Segmentation, Targeting and Positioning

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Segmentation, Targeting and Positioning
LEARNING OBJECTIVES
After reading, studying and analyzing this chapter, students should be able to understand:
2.1 The interrelationship among market segmentation, targeting, and positioning, and how to
select the best target markets.
2.2 The bases used to segment consumers, including demographics, psychographics, product
benefits sought and product usage-related factors.
2.3 Behavioral targeting and its key role in today’s marketing.
2.4 How to position, differentiate and reposition products.
CHAPTER SUMMARY
Learning Objective 2.1: To understand the interrelationship among market segmentation,
targeting and positioning and how to select the best target markets.
Segmentation is defined as the process of dividing a potential market into distinct subsets of
consumers with a common need or characteristic and selecting one or more segments to target
with a specially designed marketing mix. Besides aiding in the development of new products,
segmentation studies assist in the redesign and repositioning of existing products, in the creation
of promotional appeals, and the selection of advertising media. In order to be a viable target
market, a segment must be identifiable (by some criteria such as demographics, lifestyles, or
others), sizeable (i.e., large enough to be profitable), stable or growing, accessible (i.e., can be
reached economically), and congruent with the marketer’s objectives and resources.
Learning Objective 2.2: To understand the bases used to segment consumers, including
demographics, psychographics, product benefits consumers seek, and other product usage-related
factors.
A segmentation strategy begins by dividing the market for a product into groups that are
relatively homogeneous and share characteristics that are different from those of other groups.
Such characteristics include factual and classified as follows: behavioral and cognitive variables,
consumer-intrinsic features, and consumption-related data. The bases for segmentation include
demographics, personality and psychographics, geodemographics, product benefits, media
exposure, usage rate and occasion and level of brand loyalty. All segmentation strategies in the
“real world” stem from multiple segmentation bases.
Learning Objective 2.3: To understand behavioral targeting and its key role in today’s
marketing.
Behavioral Targeting is sending consumers personalized and prompt offers and promotional
messages based on marketers’ tracking of one or more of the following factors: online
navigation, current geographic location and purchase behavior. The objective of behavioral
targeting is to reach the right consumers and deliver to them highly relevant messages at the right
time more accurately than when using conventional segmentation techniques. Tracking online
navigation includes identifying the sites consumers’ visit, their engagement with the sites, and
their interests, lifestyles and personalities as expressed by the contents of their blogs, twits and
Facebook profiles. Many marketers use predictive analytics, which consists of methods
predicting consumers’ future purchases on the bases of past buying information and other data,
and evaluating the impact of personalized promotions stemming from the predictions. Collecting
the right data and analyzing it strategically are essential to effective behavioral targeting.
Marketers’ goal is to anticipate occurrences in your life event that impact your shopping
behavior and use these insights to get you to spend your money on their products. In addition,
they are eager to discover information about your interests and personal data and the social
networks with which you connect online.
Learning Objective 2.4: To understand how to position, differentiate and reposition products.
After segmenting the market and selecting targeting prospects, marketers must persuade
prospective buyers to buy the products that they offer, rather than competing products.
Positioning is the process by which a company creates a distinct image and identity for its
products, services, or brands in consumers’ minds. The image and unique identity are called a
“position.” The “position” in intangible, exists in the consumer’s mind, and represents how
consumers perceive the product. Positioning is more important to the ultimate success of a
product than are its actual characteristics, although products that are poorly made will not
succeed on the basis of image alone. The result of effective positioning is a unique position that
the product occupies in the mind of the consumer. Most new products fail because consumers
perceive them as “me too” offers that do not provide any advantages or unique benefits over
competitive products. The positioning strategies used most often are: umbrella positioning,
premier position, positioning against competition, key attribute, and finding an “un-owned”
perceptual position. These strategies are not mutually exclusive, and often overlap. Repositioning
is the process by which a company intentionally changes the distinct image and identity that its
products, services, and brands occupy in consumers’ minds. There are several reasons that force
marketers to reposition products, such as many competitors focusing on the same product
attribute in positioning their offerings.
