SEGMENTATION, TARGETING, AND POSITIONING

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SEGMENTATION, TARGETING, AND POSITIONING

• Segmentation
• Product positioning
• strategy
• Bases for segmentation
• Positioning
• Targeting
• Repositioning

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SEGMENTATION, TARGETING, AND POSITIONING
SEGMENTATION IDENTIFYING MEANINGFULLY DIFFERENT
GROUPS OF CUSTOMERS
TARGETING SELECTING WHICH SEGMENT(S) TO SERVE
PROUDCT
PRICE
POSITIONING IMPLEMENTING CHOSEN IMAGE AND APPEAL
TO CHOSEN SEGMENT
PROMOTION
DISTRIBUTION
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Learning Objectives

• Appreciate different unique needs and
  expectations of different customer groups
• Appreciate tradeoffs among strategies of serving
  different segments
• Understand methods for selecting and targeting
  customer groups
• Understand bases for implementing target
  selection through positioning

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Definitions

• Segmentation
• Aggregating prospective buyers into groups
  that (1) have common needs and (2) will respond
  similarly to a marketing action.
• The process of dividing a market into
  meaningful, relatively similar, and identifiable
  segments or groups. (Text, p. 97)

Although not all these consumers are completely
alike, they share relatively similar needs and
wants.
Marketing action involves efforts, resources,
and decisions--product, distribution, promotion,
and price.
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Approaches to Marketing

• Undifferentiated Strategy (no intended difference
  from competitors no specific consumer group
  sought out)
• Concentrated Strategy (differentiation one
  consumer segment sought)
• Differentiated Strategy (same firm makes
  different versions for different segments)

Southwest Airlines
Some auto makers
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Segments--Examples (1)

• Air Travel
• Business/Executive Inflexible relatively price
  insensitive (Small number of people, but travel
  often)
• Leisure Traveler/Student Relatively flexible
  very price sensitive (other methods of
  travel--e.g., bus, car, train--are feasible
  travel may not be essential) (Very large segment)
• Comfort Travelers Comfort (e.g., space, food)
  important willing to pay (Small segment)

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Examples (2) Restaurant Diners
E.g., --speed --location
High
Convenience
Low
Low
High-end delivered food
Fancy Restaurants --e.g., Ritz Carlton
Price Sensitivity
Dennys
McDonalds
Local, unbranded fast food restaurants
Taco Bell
High
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Combining variables

• Soft drink preferencessome segmentation
  variables
• Preferred taste Cola, lime, no taste, natural
  juice, ice tea
• Calorie/taste tradeoff taste more important,
  some importance of both, will sacrifice taste for
  low calories
• Usage occasion Multi-pack for home single
  can/bottle fountain drink
• Price sensitivity/brand loyalty Willingness to
  pay more for name brand or specialty soda

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Some combined segments

• Price sensitive, non-brand loyal cola-taste,
  full-flavor segment, multi-pack
• Price insensitive, cola taste, brand loyal, low
  calorie, multi-pack
• Price insensitive, natural juice, taste
  sensitive, single serving

Typical behaviors of these consumers.
Circumstances may involve occasional variations.
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Bases for Segmentation

• Geographic
• Demographic
• Psychographic
• Benefit Desired
• Usage Rate
• Other Behavior

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Geographic

• Regional differences
• Climate and physical environment
• Tastes
• Campbells Soup
• Lifestyle and values
• Urban vs. rural areas

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Demographics

• Age
• Gender
• Willingness to spend
• More useful than incomeincome ? willingness to
  spend!
• Trading Up Consumers may splurge in
  certain, personally significant categories while
  buying more downscale in other categories
• Ethnicity
• Family lifecycle stage

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Psychographics

• Personality
• Very difficult to measure
• Limited empirical support
• Motives
• Lifestyle
• Usually more practical than personality

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Usage Rate

• 80/20 rule20 of consumers may account for 80
  of consumption (in many product categories)
• Note that larger consumption rate segments may be
  subject to heavy competition
• Reasons for targeting smaller segments
• Reduced competition
• Opportunity for growth

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Other Behavioral Bases for Segmentation

