Segmentation, Targeting, and Positioning

1. Segmentation, Targeting, and Positioning Professor Lawrence Feick University of Pittsburgh

2. Outline • Definitions • Segmentation and Targeting • segmentation bases • criteria • Positioning • definition and uses • perceptual maps • Summary

3. Definitions: markets • Market • people or organizations with the willingness, ability, and authority to buy a product • Target market • people or organizations to whom a particular marketing mix is aimed • Segmentation • dividing a heterogeneous market into homogeneous submarkets

4. Definitions: targeting approaches • Mass market (undifferentiated marketing) • Segmentation • focus (concentrated marketing, niche marketing) • multi-segment (differentiated marketing)

5. Segmentation questions • Segmentation • dividing a heterogeneous market into homogeneous submarkets • Questions: • heterogeneous on what? • on what basis to divide? • how finely to divide?

6. Segmentation bases • Segmentation base: the variable or variables on which the market is divided • A good segmentation base should: • yield differences in product behavior • give insight into why consumers buy • help guide marketing mix decisions

7. Types of segmentation bases • Independent of product category • demographic characteristics • geographic characteristics • psychographic/AIO characteristics • Product category related • benefits sought/needs met • product usage, brand loyalty, price sensitivity

8. Examples of demo/geo-graphics • Age • Income • Education • Marital status • Family lifecycle • Region of country

9. Ebony, June 1998

10. Family Circle, June 1998

11. Proprietary geodemographic segmentation solutions • Census data updated and augmented with purchases, subscriptions, auto registrations • Group (cluster) geographic regions that are similar: often zip code-based • Uses: direct mail, media buys, site location • Eg: PRIZM from Claritas. Check it out: • http://www.claritas.com/prizm.htm

12. Examples of psychographics • Activities • work, hobbies, social events, vacation, clubs • Interests • family, home, job, community, fashion, food • Opinions • self, politics, social issues, business, culture • Lifestyle • VALS2 groups

14. What is your VALS 2 type? • Typical questions: • I follow the latest trends in fashion • I would rather make something than buy it • I would like to spend a year or more in a foreign country • Check it out at: • http://future.sri.com/vals/survey.html

15. Examples of benefits sought • Toothpaste • cavity prevention, whiteness, fresh breath • Cake mix • ease of preparation, cost, taste, uniqueness • Cameras • ease of use, technical features, compactness

16. Redbook, July 1998

17. Examples of product-related segmentation • Product usage: nonusers, light users, heavy users • e.g., beer, soft drinks, movie renters • Brand loyalty: loyals and switchers • e.g., laundry detergent, coffee • Price sensitive v. price insensitive

18. Selecting segments • Segment size • Segment growth and growth potential • Present and future competition • Consumer purchase ability and likelihood • Reachability

19. Positioning • Usage is sloppy- often combining a brand’s position with the marketers actions to create the position • Position: brand meaning perceived by the target market in terms of • other, competing products • perceived product characteristics, features

20. How the manufacturer sees the product

21. Manufacturer’s view • It is made from a durable alloy • It is sold through independent dealers • It has a three year warranty • It is the best we have ever produced

22. How the customer sees the product

23. Target market’s view • It looks really good and seems sturdier than brand x or y • Can it fit in my apartment? • Would people like me buy one?

24. Positioning matters! • Virginia Slims • Acura, Lexus, Infiniti • Vodka

25. What affects a product’s position? • Product: design, features, style, packaging, warranty • Price: price level, discounts • Promotion: message, media, sales promotion, publicity • Distribution: exclusivity of coverage, types of retailer

26. Issues in positioning • What/how many characteristics do consumers use to distinguish products? • Where are existing products located with respect to these characteristics? • Where is an ideal product located?

27. Perceptual mapping • Statistical tools used to locate products in terms of perceived characteristics • Interpretation: • Products closer together are perceived as similar • Similarity relates to competitiveness • Can also plot “ideal points”

28. Perceptual maps: examples • Pain reliever map (text page 251) • US auto industry circa 1985

29. Perceptual map of the US auto market circa 1985 Classy, prestigious, distinctive Mercedes-Benz Cadillac Porsche BMW Chrysler Buick Conservative, older appeal Oldsmobile Pontiac Sporty, youth oriented, performance Chevrolet Datsun Toyota Dodge Volkswagen Practical, inexpensive to own and operate

30. Questions • What is the most likely competitor for Cadillac? • Would a GM manager be happy about Buick and Oldsmobile? • How is VW perceived in the US in 1998 compared to the mid 1980s?

31. Reprise: segmentation, targeting, and positioning • Benefits: • focus on meeting customer needs, wards off competition, and helps anticipate changes • increases focus on longer term relationship • Costs • segments foregone • Issues • Colt 45, Joe Camel