Perceptual mapping is a constructing a map-like diagram representing consumers’ perceptions of
competing brands along relevant product attributes. Perceptual maps show marketers: (1) how
consumers perceive their brand in relation to competition; (2) determine the direction for altering
undesirable consumers’ perception of their brands; and (3) find gaps, in the form of “un-owned”
perceptual positions that represent opportunities for developing new brands or products.
CHAPTER OUTLINE
INTRODUCTION
1. Market segmentation is the process of dividing a market into distinct subsets with common
needs and characteristics that are different from those shared by other groups.
2. Targeting consists of selecting the segments that the company views as prospective
customers and pursuing them.
3. Positioning is the process by which a company creates a distinct image and identity for its
products, services and brands in consumers’ minds.
Market Segmentation and Effective Targeting
1. Segmentation and targeting enable producers to avoid head-on competition in the
marketplace by differentiating their offerings on the basis of such features as price, styling,
packaging, promotional appeal, method of distribution, and level of service.
2. This approach is generally more profitable.
3. Services also segment their markets and target different offerings to different market
segments.
4. Marketers use segmentation research to identify the most appropriate media in which to place
advertisements.
5. Criteria for Effective Targeting: To be an effective target, a market segment should be:
identifiable, sizeable, stable or growing, accessible, and congruent with the marketer’s
objectives and resources.
a) Identifiable: If segments are separated by common or shared needs or characteristics
that are relevant to the product or service, a marketer must be able to identify these
characteristics. Some segmentation variables such as demographics are easy to identify,
while others such as benefits sought, more difficult.
b) Sizeable: In order to be a viable market, a segment must consist of enough consumers to
make targeting it profitable.
c) Stable and Growing: Marketers prefer segments that are stable in terms of lifestyles and
consumption patterns and that are likely to grown larger and more viable in the future.
d) Reachable: To be targeted, a segment must be accessible, which means that marketers
must be able to reach that market segment in an economical way.
e) Congruent with the Company’s Objectives and Resources: Not every company is
interested or has the means to reach every market segment, even if that segment meets
the four preceding criteria.
6.
Applying the Criteria: Perry & Swift, and investment management firm, used 2011 P$YCLE
Segments.
Bases for Segmentation
1. Characteristics used for segmentation can generally be classified into two types: behavioral
and cognitive.
a. Behavioral data is evidence-based and can be determined from direct questioning.
i. Consumer-intrinsic factors include age, gender, marital status, income and
education
ii. Consumption-based factors include quantity of product purchased, frequency
of leisure activities, or frequency of buying a given product
b. Cognitive factors are abstracts reside in the consumer’s mind, do not have universal
definitions, and can only be determined via psychological and attitudinal questioning.
i. Consumer-intrinsic factors include personality traits, cultural values, and
attitudes towards politics and social issues
ii. Consumption-based factors include attitudes and preferences, such as benefits
sought from products and attitudes regarding shopping
2. Demographic segmentation divides consumers according to age, gender, ethnicity, income
and wealth, occupation, marital status, household type and size, and geographic location.
a. The core of almost all segmentations is demographics because:
i. Demographics are the easiest and most logical way to classify people and can
be measured more precisely than other segmentation bases.
ii. Demographics offer the most cost-effective way to locate and reach specific
segments because most of the secondary data compiled about any population
stems from demographics.
iii. Demographics enable marketers to identify business opportunities in the form
of shifts in age, income distribution, and populations of various regions.
iv. Many consumption behaviors, attitudes, and media exposure patterns are
directly related to demographics.
b. Age: product needs often vary with consumers’ age, and marketers commonly target
age groups.
c. Gender is a factual distinguishing segmentation variable, and many products and
services are inherently designed for either males or females. However, sex roles have
become blurred.
d. Families and Households: segmentation is based on the premise that many families
pass through similar phases in their formation, growth, and final dissolution. At each
phase, the family unit needs different products and services.
i. Family life cycle is a classification stemming from factual variables including
marital status, employment status, and the presence or absence of children in
the household.
ii. Each stage in the traditional family life cycle represents an important target
segment to many marketers.
e. Social class can indicate an ability or inability to pay for a product model or brand,
and consumers of different social classes vary in terms of values, product preferences
and buying habits.
i. Income is combined with other demographic variables to define target
markets.
ii. Income, education, and occupation tend to be closely correlated.
iii. Social class can be measured as a weighted index of education, occupation
and income
f. Ethnicity: Marketers segment some populations on the basis of cultural heritage and
ethnicity due to shared values, beliefs, and customs. African Americans, Hispanic
Americans and Asian Americans are important subcultural market segments in the
U.S.
