Segmentation, Targeting, and Positioning

1. Segmentation, Targeting, and Positioning Chapter 8

2. Objectives • Be able to define the three steps of target marketing: market segmentation, target marketing, and market positioning. • Understand the major bases for segmenting consumer and business markets.

3. Objectives • Know how companies identify attractive market segments and how they choose a target marketing strategy. • Comprehend how companies position their products for maximum competitive advantage.

4. Sells multiple brands within the same product category for a variety of products Brands feature a different mix of benefits and appeal to different segments Has also identified different niches within certain segments Tide offers seven different product formulations to serve different niches’ needs c Procter & Gamble

5. Sure • Secret • OldSpice

6. Definition • Market Segmentation: • Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes.

7. Figure 8-1: Steps in Market Segmentation, Targeting, and Positioning

8. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographical segmentation Marketing mixes are customized geographically Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Market Segmentation Key Topics

9. Market Segmentation Geographic Segmentation Variables • World Region or Country • U.S. Region • State • City • City or Metro Size • Neighborhood • Density • Climate

10. Discussion Question Geographical climate is a legitimate means of segmentation for many products or services. Name several examples of products for which need (and demand) would vary on a geographical basis.

11. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographical segments Demographic segmentation Most popular type Demographics are closely related to needs, wants and usage rates Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Market Segmentation Key Topics

12. Age Gender Family size Family life cycle Income Race Market Segmentation DemographicSegmentation Variables • Occupation • Education • Religion • Generation • Nationality

13. Corvallis map of income distribtuion

14. Salem Hispanic Population

15. Portland Household Income

16. Bend price of homes

17. What type of demographic segmentation is reflected by this ad?

18. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segments Demographic segmentation Psychographic segmentation Lifestyle, social class, and personality-based segmentation Behavioral segmentation Using multiple segmentation variables Market Segmentation Key Topics

20. Swatch targets those with an active lifestyle

21. Generation Y Trendsetters top 15 brands 15. RedStripe Jamaican beer 14. VitaminWater 13. Converse 12. Volkswagen 11. Levi’s

22. 10. H&M clothing stores 9. Target 8. AmericanApparel 7. Adidas 6. Whole Foods

23. 5. Ben & Jerry’s 4. In-N-Out Burger starts their employees out at $10 an hour -- which made the trendsetters happier to eat there, as opposed to some fast-food chains where all the workers look miserable." 3. Jet Blue "They loved everything about Jet Blue, noting that the airline is much easier to navigate, the flights are always cheap, always one-way and don't have a lot of weird special prices and restrictions,"

24. 2. Trader Joe’s • They liked that the company has a dorky newsletter and makes their employees wear silly Hawaiian shirts.

25. Apple Outlaw Consulting, a San Francisco research firm, concluded that Generation Y trendsetters are more drawn to brands that speak to them in a "straightforward and stripped-down way, use plain packaging, and avoid excess

26. Outlaw surveyed 100 of what it calls its "most forward trendsetter panelists" in New York City, Los Angeles, San Francisco and Miami, asking them which companies they most respected, and why. • the preference for simplification, lean-and-clean styling and all-in-one convenience could be motivated by environmental concerns. In other words, as the "green lifestyle" is something more and more people aspire to, the notion of excess has fallen into disfavor

27. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Typically done first Using multiple segmentation variables Market Segmentation Key Topics

28. Occasions Benefits User Status User Rates Market Segmentation Behavioral Segmentation Variables • Loyalty Status • Readiness Stage • Attitude Toward the Product

29. Occasion segmentation: Altoids’ “Love Tin” is a “curiously strong valentine”

30. Checkout Direct offers retailers & manufacturers an excellent method of reaching segments of heavy users, as well as users of the direct competition.

31. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segments Demographic segmentation Psychographic segmentation Behavioral segmentation Using multiple segmentation variables Prizm Market Segmentation Key Topics

32. Discussion Question Visit PRIZM’s “You are where you live” website. Enter the zip code(s) of your choice. Were you surprised by what you found?

