Marketting
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GMUSpring2019MKTG303-010andMKTG303-011Chapter92019-03-01.pptxChapter 9 Segmentation, Targeting, and Positioning
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Learning Objectives
Learning Objective 9.1 Outline the different methods of segmenting a market.
Learning Objective 9.2 Describe how firms determine whether a segment is attractive and therefore worth pursuing.
Learning Objective 9.3 Articulate the difference among targeting strategies: undifferentiated, differentiated, concentrated, or micromarketing.
Learning Objective 9.4 Determine the value proposition.
Learning Objective 9.5 Define positioning, and describe how firms do it.
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LO9-1 Outline the different methods of segmenting a market.
LO9-2 Describe how firms determine whether a segment is attractive and therefore worth pursuing.
LO9-3 Articulate the differences among targeting strategies: undifferentiated, differentiated, concentrated, or micromarketing.
LO9-4 Determine the value proposition.
LO9-5 Define positioning and describe how firms do it.
These are the learning objectives guiding the chapter and will be explored in more detail in the following slides.
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ABC Family (Freeform)
Freeform
© ABC Family/Courtesy Everett Collection
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ABC Family is available in approximately 94 million households. But its name signals its appeal to parents, and that’s never a recipe for appealing successfully to kids.
Ask students for their opinion on how should the network overcome this problem.
Website: http://freeform.go.com/
Segmentation, Targeting, Positioning Process
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Previous chapters addressed how to plan marketing strategy; this chapter focuses on how firms use that strategy to identify the target markets they will serve.
Step 1: Establish Overall Strategy or Objectives
Derived from mission and current state
Consistent with SWOT
Courtesy of Borticelli
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The first step in the segmentation process is to articulate the vision or objectives of the company’s marketing strategy clearly. Remind students that any strategy must be consistent with the firm’s mission statement and be based on the current assessments from SWOT analyses
Step 2: Segmentation Methods
| Segmentation Method | Sample Segments |
| Geographic | Continent: North America, Asia, Europe, Africa Within the United States: Pacific, mountain, central, south, mid-Atlantic, northeast |
| Demographic | Age, gender, income, education |
| Psychographic | Lifestyle, self-concept, self-values |
| Benefits | Convenience, economy, prestige |
| Behavioral | Occasion, loyalty |
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The second step in the segmentation process is to use a particular method or combination of methods to segment the market.
Group activity: Divide the class into groups. Have them choose either a manufacturer or national retailer. Have them describe their segmentation method and then evaluate whether or not it is the best segmentation method for that firm.
Market could be grouped by
Country
Region
Northeast, Southeast
Areas within region
State, city, neighborhoods, zip codes
Most useful for companies whose products satisfy needs that vary by region
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Geographic segmentation organizes customers into groups on the basis of where they live. Geographic information software (GIS) aids in such segmentation. Many firms use regional brands of popular products. When Dunkin’ Donuts introduced soup to its menu, it included New England Clam Chowder which appealed to northeastern consumers, but franchisees in Texas objected to this choice. Understanding regional preferences can define a company’s success—or failure.
Ask students: How can firms successfully change a national brand into a international brand? This will tie into the previous chapter on global marketing—should firm adapt to local tastes?
Most common segmentation strategy
Easy to identify
Easy to reach
U.S. Census Bureau
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Demographic segmentation groups consumers according to easily measured, objective characteristics such as age, gender, income, and education. These variables represent the most common means to define segments because they are easy to identify, and demographically segmented markets are easy to reach. This web link is to the U.S. Census Bureau. They provide one of the most important marketing research tools: Census data, which offer a rich, free source of information about various consumers that, suggests segmentation possibilities. On the Census Bureau website, walk students through the information available about the zip code in which your university is located.
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Psychographic segmentation is the one that delves into how consumers actually describe themselves. Usually marketers determine (through demographics, buying patterns, or usage) into which segment an individual consumer falls. Not just businesses segment their customers; segmentation also helps organizations that counsel drug addicts or other at-risk groups.
