Steps in Market Segmentation, Targeting, and Positioning

1. Market Segmentation Market Targeting Market Positioning 1. Identify segmentation variables and segment the market 2. Develop profiles of resulting segments 3. Evaluate attractiveness of each segment 4. Select the target segment(s) 5. Identify possible positioning concepts for each target segment 6. Select, develop, and communicate the chosen positioning concept Steps in Market Segmentation, Targeting,and Positioning

2. The process of grouping customers into relatively homogeneous sets such that customers within a segment are similar to one another in the way they respond to marketing effort directed at them. Market Segmentation A market segment is a specific group of customers with similar needs, purchasing behaviors, and identifying characteristics.

3. Market Segmentation “All markets are heterogeneous and thus, a nonsegmented strategy is inevitably suboptimal.” --Wind and Robertson (1983) “The most difficult aspect of any segmentation approach is the translation of the results into a strategy.” --Wind (1978) “Market segmentation offers potential for greater profitability through increased efficiency and customer satisfaction.” --Best (1982)

4. Toyota’s Adjacent Segmentation Strategy Lexus Supra Avalon Price Level Previa Camry Corrolla Paseo Tercel Perceived Quality

5. Benefits of Market Segmentation 1. Helps in the design of marketing programs that are most effective for reaching homogeneous groups of customers. 2. Improves the strategic allocation of marketing resources. 3. Identifies opportunities for new product development. • Methodologies: • Automatic Interaction Detector (AID) • Chi-Squared Automatic Interaction Detector (CHAID) • Regression and Discriminant Analysis • Hierarchical clustering (group similar items)

6. Bases for Segmenting Consumer Markets • Geographic • Region, City or Metro Size, Density, Climate • Demographic • Age, Gender, Family Size and Life Cycle, Race, Occupation, Income • Psychographic • Lifestyle or Personality • Behavioral • Benefits, Usage Situations

7. Geographic Segmentation Variable Typical Breakdown Region Pacific, Mountain, West North Central, West South Central, East North Central, East South Central, South Atlantic, Middle Atlantic, New England City or Metro Under 5,000; 5,000-20,000; 20,001-50,000; Size 50,001-100,000; 100,001-250,000; 250,001-500,000; 500,001-1,000,000;1,000,001-4,000,000 over 4,000,000 Density Urban, suburban, rural Climate Northern, southern

8. Demographic Segmentation Variable Typical Breakdown Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+ Gender Male, female Family size 1-2, 3-4, 5+ Family life Young, single; young, married, no children; young, married, youngest child under six; cycle young, married, oldest child over six; older, married, with children; older, married, no children under 18; older, single; other Income Under $10,000; $10,001-$15,000; $15,001-$20,000; $20,001-$30,000; $30,001-$50,000; $50,001-$100,000; over $100,000 Occupation Professional and technical; managers, officials, and proprietors; clerical, sales; craftspeople; farmers; laborers; retired; students; housewives; unemployed Education Grade school or less; some high school; high school; some college; college graduate; graduate degree Religion Catholic, Protestant, Jewish, Muslim, Hindu, other Race White, black, Asian, Hispanic Nationality American, British, French, German, Italian, Japanese

9. Psychographic Segmentation Variable Typical Breakdown Lifestyle Activities, interests, opinions Personality Compulsive, gregarious, authoritarian, ambitious Values Sense of belonging, excitement, warm relationships with others, self-fulfillment, security, being well respected, fun and enjoyment of life, self-respect, sense of accomplishment

10. Behavioral Segmentation Variable Typical Breakdown Usage situation Regular occasion, special occasion Benefits Quality, service, economy, speed User status Nonuser, ex-user, potential user, first-time user, regular user Usage rate Light user, medium user, heavy user Loyalty status None, medium, strong, absolute Readiness stage Unaware, aware, informed, interested, desirous, intending to buy Attitude toward Enthusiastic, positive, indifferent, product negative, hostile

11. Strategic Approach to Segmentation and Targeting • The usage pattern should provide the starting point for marketing segmentation. Other factors (demographics, benefits, lifestyles etc.) may be used to make the usage-based approach actionable and to enrich the positioning.

