SEGMENTATION, MARKET

TARGETING AND BRAND

POSITIONING
Chapter-4
 LEARNING OBJECTIVES
 Define the major steps in designing a customer-driven marketing
strategy: market segmentation, targeting and positioning
 List and discuss the major bases for segmenting consumer
 Explain how companies identify attractive market segments and
choose a market-targeting strategy
 Discuss how companies differentiate and position their products for
maximum competitive advantage in the marketplace
CUSTOMER-DRIVEN MARKETING
STRATEGY
 MARKET SEGMENTATION

• A market segment consists of a group

of customers who share a similar set of
needs and wants. The marketer’s task
is to identify the appropriate number
and nature of market segments and
decide which one(s) to target.
• Dividing a market into smaller
segments with distinct needs,
characteristics, or behavior that might
require separate marketing strategies
or mixes.
MARKET SEGMENTATION
 MARKET SEGMENTATION

• We use two broad groups of variables to segment consumer markets.

• Some researchers define segments by looking at descriptive
characteristics—geographic, demographic, and psychographic—and
asking whether these segments exhibit different needs or product
responses.
• Other researchers define segments by looking at behavioral
considerations, such as consumer responses to benefits, usage
occasions, or brands, then seeing whether different characteristics are
associated with each consumer response segment.
SEGMENTING CONSUMER
MARKETS
 GEOGRAPHIC SEGMENTATION
• Geographic segmentation calls for dividing the market
into different geographical units, such as nations, regions,
states, counties, cities, or even neighborhoods.
• A company may decide to operate in one or a few
geographical areas or operate in all areas but pay
attention to geographical differences in needs and wants.
 DEMOGRAPHIC SEGMENTATION
• Demographic segmentation divides the market into
segments based on variables such as age, gender, family
size, family life cycle, income, occupation, education,
religion, race, generation, and nationality.
• Demographic factors are the most popular bases for
segmenting customer groups. One reason is that
consumer needs, wants, and usage rates often vary
closely with demographic variables.
• Another is that demographic variables are easier to
measure than most other types of variables.
 DEMOGRAPHIC SEGMENTATION
• Some companies use age and
life-cycle segmentation,
offering different products or
using different marketing
approaches for different age
and life-cycle groups.
• Age and life cycle can be
tricky variables. The target
market for some products may
be the psychologically young.
 DEMOGRAPHIC SEGMENTATION
• People in the same part of the life cycle may still differ in
their life stage. Life stage defines a person’s major
concern, such as going through a divorce, going into a
second marriage, taking care of an older parent, deciding
to cohabit with another person, buying a new home, and
so on. These life stages present opportunities for
marketers who can help people cope with the
accompanying decisions.
 DEMOGRAPHIC SEGMENTATION
• Gender segmentation is dividing a market into
different segments based on gender.
• Men and women have different attitudes and behave
differently, based partly on genetic makeup and
partly on socialization.
• Research shows that women have traditionally
tended to be more communal-minded and men more
self-expressive and goal-directed; women have
tended to take in more of the data in their immediate
environment and men to focus on the part of the
environment that helps them achieve a goal.
• Gender differences are shrinking in some other areas
as men and women expand their roles.
 DEMOGRAPHIC SEGMENTATION
• People in the same part of the life cycle may still differ in
their life stage.
• Life stage defines a person’s major concern, such as
going through a divorce, going into a second marriage,
taking care of an older parent, deciding to cohabit with
another person, buying a new home, and so on.
 DEMOGRAPHIC SEGMENTATION
• The marketers of products and services such as
automobiles, clothing, cosmetics, financial services, and
travel have long used income segmentation. Many
companies target affluent consumers with luxury goods
and convenience services.
 PSYCHOGRAPHIC
SEGMENTATION
• Psychographic segmentation divides buyers into
different segments based on social class, lifestyle, or
personality characteristics. People in the same
demographic group can have very different
psychographic characteristics.
 PSYCHOGRAPHIC
SEGMENTATION
• Consumers are inspired by one of three primary motivations:
Ideals, Achievement, and Self-expression.
• Those primarily motivated by ideals are guided by knowledge
and principles.
• Those motivated by achievement look for products and services
that demonstrate success to their peers.
• Consumers whose motivation is self-expression desire social or
physical activity, variety, and risk.
• Personality traits such as energy, self-confidence, intellectualism,
novelty seeking, innovativeness, impulsiveness, leadership, and
vanity—in conjunction with key demographics—determine an
individual’s resources. Different levels of resources enhance or
constrain a person’s expression of his or her primary motivation.
PSYCHOGRAPHIC
SEGMENTATION
 BEHAVIORAL SEGMENTATION
• Behavioral segmentation divides buyers into segments
based on their knowledge, attitudes, uses, or responses
to a product.
• Many marketers believe that behavior variables are the
best starting point for building market segments.
 BEHAVIORAL SEGMENTATION:
NEEDS AND BENEFITS
• Not everyone who buys a product has the same needs or
wants the same benefits from it. Needs-based or benefit-
based segmentation identifies distinct market segments
with clear marketing implications.
 BEHAVIORAL SEGMENTATION:
DECISION ROLES
• People play five roles in a buying decision: Initiator,
Influencer, Decider, Buyer, and User.
• Recognition of different buying roles and identification of
those who play these roles for a given product or service
are vital for effective marketing.
• While developing marketing plans and communication
strategies, companies need to identify and specify the
roles players in the consumption system and the means
and modalities of reaching out to them.
 BEHAVIORAL SEGMENTATION: USER
AND USAGE RELATED VARIABLES
OCCASION
 Buyers can be grouped according to occasions when they
get the idea to buy, actually make their purchase, or use
the purchased item. Occasion segmentation can help
firms build up product usage.
 BEHAVIORAL SEGMENTATION: USER
AND USAGE
USER STATUS
• Markets can be segmented into user status (nonusers,
ex-users, potential users, first-time users, and regular
users) of a product. Marketers want to reinforce and
retain regular users, attract targeted nonusers, and
reinvigorate relationships with ex-users.
 BEHAVIORAL SEGMENTATION: USER
AND USAGE
USAGE RATE
• Markets can also be segmented into light, medium, and
heavy product users. Heavy users are often a small
percentage of the market but account for a high
percentage of total consumption.
 BEHAVIORAL SEGMENTATION:
USER AND USAGE
• Benefit segmentation requires finding the major
benefits people look for in a product class, the kinds of
people who look for each benefit, and the major brands
that deliver each benefit.
• Example: The sensitive segment (Synsodyne), the healthy
segment (Pepsodent, White plus, Colgate), for fresh
breath segment (Close up), the economic toothpowder
(Magic toothpowder), for cavity protection (Creast) for
whitening (Pepsodent whitening, Mediplus whitening etc.)
 BEHAVIORAL SEGMENTATION:
CUSTOMER LOYALTY
• A market can also be segmented by consumer loyalty.
Consumers can be loyal to brands (Surf Excel), stores
(Agora), and companies (Apple). Buyers can be divided
into groups according to their degree of loyalty.
 REQUIREMENTS FOR
EFFECTIVE SEGMENTATION
 MARKET TARGETING
Evaluating Market Segments:
In evaluating different market segments, a firm must look
at three factors:
• Segment size and growth
• Segment structural attractiveness, and
• Company objectives and resources.
 MARKET TARGETING

