Segmentation

BUAD 307 SEGMENTATION, TARGETING, AND POSITIONING Lars Perner, Instructor 1

SEGMENTATION, TARGETING, AND POSITIONING

• Segmentation• Product positioning• strategy• Bases for

segmentation• Positioning• Targeting• Repositioning



TARGETINGSELECTING WHICH

SEGMENT(S) TOSERVE

POSITIONINGIMPLEMENTING

CHOSEN IMAGE ANDAPPEAL TO CHOSEN

SEGMENT

SEGMENTATIONIDENTIFYING

MEANINGFULLYDIFFERENT GROUPS

OF CUSTOMERS PROUDCT

DISTRIBUTION

PRICE

PROMOTION


Learning Objectives

• Appreciate different unique needs and expectations of different customer groups

• Appreciate tradeoffs among strategies of serving different segments

• Understand methods for selecting and targeting customer groups

• Understand bases for implementing target selection through positioning


Definitions

Segmentation:

“Aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action.”

“The process of dividing a market into meaningful, relatively similar, and identifiable segments or groups.” (Text, p. 97)

Although not all these consumers are completely alike, they share relatively similar needs and wants.

Marketing action involves: efforts, resources, and decisions--product, distribution, promotion, and price.


Approaches to MarketingUndifferentiated Strategy (no

intended difference from competitors; no specific consumer group sought out)

Concentrated Strategy (differentiation; one consumer segment sought)

Differentiated Strategy (same firm makes different versions for different segments)

Some auto makers

SouthwestAirlines


Segments--Examples (1)

Air TravelBusiness/Executive:

Inflexible; relatively price insensitive (Small number of people, but travel often)

Leisure Traveler/Student: Relatively flexible; very price sensitive (other methods of travel--e.g., bus, car, train--are feasible; travel may not be essential) (Very large segment)

Comfort Travelers: Comfort (e.g., space, food) important; willing to pay (Small segment)


Examples (2): Restaurant Diners

High

Low

Pri

ce S

ensi

tivi

ty

ConvenienceLow High

Taco Bell

McDonald’s

Fancy Restaurants--e.g., Ritz Carlton

High-end delivered food

Denny’s

Local, “unbranded”fast food restaurants

E.g.,--speed--location


Combining variables…

Soft drink preferences—some segmentation variablesPreferred taste: Cola, lime, no taste, natural juice, ice teaCalorie/taste tradeoff: taste more important, some importance

of both, will sacrifice taste for low caloriesUsage occasion: Multi-pack for home; single can/bottle;

fountain drinkPrice sensitivity/brand loyalty: Willingness to pay more for

name brand or specialty soda


Some combined segments…

Price sensitive, non-brand loyal cola-taste, full-flavor segment, multi-pack

Price insensitive, cola taste, brand loyal, low calorie, multi-pack

Price insensitive, natural juice, taste sensitive, single serving

Typical behaviors of these consumers. Circumstances may involve occasional variations.


Bases for Segmentation

GeographicDemographicPsychographicBenefit DesiredUsage RateOther Behavior


•Geographic

Regional differencesClimate and physical

environmentTastes

Campbell’s Soup

Lifestyle and valuesUrban vs. rural areas


Demographics

AgeGenderWillingness to spend

More useful than income—income ≠ willingness to spend!

“Trading Up:” Consumers may “splurge” in certain, personally significant categories while buying more downscale in other categories

EthnicityFamily lifecycle stage


PsychographicsPersonality

Very difficult to measureLimited empirical support

MotivesLifestyle

Usually more practical than personality


Usage Rate

“80/20” rule—20% of consumers may account for 80% of consumption (in many product categories)Note that larger consumption rate

segments may be subject to heavy competition

Reasons for targeting smaller segments

Reduced competitionOpportunity for growth


Other Behavioral Bases for Segmentation

InvolvementInterestKnowledgeWillingness to spend time on

making product category decisions“Dealproneness”

Coupon usageBrand switching in response to

price incentivesOutlet (store) choice

SpecialtyConvenience store“Category killer” (e.g., Fry’s, Best

Buy, Circuit City)DiscountWarehouse


Benefits Sought

Based onDifferences in

arbitrary tastes (e.g., cola vs. non-cola drink)

Ideal pointTradeoffs (e.g.,

taste vs. calories)Usage situation

(e.g., coffee for camping (instant) vs. higher quality for home brewing)


Targeting: Selecting Segment(s) and Specializing

“You can’t be all things to all people” ---> choose one or more groups.