3. Geodemographics: Where a person lives determines some aspects of consumption behavior,
so marketers frequently use geodemographics, a hybrid segmentation scheme based on the
premise that people who live close to one another are likely to have similar financial means,
tastes, preferences, lifestyles, and consumption habits, in strategic targeting.
a. The primary commercial application of this technique is PRIZM, offered by
Nielsen’s MyBestSegments. This system uses the ZIP + 4 postal system to classify
all of the nation’s households into 66 segments.
b. Nielsen also uses P$YCLE (based on household wealth) and ConneXions (based on
household receptivity to new technologies.
4. Green Consumers: Ecologically-minded consumers have been segmented in several ways.
a. One study identified three types of green consumers: Environmental activists,
Organic eaters, and Economizers.
b. Another study identified four types of green consumers: True Greens, Donor Greens,
Learning Greens, and Non-Greens.
c. Another study divided consumers according to a spectrum of green, where the darkest
greens were willing to pay a premium for eco-friendly products to reduce global
warming, while the lightest greens were mostly concerned about saving money on
energy bills, not saving the planet. (Table 2.4 describes five segments along the
spectrum.)
5. Personality traits shape attitudes and consumption behavior.
a. Psychographic factors often overlap with personality traits.
b. Personality tests – which are generally in the form of questions or statements
presented to the respondent – can be used by researchers to determine one’s
personality and use it in segmentation.
c. Consumers who are open-minded and perceive less risk than others in trying new
things are likely to be innovators.
d. Table 2.5 includes descriptions of three groups of online shoppers segmented by
personality traits and attitudes about buying online.
6. Lifestyles, also known as psychographics, consist of activities, interests, and opinions
(AIOS).
a. The interests and opinions portions are cognitive constructs, which can be measured
via surveys but are not evidence-based.
b. A psychographic study includes a battery of statements selected from a
psychographic inventory and usually accompanied by Likert scales on which
respondents are asked to indicate their level of agreement or disagreement with each
statement (Table 2.6)
c. Because of their versatility, psychographics are widely used in segmentation and are
part of almost any hybrid segmentation framework.
d. VALS (an acronym for “values and lifestyles”) is the most popular segmentation
system combining lifestyles and values.
e. VALS focuses explicitly on explaining consumer purchasing behavior.
i. VALS includes three primary motivations: ideals motivated, achievement
motivated and self-expression motivated.
ii. VALS also reflects a continuum in terms of resources and innovativeness
(Figure 2.5)
7. Benefit segmentation is based on the benefits consumers seek from products and services.
a. Many believe benefits sought are the core of all segmentation strategies.
b. Sought benefits represent unfilled consumer needs whereas buyers’ perceptions that a
given brand delivers a unique and prominent benefit result in loyalty to the brand.
8. Media-based segmentation considers the benefits consumers seek from adopting
communication tools.
9. Usage rate segmentation stems from differences among heavy, medium and light users, and
nonusers of a specific product, service, or brand.
a. Marketers have found that within some product categories that a relatively small
group of heavy users account for a disproportionately large percentage of total
product usage.
b. Targeting heavy users is a common marketing strategy, and it can be more profitable
than targeting other user categories.
c. However, since all competitors are likely to target the same heavy users, trying to
attract these buyers requires a lot of expensive advertising.
d. Some marketers prefer to target light and medium users with products that are distinct
from those preferred by heavy users.
e. A sophisticated approach to usage rate involves identifying the factors that directly
impact the usage behavior.
f. Understanding nonusers is essential.
g. Consumers can also be segmented in terms of their awareness status and also level
of involvement.
h. Product involvement is also a segmentation factor.
