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C H A P T E R T E N

MARKET SEGMENTATION,TARGETING, AND POSITIONING

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AFTER READING THIS CHAPTER YOU SHOULDAFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO:BE ABLE TO:

Explain what market segmentation is, when to use it, and thefive steps involved in segmentation.

Recognize the different dimensions used to segment consumerand organizational markets.

Develop a market-product grid to use in segmenting andtargeting a market.

Interpret a cross tabulation to analyze market segments.

Understand how marketing managers position products inthe marketplace.

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Sneakers Story: From Little Skirmishes to All-out WarSneakers Story: From Little Skirmishes to All-out War

Global $12 billion dollar sneaker market forall kinds of athletic shoes.

Sneaker manufacturers are searching for newmarket segments of consumers and ways todifferentiate their products from everyoneelses.

Reeboks marketing research shows that in1971 only 1 of every 27 women was involved insports; today it is 1 in 3!! Thus Reebok hasput special emphasis on the female market.

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Market Segmentation DefinedMarket Segmentation Defined

Market segmentation involves aggregatingprospective buyers into groups that:

1. Have common needs and

2. Will respond similarly to the marketing action.

The groups that result from the

market segmentation process are

called market segments, a relatively

homogeneous collection of prospective buyers.

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Product Differentiation DefinedProduct Differentiation Defined

Product differentiation, in the broadest sense,involves a firms using different marketing mixactivities, such as product features and advertising,to help consumers perceive the product as beingdifferent and better than competing products. Theperceived differences may involve physical ornonphysical features, such as image or price.

In a narrower sense, product differentiation involvesa firms selling two or more products with differentfeatures targeted to different market segments.

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PP10-1 Market Segmentation Links Market Needs to PP10-1 Market Segmentation Links Market Needs to an Organizations Marketing Program an Organizations Marketing Program

Identify marketneeds

Benefits in termsof:

Product FeaturesExpenseQualitySavings in timeand convenience

Process ofsegmenting andtargeting markets

Execute marketing program

A marketing mix in terms of:ProductPricePromotionPlace

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PP10-2 Reebok Market-Product GridMarket Segment Product

GROUP Running Aerobic Tennis Basketball Childrens Walking Cross Step Athletic Golf WITH Shoes Shoes Shoes Shoes Shoes Shoes Traing Traing clothing shoes

General NEED 1981 1982 1984 1984 1984 1986 1988 1991 1993 1997

runners P P

Performance- aerobic P p

conscious dancers

consumers tennis P P

(athletes) players

basketball P P

players

step S P

exercisers

golfers P P

Fashion- comfort & S S S S S S S

conscious style

consumers conscious

(nonathletes) walkers S S S S P P

children P

KEY: P=Primary Market S=Secondary Market

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When To SegmentWhen To Segment

1. One Product & Multiple

Market Segments

2. Multiple Products & Multiple

Market Segments

3. Segments of One: Mass

Customization

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Concept CheckConcept Check

1. Market segmentation involvesaggregating prospective buyers intogroups that have two keycharacteristics. What are they?

2. What is product differentiation?

3. The process of segmenting andtargeting markets is a bridge betweenwhat two marketing activities?

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PP10-3 Five Steps in Segmenting and Targeting MarketsPP10-3 Five Steps in Segmenting and Targeting Markets

Identifymarketneeds

Steps in segmenting andtargeting marketsForm prospective buyersinto segments

Form products to be soldinto groups

Develop a market-productgrid and estimate size ofmarkets

Select target marketsTake marketing actions toreach target markets

Execute

marketing

program

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Criteria to Use in Forming Market SegmentsCriteria to Use in Forming Market Segments

1. 1. Potential for increased profit and ROI.Potential for increased profit and ROI.

2.2. Similarity of needs of potential buyers within aSimilarity of needs of potential buyers within a

segment.segment.

