1.

Introduction Completed

2. Marketing Strategy Completed

3. Market Segmentation Completed

4. Segmenting Consumer Markets Completed

5. Geographic Segmentation Completed

6. Demographic Segmentation Completed

7. Psychographic Segmentation Completed

8. Behavioral Segmentation Completed

9. Using Multiple Segmentation Bases Completed

10. Segmenting Business Markets Completed

11. Segmenting International Markets Completed

12. Requirements for Effective Segmentation Completed

13. Market Targeting Completed

14. Evaluating Market Segments Completed

15. Selecting Target Market Segments

16. Undifferentiated Marketing

17. Differentiated Marketing

18. Concentrated Marketing

19. Micromarketing

20. Choosing a Targeting Strategy

21. Socially Responsible Target Marketing

22. Differentiation and Positioning

23. Positioning Maps

24. Choosing a Differentiation & Positioning Strategy

25. Identifying Value Differences & Competitive Advantages

26. Choosing the Right Competitive Advantages

27. How Many Differences to Promote

28. Which Differences to Promote

29. Selecting an Overall Positioning Strategy

30. More for More

31. More for the Same

32. The Same for Less

33. Less for Much Less

34. More for Less

35. Developing a Positioning Statement

36. Communicating & Delivering Chosen Position

Overview
 Companies today recognize that they cannot appeal to all buyers in the marketplace—or at least not
to all buyers in the same way.
 There are many Buyers who are widely scattered and vary in their needs and buying practices.
 Companies themselves vary widely in their abilities to serve different market segments.
 Therefore, companies must identify the parts of the market they can serve best and most profitably.
 They must also design customer-driven marketing strategies that build the right relationships with
the right customers.
 New technologies—from big data analytics to digital and social media platforms—have greatly
expanded marketers’ capacity to understand and reach consumers on an individualized basis.
 Thus, most companies have moved away from mass marketing and toward target marketing.
 Target Marketing consists of identifying market segments, selecting one or more of them, and
developing products and marketing programs tailored to each.
 LO – 1 Define the major steps in designing a customer value–driven marketing strategy:
market segmentation, targeting, differentiation, and positioning.

Market Strategy
 There are 4 main steps in designing a customer value–driven marketing strategy.
 Segmentation:
o Dividing a market into distinct groups of buyers who have different needs, characteristics,
behaviours and who require separate marketing strategies.
 Targeting
o Evaluating each market segment’s attractiveness and selecting one or more segments to
serve.
 Differentiation
o Differentiating the market offering to create superior customer value.
 Positioning
o Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to
competing products in the minds of target consumers.
 In concept, marketing boils down to two questions:
o Which customers will we serve?
o How will we serve them?
 The goal is to create more value for the customers we serve than competitors do.
 Through Market Segmentation and Targeting the company selects the customers that it will serve.
 Market segmentation involves dividing a market into distinct groups of buyers who have different
needs, characteristics, behaviours and who might require separate marketing strategies or mixes.
 The company identifies different ways to segment the market and develops profiles of the resulting
market segments.
 Market targeting consists of evaluating each market segment’s attractiveness and selecting one or
more market segments to enter.
 In the final two steps, the company decides on a value proposition—how it will create value for
target customers.
 Differentiation involves actually differentiating the firm’s market offering (product or service) to
create superior customer value.
 Positioning consists of arranging for a market offering (product or service ) to occupy a clear,
distinctive, and desirable place relative to competing products in the minds of target consumers.
 LO – 2 List and discuss the major bases for segmenting consumer and business markets.