Selecting Target Market Segments

• After evaluating different segments, the company must
decide which and how many segments it will target.
• A target market consists of a set of buyers who share
common needs or characteristics that the company
decides to serve. Market targeting can be carried out at
several different levels.
MARKET TARGETING
 MARKET TARGETING
• Using an undifferentiated marketing (or mass
marketing) strategy, a firm might decide to ignore
market segment differences and target the whole market
with one offer.
• Such a strategy focuses on what is common in the needs
of consumers rather than on what is different.
• The company designs a product and a marketing program
that will appeal to the largest number of buyers..
 MARKET TARGETING
• Using a differentiated marketing (or segmented
marketing) strategy, a firm decides to target several
market segments and designs separate offers for each.
• The reason of pursuing this market targeting strategy is
that higher sales and a stronger position within each
segment can be the consequence.
• But differentiated marketing also increases the costs of
doing business. A firm usually finds it more expensive to
develop and produce
• Most large companies follow the differentiated market
targeting strategy. For instance, a car company produces
 MARKET TARGETING
• Using a differentiated marketing (or segmented
marketing) strategy, a firm decides to target several
market segments and designs separate offers for each.
• The reason of pursuing this market targeting strategy is
that higher sales and a stronger position within each
segment can be the consequence.
• Most large companies follow the differentiated market
targeting strategy. For instance, a car company produces
several different models of cars, and often even offers
different brands.
 MARKET TARGETING
• Using a concentrated marketing (or niche
marketing) strategy, instead of going after a small
share of a large market, a firm goes after a large share of
one or a few smaller segments
• Through concentrated marketing, the firm achieves a
strong market position because of its greater knowledge
of consumer needs in the niches it serves and the special
reputation it acquires.
• Following the concentrated market targeting strategy, the
company focuses on one or a few segments or niches in a
market. The aim is then to reach a large share in this
 MARKET TARGETING
• Micromarketing is the practice of tailoring products and
marketing programs to suit the tastes of specific
individuals and locations.
• Rather than seeing a customer in every individual, micro
marketers see the individual in every customer.
• Micromarketing includes local marketing and individual
marketing.
 MARKET TARGETING
• Local marketing involves tailoring brands and
promotions to the needs and wants of local customer
groups—cities, neighborhoods, and even specific stores.
• For example, Walmart customizes its merchandise store
by store to meet the needs of local shoppers.
 MARKET TARGETING

