Chapter 4

Focusing Marketing Strategy

with Segmentation and
Positioning
At the end of this presentation, you should be
able to:

1. Know about defining generic markets and

product-markets.
2. Know what market segmentation is and
how to segment product-markets into
submarkets.
3. Know three approaches to market-oriented
strategy planning.
4. Know dimensions that may be useful for
segmenting markets.
5. Know a seven-step approach to market
segmentation that you can do yourself.
6. Know what positioning is and why it is
useful.
Focusing Marketing Strategy with
Segmentation and Positioning (Exhibit 4-1)
Focusing Marketing Strategy with
Segmentation and Positioning (Exhibit 4-1)

Segmentation
•Defining markets
•Dimensions to use
•Identifying segments
•Identifying segments to target Positioning
•Segmentation approaches •Understanding customer’s view
•Positioning techniques
•Evaluating segment preferences
•Differentiating the marketing mix
•Relationship between
positioning & targeting
Search for Opportunities can Begin by
Understanding Markets

What is a
Don’t just focus
company’s
on the product
market?

Generic markets Broaden market

to product- definitions to find
markets opportunities

4–5
 Relationship Between Generic and Product-
Market Definitions
Customer user
Needs
(met by the product)

Generic
Customer types
market (who uses product) Product
definition
market
definition
Geographic area
(where market is located)

Product type
(good and/or service)
Segmentation is a Two-Step Process

1. Naming broad
product-markets

and

2. Segmenting
markets and
selecting
targets
The Process of Narrowing Down to Target
Markets (Exhibit 4-3)
All customer needs
Narrowing
Some generic market down to
specific
product-market
One broad
product-market

Homogeneous Segmenting
(narrow) product- into possible
markets target markets

Single Multiple Combined

Selecting target
target target target marketing
market markets markets approach
Three Ways to Develop Market-Oriented
Strategies
• Single Target Market Approach
– select one homogeneous segment as the target
• Multiple Target Market Approach
– select two or more target segments
– develop a different marketing mix for each segment
• Combined Target Market Approach
– combine submarkets into a single target market
– develop one marketing mix for the combined target
 Segmenters and Combiners Aim at Specific
Target Markets (Exhibit 4-6)

A segmenter Single target

market approach The
develops a Strategy
different
marketing
mix for each Strategy two
segment. Multiple target
market approach Strategy
one Strategy three

A combiner aims at two or The

more submarkets with the strategy
same marketing mix.
 Ideally, “good” market segments meet the
following criteria:

• Homogeneous (similar) within—the

customers in a market segment
• Heterogeneous (different) between—
the customers in different segments
• Substantial—the segment should be big
enough to be profitable.
• Operational—the segmenting
dimensions should be useful for
identifying customers and deciding on
marketing mix variables.
Segmenting vs. Combining

Too Much
Combining Is
Combiners Risky Segmenters
Try to Satisfy Try to Satisfy
“Pretty Well” “Very Well”

Key Issues
Profit Is the Segmenting
Balancing May Produce
Point Bigger Sales

Segment or
Combine?
Checking Your Knowledge

A neighborhood restaurant in a diverse market area sought to

appeal to a wide range of consumers by offering a menu with a
few choices from each of several different styles of cuisine—
American, Italian, Chinese, German, Thai, and Indian. Recently,
the restaurant has lost sales to newer restaurants that offer
many choices from a single style of cuisine. This example
illustrates the danger of adopting a _______________ approach.

A. single target market

B. multiple target market
C. combined target market
D. structured target market
E. mixed-mode market
Behavioral dimensions for segmenting
consumer markets

Information Needs Benefits

required Sought

Type of
problem- Thoughts
Behavioral
solving
Segmenting
Dimensions
Kind of
Rate of use
shopping

Brand Purchase
familiarity relationship
Geographic dimensions for segmenting
consumer markets

Region of
Region in a
world or
country
country
Geographic
Segmentation
Dimensions

Size of city
Demographic dimensions for segmenting
consumer markets
Income

Gender or age
Demographic
Segmentation Family size or family
Dimensions life cycle stage

Occupation or
education

Ethnicity or social
class
Psychographic dimensions for segmenting
consumer markets

Life style

Hobbies
Psychographic
segmentation
Dimensions Activities

Opinions
Segmenting business markets

Kind of Type of
relationship customer

Segmenting
Dimensions
Purchasing for Demographics
methods Business
Markets

How customers
Type of buying
will use the
situation
product
Checking Your Knowledge

The pastor of a new church decides to start prospecting for

new members. He focuses first on people who live within a
mile radius of the church, and contacts them via mail and
by visiting them door-to-door. He then moves on to people
who live from one to two miles away from the church, then
two to three miles away, and so on, up to a limit of ten
miles away. The pastor appears to be focusing on a
__________ segmenting dimension.

