Chapter 8 - Market Segmentation, Targeting, and Positioning

Market Segmentation

Aggregating prospective buyers into groups (segments) that have common needs and will respond similarly to a marketing action.

Product Differentiation

A marketing strategy that involves a firm using different marketing mix actions to help consumers perceive the product as being different and better than competing products.

One Product and Multiple Market Segments Strategy

Producing a single product and selling it to two or more segments to avoid extra production costs, adjusting only promotion or distribution (e.g., regional magazine covers).

Multiple Products and Multiple Market Segments Strategy

Marketing different lines of products targeted at distinct customer segments, justified when it raises sales without eroding quality (e.g., car lineups).

Mass Customization

Tailoring products or services to the tastes of individual customers on a high-volume scale, representing segments of one.

Build-to-Order (BTO)

Manufacturing a product only after a customer places an order, providing choices with rapid delivery from a set list of options.

Organizational Synergy

The increased customer value achieved through performing organizational functions more efficiently (e.g., lower prices, higher quality).

Cannibalization

The loss of sales and customers from an existing product line or retail store brand caused by the introduction of a new one.

Tiffany/Walmart Strategy

A two-tier segmentation approach offering variations of a basic product or service to both high-end and low-end consumer tiers.

Five Criteria for Forming Market Segments

(1) Simplicity/cost-effectiveness, (2) profit potential, (3) similarity of needs within segment, (4) difference of needs among segments, and (5) potential to reach segment.

Geographic Segmentation

Segmenting consumer markets based on where prospective customers live or work (e.g., region, city size, density, climate).

Demographic Segmentation

Segmenting consumer markets by objective, measurable attributes such as gender, age, income, race, and household size.

Psychographic Segmentation

Segmenting consumers by subjective mental or emotional attributes, aspirations, values, and lifestyle characteristics (e.g., VALS framework).

Behavioral Segmentation

Segmenting customers based on observable actions or attitudes, such as purchase location, product features sought, usage rate, and brand loyalty.

The 80/20 Rule

A concept stating that 80 percent of a firm's sales are generated from 20 percent of its customers (heavy users).

Market-Product Grid

A framework relating the market segments of potential buyers (rows) to product offerings or marketing actions (columns) to estimate market sizes.

Five Criteria for Selecting Target Segments

(1) Market size, (2) expected growth, (3) competitive position, (4) cost of reaching the segment, and (5) compatibility with company objectives and resources.

Marketing Synergies

Efficiencies that run horizontally across a market-product grid, allowing a firm to streamline marketing by targeting a single customer segment with multiple products.

Product Synergies

Efficiencies that run vertically down a market-product grid, focusing R&D and manufacturing on one product line sold to multiple market segments.

Product Positioning

The place a product occupies in consumers' minds on important attributes relative to competitive products.

Product Repositioning

Changing the place a product occupies in a consumer's mind relative to competitive products.

Head-to-Head Positioning

Competing directly with competitors on similar product attributes in the same target market.

Differentiation Positioning

Seeking a less competitive, smaller market niche in which to locate a brand rather than taking on major competitors directly.

Perceptual Map

A two-dimensional display illustrating where products or brands reside in the minds of consumers relative to key evaluative attributes.

Positioning Statement

A succinct internal statement identifying the target market, needs, product category, and unique benefits or reasons to believe to guide marketing and R&D.