33. Example Market segments for J.C. Penney Conservative • Size: 23% of population 16% of sales • Age: 35-55 years old • Values: Conservative values satisfied with present status • Employment: Has job, or career • Income: Limited disposable income • Benefits sought: Price-driven, reacts to sales, wants easy care and comfort, Not interested in fashion, Defines value as Price, Quality, Fashion

34. Traditional • Size: 38% of population 40% of total sales • Age: 25-49 years old • Values: Traditional values Active, busy, independent, self-confident • Employment: Family-and job/career-oriented • Income: Considerable income • Benefits sought: Wants traditional styling, seeks clothes that last, Interested in newness, Defines value as Quality, Fashion, Price

35. Update • Size: 16% of population 24% of total sales • Age: 25-49 • Values: Contemporary values Active, busy, independent, very self-confident • Employment: Family-and job/ career-oriented • Income: considerable income • Benefits sought: Wants newness in color and style, Shops often, Defines value as Fashion, Quality, Price

36. Example Toothpaste Benefit segments • Sensory Segment • Sociable Segment • Worrier Segment • Independent

37. Sensory Segment • Principle benefit sought: Flavor and product appearance • Demographic strengths: Children • Special behavior characteristics: Users of spearmint-flavored toothpaste • Brands: Colgate • Lifestyle characteristics: Hedonistic

38. Sociable Segment • Principle benefit sought: Brightness of teeth • Demographic strengths: Teens, young people • Special behavior characteristics: Smokers • Brands: Macleans, Ultra Brite • Lifestyle characteristics: Active

39. Worrier Segment • Principle benefit sought: Decay prevention • Demographic strengths: Large Families • Special behavior characteristics: Heavy users • Brands: Crest • Lifestyle characteristics: Conservative

40. Independent Segment • Principle benefit sought: Price • Demographic strengths: Men • Special behavior characteristics: Heavy users • Brands: Cheapest Brand • Lifestyle characteristics: Value oriented

41. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Demographic segmentation Industry, company size, location Operating variables Technology, usage status, customer capabilities Purchasing approaches Situational factors Urgency, specific application, size of order Personal characteristics Buyer-seller similarity, attitudes toward risk, loyalty Market Segmentation Key Topics

42. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Geographic segmentation Location or region Economic factors Population income or level of economic development Political and legal factors Type / stability of government, monetary regulations, amount of bureaucracy, etc. Cultural factors Language, religion, values, attitudes, customs, behavioral patterns Market Segmentation Key Topics

43. Segmenting Consumer Markets Segmenting Business Markets Segmenting International Markets Requirements for Effective Segmentation Measurable Size, purchasing power, and profile of segment Accessible Can be reached and served Substantial Large and profitable enough to serve Differentiable Respond differently Actionable Effective programs can be developed Market Segmentation Key Topics

44. Target Marketing • Evaluating Market Segments • Segment size and growth • Segment structural attractiveness • Level of competition • Substitute products • Power of buyers • Powerful suppliers • Company objectives and resources

45. Figure 8-2: Target Marketing Strategies

46. Target Marketing • Choosing a Target-Marketing Strategy Requires Consideration of: • Company resources • The degree of product variability • Product’s life-cycle stage • Market variability • Competitors’ marketing strategies

47. Target Marketing • Socially Responsible Targeting • Some segments are at special risk: • Children • Inner-city minority consumers • Internet shoppers • Controversy occurs when the methods used are questionable.

48. Positioning • Positioning: • The place the product occupies in consumers’ minds relative to competing products. • Typically defined by consumers on the basis of important attributes.

49. Positioning • Choosing a Positioning Strategy: • Identifying possible competitive advantages -- many potential sources of differentiation exist: • Products • Services • Channels • People • Image

50. Porsche is positioned on the basis of performance and freedom.