Lecture 5 –Segmenting,

Targeting Markets and Positioning

MKTG, 13e
Chapter 8: Segmenting and
Targeting Markets

© 2021 Cengage Learning.

© 2021 Cengage All Rights
Learning. Reserved.
All Rights May not
Reserved. Maybe
notscanned, copied
be scanned, or or
copied duplicated,
duplicated,or
orposted to aa publicly
posted to publiclyaccessible
accessible website,
website, in whole
in whole or inor in part.
part. 1
 Learning Objectives
By the end of this chapter you should be able to:

1. Describe the characteristics of markets and market segments

2. Explain the importance of market segmentation

3. Discuss the criteria for successful market segmentation

4. Describe the bases commonly used to segment consumer markets

5. List the steps involved in segmenting markets

6. Discuss alternative strategies for selecting target markets

7. Explain how CRM can be used as a targeting tool

8. Explain how and why firms implement positioning strategies and how product differentiation
plays a role

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 2
 Characteristics of a Market
All markets share several characteristics:

1. They are composed of people or

organizations.
2. These people or organizations have wants
and needs that can be satisfied by particular
product categories.
3. They have the ability to buy the products
they seek.
4. They are willing to exchange their
resources, usually money or credit, for
desired products.
A group of people that lacks any one of these
characteristics is NOT a market.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 3
 Market Segmentation

A subgroup of people or organizations

Market sharing one or more characteristics that
Segment cause them to have similar product
needs.

The process of dividing a market into

Market
meaningful, relatively similar, identifiable
Segmentation segments or groups.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 4
The Concept of Market Segmentation

Market
segmentation –
try yourself!

Market segmentation Market segmentation Market segmentation by

by
© 2021 gender
Cengage
by age gender
Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in and age
whole or in part. 5
Marketers segment markets for three
reasons:
• Identify and analyse groups of customers with
similar needs
• Design marketing mixes specifically matched
with the characteristics of one or more
segments
• Align with the organization’s objectives

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 7
 Criteria for Successful segmentation

Segment must be large enough to warrant a

Substantiality special marketing mix.

Identifiability Segments must be identifiable and their size

and Measurability measurable.

Members of targeted segments must be

Accessibility reachable with marketing mix.

Segments respond to the marketing mix

Responsiveness differently.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 8
Steps in market segmentation and targeting

6. Design, implement and maintain

Marketing mix
Marketing mix for each target segment

5. Select target markets

Target marketing
4. Profile and analyse
Segments
3. Select segmentation
variables (e.g. age and income)
2. Choose bases for segmenting the
Market segmentation
market (e.g. demographic)
1. Select a market or product
category (e.g. soft drink)

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 9
 Step 2: Segmentation bases

Geographic

Demographic

Psychographic

Benefit

Usage-Rate

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 10
 Step 3: Segmentation variables

• Select segmentation variables

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 11
 Geographic variables
• Geographic variables
−Region, country – e.g. Asia, USA
−Market size / city size – e.g. under
10,000 people
−Market density – e.g. urban, suburban,
rural
−Climate – e.g. cold, hot

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 12
 Demographic variables
• Demographic variables
−Age – e.g. under 6 years, 6-11 years, 12-17 years, etc.
−Gender – male; female
−Income –e.g. <$5,000, $5,000-10,000, etc.
−Ethnic / Race – e.g. Chinese, Indian, American, etc.
−Family life cycle – young single, young married
without children, young married with children,
middle-aged married with children, middle-aged
married without children, older married, older
unmarried.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 13
 Demographic variables
• Demographic variables
−Life stage – e.g. infant, preschool, child, youth,
collegiate, adult, senior
−Birth era – baby boomer, generation x,
generation y, etc.
−Household size – 1, 2, 3 or more
−Marital status – never married, married,
separated, divorced, widowed
−Education –primary, secondary, etc.
−Occupation – sales, teachers, etc.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14
 What demographic variable is it?

Nike has stepped up

its efforts to capture
the women’s sport
apparel market by
overhauling its
women’s apparel
lines, revamping the
Nikewomen.com Web
site, and opening
Nikewomen stores in
several major cities.
(www.Nikewomen.co
m)

Source: Kotler, Principles ofCengage

© 2016 Marketing,
Learning.Pearson
All Rights Reserved.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 15
 What demographic variable is it?

• segmentation has
long been used by the
marketers of products and
services such as automobiles
(e.g. Benz aims at higher-
income group), financial
services (mortgage, credit card,
loan) and insurances

Credit card companies offer different types of

cards with different perks depending on income
level.

