22/4/2025

Market
Segmentation,
Targeting &
Positioning

What are the different levels of market

segmentation?

How can a company divide a market

Chapter into segments?
Questions How should a company choose the
most attractive target markets?

What are the requirements for effective

segmentation?

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Create Value for Targeted Customers

Selecting Customers to serve

Market Segmentation

MARKETING’S BASIC MISSION is to create a difference

between a company’s offering and that of its
competitors on an attribute important to customers.

To create differentiation, marketers use segmentation,

targeting, and positioning

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Market Segmentation

Market segmentation is the process that companies use

to divide large heterogeneous markets into small
markets that can be reached more efficiently and
effectively with products and services that match their
unique needs

Market Segmentation is the process of diving the

market into homogeneous groups of customers
who respond similarly to a particular marketing
mix

Segmentation is classification of customers (and)

prospect using defined characteristics that allow you
to easily find and categorize people, while helping
you understand and predict how they may act

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Segmenting Consumer Markets

Geographic Demographic Psychographic Behavioral

Nations, states, regions, Age and Life Cycle, Life Stage Motivation, perceptions, Knowledge, attitudes, uses
counties, cities, or Generation, Income learning, memory or responses to products
neighborhoods Race & Culture, Gender
.

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Major Segmentation Variables for Consumer Markets

Geographic Pacific Mountain, West North Central, West Occupation Professional and technical; managers, officials, and
region South Central, East North Central, East South proprietors; clerical sales; craftspeople; forepersons;
Central, South Atlantic, Middle Atlantic, New operatives; farmers; retired; students; homemakers;
England unemployed
City or Under 5,000; 5,000–20,000; 20,000–50,000;
metro size 50,000–100,000; 100,000–250,000; Education Grade school or less; some high school; high school
250,000–500,000; 500,000–1,000,000; graduate; some college; college graduate; post college
1,000,000–4,000,000; 4,000,000+
Density Urban, suburban, rural Religion Catholic, Protestant, Jewish, Muslim, Hindu, Other
Climate Northern, southern
Race White, Black, Asian, Hispanic, Other
Demograph Under 6, 6–11, 12–17, 18–34, 35–49, 50–64,
ic age 64+ Generation Silent Generation, Baby Boomers, Gen X, Millennials
(Gen Y)
Family size 1–2, 3–4, 5+
Family life Young, single; young, married, no children; Nationality North American, Latin American, British, French,
cycle young, married, youngest child under 6; young; German, Italian, Chinese, Indian, Japanese
married, youngest child 6 or older; older,
married, with children; older, married, no Social class Lower lowers, upper lowers, working class, middle
children under 18; older, single; other class, upper middles, lower uppers, upper uppers

Gender Male, female Psychographi Culture-oriented, sports-oriented, outdoor-oriented

Income Under $10,000; $10,000–$15,000; $15,000– c lifestyle
$20,000; $20,000–$30,000; $30,000– Personality Compulsive, gregarious, authoritarian, ambitious
$50,000; $50,000–$100,000; $100,000+

Major Segmentation Variables for Consumer Markets

Behavioral Regular occasion, special occasion
occasions
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, negative, hostile

product

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Geographic Segmentation
Geographical units

• Nations, states, regions, counties, cities, or

neighborhoods

Nielsen Claritas’ PRIZM

(Potential Rating Index by Zip Markets)
• Education and affluence
• Family life cycle
The inhabitants in a cluster tend to lead
• Urbanization similar lives, drive similar cars, have similar
• Race and ethnicity jobs, and read similar magazines

• Mobility

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Demographic Segmentation
Age and Life Cycle
Life Stage

Gender

Income

Generation

Social Class

Demographic Segmentation

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Demographic Segmentation

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Psychographic Segmentation
Psychographics is the science of using psychology and demographics to better understand consumers

• Buyers are divided into groups on the basis of psychological/personality traits,

lifestyle, or values

VALS (Values and Lifestyles) Segmentation System

Psychographic segmentation divides US buyers into eight primary
groups based on social class, lifestyle, or personality traits
The main dimensions of the VALS segmentation
framework are consumer motivation (the horizontal
dimension) and consumer resources (the vertical
dimension).

Consumers are inspired by one of

three primary motivations: ideals,
achievement, and self-expression.
Those primarily motivated by ideals
are guided
by knowledge and principles.
Those motivated by achievement to look for
products and services that demonstrate success to
their peers.

