Chapter 5: Segmentation,
targeting, and positioning
strategies
Structure
A. INTRODUCTION
1. Overview and Strategy Blueprint
2. Marketing Strategy: Analysis &
perspectives
C. WHERE DO WE WANT TO BE?
B. WHERE ARE WE NOW?
3. Environmental & Internal Analysis:
Market Information & Intelligence
4. Strategic Marketing Decisions,
Choices & Mistakes
5. Segmentation, Targeting
& Positioning Strategies
6. Branding Strategies
7. Relational & Sustainability
Strategies
D. HOW WILL WE GET THERE?
E. DID WE GET THERE?
14. Strategy Implementation, Control
& Metrics
8. Product Innovation & Development
Strategies
9. Service Marketing Strategies
10. Pricing & Distribution
11. Marketing Communications
12. E-Marketing Strategies
13. Social and Ethical Strategies
Flow of chapter
Segmentation
Targeting
Positioning
Perceptual Mapping
Learning Objectives
 Examine the ways in which companies can segment
markets
 Discuss ways in which marketers can measure the
effectiveness of identified target markets
 Identify the various ways in which marketers can
reach their target segments
 Provide an explanation of the importance of
positioning the product Present several important tools
for perceptual mapping
Introduction
• Market segmentation is vital for company
success
• Dividing the market into reasonable segments is
the starting point
• Develop a series of strategic goals & strategies
to reach the identified target
• This chapter will present possible foundations
for effective segmentation & mechanisms
Segmentation
Foundations for effective segmentation
• It is unlikely for any company to appeal to an entire
market
• Identify segments of consumers
• Tailor offerings to meet the wants & needs of that
particular group of consumers
• Market segmentation involves the identification of
subgroups of consumers with similar wants and
buying requirements
• This helps the firm configure its marketing mix
Criteria for identifying segments
Behaviouristic
Psychographic
Geography
Demographic
Criteria for identifying segments
Geography
• Focuses on the where issue
• Local segmentation often used by small firms
• Keeps the market confined to a manageable area
• Global segmentation : The company sees the entire
world as its appropriate playing field
– Potential for cultural inappropriateness
• Need to also consider topography
– Costs of overcoming physical obstacles
Criteria for identifying segments
Demographic
• Using a series of demographic variables
– Gender
– Age
– Cohorts of society
• Moments and events in late adolescence / early adulthood (17-23 yrs)
• This may not work globally
– Level of Education
– Level of Income
– Occupation
– Religion
– Ethnicity (see Table 5.1)
– Family size
– Family life cycle stage
• Life conditions that have a potential impact of product/service purchase
decisions
– Social class/status
Table 5.1: UK population by ethnic group
1995 and 2001 (in 000s)
Criteria for identifying segments
Psychographic Bases
• Perceptual issues
• Combining individuals who are psychologically similar in their orientation
• Excellent potential for effective targeting segments, understanding how the
segments live their daily lives
• Lifestyle
– The ways in which individuals choose to live their lives
•
Personality
– Similar personality types
– Kotler (2003) lists four main variations of personality: compulsive, gregarious,
authoritarian and ambitious
•
Core Values
– Match its core values with those of the segments, building positive associations
Criteria for identifying segments
VALS Typology
• A multi-based approach to segmentation incorporating both
psychological & demographics is developed by SRI International
• For the US market SRI identified eight separate groups for
segmentation purposes
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–
–
–
–
–
–
–
Actualizers (10 % of population)
Fulfilleds (11% of population)
Experiencers (13% of population)
Achievers (14% of population)
Believers (17% of population)
Strivers (12% of population)
Makers (12% of population)
Strugglers (12% of population)
Criteria for identifying segments
Behaviouristic
• Grouping consumers having similar uses for, and
responses to particular products or services
– Usage rate
– Loyalty level
• Brand insistence, brand loyalty, split loyalty, shifting loyalty, no
loyalty
– Creation of special events
– Benefits segmentation
• In terms of key benefits that consumers seek from the use of some
product/service
Segmentation Tools
• Cluster Analysis
• Conjoint Analysis
• Discriminant Analysis
• Multidimensional Scaling
Segmentation Tools
• Main tools used are cluster analysis, conjoint
analysis, discriminant analysis and perceptual
mapping
• Cluster Analysis
– It is a multivariate technique
– Within-group differences are minimized and the betweengroup differences are maximized
• Conjoint Analysis
– Uses a series of possible product/service attribute
combinations
Segmentation Tools
• Discriminant Analysis
– Identify a series of variables that help to discriminate the
members of one or more groups
• Multidimensional Scaling
– Visually demonstrate how particular consumers view the
various offerings
Targeting
Targeting
• This involves deciding on the segment to serve and the
best action plans to reach the identified segment
• As per Derek F Abell (1980) the firm faces the following
choices
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–
–
–
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Single segment concentration
Selective specialization
Product specialization
Market specialization
Full market coverage
Targeting
Product
specialization
Single-segment
Concentration
Selective
specialization
Market specialization
Full market coverage
Measuring effectiveness of target segments
• As per Kotler (2003) segments must be
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–
–
–
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Measurable
Accessible
Substantial
Differentiable
Actionable
• Trade off - production and marketing
– Unrestrained marketing
– Production mentality
Positioning
Positioning
•
•
•
•
Perceptual position within the mind of the consumer
Target consumer has a clear & distinctive image in mind
Keep the brand name at the top of the choice
Al Reis and Jack Trout - ladder inside every consumers
head for each and every product & service
• Get to the top rung
• Being on the top of the ladder allows the firm to enjoy
consumer franchise
Consumer Franchise
• The ability for the firm to keep its
product/brand/company name foremost in the
mind of the target consumer
• It is considered as bankable asset
• Consumer franchise has two components
– Behavioral
– Attitudinal
The Positioning Statement
• The positioning statement serves as the
foundation for all of the positioning efforts
• The three key components:
– (1) the audience and context
– (2) the value proposition, and
– (3) the action components that will be used by the company to
deliver the value proposition to the audience in the context
identified.
