Chapter 7

Market Segmentation, Targeting,

and Positioning for Competitive
Advantage

1
 Steps in Market Segmentation,
Targeting, and Positioning (Fig. 7.1)
Market
Market Segmentation
Segmentation
1.
1.Identify
Identifybases
basesfor
for
segmenting
segmentingthethemarket
market
2.
2.Develop
Developsegment
segmentprofiles
profiles

Market
Market Targeting
Targeting
3.
3.Develop
Developmeasure
measureof of
segment
segmentattractiveness
attractiveness
4.
4.Select
Selecttarget
targetsegments
segments

Market
Market positioning
positioning
5.
5.Develop
Developpositioning
positioningfor
for
target
targetsegments
segments
6.
6.Develop
Developaamarketing
marketing
mix
mixfor
foreach
eachsegment
segment 2
 Step 1. Market Segmentation
Levels of Market Segmentation
Through Market Segmentation, Companies Divide Large,
Heterogeneous Markets into Smaller Segments that Can be
Reached More Efficiently And Effectively With Products and
Services That Match Their Unique Needs.
Mass Marketing
Same product to all consumers
(no segmentation, i.e Coca-Cola)

Segment Marketing
Different products to one or more segments
(some segmentation, i.e. Marriott)
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 Step 1. Market Segmentation
Levels of Market
Segmentation
Niche Marketing
Different products to subgroups within segments
(more segmentation, i.e. Standard or Luxury SUV’s)
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)

Local Marketing Individual Marketing

Tailoring brands/ promotions to Tailoring products and programs
local customer groups, i.e Sears to the needs of individual
customers, i.e. Dell
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Step 1. Market Segmentation
Geographic Segmentation

World Region or Country

City or Metro Size

Density or Climate

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Step 1. Market Segmentation
Demographic Segmentation
Dividing the market into groups
based on variables such as:
 Age

 Gender

 Family size or life cycle

 Income

 Occupation This video features an executive from Levi-Strauss

speaking the necessity of segmentation to meet the
needs of customers in all age groups.

 Education

 Religion
C li ck pic ture to pl ay

 Race Cl ick to return

 Generation

 Nationality
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 Step 1. Market Segmentation
Psychographic Segmentation
Divides Buyers Into Different Groups Based on:

Lif estyle Segmentation

Duck Head Targets
a casual student
lif estyle.

What types of
H student lifestyles
do the following
companies target:

•Tommy Hilfiger?
•Gap?
•DKNY?
•Pacific Sunwear? Click or press spacebar to return .

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 Step 1. Market Segmentation
Behavioral Segmentation
Dividing the market into
groups based on variables
such as:
 Occasions

 Benefits

 User status

 Usage rate

 Loyalty status

 Readiness stage

 Attitude toward product

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 Segmenting Business Markets

Demographics
Demographics Business
Marketers Use
Operating
Operating Variables
Variables Many of the Same
Consumer
Variables, Plus:
Purchasing
Purchasing Approaches
Approaches

Situational
Situational Factors
Factors

Personal
Personal Characteristics
Characteristics
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 Segmenting International
Markets
Geographic
Location

Factors Used
Cultural to Segment Economic
Factors International Factors
Markets

Political and
Legal Factors
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Step 1. Market Segmentation
Requirements for Effective Segmentation
Measurable
Measurable • Size, purchasing power, profiles
of segments can be measured.

Accessible
Accessible • Segments can be effectively
reached and served.

Substantial
Substantial • Segments are large or
profitable enough to serve.
• Segments must respond
Differential
Differential differently to different marketing
mix elements & programs.

• Effective programs can be

Actionable
Actionable designed to attract and serve
the segments.
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 Discussion Connections
Take another look at Figure 7-2. Can you
identify specific companies, other than the
examples already discussed, that practice
each level of segmentation?
F igu re 7 -2

Markes tin g Se rkegm tine g Ma

Ma i rkech tin g
N Micro m
a rket ing
oN oC m pl et
Se gm
e ntai on Se gme ntai on