Market segmentation
 Buyers in any market differ in their wants, resources, locations, buying attitudes, and buying
practices.
 Through market segmentation, companies divide large, diverse markets into smaller segments that
can be reached more efficiently and effectively with products and services that match their unique
needs.
 Segmentation can be categorized into four important topics:
o Segmenting Consumer Markets.
o Segmenting Business Markets
o Segmenting International Markets
o The Requirements for Effective Segmentation

Segmenting Consumer Markets

 There is no single way to segment a market.
 A marketer has to try different segmentation variables, alone and in combination, to find the best
way to view market structure.
 Some variables that might be used in segmenting consumer markets include geographic,
demographic, psychographic, and behavioural variables.
Geographic Segmentation
 Geographic segmentation calls for dividing the market into different geographical units, such as
nations, regions, states, cities, or even neighbourhoods.
 A company can choose to operate in specific geographical areas or globally, but the company should
understand and address geographical differences in needs and wants.
 Geographical differences refer to variations in consumer preferences, demands, and requirements
across different regions or locations.
 By considering geographical differences, the company can customize its products, services, and
marketing strategies to meet the specific needs of each region.
 This approach enables the company to effectively cater to the local market and enhance customer
satisfaction.
 Many companies today are localizing their products, services, advertising, promotion, and sales
efforts to fit the needs of individual regions, cities, and other localities.
 Many large retailers like Target and Walmart are now opening smaller-format stores designed to fit
the needs of smaller markets.
 The smaller Target stores are about one-third the size of a regular Target.
 They carry a limited assortment of products carefully tailored toward local patrons to create
personalized shopper experiences.
 Each small-format store analyses its customers’ characteristics, purchases, and feedback to shape
assortments.
 For example, Target’s campus stores are designed to fit the on-the-go, budget-conscious lifestyles of
college students.
 The surge in digital and mobile technology has caused a corresponding surge in hyperlocal social
marketing.
 Hyperlocal social marketing is location-based targeting to consumers in local communities or
neighbourhoods using digital and social media.
 Mazda, the Japanese automaker realized that car buyers do not travel beyond a certain maximum
radius.
 Thus, the company used geographic data to maximize revenues and set up dynamically personalized
mobile ads that would be triggered every time the user entered the radius of a local Mazda
dealership.
 Alternatively, many of the major social media, such as Facebook and Instagram, let advertisers select
audiences by geographic location.
  Companies can also sign up with Google Maps to show their locations and ads in response to “near
me” or “nearby” Google searches.
 Such hyperlocal targeting lets advertisers refine and tailor their marketing content to local consumer
locations and search intent.

Demographic Segmentation
 Demographic segmentation divides the market into segments based on variables such as age, life-
cycle stage, gender, income, occupation, education, religion, ethnicity, and generation.
 Demographic factors are the most popular bases for segmenting customer groups.
 One reason is that consumer needs, wants, and usage rates vary closely with demographic variables.
 Another is that demographic variables are easier to measure than many other types of variables.
 Even when marketers first define segments using other bases, such as benefits sought or behaviour,
they must know a segment’s demographic characteristics to assess the size of the target market and
reach it efficiently.

Age & Life Cycle

 Consumer needs and wants vary with age, prompting companies to use age and life-cycle
segmentation.
 Some companies use age and life-cycle segmentation, offering different products or using different
marketing approaches for different age and life-cycle groups.
 P&G’s Crest White toothpaste targets seniors and older adults with properties to help achieve a
brighter, whiter smile.
 In contrast, Crest Pro-Health Jr. toothpaste targets young children with packaging featuring popular
Frozen and Star Wars characters.
 Marketers should be cautious not to rely on stereotypes when using age and life-cycle segmentation.
 Age alone is often an inadequate predictor of a person's life cycle, health, work or family status,
needs, and buying power.
 For example, some 40-year-old couples are sending their children off to college, others are just
beginning new families.
Gender segmentation
 Gender segmentation has been widely used in marketing for clothing, cosmetics, toiletries, toys, and
magazines.
 P&G was among the first to use gender segmentation with Secret, a deodorant brand formulated for
women, packaged, and advertised to reinforce the female image.
 More recently, the men’s personal care industry has exploded, and many cosmetics brands that
previously catered mostly to women— from L’Oréal, Nivea, and Sephora to Unilever’s Dove—now
market men’s lines.
 Brands that have traditionally targeted men are now targeting women.
 Sports apparel makers and retailers, such as Nike, Adidas, and Under Armour are increasing their
marketing efforts aimed at women buyers. Women now make up half of all sporting good shoppers.

