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 Learning Objectives
Define the major steps in designing a customer-
driven marketing strategy: market segmentation,
targeting, differentiation, and positioning.
List and discuss the major bases for segmenting
consumer and business markets.
Explain how companies identify attractive market
segments and choose a market-targeting
strategy.
Discuss how companies differentiate and position
their products for maximum competitive
advantage.
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First Stop: P&G: Competing with
Itself and Winning
P&G brands compete directly with each other - markets
more than 100 brands.
brands clearly dominate in many household and
personal care categories
Reason for its many brandsdifferent people want
different sets of benefits
Strategy in laundry detergent segments
Identified numerous segments and subsegments
Positioned each segment
Identified narrow niches within each segment
careful market segmentation and positioning, P&G
has something special to offer consumers in each
important preference group
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 Figure 6.1 - Designing a
Customer-Driven Marketing
Strategy
Market segmentation involves dividing a market into smaller segments of buyers with distinct needs,
characteristics, or behaviors that might require separate marketing strategies or mixes.
Market targeting consists of evaluating each market segments attractiveness and selecting one or more
market segments to enter.

Differentiation involves actually differentiating the firms market offering to create superior customer
value.
Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place
relative to competing products in the minds of target consumers .

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 Table 6.1 - Major
Segmentation Variables for
Consumer Markets

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 Geographic and
Demographic Segmentation
Geographic segmentation: Dividing a
market into different geographical units
Such as nations, states, regions, counties,
cities, or neighborhoods
Demographic segmentation: Dividing
a market into segments based on
variables
Such as age, life-cycle stage, gender,
income, occupation, education, religion,
ethnicity, and generation
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Demographic Segmentation

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 Psychographic
Segmentation
Marketers segment
their markets using
variables such as:
Social class
Consumer lifestyles
Consumer
personality
Products people buy
reflect their
lifestyles.
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 Behavioral Segmentation
Occasion segmentation: Segments
divided according to occasions, when the
buyers:
Get the idea to buy
Make their purchase
Use the purchased item
Benefit segmentation: Segments
divided according to the different benefits
that consumers seek from the product

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 Behavioral Segmentation

Schwinn
makes
bikes for
every
benefit
segment.

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 Behavioral Segmentation

User status: Markets can be segmented

into nonusers, ex-users, potential
users, first-time users, and regular
users.
Usage rate: Markets can be segmented
into light, medium, and heavy users.
Loyalty status: Consumers can be loyal
to brands, stores, and companies.

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 Multiple Segmentation
Bases
Segmentation bases help companies to:
Identify smaller, better-defined target groups
Identify and understand key customer segments
Reach customers more efficiently by tailoring
market offerings and messages to customers
specific needs
Segmentation systems help marketers
segment people and locations into
marketable groups of like-minded
consumers.

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 Segmenting Business
Markets
Consumer and business markets use
many of the same variables for
segmentation.
Variables used by business marketers
for segmentation include:
Operating characteristics
Purchasing approaches
Situational factors
Personal characteristics
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 Segmenting International
Markets
Variables include:
Geographic location
Economic factors
Political and legal factors
Cultural factors
Intermarket (cross-market)
segmentation: Grouping consumers
with similar needs and buying
behaviors irrespective of their location
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 Requirements for
Effective Segmentation
To be useful, the size, purchasing power, and profiles of market segments
should be measurable. The market segments must be accessible
effectively reached and served. The market segments should be substantial
large or profitable enough to serve. They should be differentiable, which
means they are conceptually distinguishable and respond differently to
different marketing mix elements and programs. Finally, the segments should
be actionable, which means that effective programs can be designed for
attracting and serving the segments.

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 Market Targeting

Evaluating the various segments

based on:
Segment size and growth
Segment structural attractiveness
Company objectives and resources
Selecting target market segments
Target market: Set of buyers sharing
common needs or characteristics that
the company decides to serve
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 Figure 6.2 - Market-Targeting
Strategies

This figure shows that companies can target very broadly, very narrowly, or
somewhere in between.
Undifferentiated (or mass marketing) refers to a market-coverage strategy in
which a firm decides to ignore market segment differences and go after the whole
market with one offer.
Differentiated (or segmented marketing) refers to a market-coverage strategy in
which a firm decides to target several market segments and designs separate
offers for each.
Concentrated (or niche marketing) refers to a market-coverage strategy in which
a firm goes after a large share of one or a few smaller segments or niches.

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 Micromarketing includes local marketing and individual
marketing.
Local marketing involves tailoring brands and marketing to the needs and
wants of local customer segments like cities, neighborhoods, and even
specific stores.
Individual marketing involves tailoring products and marketing programs to
the needs and preferences of individual customers.

Mass customization is the process by which firms interact

one to one with masses of customers to design products,
services, and marketing programs tailor-made to individual
needs.

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 Choosing a Targeting

Strategy
Factors to consider
Company resources
When the firms resources are limited, concentrated marketing makes the most
sense
Product variability
How many version there are in the market, are there product substitutes.

Products life-cycle stage

When a firm introduces a new product, it may be practical to launch one version only,
and undifferentiated marketing or concentrated marketing may make the most sense.
In the mature stage of the product life cycle, however, differentiated marketing can be
useful
Market variability
If most buyers have the same tastes, buy the same amounts, and react the same
way to marketing efforts, undifferentiated marketing is appropriate.
Competitors marketing strategies
For e.g., when competitors use differentiated or concentrated marketing,
undifferentiated marketing can be suicidal.

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 Socially Responsible Target
Marketing
Controversy and concern of target
marketing
Vulnerable or disadvantaged consumers
are targeted with controversial or
potentially harmful products , such as
cigarettes, alcohol, and fast-food.
Should be done to serve the
interests of the company and the
interests of those targeted
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 Differentiation and
Positioning
Firms must decide
which segments to
target and on the
value proposition.
Product position:
Way a product is
defined by
consumers on
important
attributes
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Figure 6.3 - Positioning Map:

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Choosing a Differentiation
and Positioning Strategy

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 Identifying Possible Value
Differences and Competitive
Advantages
Competitive advantage: An advantage
over competitors gained by offering
greater customer value either by:
Having lower prices, or
Providing more benefits that justify higher
prices
Firms can differentiate in terms of
product, services, channels, people, or
image.

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 Choosing the Right
Competitive Advantages

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Figure 6.4 - Possible
Value Propositions

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 Winning Value Propositions
Value Description
proposition
More for more Provides the most upscale product or service
Charges a higher price to cover the higher
costs
More for the High quality at lower prices
same Can be used to attack a more-for-more
positioning
The same for Gives a good deal
less Used by discount stores that offer deep
discounts based on superior purchasing
power and lower-cost operations
Less for much Meeting consumers lower performance or
less quality requirements at a much lower price
More for less Best winning proposition
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 Developing a Positioning
Statement
Positioning statement: Summarizes
company or brand positioning
Format: To (target segment and need) our
(brand) is (concept) that (point of difference).

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 Communicating and
Delivering
the Chosen Position
All the companys marketing mix efforts
must support the positioning strategy.
Firm must take care to maintain the
position obtained through consistent
performance and communication.
Products position should be monitored
and adapted over time to match
changes in consumer needs and
competitors strategies.
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