10. The occasion or situation often determines what consumers will purchase or consume, so
marketers sometimes use usage situation segmentation. Many products are promoted for
special usage occasions.
Behavioral Targeting
1. Behavioral targeting consists of sending consumers personalized and prompt offers and
promotional messages designed to reach the right consumers and deliver to them highly
relevant messages at the right time and more accurately than when using conventional
segmentation techniques.
a. Tracking Online Navigation Includes:
i. Recording the websites that consumers visit.
ii. Measuring consumers’ levels of engagement with the sites (i.e., which
pages they look at, the length of their visits, and how often they return).
iii. Recording the visitors’ lifestyles and personalities (derived from the
contents of consumers’ blogs, tweets, and Facebook profiles).
iv. Keeping track of consumer’ purchases, almost purchases (i.e., abandoned
shopping carts), and returns or exchanges.
b. Geographic location and mobile targeting have been used effectively due to the
prevalence of smartphones and GPS devices.
2. Marketers are using predictive analytics: measures that predict consumers’ future purchases
on the bases of past buying information and other data, and also evaluate the impact of
personalized promotions stemming from the predictions.
Positioning and Repositioning
1. Positioning is the process by which a company creates a distinct image for its products,
services or brands in consumers’ minds.
2. Marketers have to persuade their target audiences to choose their products vs. competitive
products.
3. The positioning process includes the following steps:
a. Defining the market in which the product or brand competes, who the relevant
buyers are, and the offering’s competition.
b. Identifying the product’s key attributes and researching consumers’ perception
regarding each of the relevant attributes.
c. Researching how consumers perceive the competing offerings on the relevant
attributes.
d. Determining the target market’s preferred combination of attributes.
e. Developing a distinctive, differentiating, and value-based positioning concept that
communicates the applicable attributes as benefits.
f. Creating a positioning statement focused on the benefits and value that the
product provides and using it to communicate with the target audiences.
4. Positioning is especially difficult among commodities, where the physical characteristics of
all the brands are identical, such as water. Nevertheless, marketers offer many brands of
mineral water that range in price and are positioned differently. Table 2.12 describes the
positioning claims, unique benefits, and prices of several brands of bottled water.
5. Umbrella positioning is a statement or slogan that describes the universal benefit of the
company’s offering. At times, this statement does not refer to specific products. (Figure 2.9)
6. Premier positioning focuses on the brand’s exclusivity.
7. Positioning against the competition acknowledges competing brands. (Figure 2.10)
8. Key attribute positioning is based on a brand’s superiority on relevant attributes. (Figure
2.11)
9. Un-owned positioning is when a position is not associated with a product from the category.
(Figure 2.12)
10. Repositioning is the process by which a company strategically changes the distinct image
and identity that its product or brand occupies in consumers’ minds.
a. Companies do so when consumers get used to the original positioning and it no
longer stands out in their minds.
b. Similarly, when consumers begin to view the old positioning as dull, marketers
must freshen up their brands’ identities.
11. Perceptual mapping is constructing a map-like diagram representing consumers’
perceptions of competing brands along relevant product attributes. Perceptual maps show
marketers:
a. How consumers perceive their brand in relation to competition
b. How to determine the direction for altering undesirable consumer perceptions of
their brands
c. Gaps in the form or un-owned perceptual positions that offer opportunities for
developing new brands or products
REVIEW AND DISCUSSION QUESTIONS
2.1 What is market segmentation? How is the practice of market segmentation related to
the marketing concept?
Market segmentation is the process of dividing a potential market into distinct subsets of
consumers with common needs or characteristics and selecting one or more segments to
target with a distinct marketing mix. Before the widespread adoption of the marketing
concept, most companies practiced mass marketing, that is, offering the same product and
marketing mix to all consumers. The marketing concept states that a company must
determine the needs and wants of specific market segments and satisfy them better than
competition. Thus, companies who adopt the marketing concept must segment their markets
and develop products or services targeting different consumer groups. For example, Marriott
operates Fairfield Inns (short stay) and Residence Inns (apartment-like accommodations for
extended stays) for the value- or budget-oriented traveler, Courtyard for the price-conscious
businessperson, Marriott Hotel for full-service business travelers, Marriott Resorts for leisure
and vacation guests, and Marriott Senior Living environments for elderly people.