Income Segmentation
 The marketers of products and services such as automobiles, clothing, cosmetics, financial services,
and travel have long used income segmentation.
 Many companies target affluent consumers with luxury goods and convenience services.
 For example, credit card companies target affluent customers with premium cards that offer luxury
and more perks but at hefty annual fees.
 Not all companies that use income segmentation target the affluent.
 Many retailers like Dollar General and Family Dollar store chains effectively target low- and middle-
income groups.
 These stores primarily cater to families with annual incomes under $50,000.
 When scouting locations for new stores, Family Dollar real estate experts specifically look for lower-
middle-class neighborhoods.
 Dollar stores have adopted low-income strategies, positioning themselves as affordable options for
budget-conscious shoppers.
 As a result, dollar stores are currently the fastest-growing retailers in the United States.
Psychographic Segments
 Psychographic segmentation divides buyers into different segments based on lifestyle or personality
characteristics.
 People in the same demographic group can have very different psychographic characteristics.
 The products that people buy reflect their lifestyles.
 As a result, marketers often segment their markets by consumer lifestyles and base their marketing
strategies on lifestyle appeals.
 Panera, a restaurant, targets a lifestyle segment of people who prioritize healthy living and want food
that is not only tasty but also good for them.
 To better cater to this segment, Panera announced plans to eliminate more than 150 artificial
preservatives, sweeteners, colors, and flavors from its food.
 Panera launched a marketing campaign with the tagline "Food as it should be," emphasizing the idea
of providing customers with better and cleaner food options.
 Panera promotes that 100% of their food is now "100% clean," indicating the removal of artificial
ingredients to provide a healthier dining experience.
 Marketers also use personality variables to segment markets.
 Marketing using personality variables involves targeting specific "personas" segments based on
different personality traits and preferences.
 Loews, a luxury-boutique hotel chain, utilizes personality variables in its marketing strategy.
 Loews targets segments such as "weekend explorers," "business travellers," "luxury jet-setters,"
"vacationing families," and "Loews loyalists."
 The chain creates personalized offers, messages, and media plans for each segment, known as the
"SmartJourney" approach.
 For example, communications aimed at luxury jetsetters begin with personalized emails offering
opportunities for special room upgrades.
 Loews mobile app provides notifications about additional pre-stay options like reservations for fine
dining.
 On-site, travelers in this persona group receive high-touch, personalized attention based on their
preferences, such as app notifications for exclusive experiences like a "chef's tasting" or spa
treatments.
 After implementing the SmartJourney approach, Loews experienced a 40 percent improvement in
customer email engagement rates and a 20 percent increase in rebooking’s within the year.
Behavioural Segmentation
 Behavioural segmentation divides a market into segments based on consumer knowledge, attitudes,
uses of a product, or responses to a product.
 Behavioural segmentation divides buyers into segments based on their knowledge, attitudes, uses, or
responses to a product.
 Many marketers believe that behaviour variables are the best starting point for building market
segments.

Occasion segmentation
 Occasion segmentation divides the market into segments according to occasions when buyers get
the idea to buy, actually make their purchase, or use the purchased item.
 Occasion segmentation can help firms build up product usage.
 Campbell advertises its soups more heavily in the cold winter months.
 Similarly, P&G boosts its marketing for Vicks, VapoRub, and VapoDrops remedies during the cold and
flu season.
 For more than 15 years, Starbucks has welcomed the autumn season with its top-selling seasonal
beverage pumpkin spice latte (PSL) which it sells only in the fall season.
 Other brands try to boost consumption by promoting usage during non-traditional occasions.

