Segmentation, targeting, and positioning are important marketing strategies. Segmentation involves dividing the market into subgroups based on variables like geography, demographics, psychographics, and behavior. Effective segmentation results in groups that are measurable, accessible, substantial, differentiable, and actionable. Targeting involves selecting specific segments to target with tailored marketing programs. Positioning is how a product is defined in consumers' minds relative to competitors based on attributes, benefits, and competitive advantages.

1. Segmentation, Targeting & Positioning

2. Overview: Segmentation, Targeting & Positioning Why do this?

3. Market Segmentation - Principles Segmentation Variables Geographic Demographic Psychographic Behavioral Other (anything!) No single best way to segment a market. Often best to combine variables and identify smaller, better-defined target groups.

4. Geographic Segmentation Divide markets into different geographic units. Examples: World Region or Country: North America, Western Europe, European Union, Pacific Rim, Mexico, etc. Country Region: Pacific, Mountain, East Coast, etc. City or Metro Size: New York, San Francisco Population Density: rural, suburban, urban Climate: northern, southern, tropical, semi-tropical

5. Demographic Segmentation Use Differences in: age, gender, family size, family life cycle, income, occupation, education, race, and religion Most frequently used segmentation variable Ease of measurement and high availability. Usually the worst variable to use.

6. Psychographic Segmentation Psychographic segmentation divides a market into different groups based on social class, lifestyle, or personality characteristics. People in the same demographic classification often have very different lifestyles and personalities.

7. Behavioral Segmentation Occasion Special promotions & labels for holidays. Special products for special occasions. Benefits Sought Different segments desire different benefits from the same products. Loyalty Status Nonusers, ex-users, potential users, first-time users, regular users. Usage Rate Light, medium, heavy.

8. Loyalty Status Segmentation Switchers Shifting loyals Split loyals Hard-core

9. User & Loyalty Status Segmentation

10. Geodemographic Segmentation PRIZM, by Claritas Organized by ZIP code Based on U.S. Census data Profiles on 260,000+ U.S. neighborhoods 62 clusters or types

11. Claritas’ Prizm

12. Requirements for Effective Segmentation Segments must be Measurable Accessible Substantial Differentiable Actionable “ Lefties” are hard to identify and measure, so few firms target this segment.

13. Segment Size and Growth Potential Sales, profitability and growth rates Segment Structural Attractiveness Competition, substitute products, buyers & supplier power, new entrants (Porter’s Five Forces) Company Objectives and Resources Core competencies “ What business do we want to be in?” Evaluating Market Segments

14. Targeting Segments - Overview

15. Market Preference Patterns

16. Ignores segmentation opportunities Undifferentiated (Mass) Marketing

17. Differentiated (Segmented) Marketing Targets several segments and designs separate offers for each. Coca-Cola (Coke, Sprite, Diet Coke, etc.) Procter & Gamble (Tide, Cheer, Gain, Dreft, etc.) Toyota (Camry, Corolla, Prius, Scion, etc.)

18. Question du Jour Should the same company produce and market brands that compete with each other?

19. Niche Marketing Targets one or a couple small segments Niches have very specialized interests

20. Tailoring products and marketing programs to suit the tastes of specific individuals and/or locations. Micromarketing

21. Flexible Marketing Offerings “ Naked”/Core solution Product and service elements that all segment members value Discretionary options Some segment members value Options may carry additional charges

22. Patterns of Target Market Selection: Product x Market Matrices

23. Controversies and concerns Targeting the vulnerable and disadvantaged Cereal, Cigarettes, Alcohol, Fast-food The “Catch-22” of Targeting Psychological Reactance Failure to target seen as prejudice Socially Responsible Targeting

24. The place a product occupies in consumers’ minds relative to competing products. Positioning

25. eBay’s positioning: No matter what “it” is, you can find “it” on eBay! Positioning Example

26. To (target segment and need) our (brand) is a (concept) that (point-of-difference). Positioning Example “ To busy mobile professionals who need to always be in the loop, Blackberry is a wireless connectivity solution that allows you to stay connected to people and resources while on the go more easily and reliably than the competing technologies.”

27. Positioning Maps: Luxury SUVs Price vs. Orientation Dimensions

28. Competitive advantages Points of Parity Points of Difference => Differentiation Positioning results from differentiation and competitive advantages. Positioning may change over time. Positioning Strategy

29. Sources of Differentiation Product Design Quality Additional Services Image People (Staff) Price Other 6-

30. Choosing the Right Competitive Advantages The best competitive advantages are… Important Distinctive Superior Communicable Pre-emptive Affordable (to company and consumer) Profitable Moral: Avoid meaningless differentiation.

31. Under-positioning : Not positioning strongly enough. Over-positioning : Giving buyers too narrow a picture of the product. Muddled Positioning : Leaving buyers with a confused image of the product. Positioning Errors

32. Generic Product Positions & Value Propositions

33. Question du Jour Which is more important: Product or Positioning ?

34. In-class Activity Describe how each of the following brands, companies, or products is positioned:

35. In-class Activity, Part 2 Choose one of the companies/brands and… Identify relevant direct competitors Choose the two dimensions that are most important to consumers Develop a perceptual positioning map Are there any opportunities in this category?

36. In-class Activity, Part 3 Choose a company and invent a segmentation scheme for that company’s customers using the variables we discussed in class.

37. In-class Activity – Developing a Segmentation Scheme Develop a PSYCHOGRAPHIC/USAGE segmentation scheme for each of the following types of consumers. Segment the market into three or more substantive groups. Be sure to think of the key psychological/usage drivers of consumption. Name your segments – the more creative, the better! Consumers Vacationers Internet Users Restaurant Patrons Eco-friendly product consumers Smartphone Users Grocery Store Shoppers