2.2 How are market segmentation, targeting, and positioning interrelated? Illustrate how
these three concepts can be used to develop a marketing strategy for a product of your
choice.
Market segmentation consists of subdividing the market into homogeneous clusters, and it
is the first step in a three-phase market strategy. After segmenting the market, the marketer
must select one or more segments to target (targeting) with a specific marketing mix. The
third step is to position (positioning) the product so that it is perceived by the target market
to satisfy its needs better than other competitive offerings. For example, a toothpaste
manufacturer can segment the market according to the benefits that consumers look for in the
product. The firm may select one segment, such as those consumers who are primarily
concerned with plaque prevention, as its target market. Then, the company must position the
product so that it is perceived as providing better plaque prevention than other toothpaste
brands on the market.
2.3 Apply the five criteria for effective targeting to marketing a product of your choice to
college students.
To be an effective target, a market segment should be: 1) identifiable, 2) sizable, 3) stable or
growing, 4) accessible (reachable), and (5) congruent with the marketer’s objectives and
resources. Marketing credit cards to college students provides a good illustration of utilizing
the five criteria. Thus, a bank offering its credit card to students has apparently identified a
common need for the service among students, determined that there is a sufficient number of
consumers in this segment to make it profitable for the company, that the segment is stable
(i.e., not fickle, eager to buy, and able to spend), that it is accessible (i.e., can be reached in
an economical way) and that the product and service is congruent with the bank’s objectives
and resources to serve the market.
2.4 Discuss the advantages and disadvantages of using demographics as a basis for
segmentation. Can demographics and psychographics be used together to segment
markets? Illustrate your answer with a specific example.
Demographic information is the most accessible and cost effective way to identify a target
market. Demographics are easier to measure than other segmentation variables. Most
secondary data (e.g., census data) are expressed in demographic terms and most media
develop demographic profiles of their audiences. Also, demographic trends reveal shifts in
age and income that signal business opportunities for marketers. Demographics, however,
tend to be one-dimensional because it provides information on the potential for usage but not
on why a particular brand is used or exactly who uses it. Thus, demographics help locate a
target market, although psychological and sociocultural characteristics help describe who its
members are, how they think, feel, and behave.
2.5 Select at least two segmentation bases that should be used jointly to segment the market
for each of the following products and explain your choices: (1) men’s denim pants; (2)
women’s cocktail dresses; (3) hybrid cars; (4) e-readers.
Student responses will vary. The bases of segmentation may include demographics,
geodemographics, “green”-ness, personality traits, psychographics/lifestyles, benefits, media
usage, usage rate, and usage occasion.
2.6 Some marketers consider benefit segmentation as the segmentation approach most
consistent with the marketing concept. Do you agree or disagree with this view? Why?
Benefit segmentation is built upon the premise that consumers are basically purchasing needs,
wants, and satisfactions. Thus, it is entirely consistent with the marketing concept. Benefit
segmentation allows marketers to position various brands within the same product category
by stressing those benefits/desired satisfactions appropriate to each segment served. For
example, in the toothpaste market, Close-up is marketed by using a social appeal that stresses
bright teeth and is targeted to young people; Aim is targeted to parents as a good tasting
toothpaste that will encourage children to brush longer; Viadent is targeted to adults as a
means to remove tartar (cosmetic benefit) and plaque (health benefit).
2.7 Regent Seven Seas Cruises and Royal Caribbean International are two companies in
the vacation and travel industry. After looking at their websites, describe the kind of
consumers that each company is seeking to attract. Also, describe how either company
can use demographics and psychographics to identify TV shows and magazines in
which to place its advertisements.