• Micromarketing becomes individual marketing—

tailoring products and marketing programs to the needs
and preferences of individual customers.
• Individual marketing has also been labeled one-to-one
marketing, mass customization, and markets-of-one
marketing.
• The widespread use of mass marketing has obscured the
fact that for centuries consumers were served as
individuals: The tailor custom-made a suit, the cobbler
designed shoes for an individual, and the cabinetmaker
made furniture to order.
 MARKET TARGETING
Choosing a Targeting Strategy
When choosing a market targeting strategy, the company should
consider:
• The company’s resources. If resources are limited, a
concentrated market targeting strategy might make more sense.
• The degree of product variability. In case of uniform products,
such as apples or steel, undifferentiated marketing may be more
suited. In case of products that can vary in design (cars, cameras
etc.), more narrow differentiation and concentration is suitable.
 MARKET TARGETING
Choosing a Targeting Strategy
When choosing a market targeting strategy, the company should
consider:
• The product life cycle. When a company introduces a new product,
it may be helpful to launch only one version. Undifferentiated or
concentrated marketing might make most sense. In the mature stage,
a segmented market targeting may be appropriate.
• Market variability. If you talk about a kind of product where all
buyers have the same tastes, buy the same amounts etc.,
undifferentiated marketing makes sense.
 MARKET TARGETING
Choosing a Targeting Strategy
When choosing a market targeting strategy, the company should
consider:
• Competitors’ marketing strategies. If competitors apply
differentiated or concentrated market targeting strategies, using
undifferentiated marketing may prove to be fatal. However, the firm
might also gain an advantage by using a different market targeting
strategy than competitors, especially if it can serve individual
customers better by meeting their needs. Then, a concentrated market
targeting strategy or micromarketing will work best.
 DIFFERENTIATION AND
POSITIONING
The differentiation and positioning task consists of three
steps:
• Identifying a set of differentiating competitive advantages
on which to build a position,
• Choosing the right competitive advantages, and
• Selecting an overall positioning strategy.
 DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and Competitive
Advantages
• An advantage over competitors gained by offering greater
customer value, either by having lower prices or providing more
benefits that justify higher prices is called competitive
advantage.
• To find points of differentiation, marketers must think through
the customer’s entire experience with the company’s product or
service. An alert company can find ways to differentiate itself at
every customer contact point. It can differentiate along the lines
of product, services, channels, people, or image.
 DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and
Competitive Advantages
Product differentiation
• Through product differentiation, brands can be
differentiated on features, performance, or style and
design.
 DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and
Competitive Advantages
Services differentiation
• Some companies gain services differentiation through
speedy, convenient, or careful delivery.
 DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and
Competitive Advantages
Channels differentiation
• Firms that practice channel differentiation gain
competitive advantage through the way they design their
channel’s coverage, expertise, and performance.
 DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and
Competitive Advantages
People differentiation
• Companies can also gain a strong competitive advantage
through people differentiation—hiring and training better
people than their competitors do.
 DIFFERENTIATION AND
POSITIONING
Identifying Possible Value Differences and
Competitive Advantages
Image differentiation.
• Even when competing offers look the same, buyers may
perceive a difference based on company or brand image
differentiation. A company or brand image should convey
a product’s distinctive benefits and positioning.
Developing a strong and distinctive image calls for
creativity and hard work.
 DIFFERENTIATION AND POSITIONING
Which Differences to Promote?
A difference is worth establishing to the extent that it
satisfies the following criteria:
• 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.
 DIFFERENTIATION AND POSITIONING
Which Differences to Promote.
A difference is worth establishing to the extent that it
satisfies the following criteria:
• 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.
 DIFFERENTIATION AND POSITIONING
Selecting an Overall Positioning Strategy
• The full positioning of a brand is called the brand’s value
proposition—the full mix of benefits on which a brand is
differentiated and positioned.
• It is the answer to the customer’s question “Why should I
buy your brand?”
 DIFFERENTIATION AND POSITIONING
Developing a Positioning Statement
• A statement that summarizes company or brand
positioning. It takes this form: To (target segment and
need) our (brand) is (concept) that (point of difference).
 DIFFERENTIATION AND POSITIONING
• Positioning Statement
DIFFERENTIATION AND POSITIONING