Chapter 7- slide 1

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Chapter Seven
Customer-Driven Marketing Strategy:
Segmentation, Targeting &
Positioning
Chapter 7- slide 2
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Learning Objectives
After studying this chapter, you should be able to:
1. Define the three steps of target marketing: market
segmentation, target marketing, and market positioning
2. List and discuss the major bases for segmenting
consumer and business markets
3. Explain how companies identify attractive consumer
and business markets
4. Discuss how companies position their products for
maximum competitive advantage in the marketplace
Chapter 7- slide 3
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Chapter Concepts:
1. Market Segmentation
2. Marketing Target
3. Differentiation and Positioning
4. Positioning for Competitive Advantage
Chapter 7- slide 4
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Market Segmentation
Market segmentation is the process that
companies use to divide large heterogeneous
markets into small markets that can be reached
more efficiently and effectively with products
and services that match their unique needs.
Chapter 7- slide 5
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Market Segmentation
Segmenting consumer markets
Segmenting business markets
Segmenting international markets
Requirements for effective segmentation
Chapter 7- slide 6
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Market Segmentation
Segmenting Consumer Markets
Geographic segmentation
Demographic segmentation
Psychographic segmentation
Behavioral segmentation
Chapter 7- slide 7
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Market Segmentation
Geographic segmentation
Geographic segmentation divides the market
into different geographical units such as
nations, regions, states, counties, or cities.
Chapter 7- slide 8
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Market Segmentation
Demographic segmentation
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.
Most popular segmentation method because
consumer needs, wants, and usage often vary
closely with demographic variables and are
easier to measure than other types of
variables.

Chapter 7- slide 9
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Market Segmentation
Demographic segmentation
Occupation segmentation
Different occupations could mean different buying power
eg. Doctors earn more than nurses
Different occupations could mean different needs for
different types of products
eg. Office workers need to buy work clothes, while blue-
collared workers usually attired differently

Chapter 7- slide 10
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Market Segmentation
Demographic 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.
Eg: Age: 18-24, 25-34, 35-44, 45+

Chapter 7- slide 11
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Life Cycle Segmentation
Bachelor stage young, single
people;
Young married couples early
married years before the arrival of
children;
Full nest I young married couples
with children;
Full nest II older married couples
with dependent children;
Empty nest older married couples
with no dependent children; and
Older single people - still working or
retired
Chapter 7- slide 12
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Market Segmentation
Demographic segmentation
Gender segmentation divides the market
based on sex (male or female).

Income segmentation divides the market into
affluent or low-income consumers.
Chapter 7- slide 13
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Market Segmentation
Psychographic segmentation
Psychographic segmentation divides buyers
into different groups based on social class,
lifestyle, or personality traits.
Example:
Social Class Upper, upper middle, lower middle, etc.

Lifestyle Activities (golf, travel); interests (politics, art);
Opinions (conservation, capitalism)

Personality Ambitious, self-confident, aggressive, introverted,
extroverted, sociable
Chapter 7- slide 14
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Market Segmentation
Behavioral segmentation
Behavioral segmentation divides buyers into
groups based on their knowledge, attitudes,
uses, or responses to a product.
Occasion
Benefits sought
User status
Usage rate
Loyalty status
Chapter 7- slide 15
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Market Segmentation
Behavioral segmentation
Occasion segmentation divides buyers into
groups according to occasions when they get
the idea to buy, actually make purchases, or
respond to a product.
Eg: consumers
buy special items
for occasions like
birthdays
Chapter 7- slide 16
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Market Segmentation
Behavioral segmentation
Benefit segmentation requires finding the
major benefits people look for in the product
class, the kinds of people who look for each
benefit, and the major brands that deliver each
benefit.
Eg: Quality, Service, Economy, Convenience,
Speed
Chapter 7- slide 17
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Market Segmentation
Behavioral segmentation
User status divides buyers into ex-users,
potential users, first-time users, and regular
users of a product.
Usage rate divides buyers into light, medium,
and heavy product users.
Loyalty status divides buyers into groups
according to their degree of loyalty.