A. behavioral
B. demographic
C. benefit
D. geographic
E. relationship
What Dimensions are used to Segment
Markets?

Qualifying Determining
Dimensions Dimensions
• Relevant to • Affect the
including a customer’s
customer type in a purchase of a
OR
product-market product or brand

• Help identify “core • Can be further

segmented
benefits”
Determining vs. Qualifying Dimensions

Determining Determining
Dimensions May Dimensions May
Be Very Specific Change

Key Issues

Different
Dimensions For Qualifying
Different Dimensions Are
Submarkets Important Too
More Sophisticated Techniques May Help in
Segmenting

Clustering

Customer Database

Customer Relationship
Management (CRM)
Ethical Issues in Segmenting Markets

Ethical International
Exploitation
Issues Issues

Creates
Unnecessary
Wants

Does Harm
Checking Your Knowledge

A father taking his family of four on vacation was trying to make

hotel reservations for a trip to Disney World. He first eliminated
all hotels that were in excess of two miles from the main gate to
Disney World. Then he focused exclusively on hotels offering
suites so that his family would have more space. He eventually
selected the Excelsior Hotel because he knew the hotel offered
suites and a complementary breakfast. For him, the available of
the complementary breakfast was a ______________
segmenting dimension.

A. qualifying
B. determining
C. differentiated
D. geographic
E. demographic
Targeting

Determine which of those segments are most

likely to generate desired conversions

Size: how large your segment à future growth

potential.
Profitability: Profit and cost during lifetime value.
Reachability: how easy or difficult it will be for you
to reach each segment with your marketing efforts
 DIFFERENTIATION vs POSITIONING

Positioning refers to acquiring a

space in the mind of the
customer whereas differentiation
is a marketing strategy companies
use to make their product unique to
stand out from competitors.
 DIFFERENTIATION

• Differentiate the marketing mix—to serve customers

better

• The firm builds a competitive advantage

• Differentiated marketing targets several different market

segments and designs separate offers for each.

• Goal is to achieve higher sales and stronger position

• More expensive than undifferentiated marketing

• A product or brand can be differentiated based on a number

of attributes: Features, Performance, Timing, Distribution,
 POSITIONING

Positioning refers to how customers

think about proposed or present brands
in a market
Value Positioning: How a company will
create differentiated value for targeted
segments and what positions it wants to
occupy in those segments.
Product positioning
Brand positioning
Differentiation and Positioning Strategy

Choosing a Differentiation and Positioning Strategy

The differentiation and positioning task consists of
three steps:
• 1. Identifying a set of possible competitive
advantages upon which to build a position
• 2. Choosing the right competitive advantages
• 3. Selecting an overall positioning strategy
• 4. Communicating and delivering the chosen
position to the market
Differentiation and Positioning Strategy

Identifying Possible Value Differences and

Competitive Advantages
• To the extent that a company can differentiate and
position itself as providing superior
• customer value, it gains competitive advantage.

• It can differentiate along the lines of product,

service, channel, people, or image.
Differentiation and Positioning Strategy

Identifying Possible Value Differences and

Competitive Advantages
• To the extent that a company can differentiate and
position itself as providing superior
• customer value, it gains competitive advantage.

• It can differentiate along the lines of product,

service, channel, people, or image.
Differentiation and Positioning Strategy

Choosing the Right Competitive Advantages

A difference is worth establishing to the extent that it satisfies the
following criteria:
Important: The difference delivers a highly valued benefit to target buyers.
Distinctive: Competitors do not offer the difference, or the company can
offer it in a more
distinctive way.
Superior: The difference is superior to other ways that customers might
obtain the same
benefit.
Communicable: The difference is communicable and visible to buyers.
Preemptive: Competitors cannot easily copy the difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference profitably.
“Product Space” Representation of Positioning
(Exhibit 4-13)