Benefit segmentation
 Benefit segmentation divides the market into segments according to the different benefits that
consumers seek from the product.
 A powerful form of segmentation is grouping buyers according to the different benefits that they
seek from a product.
 Benefit segmentation requires finding the major benefits people look for in a product class, the kinds
of people who look for each benefit, and the major brands that deliver each benefit.
 For example, people buying bicycles are looking for any of numerous benefits, from competitive
racing and sports performance to recreation, fitness, touring, transportation, and just plain fun.
 To meet varying benefit preferences, Schwinn offers a wide range of bike lines, each designed for a
specific benefit segment or subsegment from cruisers, hybrid, mountain, road, electric, & kids.
 Schwinn employs benefit segmentation to tailor bikes to specific customer preferences and needs.
 Schwinn's mountain bikes target riders who prioritize a solid, rugged, and durable bikes capable of
handling various terrains.
 Schwinn electric bikes cater to riders who desire an extra boost to make their morning commute or
city rides easier and more convenient.
User Status
 Markets can be segmented into nonusers, ex-users, potential users, first time users, and regular users
of a product.
 Marketers want to reinforce and retain regular users, attract targeted nonusers, and reinvigorate
relationships with ex-users.
 Included in the potential users group are consumers facing life-stage changes—such as new parents
who can be turned into heavy users.
 For example, to get new parents to use its products, P&G makes certain that its Pampers are the
diaper most U.S. hospitals provide for newborns and then promotes them as “1 choice of hospitals.”

Usage Rate
 Markets can also be segmented into light, medium, and heavy product users.
 Heavy users are often a small percentage of the market but account for a high percentage of total
consumption.
Loyalty Status
 A market can also be segmented by consumer loyalty.
 Consumers can be loyal to brands (Tide), stores (Target), and companies (Apple).
 Buyers can be divided into groups according to their degree of loyalty.
 Some consumers are completely loyal—they buy one brand all the time and can’t wait to tell others
about it.
 Other consumers are somewhat loyal—they are loyal to two or three brands of a given product or
favour one brand while sometimes buying others.
 Other buyers show no loyalty to any brand—they either want something different each time they
buy, or they buy whatever’s on sale.
 A company can learn a lot by analysing loyalty patterns in its market.
 It should start by studying its own loyal customers.
 Highly loyal customers can be a real asset. They often promote the brand through word of mouth
and social media.
 Instead of just marketing to loyal customers, companies should engage them fully and make them
partners in building the brand and telling the brand story.
 For example, UAE’s leading telecommunications company launched a youth-targeted brand that
allows its customers to choose data plans based on their usage.
 Some companies actually put loyalists to work for the brand.
 For example, Patagonia relies on its most tried-and-true customers— Patagonia ambassadors—to
field-test products in harsh environments, provide input for “ ambassador-driven” lines of apparel
and gear, and share their product experiences with others.
 In contrast, by studying its less-loyal buyers, a company can detect which brands are most
competitive with its own.
 By looking at customers who are shifting away from its brand, the company can learn about its
marketing weaknesses and take actions to correct them.
Using Multiple Segmentation Bases
 Marketers rarely limit their segmentation analysis to only one or a few variables.
 Rather, they often use multiple segmentation bases in an effort to identify smaller, better-defined
target groups.
 Several business information services provide multivariable segmentation systems that merge
geographic, demographic, lifestyle, and behavioural data to help companies segment their markets
down to zip codes, neighbourhoods, and even households.
 For example, Acxiom’s Personicx system classifies U.S. households into one of 70 distinct clusters
within 21 life stage groups.
 Personicx segments carry colourful descriptive names such as “Cartoons and Carpools.”
 Each segment has its own pattern of demographics, lifestyles, likes and dislikes, and purchase
behaviours.
 Using the Personicx system, marketers can paint a surprisingly precise picture of who consumers are
and what they might buy.
 The "Cartoons and Carpools" cluster represents middle-income, married couples in their mid-30s
with children of various ages.
 This cluster falls in the middle range in terms of income, education, and home values, allowing them
to provide for their families.
 The "Cartoons and Carpools" cluster has a significant concentration of Hispanic individuals and
consists of individuals engaged in blue-collar occupations.
 Consumers in this cluster often drive minivans and they frequently purchase clothes and shoes for
their children, indicating a focus on family needs and providing for their kids' essentials.
 Family-oriented activities, such as visiting zoos, going to theme parks, and camping, are popular
among individuals in the "Cartoons and Carpools" cluster.
 Understanding such clusters allows marketers to tailor their products, services, and marketing
strategies to effectively reach and engage this specific target audience.
 Personicx and other such systems can help marketers to segment people and locations into
marketable groups of like-minded consumers.
 Such rich segmentation provides a powerful tool for marketers of all kinds.
 It can help companies identify and better understand key customer segments, reach them more
efficiently, and tailor market offerings and messages to their specific needs.
Segmenting Business Markets

