Segmentation, Targeting and Positioning

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Segmentation, Targeting and Positioning

• Audhesh Paswan, Ph.D.
• University of North Texas

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Market Segmentation, Targeting,and Positioning
T34
Market Segmentation
Market Targeting
Market Positioning
1. Identify segmentation variables and segment
the market 2. Develop profiles
of resulting segments
3. Evaluate attractiveness of each segment 4.
Select the target segment(s)
5. Identify possible positioning concepts
for each target segment 6. Select, develop,
and communicate the chosen positioning concept
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Segments

• Group of people who are supposed to respond in
  similar manner.
• Homogeneity/heterogeneity
• Parsimony
• Accessibility

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Segmentation

• Segmentation Basis (dependent)- their needs and
  wants.
• Segment descriptors (independent)- age, income,
  etc.

5
Segmentation - STP Approach

• Segment using demand variables (customer needs,
  wants, benefits, problem solution desired, usage
  situation etc.).
• Describe segments using variables that help firm
  target (shopping pattern, demographic, etc.).
• Evaluate attractiveness of each segment (growth
  rate, distribution cost etc.).
• Select one or more segment for targeting.
• Identify and implement position for firms offer.

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Segmentation - Method

• Use factor Analysis to reduce data dimensions.
• Form segments by cluster analysis.
• Similarity or distance (Euclidean distance, city
  block metric).
• Clustering methods
• Hierarchical method (build up or break down data
  row by row), e.g., Wards.
• Partitioning method (break data into arbitrary
  group and iterate to get the best desired
  result), e.g., K-Means.

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Segmentation - Method

• Predictive Validity
• Hit rate use hold-out sample variance explained
  by each discriminant function.

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Segmentation - Other Method

• Behavior based segmentation
• cross classification.
• Regression.
• Choice models.

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Strategic Groups in the Major Appliance Industry
T33

• Group A
• Narrow line
• Lower mfg. cost
• Very high service
• High price

High

• Group C
• Moderate line
• Medium mfg. cost
• Medium service
• Medium price

Quality

• Group B
• Full line
• Low mfg. cost
• Good service
• Medium price

• Group D
• Broad line
• Medium mrg. cost
• Low service
• Low price

Low
Low
High
Vertical Integration
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Product / Market Battlefield for Toothpaste
T32
Customer segmentation
Children / Teens
Age 19-35
Age 36
Plain toothpaste
Colgate-Palmolive Procter Gamble
Colgate-Palmolive Procter Gamble
Colgate-Palmolive Procter Gamble
Toothpaste with fluoride
Colgate-Palmolive Procter Gamble
Colgate-Palmolive Procter Gamble
Colgate-Palmolive Procter Gamble
Gel
Colgate-Palmolive Procter Gamble Lever Bros.
Colgate-Palmolive Procter Gamble Lever Bros.
Colgate-Palmolive Procter Gamble Lever Bros.
Product segmentation
Striped
Beecham
Beecham
Topol
Topol
Smokers toothpaste
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Basic Market-Preference Patterns
T35
(a) Homogeneous preferences
(b) Diffused preferences
(c) Clustered preferences
Creaminess
Creaminess
Creaminess
Sweetness
Sweetness
Sweetness
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Heavy and Light Users of Common Consumer Products
T36
75
25
71
29
79
21
75
25
83
17
83
17
13
87
81
19
5
95
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Targeting and Positioning

• It is a managerial decision based on
• Strengths and Weaknesses -
• always internal, actual or perceived,
• Threats and Opportunities -
• Normally external, actual or perceived

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Five Patterns of Target Market Selection
T37
Single-segment concentration
Selective specialization
Product specialization
M1 M2 M3
M1 M2 M3
M1 M2 M3
P1 P2 P3
P1 P2 P3
P1 P2 P3
Market specialization
Full market coverage
M1 M2 M3
M1 M2 M3
P1 P2 P3
P1 P2 P3
P Product M Market
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Segment-by-SegmentInvasion Plan
T38
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BCG Competitive Advantage Matrix
T39
Number of Approaches to Achieve Advantage
Few
Many
Volume
Specialized
Large
Size of the Advantage
Fragmented
Stalemated
Small
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Targeting and Positioning

• Use of Perceptual map
• Helps in new product decision.
• Reality check for competitive structure and
  positioning.
• Identification of who to compete against.
• Image or reputation studies.

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Perceptual Map
T40
1.0 0.8 0.6 0.4 0.2
Live shows
Easy to reach
Little waiting
Good food
Fantasy
Educational, animals
Exercise
Marineland of the Pacific
Fun rides
Knotts Berry Farm
Japanese Deer Park
Disneyland
-1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2
0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

-0.2 -0.4 -0.6 -0.8
Magic Mountain
Lion Country Safari
Busch Gardens
Economical
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Perceptual Map
T41
High Quality
A
G
D
E
C
B
Low Price
High Price
F
Low Quality
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Product and BrandPositioning
T44a
Product-positioning map (breakfast market)
Expensive
Bacon and eggs
Cold cereal
Slow
Quick
Pancakes
Instant breakfast
Hot cereal
Inexpensive
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Product and BrandPositioning
T44b
Brand-positioning map (instant breakfast market)
High price per ounce
Brand C
Low in calories
High in calories
Brand B
Brand A
Low price per ounce
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Perceptual Mapping Methods

• Perceptual maps (product space maps)
• Similarity based methods
• Attribute based methods
• Preference maps
• Ideal point model
• Vector model
• Joint space maps
• External analysis
• Simple joint space using modifies perceptual
  mapping methods

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Attribute based models

• Identify set of products and attributes for
  evaluation.
• Obtain perceptual data.
• Select a perceptual mapping method.
• A suggested technique for attribute analysis -
  Factor analysis

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Similarity based methods

• Identify alternatives (products or services).
• Develop a matrix of similarities (proximity
  matrix).
• Develop a perceptual map.
• Determine the number of dimensions for the map
• Stress as a measure of good fit,
• stress value of 0 is perfect fit, I.e., similar
  to 1-RR.

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Joint Space Maps

• Combines a perceptual map with the desired or
  ideal position for a target segment.

Preference
Attributesgt
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Utility Functions Basedon Conjoint Analysis
T45
Package design
Brand name
Retail Price
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
1.0
1.0
1.0
Utility
Utility
Utility
A B C
K2R Glory Bissell
1.19 1.39 1.59
0
0
00
Money-Back Guarantee?
Good Housekeeping Seal?
-- -- -- -- --
-- -- -- -- --
1.0
1.0
Utility
Utility
0
No Yes
No Yes
0
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Adopter Categorization of the Basis of Relative
Time of Adoption of Innovations
T47
34 Early majority
34 Late majority
13.5
2.5 Innovators
16 Laggards
Early adopters
Time of adoption of innovations