Figure 5.2 - Sample Positioning Statement
[Convince] To business managers and professionals
engaged in making time sensitive decisions about
international business,
[That] DHL delivers on time
[Because] its pickup, transportation and delivery
system is wholly-owned and managed by DHL
personnel, not by third party providers.
Figure 5.3 - The 4 C‘s of Positioning
• Clarity: in terms of target market and
differential advantage
• Consistency: maintain a consistent message
• Credibility: in the minds of the target customer-they must believe the claim
• Competitiveness: the differential advantage
should offer the customer something of value
competitors cannot provide (competitors should
be named if possible)
Figure 5.4 - Examples of Positioning Statements
Apple offers …. the best personal
computing experience to students,
educators, creative professionals
and consumers around the world
through its innovative hardware,
software and Internet offerings.
The Chrysler PT Cruiser is an
inexpensive, small car, that is
versatile, fun to drive, and will
appeal to active singles and young
couples with children who
otherwise would have bought an
SUV or a minivan.
Perceptual Mapping
Figure 5.5 - Perceptual Mapping: Mars
Figure 5.6 - Perceptual Map UK
Confectionery Brands
Perceptual Mapping
• It is the visual representation of the different
competitive brand offerings/objects of interest in
perceptual space
• It represents a map of various offerings within
the minds of the target consumers
• “Perception equals reality”
Sage Positioning Wisdom
• Trout and Rivkin (1996) point to seven key positioning pitfalls to
watch for:
– 1) the obvious factor (don’t get too creative or clever – things become
confusing),
– 2) the future factor (don’t constantly change and modernize strategy),
– 3) the cutesy factor (tell things in a straightforward way, many
companies like to get cute and creative),
– 4) the would-be-hero factor (hard chargers in the company trying to get
the CEO’s attention who monkey with the positioning of the product),
– 5) the numbers factor (endless line extensions), and
– 6) the tinkering factor (what are seen as improvements internally can
often be seen as confusing).
Positioning and the importance of consistency
• The key strategic issue associated with
positioning is to present a clear and consistent
message to the target audience
• The company that constantly tinkers with image
stands the chance of confusing its target market
Latest Thinking: Emotional Segmentation
(Yankelovich and Meer 2006)
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•
•
Psychographics are not good predictors of consumer’s purchases in any
particular product category.
Marketers should practice a “smarter” form of segmentation based upon
emotional connections.
The following questions will help marketers to find that emotional
connection:
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–
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–
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What are we trying to do?
Which customers actually drive profits?
Which attitudes matter in the buying decision?
What are the customers actually doing?
Will this segmentation make sense to senior management?
Can this segmentation register change?
Latest Thinking: Price-Benefit Position
Maps (D’Aveni 2007)
• This approach allows the company to understand how much the
customer will actually pay for a perceived benefit.
• This mapping builds on the primary benefit that customers will see
as valuable to them along with the prices of all of the various
products in that specific product category.
• The steps to be followed are as follows:
– (1) define the market
– (2) choose the price and determine the primary benefit
– (3) plot positions and draw the expected price line
Conclusion
• Companies that approach the process of segmentation, processing
and positioning as a series of logical steps, enhance their chance of
success.
• The company must find appropriate target consumers, understand
them, effectively reach them and grab a position inside their heads.
• The company must also avoid the lure of change for the sake of
change and focus on consistency.
• This requires keeping up with the perceptions of consumers and
continuing to build and maintain consumer franchise.