12. The Usage-based Approach Convey the Benefits to The Swing Group Those Who Love US Those who are Indifferent Those Who Hate US Swing Group Future Barriers Understand Benefits

13. Brand and Category Development BDI High Low High Maintain Point of Entry Market Penetration CDI Category Build ? Low

14. Major Segmentation Variables for Business Markets Demographic • Industry • Company size • Location Operating Variables • Technology • User/nonuser status • Customer capabilities Purchasing Approaches • Purchasing-function organization • Power structure • Nature of existing relationship • General purchasing policies • Purchasing criteria Situational Factors • Urgency • Specific application • Size of order Personal Characteristics • Buyer-seller similarity • Attitudes toward risk • Loyalty

15. Market Targeting The process of evaluating the various segments and deciding how many and which segments to serve.

16. Segment Attractiveness

17. Segment Profitability Segment Segment

18. Person/Situation Segmentation Step 1: Use observational studies, focus group interviews, and secondary data to discover whether different usage situations exist and whether they are determinant, in the sense that they appear to affect the importance of various product characteristics. Step 2: Identify needs, benefits and perceptions by usage situation as well as by individual difference characteristics. Step 3: Construct a person/situation segmentation matrix. The rows are the major usage situations and the columns are the groups of users identified by a singlecharacteristic or combination of characteristics. Step 4: Profile each nonempty cell. State the major benefits sought, important product attributes, and unique market behavior for each nonempty cell of the matrix. (Some types of people will never consume the product in certain situations.) Step 5: Rank the cells in the matrix in terms of potential sales volume. Step 6: Position your competitors’ offerings within the matrix. The person/situation segments they currently serve can be determined by the product feature they promote and other marketing strategies. Step 7: Position your offering within the matrix on the same criteria. Step 8: Assess how well your current offering and marketing strategy meet the needs of the segment compared to the competitions’ offering. Step 9: Identify market opportunities based on segment size, needs, and competitive advantage.

19. Person by Situation Segmentation 1. Profile segments 2. Rank segments Person 3. Identify competitors 4. Identify company’s position Benefits sought 3 Salient attributes Competitor B Behaviors Usage Situation Competitor A 2 Company Company 1 Competitor C

20. Person by Situation Segmentation: Family Dining Segments Person Married with kids, $35,000 Married with kids, $25,000+ Female $25,000 or less Female, 22-44 Married with kids • Cabin Fever • Reduce loneliness • Less bored blue • Get out of the house • Mom’s Night Off • Reward, rejuvenate • An extravagance Special trip, Eat at restaurant Eat at restaurant, 3+ people, Under $4/person • On the Way Home • Quick and easy • Convenient • Kid’s feel special • Kid’s Treat • Make kids happy • Kids won’t • embarrass me Situation Family dinner, Eat at home, Under $5/person • Family Meal • Reward everyone • Easy to get • Food kids like Family dinner, Eat at home, $3/person • Good Price-Value • Save money • Stay home, don’t cook • Discount prices Source: Pizza Hut

21. Person by Situation Segmentation: Family Dining Segments Person Married with kids, $35,000 Married with kids, $25,000+ Female $25,000 or less Female, 22-44 Married with kids • Cabin Fever • Reduce loneliness • Less bored blue • Get out of the house Special trip, Eat at restaurant Eat at restaurant, 3+ people, Under $4/person • Kid’s Treat • Make kids happy • Kids won’t • embarrass me Situation Family dinner, Eat at home, Under $5/person • Family Meal • Reward everyone • Easy to get • Food kids like Family dinner, Eat at home, $3/person • Good Price-Value • Save money • Stay home, don’t cook • Discount prices Source: Pizza Hut