Focus narrows scope of competition, but demands are greater.


IDENTIFYING TARGETS

Customer information “enhancement”—information from different sources integrated (e.g., real estate records, purchase lists, magazine subscription, credit records)

“Merge-purge”Customer lists from

different sources are combined with removal of duplicates


NON-REDUNDANT FINAL

LIST

NAMES AND ADDRESSES FROM ALL

SOURCES USEDSURFER CHICK

SURFER DUDE

EXTREME SURFINGCALIFORN

IA SURFER

SURFER’S SUPPLY

SURF CITY

SURFGEAR

GENERAL LISTS (E.G., PHONE BOOK

LISTINGS)

SELECT RESIDENCES

W/IN 2 BLOCKS OF

BEACH

LISTS OF BUYERS FROM

ONLINE/CATALOG MERCAHNTS

MAGAZINE SUBSCRIPTI

ONS

MERGE PROCESS

PURGE PROCESS

REMOVE DUPLICAT

ES

CALIFORNIA SURFERS’ ASSOC.

GEORGIA SURFER SOCIETY

ORGANIZATION

MEMBERSHIPS

SORORITY SURFERS OF

AMERICA



POSITIONINGIMPLEMENTING

CHOSEN IMAGE ANDAPPEAL TO CHOSEN

SEGMENT

PROUDCT

PROMOTION

PRICE

DISTRIBUTION

PREMIUM

BASIC

DURABLE

PRESTIGE

FUN

POWERFUL

PREMIUM

LOW PRICE

VALUE

INTENSIVE

SELECTIVE

EXCLUSIVE


“STUCK IN THE MIDDLE” PROBLEM

Brands that offer a clear benefit tend to do better

Clear orientationWal-MartNordstrom’sKFC

“Stuck in the middle”Sears—Competition both from

“above” and “below.”Nevertheless, there are

successful “middlelers:” Denny’s, Vons, Ralph’s


Positioning Strategies

“Head-on” competitionAirlines (want to differentiate but have

difficulty pulling it off in practice)Beef products

DifferentiationBurger King: Grilled instead of

McDonald’s fried burgersHallmark: “When you care to send the

very best…”Hertz (vs. “Not exactly”)Zachy Farms (chicken)


Repositioning

Repositioning: Changing established position may be difficult -- e.g., Sears McDonald

Good sales;poor everydayvalues

Lunch; not dinnerGood for children


Multidimensional Scaling

Consumer product perception is identified along two or more “dimensions”

Methods:A priori specification of

dimensions respondents make judgments

Respondent rating of relative similarity of brands/product categories statistical model identifies unnamed dimensions dimensions are inferred from characteristics of items at different points


Snickers

Reese’s

Mr. Goodbar

Toblerone

Twix

Smores

Almond Joy

Butterfinger

M&M

Kitkat

York

HIGH

HIGHLOW

LOW

Mars

Milky Way

Hershey’s

Heath

RitterDove Milk Chocolate


Similarity Ratings

Snickers M&M Almond Joy Mr. Goodbar

Snickers 7M&M 5 7Almond Joy 6 6 7Mr. Goodbar 3 2 3 7

1=“Not at all similar” 7=“Extremely Similar”

Logically, all candy bars are “extremely similar” to themselves. The shaded regions are redundant—only the order is varied.


Some Repositioning Campaigns

Geritol: “Not too young for Geritol.”

Orange juice: “It isn’t just for breakfast anymore.”

Microsoft “hipper”

NOTE: Repositioning is difficult. It will take a great deal of advertising support. There is no guarantee that consumers will cooperate!


Some Brands That Were Dropped Rather Than Repositioned

ValueJet AirTranPackard Bell e-MachinesGerman Communist Party Party for Democratic

Socialism


Euphemisms in Positioning

“Loss Prevention Associate”“Sales Counselor”“Pre-Owned” or “Previously Loved”

Vehicle“Gaming”

Segmentation

Documents

Transcript of Segmentation