• Involvement
• Interest
• Knowledge
• Willingness to spend time on making product
  category decisions
• Dealproneness
• Coupon usage
• Brand switching in response to price incentives
• Outlet (store) choice
• Specialty
• Convenience store
• Category killer (e.g., Frys, Best Buy, Circuit
  City)
• Discount
• Warehouse

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Benefits Sought

• Based on
• Differences in arbitrary tastes (e.g., cola vs.
  non-cola drink)
• Ideal point
• Tradeoffs (e.g., taste vs. calories)
• Usage situation (e.g., coffee for camping
  (instant) vs. higher quality for home brewing)

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Targeting Selecting Segment(s) and Specializing

• You cant be all things to all people ---gt
  choose one or more groups.
• Focus narrows scope of competition, but demands
  are greater.

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IDENTIFYING TARGETS

• Customer information enhancementinformation
  from different sources integrated (e.g., real
  estate records, purchase lists, magazine
  subscription, credit records)
• Merge-purge
• Customer lists from different sources are
  combined with removal of duplicates

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SEGMENTATION, TARGETING, AND POSITIONING
PROUDCT
PRICE
PREMIUM
PREMIUM
POSITIONING IMPLEMENTING CHOSEN IMAGE AND APPEAL
TO CHOSEN SEGMENT
LOW PRICE
BASIC
VALUE
DURABLE
DISTRIBUTION
PROMOTION
INTENSIVE
PRESTIGE
SELECTIVE
FUN
EXCLUSIVE
POWERFUL
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STUCK IN THE MIDDLE PROBLEM

• Brands that offer a clear benefit tend to do
  better
• Clear orientation
• Wal-Mart
• Nordstroms
• KFC
• Stuck in the middle
• SearsCompetition both from above and below.
• Nevertheless, there are successful middlelers
  Dennys, Vons, Ralphs

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Positioning Strategies

• Head-on competition
• Airlines (want to differentiate but have
  difficulty pulling it off in practice)
• Beef products
• Differentiation
• Burger King Grilled instead of McDonalds fried
  burgers
• Hallmark When you care to send the very best
• Hertz (vs. Not exactly)
• Zachy Farms (chicken)

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The Three Value Disciplines

• Many successful firms are distinguished by
  excelling in one of three value disciplines
  (Treacy and Wiersema, 1993)
• Operational excellence (high efficiency)e.g.,
  Wal-Mart, Southwest Airlines
• Customer intimacy (high service to
  customers)e.g., Nordstroms, IBM
• Technological excellence (constant innovation of
  state of the art)e.g., Intel
• All firms must meet acceptable levels on the
  other two dimensions

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Repositioning

• Repositioning Changing established position may
  be difficult -- e.g.,
• Sears
• McDonald

Good sales poor everyday values
Lunch not dinner Good for children
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Multidimensional Scaling

• Consumer product perception is identified along
  two or more dimensions
• Methods
• A priori specification of dimensions ?
  respondents make judgments
• Respondent rating of relative similarity of
  brands/product categories ? statistical model
  identifies unnamed dimensions ? dimensions are
  inferred from characteristics of items at
  different points

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HIGH
Hersheys
Toblerone
Dove Milk Chocolate
Ritter
Mr. Goodbar
MM
HIGH
LOW
Snickers
Almond Joy
Kitkat
Mars
Reeses
York
Smores
Heath
Butterfinger
Twix
LOW
Milky Way
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Similarity Ratings
1Not at all similar
7Extremely
Similar Logically, all candy bars are
extremely similar to themselves. The shaded
regions are redundantonly the order is varied.
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Some Repositioning Campaigns

• Geritol Not too young for Geritol.
• Orange juice It isnt just for breakfast
  anymore.
• Microsoft ? hipper

NOTE Repositioning is difficult. It will take
a great deal of advertising support. There is no
guarantee that consumers will cooperate!
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Some Brands That Were Dropped Rather Than
Repositioned

• ValueJet ? AirTran
• Packard Bell ? e-Machines
• German Communist Party ? Party for Democratic
  Socialism

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Euphemisms in Positioning

• Loss Prevention Associate
• Sales Counselor
• Pre-Owned or Previously Loved Vehicle
• Gaming