Consumers whose motivation is self-expression

desire social or physical activity, variety, and risk.
Personality traits such as energy, self-confidence,
intellectualism, novelty seeking, innovativeness,
impulsiveness, leadership, and
vanity—in conjunction with key demographics—
determine an individual’s resources.
Different levels of resources enhance
or constrain a person’s expression of his or
her primary motivation.

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Behavioral Segmentation is a form of customer segmentation that is based on

patterns of behavior displayed by customers as they interact with a
company/brand or make a purchasing decision.
It allows businesses to divide customers into groups according to their
knowledge of, attitude towards, use of, or response to a product, service or
brand.

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Behavioral segmentation
Divides buyers into groups based on their knowledge, attitudes,
uses, or responses to a product
Occasions (celebration, Milk)
We can distinguish buyers User status (nonusers, xusers,
according to the occasions when potential users, first timer, Usage rate (HML) e,g, data plan
they develop a need, purchase a regular – ie lifecycle stage )
product, or use a product

Loyalty status (e.g., hardcore,

Attitude – enthusiastic, positive,
Buyer-readiness stage split loyals, shifting loyals,
indifferent, negative and hostile
switchers)

Benefits sought (different Behavior is more tied

benefits sought by segments)
Arm and Hammer, 100+, scented into how consumers
and unscented soaps use the product

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Buyers Readiness Stage

Groups individuals according to their readiness to purchase the product

The segmentation model is particularly useful in formutlating and monitoring the marketing communication strategies
employed to move consumers towards purchase of a product/brand

Awareness Interest Evaluation Trial Adoption

becomes aware of the whether trying the tries the new

new product, but lacks seeks information new product makes product on a small
information about it sense scale to improve his
or her estimate of
its value

Behavioral Segmentation – Buyer Readiness Stage

Aware

Ever tried
The brand funnel
Recent trial illustrates
variations in the
Occasional user
Buyer-Readiness
Regular user
Stage

Most often used

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Behavioral Segmentation Breakdown

Loyalty Status

Hard-core

Split loyals 2 or 3 brands

Shifting loyals Shift from one brand to another

Switchers

NCH

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Effective Segmentation Criteria

The size, purchasing power, and profiles of the
Measurable segments can be measured.

The market segments are large or profitable

Substantial enough to serve.

The market segments can be effectively

Accessible reached and served.

The segments are conceptually distinguishable

Differentiable and respond differently to different marketing
mix elements and programs.

Effective programs can be designed for

Actionable attracting and serving the segments.

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Evaluating and Selecting the Market Segments

• Possible Levels of Segmentation

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Evaluating Market Segments

• Segment size and
growth
• Segment structural
attractiveness – factors
that affect long run
attractiveness:
competitors, substitute
products, power of
buyers, powerful
suppliers (see Porter
Five Forces).
• Company objectives
and resources

Market Segmentation Defines Possible

Target Markets

Broad product-market (or generic market) name goes

here (The bicycle-riders product-market)

Submarket 1
(Exercisers) Submarket 3 Submarket 4
(Transportation riders) (Socializers)
Submarket 2
(Off-road
adventurers) Submarket 5
(Environmentalists)

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Targeting

Targeting or target market selection is the process of deciding which market

segments the company should actively pursue to generate sales

Firms choose between adopting undifferentiated, differentiated or concentrated

targeting strategies

Target market consists of a set of buyers who share common needs or

characteristics that the company decides to serve

Targeting Strategies

Undifferentiated
• Attempts to target all customers with the same
marketing mix e.g., Ford model T, staple products

Differentiated
• Simultaneously targets several market segments, each
with a unique marketing mix, e.g., Aston Martin, Ford,
Jaguar, Land Rover, Lincoln and Volvo

Concentrated
• Selects one segment and concentrates on serving it
e.g., Victoria Secret

One-to-one

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Target Marketing Strategies:

From Broad to Narrow

Strategies for Selecting Target Markets

Undifferentiated Strategy

Company Mix Market

Differentiated Strategy

Marketing Mix 1 Segment 1

Marketing Mix 2 Segment 2

Marketing Mix 3 Segment 3

Concentrated Strategy Segment 1

Company Marketing Mix Segment 2

Segment 3

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Product/Brand Positioning

The act of designing a company’s offering and image to occupy a

distinctive place in the minds of the target market
• Value Proposition
• Positioning is defined as the marketers effort to identify a
unique selling propositions (USP) for the product.

Brand/product position is the way the brand/product is

defined by consumers on important attributes—the place
the brand/product occupies in consumers’ minds relative to
competing products.
• Perceptions
• Impressions
• Feelings /Emotions

Communicating the differences in the brands – why the brand is you

Product/Brand Positioning

Positioning is about developing a unique selling

proposition for the target segment. A company’s USP
should be both unique, that is differentiated from
other competitors, as well as selling – appealing to
the target customers
Companies must be very specific in terms of their intended
positioning or unique selling proposition if they want to stand
out among the clutter of choices confronting customers.