Source: Kotler, Principles of Marketing, Pearson

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 16
 Psychographic variables

• Psychographic variables
−Personality – e.g. aggressive, ambitious, etc.
−Lifestyles – e.g. the way people spend their time,
their beliefs etc.
−Motives – e.g. emotional, rational, etc.

Note: skip geodemographic.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 17
 Benefit variables

• The process of grouping customers into

market segments according to the benefits
they seek from the product.
• Benefit variables
−Product features – e.g. no sugar, low fat, etc.
−Needs – e.g. quality, service, value, financing,
convenience, etc.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 18
 Usage-rate variables
• Dividing a market by the amount of
product bought or consumed
• Usage / Patronage variables
−Usage rate –light user, medium user,
heavy user
−User status – e.g. nonuser, regular
user, first-time user, etc.
Note: skip 80/20 principle.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 19
 Step 4 and 5:
Target Markets
• Target market
– a group of people or organizations for which an
organization designs, implements, and maintains a
marketing mix intended to meet the needs of that
group, resulting in mutually satisfying exchanges

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 20
Strategies for selecting target market
Company
marketing Undifferentiated Market
mix

Company Segment 1
marketing Concentrated Segment 2
mix Segment 3

Company mix 1 Segment 1

Company mix 2 Segment 2
Company mix 3 Segment 3
Multisegment

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 21
Undifferentiated targeting strategy

• A marketing approach that views the

market as one big market with no
individual segments; therefore,
requires a single marketing mix .

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 22
Undifferentiated targeting strategy
(cont.)
• Advantages:
−Potential for saving on production and
marketing costs
• Disadvantages:
−Unimaginative product offerings
−Company more susceptible to
competition
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 23
Concentrated targeting strategy

• A strategy used to select one

segment of a market (niche) for
targeting marketing efforts

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 24
 Concentrated targeting strategy
(cont.)
• Advantages:
−Concentration of resources
−Meets narrowly defined segment
−Small firms can compete
−Strong positioning
• Disadvantages:
−Segments too small or changing
−Large competitors may market to niche segment
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 25
Multisegment targeting strategy

• A strategy that chooses two or

more well-defined market
segments and develops a distinct
marketing mix for each

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 26
 Multisegment targeting strategy
(cont.)
• Advantages:
−greater financial success – e.g. greater sales volume,
higher profits, larger market share
−economies of scale in manufacturing and marketing
• Disadvantages:
−high costs – product design, inventory, marketing
research
−Cannibalisation – sales of a new product cut into
sales of existing products.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 27
 CRM as a Targeting Tool

• Companies that successfully implement customer relationship

management (CRM) tend to customize the goods and
services offered to their customers based on data generated
through interactions between carefully defined groups of
customers and the company.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 28
 Four CRM Trends
• Personalisation
One-size-fits all marketing no longer relevant
• Time savings
Direct and personal marketing efforts will grow to meet
needs of busy consumers.
• Loyalty
Consumers will be loyal to companies that have earned—
and reinforced—their loyalty.
• Technology
Mass-media approaches will decline as technology allows
better customer tracking.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 29
Step 6: Develop marketing mix for each
target segment

• Product (Lec 7)
• Pricing (Lec 8)
• Place (Lec 9)
• Promotion (Lec 10)

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
9-30 30
 Perceptual Mapping

A means of displaying or graphing, in

two or more dimensions, the location of
products, brands, or groups of products
in customers’ minds.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 31
 Perceptual Map

Source: Based on Vanessa O’Connell, “Park Avenue Classic or Soho Trendy?” The Wall Street Journal, April 20, 2007, B1.
© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 32
 Positioning

Developing a specific marketing mix

to influence potential customers’
overall perception of a brand, product
line, or organization in general.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 33
 FOUR Types of Competition for
Positioning Decisions
Direct and Indirect Competition
1. Direct Competition – is competition in a market with
businesses that offer the same type of product or service
2. Indirect Competition – competes with other companies offering
products that are not in the same product category but that
satisfy similar customer needs.

Price and Non-price Competition

1. Price Competition - emphasize price when company compete
with each other
2. Non-price competition – emphasize other marketing mix other
than price.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 34
 Repositioning

Changing consumers’
perceptions of a brand in
relation to competing brands.

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 35
 Perceptual Mapping

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 36
• Skip
−geodemographics (p. 147)
−bases for segmenting business markets (p.148)
−Positioning bases (p.153-154)

© 2021 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 37