Regent Seven Seas Cruises is owned by Prestige Cruise Holdings. According to their web
site, Prestige is the market leader in the Upper Premium and Luxury segments of the cruise
industry. The company is trying to attract wealthy, upscale consumers who can afford luxury
and personalized cruise itineraries. Royal Caribbean makes it clear that their cruises are for
everyone, from families, couples, family reunions to corporate events. Royal Caribbean
offers activities that range from “mild to wild.” Obviously, both companies rely on
demographics in segmenting their markets. Within each of the demographic groups listed
above, the companies should identify additional socioeconomic factors (i.e., income,
education, occupation) of consumers to whom their cruises may appeal. Both companies
should identify the psychographics of consumers in the different segments, combine
demographics and psychographics, and create several profiles of its likely customers. Then,
both Regent Seven Seas Cruises and Royal Caribbean International should identify TV
shows and magazines that have “audience profiles” matching its customers’ profiles, and
place its advertisements in such media.
2.8 How can a marketer for a chain of health clubs use the VALS™ segmentation profiles
to develop an advertising campaign? Which segments should be targeted? How should
the health club be positioned to each of these segments?
The best prospects (note that opinions on the following may vary) for health clubs appear to
be the Actualizers and Achievers because members of these groups are interested in growth,
control of their lives, self-discovery, and self-expression. Many of them are probably already
involved in some form of physical activity; however, a health club that is positioned as, say,
“for people who are in the best shape they have ever been in but still aren't satisfied” will
appeal to them. The health club should be portrayed as a mechanism which will help these
people control an additional aspect of their lives—their health and physical well-being—
through exercise. Normally, the Experiencers and Makers are not good prospects for a health
club because they are interested in outdoor sports and recreation. If, however, seasonal
weather prevents such endeavors, the health club could be presented as an alternative. The
Believers are probably too set in their ways to join a health club, and the Strivers and
Strugglers do not have the financial resources to join one. The Fulfilled represent a good
target market because they are mature, educated, and financially secure individuals who
might want to broaden their horizons. To them, the health club should be positioned as a
new, highly fulfilling, and beneficial experience; value should be stressed in the promotion
because these consumers are practical and concerned with the functionality of their
purchases.
2.9 Using one of the frameworks described in Table 2.3, find at least two suitable segments
for one of the following products: (1) SUVs; (2) financial retirement plans; or (3) LED
TVs. Using Nielsen’s online Zip Code Look-Up, identify the closest location of
consumer clusters belonging to these segments to your home. Describe the segments
you chose and why, and the locations you looked up.
Student responses will vary. When students describe the segments, they should make sure
they are discussing issues related to both demographics and behaviors. Look for the
responses to include why they selected the segments.
2.10 Explain how marketers can use each of the following into data predictive analytics:
(1) the websites consumers visit; (2) consumers’ levels of engagement with visited
websites (i.e. the pages viewed, lengths of visits, return to site frequency); (3) visitors’
interests, lifestyles and personalities e.g. from the contents of their blogs, twits and
Facebook profiles; (4) visitors’ purchases, almost purchases and abandoned carts, and
product returns and exchanges.
Predictive analytics are measures that predict consumers’ future purchases on the bases of
past buying information and other data, and also evaluate the impact of personalized
promotions stemming from the predictions. Recording the websites that consumers visit,
measuring consumers’ levels of engagement with the sites (i.e., which pages they look at, the
length of their visits, and how often they return), recording the visitors’ lifestyles and
personalities (derived from the contents of consumers’ blogs, tweets, and Facebook profiles),
and keeping track of consumer’ purchases, almost purchases (i.e., abandoned shopping carts),
and returns or exchanges can be used in models and turned into measures that predict future
behavior that are useful for segmenting and developing strategies.
2.11 How would you segment the market of consumers who would like to order Oakley
sunglasses online? Explain your answer.
Responses will vary, but students should consider the bases for segmentation (demographics,
geodemographics, “green”-ness, personality traits, psychographics/lifestyles, benefits, media
usage, usage rate, and usage occasion) and the information referenced in 2.10 that is used to
gain insights online ((1) the websites consumers visit; (2) consumers’ levels of engagement
with visited websites (i.e. the pages viewed, lengths of visits, return to site frequency); (3)
visitors’ interests, lifestyles and personalities e.g. from the contents of their blogs, twits and
Facebook profiles; (4) visitors’ purchases, almost purchases and abandoned carts, and
product returns and exchanges).
