CHAPTER EIGHT

MARKET SEGMENTATION,TARGETING, AND

POSITIONING

nn Identify the essential components of a marketIdentify the essential components of a marketnn Outline the role of market segmentation in developingOutline the role of market segmentation in developing

a marketing strategya marketing strategynn Describe the criteria necessary for effectiveDescribe the criteria necessary for effective

segmentationsegmentationnn Explain each of the four basis for segmentingExplain each of the four basis for segmenting

consumer marketsconsumer marketsnn Identify the steps in the market segmentation processIdentify the steps in the market segmentation processnn Discuss four alternative strategies for reaching targetDiscuss four alternative strategies for reaching target

marketsmarketsnn Summarize the types of positioning strategies and theSummarize the types of positioning strategies and the

purposes of positioning and repositioning productspurposes of positioning and repositioning products

CHAPTER OBJECTIVESCHAPTER OBJECTIVES

nnMarket:Market: people or institutionspeople or institutionswith sufficient purchasingwith sufficient purchasingpower, authority, andpower, authority, andwillingness to buywillingness to buy

TYPES OF MARKETSTYPES OF MARKETS

nn Consumer products:Consumer products: goods or servicesgoods or servicespurchased by an ultimate consumer forpurchased by an ultimate consumer forpersonal usepersonal use

nn Business products:Business products: goods or servicesgoods or servicespurchased for use either directly orpurchased for use either directly orindirectly in the production of other goodsindirectly in the production of other goodsand services for resaleand services for resale

TYPES OF MARKETSTYPES OF MARKETS

nn Market Segmentation:Market Segmentation: division ofdivision ofthe total market into smaller,the total market into smaller,relatively homogeneous groupsrelatively homogeneous groups

nn Target market:Target market: specific segment ofspecific segment ofconsumers most likely to purchase aconsumers most likely to purchase aparticular productparticular product

TYPES OF MARKETSTYPES OF MARKETS

No Market SegmentationNo Market Segmentation

Segmented by SexSegmented by Sex

Segmented by AgeSegmented by Age

Geographic SegmentationGeographic Segmentation

nn Geographic Segmentation:Geographic Segmentation: Dividing anDividing anoverall market into homogeneous groupsoverall market into homogeneous groupson the basis of their locationson the basis of their locations

nn Demand for some goods and services can varyDemand for some goods and services can varyaccording to the geographic regionaccording to the geographic region

nn Most major brands get 80 percent of their salesMost major brands get 80 percent of their salesfrom what are calledfrom what are called core regionscore regions

nn Climate is another important segmentation factorClimate is another important segmentation factor–– Northern consumers, for example, eat more soup thanNorthern consumers, for example, eat more soup than

SouthernersSoutherners–– Southerners use more chlorine for their swimmingSoutherners use more chlorine for their swimming

pools than Northern residentspools than Northern residents

Using GeographicUsing GeographicSegmentationSegmentation

nn PampersPampers–– This ad is anThis ad is an

example ofexample ofgeographicgeographicsegmentation.segmentation.

–– When visiting theWhen visiting theweb site look for theweb site look for thedifferent countriesdifferent countriesPampers markets to.Pampers markets to.

nn Demographic segmentation:Demographic segmentation: dividingdividingconsumer groups according toconsumer groups according tocharacteristics such as sex, age, income,characteristics such as sex, age, income,occupation, education, household size, andoccupation, education, household size, andstage in the family life cyclestage in the family life cycle

nn A primary source for demographic dataA primary source for demographic dataand United States is the Bureau of Censusand United States is the Bureau of Census

Demographic SegmentationDemographic Segmentation

Segmenting bySegmenting bygendergender

Marketers mustensure thattraditionalassumptions arenot falseOther firms startby targeting onegender and thenswitch to bothTo somecompaniesmarketsuccessfully toboth genders

nn Segmenting by ageSegmenting by age–– Sociologists attributeSociologists attribute

different consumerdifferent consumerneeds and wantsneeds and wantsamong various ageamong various agegroups to thegroups to the cohertcoherteffecteffect

