Market segmentation, targeting, and positioning Marketing 3331 Segmentation Targeting and... · The five key steps in segmenting and targeting markets that link market needs to a

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Marketing 3331

Market segmentation, targeting, and positioning


IN MARKETING NEWS TODAY

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“Stand By You” ● “Since 1988, our employees have helped

provide more than 79 million cans of water to cities across the U.S. that were impacted by natural disasters. But there’s more to do. By the end of 2018, our brewery in Fort Collins, CO will be joining our brewery in Cartersville, GA to deliver even more clean drinking water to communities in need.”

Source: https:/ / www.youtube.com/ watch?v=CxGUmtRLm5g

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“Blaze and Ice” ● Mountain Dew Super Bowl Commercial 2018

with Morgan Freeman and Peter Dinklage and Doritos Blaze

Source: https:/ / www.youtube.com/ watch?v=4eKYR_iL5eU

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Japanese ads of 2017 Source: https:/ / www.youtube.com/ watch?v=2jOeqZBpmyo

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https://www.youtube.com/watch?v=hxRqKgjD3vY


Zappos.com Strategy: Segments + Service = “WOW”

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A Clear Market Segmentation Strategy

• Founder: Tony Hsieh • Origin: “zapatos”, or shoes

• Offer a huge selection of shoes to • people who will buy them online.

• Expanded their products to clothes, • accessories and beauty aides.


Zappos.com Strategy: Segments + Service = “WOW”

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“WOW” Customer Service ● Mandatory 4-week customer service training ● He offers one-month’s salary for an new-hire

employee that takes the training ● “If you take the money and run, you’re not right

for this company” ● Few have ever taken the money and left.

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Your culture is your brand. ● “As we grow as a company, it has become

more and more important to explicitly define the core values from which we develop our culture, our brand, and our business strategies.”

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Market Segments • Relatively homogeneous groups of perspective buyers that that

result from the market segmentation process

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Market Segmentation • involves aggregating prospective buyers into groups, or segments,

that: 1. Have common needs 2. Will respond similarly to a marketing action.

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Product Differentiation • a marketing strategy that involves a firm using different marketing

mix actions to help consumers perceive the product as being different and better than competing products

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Why segmentation? ● Linking the various buyers’ needs and the organizations

marketing program ● It’s a means to an end. It leads to a tangible marketing

action that could increase sales and profitability ● Grouping people together by similarity of their needs and

benefits they are looking for in order to make a purchase

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Market segmentation links market needs to an organization’s marketing program through

marketing mix actions


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Market Product Grid ● a framework to relate the market segments of potential buyers to

products offered or potential marketing actions


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A market-product grid shows the kind of sleeper that is targeted for each of the bed pillows with a

different firmness

Where do they get these numbers? - MR


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Why segment markets? ● One-Size-Fits-All Mass Markets

No Longer Exist ● One Product and

Multiple Market Segments ● Multiple Products and Multiple Market Segments


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One-Size-Fits-All Mass Markets No Longer Exist

• Targeting high-income and low income families

• P&G expects segmentation to increase sales, profit, and return on investment


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One Product and Multiple Market Segments

• When a organization produces only one single product or service and attempts to sell it to two or more market segments

• Avoids extra costs of development and producing additional versions of the product, thus not having to do a separate promotional campaign


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One Product and Multiple Market Segments

• Magazines and books are single products directed towards two or more distinct market segments.

• Who reads Harry Potter? Pre-teens, teens, and adult segments around the world in over 67 different languages.


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Multiple Products and Multiple Market Segments

• Products targeted to a different type of customer

• Producing multiple versions of essentially the same product – a vehicle

• But for this to work: 1. Must meet customer needs 2. Doesn’t reduce quality or increase price 3. Adds to Ford’s sales revenue and profit


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Segments of One ● Back in the day economies of scale in manufacturing

mass-produced items so affordable that people were willing to compromise their individual tastes and settle for standardized products

● Mass Customization ○ Due to technology and flexible manufacturing, tailored

products and services can be produced in mass quantities to individual costumers on a high-volume scale

● Build-to-Order (BTO)


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The Segmentation Tradeoff: Synergies vs. Cannibalization ● Organizational Synergy ● Cannibalization ● “Tiffany/ Walmart” Strategies


Organizational Synergy • the increased customer service “value” achieved through performing

organizational functions (i.e. marketing or manufacturing) • More products • Improved quality of existing products • Lower prices • Easier access to products through channels of distribution

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“Tiffany/ Walmart” Strategies • Offering variations of the same basic offering to high-end and low-

end segments

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“Tiffany/ Walmart” Strategies


Cannibalization • when new products and new stores steal customers and sales from

older, existing products

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Cannibalization

“successful, relatively affluent, fashion

conscious women”

“value-conscious women who want a casual lifestyle at work and home”


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The five key steps in segmenting and targeting markets that link market needs to

a firm’s marketing program


Step One ● Group potential buyers into segments

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Group potential buyers into segments

Opened a restaurant on campus at an urban university that offers day and night classes. You offer the basics of all Wendy’s restaurants You are free to set hours and local advertising to generate profit


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Criteria to Use in Forming the Segments ● Similarity of Needs of Potential Buyers within a Segment ● Potential for Increased Profit ● Similarity of Needs of

Potential Buyers among Segments


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Criteria to Use in Forming the Segments ● Differences of Needs of Buyers Among Segments ● Potential of a Marketing Action to Reach a Segment

