2. Market Segmentation and Product Positioning Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter 15

3. 15-3 Selection of the appropriate target market is paramount to developing successful marketing programs Market segmentation is based on the idea that a single product usually will not appeal to all consumers Introduction

4. 15-4 Market segmentation is the process of dividing a market into groups of similar consumers and selecting the most appropriate group(s) of individuals for the firm to serve Five tasks in the process of market segmentation Introduction cont.

5. 15-5 Analyze Consumer-Product Relationships Entails analysis of the affect and cognition, behavior, and environments involved in the purchase/consumption process for the particular product Three general approaches –Brainstorm the product concept

6. 15-6 Analyze Consumer-Product Relationships cont. –Focus groups and other types of primary research –Secondary research Considerable information is available for analyzing various markets for many established product categories For many products, the initial breakdown in markets is between the prestige and mass markets

7. 15-7 Investigate Segmentation Bases No simple way to determine the best bases for segmenting markets Benefits segmentation –Benefits people seek in consuming a given product is the basic reason for the existence of true market segments –Attempts to measure consumer value systems and consumers’ perceptions of various brands in a product class

8. 15-8 Investigate Segmentation Bases cont. Psychographic segmentation –Divides markets on differences in consumer lifestyles –Generally follows a post hoc model –Studies often include hundreds of questions and provide a tremendous amount of information about consumers –The validity of this segmentation is sometimes questioned

9. 15-9 Investigate Segmentation Bases cont. –Development of VALS TM

10. 15-10 Investigate Segmentation Bases cont. Person/Situation segmentation –Markets can often be divided on the basis of the usage situation in conjunction with individual differences of consumers

11. 15-11 Investigate Segmentation Bases cont. –Combines not only the persona and the situation, but also other important segmentation bases Benefits sought Product and attribute perceptions Marketplace behavior

12. 15-12 Investigate Segmentation Bases cont.

13. 15-13 Investigate Segmentation Bases cont. Geodemographic segmentation –Identifies specific households by focusing on local neighborhood geography to create classifications of actual, addressable, mappable neighborhoods where consumers live and shop

14. 15-14 Investigate Segmentation Bases cont. –PRIZM system Based on the assumptions that consumers in particular neighborhoods are similar in many respects and that the best prospects are those who actually use a product or other consumes like them

15. 15-15 Develop Product Positioning Positioning the product relative to competing products in the minds of consumers Key objective is to form a particular brand image in consumers’ minds Accomplished by developing a coherent strategy that may involve all of the marketing mix elements

16. 15-16 Develop Product Positioning cont. Positioning by attribute –Associate a product with an attribute, a product feature, or a customer feature –A new product can be positioned with respect to an attribute ignored by competitors

17. 15-17 Develop Product Positioning cont. –Sometimes a product can be positioned in terms of two or more attributes simultaneously –The price/quality attribute dimension is commonly used for positioning products as well as stores

18. 15-18 Develop Product Positioning cont. Positioning by use or application –Products can have multiple positioning strategies, although increasing the number involves difficulties and risks Positioning by product user Positioning by product class

19. 15-19 Develop Product Positioning cont. Positioning by competitors –The major purpose is to convince consumers that a brand is better than the market leader on important attributes Positioning maps –A visual depiction of consumers’ perceptions of competitive products, brands, or models

20. 15-20 Develop Product Positioning cont. –Constructed by surveying consumers about various product attributes and developing dimension and a graph indicating the relative position of competitors –Can give marketers a sense of how their brands are perceived by consumers relative to competitors and suggest positioning strategies

21. 15-21 Develop Product Positioning cont.

22. 15-22 Select Segmentation Strategy Four basic segmentation strategy alternatives –May decide not to enter the market –May decide not to segment but to be a mass marketer –May decide to market to only one segment –May decide to market more than one segment and design a separate marketing strategy for each

23. 15-23 Select Segmentation Strategy cont. Marketers must have some criteria on which to base segmentation strategy decisions –Must be able to measure the segment’s size and characteristics –Must be large enough to be meaningful –Must be marketable

24. 15-24 Design Marketing Mix Strategy Selecting the target market and designing the marketing mix go hand-in-hand Many marketing mix decisions are made in conjunction with target market selections

25. 15-25 Summary Market segment was defined Market segmentation was analyzed in terms of interrelated tasks Noted that market segmentation is a cornerstone of sound marketing strategy development