Group Activity: Divide students into groups. Have each choose a product/service they like. Have them describe users of that product/service in terms of psychographics.
VALS Framework
Jump to Appendix 2 long image description
VALS
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The most widely used tool to support such psychographic segmentation efforts is owned and operated by Strategic Business Insights (SBI). Called VALS™, it examines the intersection of psychology, demographics, and lifestyles. Consumers can be classified into eight segments based on their answers to the questionnaire Click on the VALS hyperlink and take the survey as a class.
Group activity: Have students complete the VALS survey individually, and then bring their completed survey to class.
Ask students: Why might you fall into similar categories? Who fell into different categories? For example, few business students likely belong to the Believers category, but art majors very well may.
State Farm Will No Longer Insure Residents of Hurricane Battered Mississippi
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Ask students when geographic segmentation is not legal or ethical. You can play this video about State Farm refusing to insure Mississippi residents.
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Dividing the market into segments whose needs and wants are best satisfied by the product benefits can be a very powerful tool.
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Benefit segmentation groups consumers on the basis of the benefits they derive from products or services. Group activity: Have students identify products that provide different types of benefits. How else might these products be segmented?
This activity provides a good opportunity to remind students that products exist in multiple segments, just as consumers do.
Different motives lead different consumers to purchase the same product.
Occasion segmentation
Based on when a product or service is purchased or consumed
Clothing, snack foods
Loyalty segmentation
Hotels, airlines, restaurants (Starbucks)
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Behavioral segmentation based on when a product or service is purchased or consumed is called occasion segmentation. Men’s Wearhouse uses this type of segmentation to develop its merchandise selection and its promotions. Sometimes men need a suit for their everyday work, but other suits are expressly for special occasions such as a prom or a wedding. Snack food companies such as Frito-Lay also make and promote snacks for various occasions—individual servings of potato chips for a snack on the run but 16-ounce bags for parties.
Firms have long known that it pays to retain loyal customers. Loyal customers are those who feel so strongly that the firm can meet their relevant needs best that any competitors are virtually excluded from their consideration; that is, these customers buy almost exclusively from the firm. Firms encourage loyalty in various ways, such as airline mileage or hotel point reward programs.
Ask students: Are you a loyal buyer of any single product, to the extent that you refuse to purchase a substitute?
Students may refer to soft drinks, but true brand loyalty is extremely rare.
PROGRESS CHECK (1 of 2)
What are the various segmentation methods?
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Geographic, Demographic, Psychographic, Geodemographic, Benefits, and Behavioral
Step 3: Evaluate Segment Attractiveness
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Marketers first must determine whether the segment is worth pursuing, using several descriptive criteria: Is the segment identifiable, substantial, reachable, responsive, and profitable?
Identifiable
Who is in their market?
Are the segments unique?
Does each segment require a unique marketing mix?
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Firms must be able to identify who is within their market to be able to design products or services to meet their needs. It is equally important to ensure that the segments are distinct from one another, because too much overlap between segments means that distinct marketing strategies aren’t necessary to meet segment members’ needs.
Ask students: When would these women all be in the same segment? When would they be in different segments?
These women would appear in the same segment if the segmentation variable were gender but in individual segments based on race or lifestyle. They also may be in different geographic or income segments, for example.
Substantial
Too small and it is insignificant
Too big and it might need its own store
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Just because a firm can find a market does not necessarily mean it represents a good market. If a market is too small or its buying power insignificant, it won’t generate sufficient profits or be able to support the marketing mix activities. But size in terms of number of people is not the only consideration; despite its small size, the market for the original Hummer was incredibly profitable, and therefore was substantial
Reachable
Know the product exists
Understand what it can do
Recognize how to buy
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The best product or service cannot have any impact, no matter how identifiable or substantial the target market is, if that market cannot be reached (or accessed) through persuasive communications and product distribution. The Internet has enabled more people to be reached more easily, but various areas around the world simply cannot be served because they aren’t accessible to marketing messages or because there isn’t adequate distribution.
