Chapter 7; Segmentation, Targeting and Positioning

Importance of Segmentation

Defines needs and wants of most interested customers.

• design marketing strategies

• Focuses resources to maximize profits

Five Criteria

1. Substantial

2. Measurable

3. Differentiable

4. Accessible

5. Actionable

Substantial criteria

Enough to make a profit

Measurable criteria

Size and purchasing power must be measurable and identified.

Differentiable criteria

Segments must respond differently to marketing strategies.

Accessible criteria

Reach and serve the market

Actionable criteria

Ability to develop strategies to attract the segment to company’s products.

Segmentation Bases

Characteristics that influence buying behavior

• Demographic

• Psychographic

• Geographic

• Behavioral

Demographic Characteristics

The age, gender, income, family size, martial status.

• Example:

  • A college student received special discounts from a store because of their age group and low income bracket

Psychographic characteristics

• Adds psychology and personality traits to demographics.

• Lifestyle: opinions, interests, and activities

• VALS: eight psychographic groups based on motivation and resources.

  • Example:

    • Dick’s sporting goods segments consumers based on sports and activities they enjoy participating in.

Geographic Characteristics

Market size in an area, customer convenience (location), population shifts.

• Example:

  • Spotify makes concert recommendations for shows that are near where I live.

Behavioral characteristics

• Behavior toward products; occasions, loyalty and usage rate.

• 80/20 rule: 80% of companies demand comes from 20% of its users.

  • Ex: Spotify wrapped at the end of the year.

Factors in Selecting Target Markets

1. Growth potential

   • Sirius XM purchased Pandora = larger growth potential in target market versus paid radio.

2. Level of competition

   • New coffee shop may not select geographic target market saturated by Starbucks

3. Strategic Fit (with what company is and wants to be)

   • Lexus would not select target market looking for inexpensive transportation.

3 Target Market Strategies

1. Undifferentiated targeting

2. Differentiated targeting

3. Niche marketing

Undifferentiated targeting

Marketplace is one big segment

• Limited use for uniform products like bananas.

Differentiated targeting

Pursues several different target markets at once with different strategies for each.

• Example:

  • target going after college students, families.

Niche marketing

Unique products that target large share of small market.

• Ex: Eat Fit Go, healthy foods

Market Positioning

Activities to create a certain perception of product in the eyes of the target market.

1. Analyze competitors’ positions

2. Define competitive advantage

3. Evaluate feedback

Analyze Competitors’ Positions

Understand how consumers perceive competition.

• Extra important for similar goods and services

  • Ex:

    • Banks

    • Cellular service

Define Competitive Advantage

• Price/quantity relationship: Walmart

• Attributes: Air Jordans, Chevy v. Ford

• Application: Apple products

Evaluate Feedback

Continuously listen to your customers.

• Take feedback to improve, change your positioning.

  • Example:

    • Chevy took feedback from customers about its vehicles and created ads with real people to correct misconceptions and reposition itself.

Positioning Statement

Description of core target and picture of how the firm wants the market to view its product. Includes:

1. Target market

2. How customers should view the brand

3. How they are better

Ex: Coke

• For consumers who want to purchase a wide range of products online with quick delivery (TARGET). Amazon provides a one-stop online shopping site (how they view them). Amazon sells itself apart from other online retailers with its customer obsession, passion for innovation, and commitment to operational excellence (how better).

Repositioning

Reestablishing a product’s position in response to changes in the marketplace.

• Domino’s admitted issues, became transparent, improved product and ordering systems.

Repositioning the Competition

Dunkin’ tried to reposition Starbucks.