunity for growth

17. DYNAMIC PRICING
The effective price may be set based on the past behavior of the customer
Customers who have not shopped at Staples or Staples.com recently may receive a coupon
Amazon.com may base the price offered on previous purchases. New customers may receive lower price offers.

18. BENEFITS SOUGHT Based on
Differences in arbitrary tastes (e.g., cola vs. non-cola drink)
Tradeoffs (e.g., taste vs. calories)
Usage situation (e.g., coffee for camping (instant) vs. higher quality for home brewing)

19. TARGETING: SELECTING SEGMENT(S) AND SPECIALIZING
“You can’t be all things to all people” ---> choose one or more groups.
Focus narrows scope of competition, but demands are greater.

20. SOME CRITERIA IN EVALUATING SEGMENT ATTRACTIVENESS
Identifiability (and distinctiveness from other segments)
Reachability
Substantiality (segment size)—note that a large segment may attract heavy competition, however.
Profitability
Responsiveness

21. APPROACHES TO TARGETING
Undifferentiated: Offering sold as a commodity
Differentiated: Different offerings provided to several different segments (e.g., auto manufacturers make different cars and trucks aimed at different customer groups)
Concentrated: Firm focuses on serving one segment
Micro-marketing (one-to-one): Unique offerings to each customer

22. Text, Exhibit 9.8: The Value Proposition
Competitor offerings
Customer needs and wants
Firm
offerings

23. SEGMENTATION, TARGETING, AND POSITIONING
PROUDCT
PRICE
PREMIUM
PREMIUM
POSITIONING
IMPLEMENTING
CHOSEN IMAGE AND
APPEAL TO CHOSEN
SEGMENT
LOW PRICE
BASIC
VALUE
DURABLE
DISTRIBUTION
PROMOTION
INTENSIVE
PRESTIGE
SELECTIVE
FUN
EXCLUSIVE
POWERFUL

24. POSITIONING STRATEGY The value proposition—some possible benefits
Unique product/service
Price
As low price benefit
As good value compared to competitors
Quality
Prestige
Customer values (e.g., cruelty free foods and personal care items)
Customer communication and education needed