 Consumer and business marketers use many of the same variables to segment their markets.
 Business buyers can be segmented geographically, demographically (industry/company size), or by
benefits sought, user status, usage rate, and loyalty status.
 Business marketers use some additional variables, such as customer operating characteristics,
purchasing approaches, situational factors, and personal characteristics.
 Almost every company serves at least some business markets.
 Starbucks serves various business markets and has developed distinct marketing programs for
different commercial segments.
 In the office coffee segment, Starbucks Branded Solutions offers workplace coffee services to
businesses, allowing them to provide Starbucks coffee and related products to their employees.
 Starbucks assists business customers in designing customized office solutions, offering a range of
coffee brands, syrups, branded paper products, and diverse brewing methods like brewed coffee,
premium self-service, and ready-to-drink options.
 In the college and university segment, Starbucks offers various platforms for providing their products,
including premium self-service, ready-to-drink options, and licensed stores.
 Starbucks not only supplies coffee, tea, and paper products to its business customers but also offers
equipment, training, and marketing and merchandising support.
 Many companies establish separate systems for dealing with larger or multiple-location customers.
 For example, Steelcase, a major producer of office furniture systems, first divides custom first divides
customers into several segments such as healthcare, education, hospitality, legal, government,
architects, and designers.
 Company salespeople work with independent Steelcase dealers to handle smaller, local, or regional
Steelcase customers in each segment.
 Many national, multiple-location customers, such as ExxonMobil or IBM, have special needs that may
reach beyond the scope of individual dealers.
 Therefore, Steelcase uses national account managers to help its dealer networks handle national
accounts and global account managers who deal with accounts that operate across both national and
international regions.
Segmenting International Markets

 Few companies operate in all or most countries worldwide due to resource limitations or lack of
willingness.

 Large companies like Coca-Cola or Unilever may sell products in over 200 countries, but many
international companies focus on a smaller set of countries rather than operating in all or most of the
countries.

 Economic, cultural, and political characteristics vary significantly across different countries, even
those in close proximity.

 Thus, just as they do within their domestic markets, international firms need to group their world
markets into segments with distinct buying needs and behaviours.

 Companies can segment international markets using one or a combination of several variables.

 Geographic segmentation involves grouping countries based on regions like Western Europe, the
Pacific Rim, South Asia, or Africa.

 This segmentation assumes that neighbouring nations share common traits and behaviours, but
there are exceptions.

 Some U.S. marketers may group all Central and South American countries together, which overlooks
their diverse characteristics.

 The Dominican Republic differs significantly from Brazil, just as Italy differs from Sweden.

 World markets can also be segmented based on economic factors.

 Countries might be grouped by population income levels or by their overall level of economic
development.

 A country’s economic structure shapes its population’s product and service needs and therefore the
marketing opportunities it offers.

 For example, many companies are now targeting the BRICS countries—Brazil, Russia, India, China,
and South Africa—which are fastest developing economies with rapidly increasing buying power.

 Countries can be segmented based on political and legal factors.

  Political and legal factors include the type and stability of government, receptivity to foreign firms,
monetary regulations, and the level of bureaucracy.

 These factors influence the business environment and opportunities for foreign firms in a particular
country.