The goal is to locate the brand in the minds of

consumers to maximize the potential benefit to the
firm.
A good brand positioning helps guide marketing strategy by
clarifying the brand’s essence, identifying the goals it helps
the consumer achieve, and showing how it does so in a unique
way

Communicating the differences in the brands – why the brand is you

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Positioning
each of these target markets, the firm develops a market offering that it positions in target
buyers’ minds as delivering some key benefit(s).

Essence of Strategic Marketing

Positioning Example 1
High moisturizing

Tone 7 Zest
4
Dove Lever 2000
5 2
Safeguard
Coast
Lux 8
Nondeodorant 3 Deodorant

1
Dial
Lifebuoy
Lava
6

low moisturizing

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Positioning Example 2

Competitive Frame of Reference

• Competitive frame of reference
• Defines which other brands a brand competes with and which should
thus be the focus of competitive analysis
• Identifying and analyzing competitors

Customers’ Ratings of Competitors on key Success Factors

Customer Product Product Technical Selling

blank
Awareness Quality Availability Assistance Staff

Competitor A E E P P G

Competitor B G G E G E

Competitor C F P G F F

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Points-of-Parity and Points-of-Difference

Points-of-parity (POPs)
• Points of parity are those elements (benefits/ attributes) that are considered mandatory for a brand to
be considered a legitimate competitor in its specific category.
• It is what makes consumer consider your brand, along with your competitors. So before you work on
identifying your competitive advantage, you want to make sure you identify what it takes to be a player in
your category, and have all these points covered.

• POP forms
• Category
• attributes or benefits that consumers view as essential to a legitimate and credible offering
within a certain product or service category. ATMs for banks, cup holders in a car,
• Correlational
• are potentially negative associations that arise from the existence of positive associations for the
brand. If you are luxury you cant be economical
• Competitive
• are associations designed to overcome perceived weaknesses of the brand in light of competitors’
points-of-difference

Points-of-Parity and Points-of-Difference

Points-of-difference (PODs)
• Are the attributes that make your brand unique. It is your competitive advantage. It is what
your brand slogan should reflect.
• Attributes/benefits that consumers strongly associate with a brand, positively evaluate, and
believe they could not find to the same extent with a competitive brand.
• POD criteria
• Desirable
• Consumers must see the brand association as personally relevant to them.
Substantiates
• Deliverable
• the internal resources and commitment to feasibly and profitably create and maintain
the brand association in the minds of consumers
• Differentiating
• consumers must see the brand association as distinctive and superior to relevant
competitors

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Communicating POPs and PODs

Negatively correlated attributes/benefits

• Low price vs. high quality
• Taste vs. low calories The best approach clearly is to develop a product or service
that performs well on both dimensions.

• Powerful vs. safe

• Ubiquitous vs. exclusive
• Varied vs. simple

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How Should Business Markets Be Segmented?

Demographic

Operating variables

Purchasing approaches

Situational factors

Personal characteristics

Major Segmentation Variables for Business Markets

Major Segmentation Variables for Business Markets
Demographic
1. Industry: Which industries should we serve?
2. Company size: What size companies should we serve?
3. Location: What geographical areas should we serve?

Operating Variables
4. Technology: What customer technologies should we focus on?
5. User or nonuser status: Should we serve heavy users, medium users, light users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or few services?

Purchasing Approaches
7. Purchasing-function organization: Should we serve companies with a highly centralized or decentralized purchasing
organization?
8. Power structure: Should we serve companies that are engineering dominated, financially dominated, and so on?
9. Nature of existing relationship: Should we serve companies with which we have strong relationships or simply go after the most
desirable companies?
10. General purchasing policies: Should we serve companies that prefer leasing? Service contract? Systems purchases? Sealed
bidding?
11. Purchasing criteria: Should we serve companies that are seeking quality? Service? Price?

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Major Segmentation Variables for Business

Situational Factors
12. Urgency: Should we serve companies that need quick and sudden delivery or service?
13. Specific application: Should we focus on a certain application of our product rather than all
applications?
14. Size or order: Should we focus on large or small orders?

Personal Characteristics
15. Buyer-seller similarity: Should we serve companies whose people and values are similar to ours?
16. Attitude toward risk: Should we serve risk-taking or risk-avoiding customers?
17. Loyalty: Should we serve companies that show high loyalty to their suppliers?

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