1. How will they react to it? 2. Will they eventually purchase the brand?


4 Ways to Segment Consumer Markets • Geographic Segmentation • Demographic Segmentation • Psychographic Segmentation • Behavioral Segmentation

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Geographic Segmentation

Geographic Segmentation

• Based on where prospective customers live and work Too spicy for the East and not spicy enough for the West and Southwest

• Texas and California has spicier cheese to accomodate thie region


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Demographic Segmentation

Demographic Segmentation

• Based on some objective, physical (gender, race), measurable (age, income), or other classification attribute (birth era, occupation) of prospective customers

• More than half the U.S. households have 1-2 individuals, thus serving sizes are 1-2 servings per can


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Psychographic Segmentation

Psychographic Segmentation

• Based on subjective mental or emotional attributes (personality), aspirations (lifestyle), or needs of prospective customers

• Campbell’s Star Wars Ad: New Kids https:/ / www.youtube.com/ watch?v=eLyrllt2SyM

• Campbell’s Star Wars Ad: Dads https:/ / www.youtube.com/ watch?v=eLyrllt2SyM

https://www.youtube.com/watch?v=eLyrllt2SyM

https://www.youtube.com/watch?v=eLyrllt2SyM


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Behavioral Segmentation


• Based on product features that are important to different customers

• College dorm students prepare their own food and snack late at night in dorm rooms that are very limited on space

• MicroFridge offers a combo microwave, refrigerator, freezer, and charging station appliance


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• Based on usage rates during a specific period of time; also called frequency marketing

• Many airline companies have frequent flier programs to encourage passengers to fly with them often and create loyal customers


80/ 20 Rule • a concept that suggests 80 percent of a firm’s sales are obtained

from 20 percent of its customers • “80% of income in Italy was received by 20% of the Italian

population”

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Segmentation bases, variables, and breakdowns for U.S. consumer markets


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Comparison of various kinds of users and nonusers for Wendy’s, Burger King, and McDonald’s fast-food restaurants; adults asked

about fast-food preferences


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Segment Variables ● Students

○ Dorms, Sororities and fraternities OR Apartments ○ Day OR Night Commuters

● Non-Students ○ Faculty & Staff ○ Residents in Area ○ Workers in Area

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Ways to Segment Organizational Markets

Geographic Segmentation • Personal sales calls

Demographic Segmentation • Printing needs vary by people

Behavioral Segmentation • The size of the firm determines

the copier product


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Segmentation bases, variables, and breakdowns for U.S. organizational markets


Step Two ● Group products into categories

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Individual Wendy’s Products

Founder Dave Thomas promised four basic items: 1. “Hot ‘N Juicy”

hamburgers 2. Frosty Dairy Desserts

(Frostys) 3. French Fries 4. Soft Drinks


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Groupings of Wendy’s Products

• Breakfast • Lunch • Dinner

• Between Meal Snack • After Dinner Snack


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Wendy’s new products and innovations target specific market segments based on a customer’s gender, needs,

or university affiliation


Step Three ● Develop a market-product grid and estimate the size of the markets

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Forming a Market Grid

Base on past purchase data Guesstimate if funds are low


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Selecting a target market for your Wendy’s fast-food restaurant next to an urban university (target market is shaded)


Step Four ● Select the target markets

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Criteria to Use in Selecting Target Markets

1. Divide the market into segments 2. Actually pick the target segments


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Criteria to use in selecting target markets

• Market Size • Expected Growth • Competitive Position • Cost of Reaching the Segment • Organizational Compatibility


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Choose the products and segments ● No Breakfast

○ Too small a market and incompatible with your objectives and resources

● Four Student Segments Only ○ Look back (Slide 51); Not the three nonstudent

segments – but not turning their business away either!


Step Five ● Taking marketing actions

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Wendy’s Segmentation Strategy

1. Day Commuters 2. Between-Meal Snacks 3. Dinners to Night Commuters 4. Keep an eye on competition


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Advertising actions to market various meals to a range of possible market segments of students


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Keeping an Eye on Competition

• Simple menu and décor

• Modest prices

• Fresh beef

• Fresh potatoes from specific farms

• Trans-fat-free menu (cooking with peanut oil)


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Keeping an Eye on Competition


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Apple’s Segmentation Strategy


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Product Positioning ● the place a product occupies in consumers’ minds based

on important attributes relative to competitive products

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Two Approaches to Product Positioning ● Head-to-Head Positioning

○ Competing directly with competitors on similar product attributes in the same target market

● Differentiation Positioning ○ Involves seeking a less competitive, smaller market

niche in which to locate a brand

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Product Positioning with Perceptual Maps 1. Identify Important Attributes for a Product or Brand Class 2. Customers’ Ratings of Competing Products or Brands on

These Attributes 3. Customer’s Ratings of the Company’s Products or Brands

on These Attributes 4. Reposition the Company’s Products or Brands in the Minds

of Consumers


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Perceptual Maps ● a means of displaying in two dimensions the location of

products or brands in the minds of consumers to enable a manager to see how they perceive competing products or brands, as well as the firm’s own product or brand

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Repositioning Chocolate Milk

• Identify Important Attributes for Adult Drinks • Discover How Adults See Competing Drinks • Discover How Customers See Chocolate Milk • Reposition Chocolate Milk to Make It More

Appealing to Adults


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A perceptual map of the location of beverages in the minds of American adults


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The strategy American dairies are using to reposition chocolate milk to reach adults


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Repositioning Chocolate Milk

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Market segmentation, targeting, and positioning Marketing 3331 Segmentation Targeting and... · The five key steps in segmenting and targeting markets that link market needs to a