Ask students: What types of media influence the way they shop?
The answer may lead to an interesting discussion about how difficult it is to reach Generation Y customers either because they don’t participate in traditional media such as newspapers or because they are skeptical about being influenced by commercial messages.
Responsive
Customers must:
React positively to firm’s offering
Move toward the firm’s products/services
Accept the firm’s value proposition
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Group activity: Nike is very successful at selling sports-related goods. Would consumers accept personal care products from Nike? Why or why not? Develop a list of potential products for Nike.
Ask students: Are any of the following acceptable: cologne, deodorant, toothpaste, or hair gel? Why or why not?
What about Nike towels, sheets, or pajamas?
What differences can you identify between these two types of product categories?
Students are likely to say they will not understand the value proposition and the company’s expertise.
Yet other students might say that they would purchase personal care products from Nike because Nike offers superior products.
Profitable
| Homeowners | Businesses | |
| Segment size | 75,000 | 1,000 |
| Segment adoption percentage | 1% | 20% |
| Purchase behavior Purchase price Frequency of purchase | $100 12 times | $500 20 times |
| Profit margin percentage | 60% | 80% |
| Fixed costs | $400,000 | $1,000,000 |
| Segment profit | $140,000 | $600,000 |
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A hot segment today may not last long enough to make it worth investment. Many firms are investigating when and how much to invest in the Millennial/GenY generational cohort. Firms in financial services and housing understand that it provides a new potential market, but the debt levels this segment carries makes it difficult to target effectively.
To illustrate how a business might determine a segment’s profitability, consider Camillo’s start-up lawn service. He is trying to determine whether to target homeowners or businesses in a small midwestern town. The slide estimates the profitability of the two segments.
Profitable Segments
Segment = Children under 15
Is this segment profitable?
Segment size = 60 million (<15 yrs)
Segmentation Adoption Percentage = 35%
Purchase Behavior = $500 x 1 time purchase
Profit margin % = 10%
Fixed Cost = $50M
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Children under 15 represent a very profitable market segment, as this example illustrates.
Step 4: Select a Target Market
Condé Nast has more than 20 niche magazines focused on different aspects of life.
©M Hruby
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The fourth step in the STP process is to select a target market. The key factor likely to affect this decision is the marketer’s ability to pursue such an opportunity or target segment. Hallmark looks at geographic segmentation when building new stores. They also use benefit segmentation for their online cards. In general, a company matches their competencies with the attractiveness of target markets.
Segmentation Strategy
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When everyone might be considered a potential user of its product, a firm uses an undifferentiated targeting strategy (mass marketing). Firms using a differentiated targeting strategy target several market segments with a different offering for each. When an organization selects a single, primary target market and focuses all its energies on providing a product to fit that market’s needs, it is using a concentrated targeting strategy. When a firm tailors a product or service to suit an individual customer’s wants or needs, it is undertaking an extreme form of segmentation called micromarketing or one-to-one marketing.
Ask students: What is an example of a mass market product? Answer: There are very few mass market products. Even commodity goods such as flour are now differentiated.
Ask students: What are examples of products that use differentiated, concentrated, and micromarketing segmentation strategies?
Differentiated = Coca Cola
Concentrated = Helena Rubenstein or Clinique
Micromarketing = Financial Services Providers
Step 5: Develop Positioning Strategy
Positioning Methods
Value
Salient Attributes
Symbol
Competition
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Positioning strategies generally focus on either how the product or service affects the consumer or how it is better than competitors’ products and services. When positioning against competitors, the objective is to play up how the brand being marketed provides the desired benefits better than do those of competitors. Firms thus position their products and services according to value, salient attributes, and symbols, and against competition.