3.3. Difference of needs of buyers among Difference of needs of buyers among segments.segments.

4.4. Feasibility of marketing action to reach a Feasibility of marketing action to reach a segment.segment.

5.5. Simplicity and cost of assigning potential buyersSimplicity and cost of assigning potential buyers

to segments.to segments.

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MAIN DIMENSION SEGMENTATION TYPICAL

VARIABLES BREAKDOWNSCUSTOMER CHARACTERISTICS

Geographic

Demographic

RegionCity or CensusMetropolitan area(CMA) sizeDensityClimate

Atlantic, Quebec, Ontario, Prairies, British ColumbiaUnder 5,000; 5,000-19,999; 20,000-49,999; 50,000-99,999; 100,000-249,999; 250,000-499,999; 500,000-999,999; 1,000,000 or more

Urban; suburban; small town; ruralEast; West

GenderAge

RaceLife StageIncome

Family sizeHome ownershipEducation

Male; female

Under 6; 6-11; 12-17; 18-24; 25-34; 35-44; 45-54; 55-64; 65-74; 75 and over

White; Black; Asian; Native; otherYoung single; young married; older married; etc.Under $10,000; 10,000-19,9999; 20,000-29,999; 30,000-39,999 40,000-54,999; 55,000-74,999; $75,000+

1; 2; 3; 4; 5 or moreOwn home; rent homeGrade school or less; some high school; high school graduate;some college; college graduate

PP10-4a Canadian Consumer Market Segmentation VariablesPP10-4a Canadian Consumer Market Segmentation Variables

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PP10-4b Canadian Consumer Market Segmentation VariablesPP10-4b Canadian Consumer Market Segmentation Variables

MAIN DIMENSION SEGMENTATION TYPICAL

VARIABLES BREAKDOWNS

CUSTOMER CHARACTERISTICS

Behavioural

Psychographic

Benefits soughtUsage rateUser statusLoyalty status

Quality; service; low cost Light user; medium user; heavy user

Non-user; ex-user; prospect; first-time user; regular user None; medium; strong

Personality

Lifestyle (GoldFarbSegments)

Gregarious; compulsive; extroverted; introverted

Structured; discontented; fearful; assured;resentful; caring

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MAIN DIMENSIONS VARIABLES TYPICAL BREAKDOWNS

Geographic Region Atlantic, Quebec, Ontario,segmentation Prairies, British Columbia

Location In CMA; not in CMA

Demographic NAICS code 2-digit; 3-digit; 4-digit; 5-digitsegmentation categories

Number of Employees 119; 2099; 100249; 250+Annual Sales Volume Less than $1 million; $110 mil-

lion; $10100 million; over$100 million

Behavioural Benefits sought Quality; customer service; lowsegmentation price

Usage rate Light user; medium user; heavyuser

User status Nonuser; ex-user; prospect; first-time user; regular user

Loyalty status None; medium; strongPurchase method Centralized; decentralized;

Individual; groupType of buy New buy; modified rebuy; straight

rebuy

MAIN DIMENSIONS VARIABLES TYPICAL BREAKDOWNS

Geographic Region Atlantic, Quebec, Ontario,segmentation Prairies, British Columbia

Location In CMA; not in CMA

Demographic NAICS code 2-digit; 3-digit; 4-digit; 5-digitsegmentation categories

Number of Employees 119; 2099; 100249; 250+Annual Sales Volume Less than $1 million; $110 mil-

lion; $10100 million; over$100 million

Behavioural Benefits sought Quality; customer service; lowsegmentation price

Usage rate Light user; medium user; heavyuser

User status Nonuser; ex-user; prospect; first-time user; regular user

Loyalty status None; medium; strongPurchase method Centralized; decentralized;

Individual; groupType of buy New buy; modified rebuy; straight

rebuy

PP10-5 Segmentation Variables for Organizational MarketsPP10-5 Segmentation Variables for Organizational Markets

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PP10-6 Selecting a Target Market for your Fast-Food RestaurantPP10-6 Selecting a Target Market for your Fast-Food Restaurant