Eg: Completely loyal, somewhat loyal (2-3
brands), Not loyal
Chapter 7- slide 18
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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.
Chapter 7- slide 19
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Eg: To segment attitude towards Internet usage & online
purchasing among the Malaysian urban adult population,
AC Nielsen uses multivariable segmentation based on
ownership of PCs, mobile phones, PDAs, satellite TV
subscription to find 4 segments
E-Savvy
Mainly Chinese, young, high-income households
The Mobiles
Malay & Chinese, 20s & 30s, mid-income households
Homebodies
15 to 20, mid-income households
Not interested
Mainly Malays, 50s

Chapter 7- slide 20
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What variables can a bank use to identify wealthy
individuals which it wants to target for a new investment
scheme?
Chapter 7- slide 21
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Market Segmentation
Segmenting Business Markets
Business can be segmented by:
Geographics
Location
Demographics
Industry, company size
Customer-operating
characteristics
Technology, user status, service
Chapter 7- slide 22
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Market Segmentation
Segmenting Business Markets
Business can be segmented by:
Purchasing approaches
purchasing function-organization, power structure, relationship,
policy, purchasing criteria
Situational factors
Urgency, application, order size
Personal characteristics
Buyer-seller similarity, attitude towards risk, loyalty

Chapter 7- slide 23
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Market Segmentation
Segmenting International Markets
Geographic location
Region or nations
Economic factors
Population income levels, economic development
Political and legal factors
Type and stability of government, receptivity to foreign firms,
monetary regulations, bureaucracy
Cultural factors
Languages, religions, values and attitudes, customs, behavior
Chapter 7- slide 24
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Intermarket segmentation divides consumers
into groups with similar needs and buying
behaviors even though they are located in
different countries.
Examples:
IKEA targets global middle class
Mercedes-Benz targets worldwide well-to-do
MTV, Sony, Adidas, Coca-cola worldwide
teenagers

Adidas Impossible is Nothing
Chapter 7- slide 25
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Requirements for Effective Segmentation
Measurable: The size, purchasing power, and
profiles of the segments can be measured.
Accessible: The market can be effectively
reached and served
Substantial: The markets are large and profitable
enough to serve
Differentiable: The markets are conceptually
distinguishable and respond differently to
marketing mix elements and programs
Actionable: Effective programs can be designed
for attracting and serving the segments

Chapter 7- slide 26
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Few companies
target left
handers. Why?
Chapter 7- slide 27
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Market Targeting
Evaluating Market Segments
Segment size and growth
Segment structural attractiveness
Company objectives and resources

Chapter 7- slide 28
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Evaluating Market Segments
Segment size and growth:
Smaller versus larger segments
Growth potential

Segment structural
attractiveness:
Competition
Substitute products
Power of buyers
Power of suppliers
Market Targeting

Company objectives and
resources:
Competitive advantage
Availability of resources
Consistent with
company objectives

Chapter 7- slide 29
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Selecting Target Market Segments
Market Targeting
Target market: the set of buyers who
share common needs or characteristics
that the company decides to serve
Chapter 7- slide 30
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Target Marketing Strategies
Market Targeting
Chapter 7- slide 31
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Target Marketing Strategies
Undifferentiated marketing targets the whole
market with one offer.
Mass marketing
Focuses on common needs rather than
whats different

Market Targeting
Chapter 7- slide 32
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Target Marketing Strategies
Differentiated marketing targets several
different market segments and designs
separate offers for each.
Goal is to achieve higher sales and stronger
position
More expensive than undifferentiated
marketing
Market Targeting
Chapter 7- slide 33
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Differentiated marketing Colgate targets
different market segments with different
types of toothpaste.
Chapter 7- slide 34
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Target Marketing Strategies
Concentrated marketing targets a small share
of a large market
Limited company resources
Knowledge of the market
More effective and efficient
Market Targeting
Chapter 7- slide 35
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Target Marketing Strategies
Micromarketing is the practice of tailoring
products and marketing programs to suit the
tastes of specific individuals and locations.
Local marketing
Individual marketing
Market Targeting
Chapter 7- slide 36
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Burger King introduce rendang burgers in
Singapore and Malaysia, where local
palates prefer spicy food.
Local marketing involves
tailoring brands and promotion to
the needs and wants of local
customer groups by cities,
neighborhoods or stores.
Benefits of local marketing
Increased marketing effectiveness in competitive markets
More customer-specific offerings
Challenges of local marketing:
Increased manufacturing and marketing costs
Less economy of scale
Logistics
Dilution of company image
Chapter 7- slide 37
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Individual marketing involves tailoring
products and marketing programs to the needs
and preferences of individual customers.
Also known as:
One-to-one marketing
Mass customization
Markets-of-one
marketing
Mass customization is the process through which
firms interact one-to-one with masses of customers
to design products and services tailor-made to
meet individual needs.
Chapter 7- slide 38
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Which Strategy is Best? Depends on:
Company resources
Limited resources concentrated marketing
Product variability
Uniform products undifferentiated marketing
Vary in design differentiation or concentrated marketing
Product life-cycle stage
Introduction undifferentiated marketing, Maturity - differentiated
marketing
Market variability
Same taste, amounts, reaction to 4P- Undifferentiated marketing
Competitors marketing strategies
Competitors using undifferentiated marketing - differentiated or
concentrated marketing.