–– CohertCohert effecteffect is ais atendency amongtendency amongmembers of amembers of ageneration to begeneration to beinfluenced and drawninfluenced and drawntogether by significanttogether by significantevents occurringevents occurringduring their keyduring their keyformative years,formative years,roughly 17 to 22 yearsroughly 17 to 22 yearsof ageof age

nn Segmenting by AgeSegmenting by Agenn BoomersBoomers——PeoplePeople

born from 1946 untilborn from 1946 until1965. Nearly 421965. Nearly 42percent of U.S.percent of U.S.adults were born inadults were born inthis period. Valuesthis period. Valuesof this age groupof this age groupwere influenced bothwere influenced bothby the Vietnam Warby the Vietnam Warand the careerand the career--drivendrivenera. Baby boomersera. Baby boomersover the age of 50over the age of 50will have a totalwill have a totaldisposable income ofdisposable income of$1 trillion.$1 trillion.

nn Family Life CycleFamily Life CycleStages SegmentationStages Segmentation– The process of family

formation anddissolution.

– The underlying themeis that life stage, notage per se, is theprimary determinantof many consumerpurchases.

– Today, the averagewoman gives birth totwo children .

– She usually has herchildren at a laterage—about 35.

nn Psychographic Segmentation:Psychographic Segmentation: dividing adividing apopulation into groups that have similarpopulation into groups that have similarpsychological characteristics, values, andpsychological characteristics, values, andlifestyles.lifestyles.

nn Lifestyle:Lifestyle: peoplepeople’’s decisions about how to lives decisions about how to livetheir daily lives, including family, job, social,their daily lives, including family, job, social,and consumer activitiesand consumer activities

nn AIO Statements:AIO Statements: statements in a psychographicstatements in a psychographicsurvey, choices reflect a respondentsurvey, choices reflect a respondent’’s activities,s activities,interests, and opinionsinterests, and opinions

Psychographic SegmentationPsychographic Segmentation

nn ProductProduct--related segmentation:related segmentation: dividing adividing aconsumer population into homogeneous groupsconsumer population into homogeneous groupsbased on characteristics of their relationships tobased on characteristics of their relationships tothe productthe product

nn Can take the form of segmenting based on:Can take the form of segmenting based on:–– BenefitsBenefits that people seek when they buythat people seek when they buy–– Usage ratesUsage rates for a product (80/20 Rule)for a product (80/20 Rule)–– ConsumersConsumers’’ brand loyaltybrand loyalty toward a product (Frequenttoward a product (Frequent

Flyer Programs)Flyer Programs)

ProductProduct--Related SegmentationRelated SegmentationProductProduct BenefitsBenefits Usage RatesUsage Rates Brand LoyaltyBrand Loyalty

© PhotoDisc

nn EclipseEclipse–– Segmenting bySegmenting by

Benefits SoughtBenefits Sought

Criteria for EffectiveCriteria for EffectiveSegmentationSegmentation

Segment must presentmeasurable purchasing

power and size

Marketers must be able toeffectively promote to and

serve the segment

Segment must besufficiently large enoughfor good profit potential

Segment must match thefirm’s marketing

capabilities

STRATEGIES FOR REACHINGSTRATEGIES FOR REACHINGTARGET MARKETSTARGET MARKETS

nn Undifferentiated marketingUndifferentiated marketing

nn Differentiated marketingDifferentiated marketing

nn Concentrated marketing (nicheConcentrated marketing (nichemarketing)marketing)

nn MicromarketingMicromarketing

STRATEGIES FOR REACHINGSTRATEGIES FOR REACHINGTARGET MARKETS: Selecting and ExecutingTARGET MARKETS: Selecting and Executing

a Strategya Strategy

nn Positioning:Positioning: a marketing strategy thata marketing strategy thatemphasizes serving a specific market segment byemphasizes serving a specific market segment byachieving a certain position in buyersachieving a certain position in buyers’’ mindsminds

nn Positioning map:Positioning map: graphic illustration that showsgraphic illustration that showsdifferences in consumersdifferences in consumers’’ perceptions ofperceptions ofcompeting productscompeting products

nn Reposition:Reposition: marketing strategy to change themarketing strategy to change theposition of its product in consumersposition of its product in consumers’’ mindsmindsrelative to the positions of competing productsrelative to the positions of competing products

Hypothetical CompetitiveHypothetical CompetitivePositioning Map forPositioning Map forSelected RetailersSelected Retailers