High moisturizing

Tone 7
Zest
4
Dove Lever 2000
5 2
Safeguard
Coast
Lux 8
Nondeodorant 3 Deodorant

1
Dial
Lifebuoy
Lava
6

low moisturizing
Checking Your Knowledge

The “product space” graph (perceptual map) resulting from

a positioning study for shampoo shows a substantial target
market that is currently served by only one product—
“Exotic Balsam.” Which of the following is a reasonable
course of action for a competing manufacturer?
A. Develop a new product to compete with Exotic Balsam.
B. Look for an area on the map where there is a smaller target
market that is not served by any current products.
C. Attempt to reposition a current product as an alternative to
Exotic Balsam.
D. Do a broader analysis that includes an examination of
customer needs and attitudes.
E. Any of the above might be reasonable, depending on the
circumstances.
You should now be able to:

1. Know about defining generic markets

and product-markets.
2. Know what market segmentation is and
how to segment product-markets into
submarkets.
3. Know three approaches to market-
oriented strategy planning.
4. Know dimensions that may be useful
for segmenting markets.
5. Know a seven-step approach to market
segmentation that you can do yourself.
6. Know what positioning is and why it is
useful.
Key Terms

• Market • Combiners
• Generic market • Segmenters
• Product market • Qualifying dimensions
• Market • Determining dimensions
segmentation • Clustering techniques
• Segmenting • Customer relationship
• Market segment management (CRM)
• Single target market • Positioning
approach
• Multiple target
market approach
• Combined target
market approach
 is the process of naming broad product-markets and then
segmenting these broad product-markets in order to select
target markets and develop suitable marketing mixes.
A. Market segmentation
B. Strategic planning
C. Mass marketing
D. Market positioning
E. Implementation
 When segmenting markets, why can't managers simply choose one or two
demographic . characteristics around which to define their target group?
A. It puts marketers at risk of discrimination lawsuits.
B. Customer behavior is too complex to be explained in terms of just one or
two demographic characteristics.
C. Demographic characteristics do not influence buying behaviors.
D. It will fail to produce a homogeneous group.
E. Market segments must be based on three or more dimensions to be valid
Which is the first step in market segmentation? .
A. Finding one or two demographic characteristics to divide up the whole mass
market.
B. Clustering people with similar needs into a market segment.
C. Naming a broad product-market of interest to the firm.
Evaluating market segments to determine if they are large enough.
 A target marketer who uses two different marketing mix strategies to
make two separate. appeals to office tablet computer users and home
tablet computer users is applying:
A. The broad market approach.
B. The single target market approach.
C. The multiple target market approach.
D. The combined target market approach.
E. The generic market approach.
Gina Williams wanted to start a decorating business. She identified
several possible. target markets, but decided to serve a market
composed of recently married couples that owned their first home.
Gina appears to be following:
A. A multiple target market approach.
B. A single target market approach.
C. A combined target market approach.
D. A mass marketing approach.
None of these approaches is correct.
 If geographic location and other demographic characteristics are used as
target market . dimensions, which potential strategy decision area is
mostly likely to be affected?
A. what potential customers need
B. Target markets- size
C. what customers might be willing to pay
D. Product line assortment
E. Product-which features to include
Behavioral (as opposed to demographic) segmenting dimensions include:
A. Family life cycle.
B. Geographic location.
C. Education.
D. Social class.
E. Purchase relationship.
Which of the following is a consumer market demographic dimension? .
A. Sex
B. Age
C. Occupation
D. Education
E. All of these are examples of a consumer market demographic dimension

How customers think about the various brands in a market can be graphically
. represented and tracked through
A. Segmenting
B. Positioning
C. Targeting
D. Researching
E. Clustering
 Positioning maps are based on: .
A. The actual objective characteristics of products.
B. The opinions of the marketing managers.
C. The potential places where a product may be sold and purchased.
D. The prices of competing products.
E. Customers' perceptions of products.

Nonprofit organizations
A. do not have a profit objective, so the marketing concept does not apply.
B. can benefit by adopting the marketing concept.
C. are fundamentally different than business firms-so they should embrace
a production orientation rather than a marketing orientation.
D. do not need to be concerned with marketing activities.
E. none of these is true.
In monopolistic competition,
A. one firm completely controls a broad product- market.
B. each competitor tries to get control in its "own" target market.
C. competitors offer the same marketing mix.
different marketing mixes are nevertheless seen as the same by all customers.
D. all customers view various alternatives as substitutes.

Positioning analysis
A. helps managers understand the actual characteristics of their products.
B. is not a product-oriented approach.
C. is a visual aid to understanding a product- market.
D. shows that managers and customers usually view present brands similarly.
E. always leads a firm to segmenting and not combining.