Using the segmentation bases you’ve just

e xtp age 24 6
T

li ckor pres space bart oretu rn

C

read about, segment the U.S. footwear

market.
 Describe each of the major segments and sub
segments.
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 Step 2. Market Targeting
Evaluating Market Segments
Segment Size and Growth
 Analyze current sales, growth rates and expected
profitability for various segments.
Segment Structural Attractiveness
 Consider effects of: competitors, availability of
substitute products and, the power of buyers &
suppliers.
Company Objectives and Resources
 Company skills & resources needed to succeed in
that segment(s).
 Look for Competitive Advantages. 13
Step 2. Market Targeting
Market Coverage Strategies
Company
Company
Marketing
Marketing Market
Market
Mix
Mix
A. Undifferentiated Marketing
Company
Company
Marketing Segment
Segment11
MarketingMix
Mix11
Company
Company Segment
Segment22
Marketing
MarketingMix
Mix22
Company
Company Segment
Segment33
Marketing
MarketingMix
Mix33
B. Differentiated Marketing

Segment
Segment11
Company
Company
Marketing
Marketing Segment
Mix Segment22
Mix
Segment
Segment33
C. Concentrated Marketing 14
Step 2. Market Targeting
Choosing a Market-Coverage Strategy

Company
Company Resources
Resources

Product
Product Variability
Variability

Product’s
Product’s Stage
Stage in
in the
the Life
Life Cycle
Cycle

Market
Market Variability
Variability

Competitor’s
Competitor’s Marketing
Marketing Strategies
Strategies

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 Socially Responsible Target
Marketing
Smart targeting helps companies and
consumers alike.
Target marketing sometimes generates
controversy and concern.
 Disadvantaged and vulnerable can be targeted.
 Cigarette, beer, and fast-food marketers have
received criticism in the past.
 Internet has come under attack because of the
loose boundaries and lack of control in
marketing practices.
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 Discussion Connection
At the last Discussion Connection, you segmented
the U.S. footwear market.
 Now, pick two companies that serve this market and
describe their segmentation and targeting strategies.
 Can you come up with one that targets many different
segments versus another that focuses on only one or a
few segments?
How does each company you choose differentiate
its marketing offer and image?
How has each done a good job of establishing this
differentiation in the minds of targeted consumers?
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 Step 3. Choosing a
Positioning:

O n what does
Vol vo positi on?

Wha t a bout:

Positioning Strategy
•Saab?
•Le xus?

C li ck o r p re ss sp a cebar to ret u rn .

Product’s Position - the way the product is

defined by consumers on important
attributes - the place the product occupies
in consumers’ minds relative to competing
products.
Marketers must:
 Plan positions to give their products the greatest
advantage in selected target markets,
 Design marketing mixes to create these planned
positions.
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 Step 3. Choosing a Positioning
Strategy
Step 1. Identifying
Possible Competitive
Advantages
Step 2. Selecting the
Right Competitive
Advantage
Step 3. Communicating
and Delivering the
Chosen Position

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 Identifying Possible
Competitive Advantages
Key to winning and keeping customers is to
understand their needs and buying
processes better than competitors do and
deliver more value.
Competitive advantage is an advantage
over competitors gained by offering
consumers greater value, either through
lower prices or by providing more benefits,
that justify competitive advantage,
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Identifying Possible
Competitive Advantages
Product Services
Differentiation Differentiation
i.e. Features, i.e. Delivery, Installation,
Performance, Style & Repair Services, Customer
Design, or Attributes Training Services

Image Personnel
Differentiation Differentiation
i.e. Symbols, i.e. Hiring, Training
Atmospheres, Events Better People Than
Competitors Do

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 Choosing the Right Competitive
Advantages
Important
Important

Profitable Criteria Distinctive

Profitable Distinctive
For Determining
Which Differences
To Promote
Superior
Superior
Affordable
Affordable

Preemptive
Preemptive Communicable
Communicable
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 Selecting an Overall
Positioning Strategy (Fig. 7.4)
Price
More The same Less
More More More More
More
More More for
for for for
for for the
the Less
More same Less
More same
Benefits

The
The same
same
The Same for
for
less
less
Less
Less for
for
Less much
much
less
less
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 Communicating and Delivering
the Chosen Position
Once position is chosen, company must
take strong steps to deliver and
communicate the desired position to target
consumers.
All the company’s marketing mix must
support the positioning strategy.
Positioning strategy must be monitored and
adapted over time to match changes in
consumer needs and competitor’s
strategies. 24
 Review of Concept
Connections
Define the three steps of target marketing: market
segmentation, market targeting, and market
positioning.
List and discuss the major levels of market
segmentation and bases for segmenting consumer
and business markets.
Explain how companies identify attractive market
segments and choose a market-coverage strategy.
Discuss how companies can position their products
for maximum competitive advantage in the
marketplace.
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