Chapter 7- slide 39
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Market Targeting
Socially Responsible Target
Marketing
Benefits customers with
specific needs
Concern for vulnerable
segments
Children
Alcohol
Cigarettes
Chapter 7- slide 40
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Differentiation and Positioning
Product position is the way the product is
defined by consumers on important attributes
the place the product occupies in consumers
minds relative to competing products.


In the automobile industry how are brands positioned?
Volvo is positioned on safety
Mercedes is positioned on luxury
BMW is positioned on performance
Toyota Prius is positioned as a high tech solution
to energy shortage
Chapter 7- slide 41
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Positioning maps show consumer perceptions of
their brands versus competing products on important
buying dimensions.
Positioning map:
Large luxury SUVs
Chapter 7- slide 42
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Differentiation and Positioning
Choosing a Differentiation and Positioning
Strategy
Identifying a set of possible competitive
advantages to build a position
Choosing the right competitive advantages
Selecting an overall positioning strategy

Chapter 7- slide 43
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Differentiation and Positioning
Identifying Possible Competitive Advantage
Product differentiation
Service differentiation
Channels
People
Image
Chapter 7- slide 44
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Product differentiation takes place along a continuum.
Little variation: chicken, steel, and aspirin.
Highly differentiated: autos, clothing, and furniture.
Differentiated on features, performance, style, or
design.
Services differentiation
Speedy, convenient, or careful delivery
Installation
Channel differentiation: coverage, expertise, performance.
People differentiation
hiring and training better people than competitors.
Even when competing offers look the same, buyers may
perceive a difference based on company or brand image
differentiation


Chapter 7- slide 45
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Singapore Airlines may
charge a higher price, but
provides excellent services
product and service
differentiation.
Rick Hall
James Cridland
Nakedsky.org
juandazeng | Flickr.com
Chapter 7- slide 46
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Choosing the Right Competitive Advantages
A difference is worth establishing to the extent
that it satisfies the following criteria:
Important
Distinctive
Superior
Communicable
Preemptive
Affordable
Profitable
Differentiation and Positioning
Chapter 7- slide 47
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Important
The difference delivers a highly valued benefit to target buyers.
Distinctive
Competitors do not offer the difference, or the company can offer it in a
more distinctive way.
Superior
The difference is 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.
Affordable
Buyers can afford to pay for the difference.
Profitable
The company can introduce the difference profitably.
Chapter 7- slide 48
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Differentiation and Positioning
Selecting an Overall Positioning Strategy
Value proposition is the full mix of benefits
upon which a brand is positioned.
More for more
More for the same
Same for less
Less for much less
More for less
Chapter 7- slide 49
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Figure 7.7
Possible value
propositions
Chapter 7- slide 50
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Developing a Positioning Statement
To (target segment and need) our (brand) is
(concept) that (point of difference)

Chapter 7- slide 51
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Communication and Delivering the
Chosen Position
Once it has chosen a position, the company must take
strong steps to deliver and communicate the desired
position to target consumers.

If the company decides to build a position on better
quality and service, it must first deliver that position.
Designing the marketing mixproduct, price, place, and
promotioninvolves working out the tactical details of
the positioning strategy.
Chapter 7- slide 52
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Communication and Delivering the
Chosen Position
Establishing a position or changing one usually takes
a long time. In contrast, positions that have taken
years to build can quickly be lost.
Once a company has built the desired position, it
must take care to maintain it through consistent
performance and communication.
It must closely monitor and adapt the position over
time to match changes in consumer needs and
competitors strategies.