Circles for a Successful Value Proposition No Overlap with Competition
Jump to Appendix 3 long image description
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Ask students: How is this positioning? They should say salient attributes and competition.
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Circles for a Successful Value Proposition Determining the Value Proposition
Jump to Appendix 4 long image description
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Ask students – how is this positioning? They should say salient attributes and competition.
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Positioning Steps
Determine consumers’ perceptions and evaluations in relation to competitors’.
Identify the market’s ideal points and size.
Identify competitors’ positions.
Determine consumer preferences
Select the position.
Monitor the positioning strategy.
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This slide provides the steps necessary to develop the perceptual maps on the next slides. Switch back and forth on these slides to explain the perceptual maps.
Perceptual Maps (1 of 5)
Jump to Appendix 5 long image description
Price
Style
Low
High
Traditional
Contemporary
BMW
Toyota
Buick
Cadillac
Kia
Ford
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Perceptual Maps (2 of 5)
Jump to Appendix 6 long image description
Price
Style
Low
High
Traditional
Contemporary
Target Market
Size indicated
By size of circle
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Perceptual Maps (3 of 5)
Jump to Appendix 7 long image description
Price
Style
Low
High
Traditional
Contemporary
Target Market
Size indicated
By size of circle
BMW
Toyota
Buick
Cadillac
Kia
Ford
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Perceptual Maps (4 of 5)
Jump to Appendix 8 long image description
Price
Style
Low
High
Traditional
Contemporary
Target Market
Size indicated
By size of circle
BMW
Toyota
Buick
Cadillac
Kia
Ford
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Perceptual Maps (5 of 5)
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This perceptual map is for Gatorade, which was seeking a positioning of healthy and sweet taste.
PROGRESS CHECK (2 of 2)
What is a perceptual map?
Identify the six positioning steps.
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A perceptual map displays, in two or more dimensions, the position of products or brands in the consumer’s mind.
Determine consumers’ perceptions and evaluations of the product or service in relation to competitors’, identify competitors’ positions, determine consumer preferences, select the position, monitor the positioning strategy
Glossary
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Glossary-1
Benefit segmentation groups consumers on the basis of the benefits they derive from products or services.
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Benefit segmentation groups consumers on the basis of the benefits they derive from products or services.
Glossary-2
Demographic segmentation groups consumers according to easily measured, objective characteristics such as age, gender, income, and education.
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Demographic segmentation groups consumers according to easily measured, objective characteristics such as age, gender, income, and education.
Glossary-3
Geodemographic segmentation uses a combination of geographic, demographic, and lifestyle characteristics to classify consumers.
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Geodemographic segmentation uses a combination of geographic, demographic, and lifestyle characteristics to classify consumers.
Glossary-4
Geographic segmentation organizes customers into groups on the basis of where they live.
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Geographic segmentation organizes customers into groups on the basis of where they live.
Glossary-5
Behavioral segmentation divides customers into groups based on how they use the product or service.
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Behavioral segmentation divides customers into groups based on how they use the product or service.
Glossary-6
Psychographic segmentation, or psychographics, allows people to describe themselves using characteristics that help them choose how they occupy their time (behavior) and what underlying psychological reasons determine these choices.
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Psychographic segmentation, or psychographics, allows people to describe themselves using characteristics that help them choose how they occupy their time (behavior) and what underlying psychological reasons determine these choices.
Glossary-7
The Value and Lifestyle Survey (VALS) is a psychographic tool that classifies consumers into eight categories based on their answers to a questionnaire.
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The Value and Lifestyle Survey (VALS) is a psychographic tool that classifies consumers into eight categories based on their answers to a questionnaire.
Image Descriptions Appendix
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Appendix 1 Segmentation, Targeting, Positioning Process
Segmentation
Step 1 Establish strategy or objectives.
Step 2 Use segmentation methods.
Targeting
Step 3 Evaluate segment attractiveness.
Step 4 Select target market.
Positioning
Step 5 Identify and develop positioning strategy.
