4-1

Chapter Three

Strategic Market
Segmentation,
Targeting &
Positioning

McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

 Segmentation and
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Market-Driven Strategy
SEGMENTS

VALUE
OPPORTUNITIES

CAPABILITIES/
SEGMENT
MATCH

TARGET(S)

POSITIONING
STRATEGY
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Illustrative Segmentation
Variables
Consumer Industrial/
Markets Organizational
Markets
Characteristics Age, gender, Type of industry,
of people/ income, size, geographic
organizations family size, location, corporate
lifecycle stage, culture, stage of
geographic development,
location, producer/
lifestyle intermediary
Use situation Occasion, Application,
importance of purchasing
purchase, prior procedure
experience with (new task, modified
product, user rebuy, straight
status rebuy
Buyers’ needs/ Brand loyalty Performance
preferences status, brand requirements, brand
preference, preferences, desired
benefits sought, features, service
quality, proneness requirements
to make a deal
Purchase Size of purchase, Volume, frequency
behavior frequency of of purchase
purchase
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Requirements for
Segmentation

Identifiable
segments
Response Actionable
differences segments

Segmentation
Requirements

Stability Favorable
over time cost/benefit
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Segmentation “Fit” for

Implementation
Segment Attractiveness
and Internal Compatibility
Internal Compatibility
High Low

Attractive segments Attractive segments

that match with but with poor match
High company with company
capabilities capabilities

Market Segment
Attractiveness
Unattractive segments Unattractive segments
but with match to that do not match with
Low company company capabilities
capabilities
 4-6

Market Targeting
and Strategic
Positioning

Core dimensions of market-driven

strategy:

Deciding which buyer’s to target and

how to position the firm’s products
 4-7

Identify segments
within the
product-market

TARGETING
&
POSTIONING

Decide and Decide

implement a which
positioning segment(s)
strategy for to
each targeted target
segment
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Market Targeting
Alternatives

Segments Clearly Defined

Target Target
Selected Multiple
Selective Niche(s) Segments
Extensive
Targeting Targeting
Product Product
Specialization Variety

Differentiated But Segments

Not Clearly Defined
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Strategies
Emerging Market
Buyer Diversity
– Segmentation limited due to
similarity of buyers’ preferences
Industry Structure
– Typically small new
organizations
– Limited access to resources
Capabilities and Resources
– Differentiation strategy rather
than low-cost
– First-mover advantage
Targeting Strategy
– Single target or a few broad
segments
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Strategies for
Growth Market
Buyer Diversity
– Segments should exist
Industry Structure
– Numerous competitors
Capabilities and Resources
– Survival requires aggressive actions by
firms that seek large market positions
– Otherwise select one or a few market
segments
Targeting Strategy
– Three possible strategies
1. Extensive market coverage
2. Selective targeting
3. Very focused targeting strategies
 4-11

Strategies for
Mature Markets
Buyer Diversity
– Segmentation is essential for
competitive advantage
Industry Structure
– Intense competition for market share
– Emphasis on cost and service, and
pressures on profits
Capabilities and Resources
 Management’s objectives: cost
reduction, product differentiation
Targeting Strategy
 Firms pursuing extensive targeting
strategies may decide to exit from
certain segments
 4-12

Strategic Positioning
POSITIONING
CONCEPT

The desired positioning of

the product (brand) by
targeted buyers

MARKET
TARGET

POSITIONING POSITIONING
EFFECTIVENESS STRATEGY
The extent to The combination
which of marketing
positioning actions used to
objectives are communicate
achieved for the the positioning
market target concept to
targeted buyers
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The Perception or
Association that
Management Wants
Buyers to Have
Concerning the Brand

Symbolic Functional

POSITIONING
CONCEPT

Experiential
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DEVELOPING THE
POSITIONING
STRATEGY
Positioning Issues
1. The positioning concept
applies to a specific brand
rather than all the competing
brands that compose a
product classification
2. The concept is used to guide
positioning decisions over
the life of the brand
3. Multiple concepts are likely
to confuse buyers and may
weaken the effectiveness of
positioning actions
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The positioning strategy
indicates how (& why) the
product mix, line, or brand is to
be positioned for each market
target. This strategy includes:
•The product strategy, indicating how the
product(s) will be positioned against the
competition in the product-market.
•The value chain (distribution) strategy to
be used.
•The pricing strategy, including the role and
positioning of price relative to competition.
•The advertising and sales promotion
strategy and the objectives these promotion
components are expected to achieve.
•The sales force strategy, direct marketing
strategy, and the Internet strategy, indicating
how they are used in the positioning strategy.
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Positioning Errors
 Under-positioning – customers
have only vague ideas about the
company and do not perceive
anything distinctive about it
 Over-positioning – Customers
have too narrow an
understanding of the company,
product, or brand
 Confused positioning –
Frequent changes and
contradictory messages confuse
customers
 Doubtful positioning – claims
made for the product or brand
are not regarded as credible
 4-17

Illustrative Impacts of Changes in

Business Strategy Restructuring on
Targeting and Positioning Strategies
Changes in
Business Strategy Market Targeting Impact Positioning Impact
Rapid Market scope may not Substantial changes in
Growth/ change although targets resource allocation, (e.g.
Retrenchment may be increased or advertising expenditures
reduced.

Changing the No change is necessary Changes in product strategy,

Product Mix unless increase in product methods of distribution, and
scope creates opportunities promotional strategies may be
in new segments. necessary.

Changing the Targeting is likely to change Positioning strategy must be

Market Scope to include new targets. developed for each new
target.

Repositioning Should not have a major Product, distribution, price,

effect on targeting strategy. and promotion strategies may
be affected.

Value Chain Should have no effect on Primary impact on channel,

Integration targeting strategy. pricing and promotion
strategies.

Diversification Targeting strategies must be Positioning strategies must be

selected in new business developed (or acquired for the
areas. new business areas.

Strategic Alliance Targeting strategy may be Operating relationships and

affected based on the nature assignment or responsibilities
and scope of the alliance. must be established.