 Cultural factors can also be used, grouping markets according to common languages, religions, values
and attitudes, customs, and behavioural patterns.

 Segmenting international markets based on geographic, economic, political, cultural, and other
factors presumes that segments should consist of clusters of countries.

 However, thanks to technologies such as social media, mobile phones, and satellite TV, today’s
marketers can define and reach segments of like-minded consumers no matter where in the world.

Intermarket Segmentation
 Intermarket (cross-market) segmentation involves forming segments of consumers who have similar
needs and buying behaviours even though they are located in different countries.

 Using intermarket segmentation (also called cross-market segmentation), marketers form segments
of consumers who have similar needs and buying behaviours even though they are located in
different countries.

 Zara, the world's largest fast-fashion retailer, employs intermarket segmentation to target fashion-
conscious and value-seeking shoppers in over 96 countries.

 Zara's stores and online marketplaces worldwide offer similar appeals, providing stylish, good quality,
and constantly refreshed fashion at affordable prices compared to high-end brands.

 Zara utilizes digital technologies to directly engage with target like-minded consumers no matter
where they live, leveraging platforms like Instagram, Facebook, Pinterest, and YouTube.
Requirements for Effective Segmentation
 There are many ways to segment a market, but not all segmentations are effective.
 To be useful, market segments must be:
 Measurable: The size, purchasing power, and profiles of the segments can be measured.
 Accessible: The market segments can be effectively reached and served.
 Substantial: The market segments are large or profitable enough to serve. A segment should be the
largest possible homogeneous group worth pursuing with a tailored marketing program.
 Differentiable: The segments are conceptually distinguishable and respond differently to different
marketing mix elements and programs. If men and women respond similarly to marketing efforts for
soft drinks, they do not constitute separate segments.
 Actionable: Effective programs can be designed for attracting and serving the segments. For example,
one small airline identified seven market segments, its staff however, was too small to develop
separate marketing programs for each segment.
 LO – 3 Explain how companies identify attractive market segments and choose a market-
targeting strategy.

Market Targeting

 Market segmentation reveals the firm’s market segment opportunities.

 The firm then has to evaluate the various segments and decide how many and which segments it can
serve best.

Evaluating Market Segments

 In evaluating different market segments, a firm must look at three factors:
o Segment size & growth.
o Segment structural attractiveness.
o Company objectives & resources.

Segment Size & Growth

 First, a company wants to select segments that have the right size and growth characteristics.
 “Right size and growth” are relative.
 The largest, fastest-growing segments are not always the most attractive ones for every company.
 Smaller companies lack the skills and resources needed to serve larger segments. Or they may find these
segments too competitive.
 Such companies may target segments that are smaller and less attractive, in an absolute sense, but that
are potentially more profitable for them.
Segment Structural Attractiveness
 The company also needs to examine major structural factors that affect long-run segment attractiveness.
 For example, a segment is less attractive if it already contains many strong and aggressive competitors or
if it is easy for new entrants to come into the segment.
 The existence of many actual or potential substitute products may limit prices and the profits that can be
earned in a segment.
 The relative power of buyers also affects segment attractiveness.
 Buyers with strong bargaining power relative to sellers will try to force prices down, demand more
services, and set competitors against one another— all at the expense of seller profitability.
 Finally, a segment may be less attractive if it contains powerful suppliers that can control prices or reduce
the quality or quantity of ordered goods and services.

Company Objectives & Resources

 Even if a segment has the right size and growth and is structurally attractive, the company must consider
its own objectives and resources.
 Some attractive segments can be dismissed quickly because they do not mesh with the company’s long-
run objectives.
 Or the company lacks the skills and resources needed to succeed in an attractive segment.
 For example, the economy segment of the automobile market is large and growing.
 Given its objectives and resources, it would make little sense for luxury-performance carmaker Mercedes
to enter this segment.
 A company should only enter segments in which it can create superior customer value and gain
advantages over its competitors.

Selecting Target Market Segments