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Appendix 2 VALS Framework
Innovators have high resources and high innovation, while Survivors have low resources and low innovation. The three primary motivations are Ideals, Achievement and Self-Expression. Those who are motivated by Ideals are Thinkers and Believers. Those who are motivated by Achievement are Achievers and Strivers. Those who are motivated by Self-Expression are Experiencers and Makers.
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Appendix 3 Circles for a Successful Value Proposition No Overlap with Competition
Three circles are shown: competitive offering, customer needs and wants, and company offering. The customer needs and wants and company offering circles overlap. This overlap is designated the value proposition.
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Appendix 4 Circles for a Successful Value Proposition Determining the Value Proposition
Three overlapping circles are shown: competitor benefits, customer needs, and firm benefits. Between them, seven numbers are marked at various points.
1: Firm’s value proposition. Overlaps between the customer needs and firm benefits circles.
2: Customer’s unmet needs (marketing opportunity). Falls within the customer needs circle.
3: Firm’s benefits that are not required - educate customer or redesign product. Falls within the firm benefits circle.
4: Key benefits that both the firm and competitor provide that customers require - carefully monitor performance relative to competitor on these benefits. Overlaps with all three circles.
5: Competitor’s value proposition - monitor and imitate if needed. Overlaps with competitor benefits and customer needs.
6: Benefits both firms provide that customers do not appear to need. Overlaps with competitor benefits and firm benefits.
7: Competitor benefits that are not required. Falls within the competitor benefits circle.
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Appendix 5 Perceptual Maps (1 of 5)
A square is divided into four equal quadrants. The vertical axis, style is labeled contemporary at the top and traditional at the bottom. The horizontal axis, price, is labeled low on the left and high on the right. Six cars makers are marked on the perceptual map: BMW (contemporary, high price). Cadillac (contemporary, high price). Buick (mid-contemporary, mid-low price). Toyota (traditional, mid-price). Ford (traditional, mid-low price). Kia (traditional, low price).
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Appendix 6 Perceptual Maps (2 of 5)
A square is divided into four equal quadrants. The vertical axis, style is labeled contemporary at the top and traditional at the bottom. The horizontal axis, price, is labeled low on the left and high on the right. Three circles are marked on the map. They represent target market size, which in turn is represented by the size of the circle.
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Appendix 7 Perceptual Maps (3 of 5)
A square is divided into four equal quadrants. The vertical axis, style is labeled contemporary at the top and traditional at the bottom. The horizontal axis, price, is labeled low on the left and high on the right. Three circles are marked on the map. They represent target market size, which in turn is represented by the size of the circle. The largest target market is Buick. BMW is the second largest, and sits just at the edge of a target market circle. Toyota and Ford is the third largest target market circle, with Ford sitting just at the edge. Cadillac sits just outside of the BMW target market. Kia has no target market indicated.
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Appendix 8 Perceptual Maps (4 of 5) Appendix
A square is divided into four equal quadrants. The vertical axis, style is labeled contemporary at the top and traditional at the bottom. The horizontal axis, price, is labeled low on the left and high on the right. Three circles are marked on the map. They represent target market size, which in turn is represented by the size of the circle. The largest target market is Buick. BMW is the second largest, and sits just at the edge of a target market circle. Toyota and Ford is the third largest target market circle, with Ford sitting just at the edge. Cadillac sits just outside of the BMW target market. Kia has no target market indicated.
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Appendix 9 Perceptual Maps (5 of 5)
Drinks are charted based on their sweet taste, if they are healthy, their light taste, and if they are less natural. Coke and Pepsi are in the sweet taste, less natural quadrant. Propel Fitness Water and Bottled Water are in the light taste, healthy quadrant. Powerade is in the sweet taste, healthy quadrant. Gatorade is introduced as healthy and having a light taste. By repositioning itself, Gatorade is now shown as healthy and having a sweet taste.
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Marketing Chapter 9
The End
The End
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