2.12 Describe the stages in the positioning process and apply them to positioning a
product of your choice.
The positioning process includes the following steps:
1. Defining the market in which the product or brand competes, who the relevant buyers are,
and the offering’s competition.
2. Identifying the product’s key attributes and researching consumers’ perception regarding
each of the relevant attributes.
3. Researching how consumers perceive the competing offerings on the relevant attributes.
4. Determining the target market’s preferred combination of attributes.
5. Developing a distinctive, differentiating, and value-based positioning concept that
communicates the applicable attributes as benefits.
6. Creating a positioning statement focused on the benefits and value that the product
provides and using it to communicate with the target audiences.
Students may select from a tremendous number of products. Look for each of the six steps
in the process to be covered in the description.
2.13 How is the understanding of consumers’ perceptions of a product’s attributes used
to position a brand within that product category?
Key attribute positioning is based on a brand’s superiority on relevant attributes. Believing
that consumers use brands to express their identities, some marketers have repositioned their
products from focusing on functional attributes to focusing on how the products fit into a
consumer’s lifestyle.
2.14
What is the relationship between benefit segmentation and positioning?
Benefit segmentation is based on the benefits that consumers seek from products and
services. The benefits that consumers look for represent unfilled needs, whereas buyers’
perceptions that a given brand delivers a unique and prominent benefit result in loyalty to
that brand. Positioning is the process by which a company creates a distinct image and
identity for its products, services, or brands in consumers’ minds. The image and unique
identity are called a “position.” The position, which is intangible and exists only in the
consumer’s mind, represents how marketers want consumers to perceive products and
brands. The result of effective positioning is a unique perception of the product in
consumers’ minds relative to competing offerings. If that unique position is based on an
ability to deliver benefits sought in a superior way, the product is likely to have greater
success.
2.15
Why do marketers have to reposition their brands? Illustrate with examples.
Repositioning is the process by which a company strategically changes the distinct image and
identity that its product or brand occupies in consumers’ minds. Companies do so when
consumers get used to the original positioning and it no longer stands out in their minds.
Similarly, when consumers begin to view the old positioning as dull, marketers must freshen
up their brands’ identities. Examples are included in Table 2.13, or students may come up
with their own.
2.16 What are perceptual maps and how are they used in positioning brands within the
same product category? Illustrate your answer with the chapter’s discussion of eye
drops and toothpaste.
Perceptual mapping is constructing a map-like diagram representing consumers’
perceptions of competing brands along relevant product attributes. Perceptual maps show
marketers:
1. How consumers perceive their brand in relation to competition.
2. How to determine the direction for altering undesirable consumer perception of their
brands.
3. Gaps, in the form of un-owned perceptual positions, that represent opportunities for
developing new brands or products.
The aim of perceptual mapping is to develop repositioning strategies and fine-tune the
images (i.e., consumers’ perceptions) of products and services. The marketers of Crest and
Visine studied customers and discovered which attributes (or their combinations) represent
benefits that consumers seek from such products. By offering product versions that provide
distinct benefits and filling as many positions as possible, the makers of Visine and Crest
made it virtually impossible for other companies to penetrate their respective markets.
2.17
Describe the relationship between behavioral targeting and predictive analytics.
Behavioral targeting consists of sending consumers personalized and prompt offers and
promotional messages based on marketers’ tracking of one or more of the following factors:
online navigation, current geographic location, and purchase behavior. The idea is to reach
the right customers at the right time. Predictive analytics are methods for predicting
consumers’ future purchases on the bases of past buying information and other data, and
evaluating the impact of personalized promotions stemming from the predictions. Collecting
the right data and analyzing it strategically are essential to effective behavioral targeting.
HANDS-ON ASSIGNMENTS
2.18 Select a product and brand that you use frequently and list the benefits you receive
from using it. Without disclosing your list, ask a fellow student who uses a different
brand in this product category (preferably, a friend of the opposite sex) to make a
similar list for his or her brand. Compare the two lists and identify the implications for
using benefit segmentation to market the two brands.
Instructor’s Discussion
This exercise is designed to illustrate the variability of the benefits that consumers seek in the
same product and that knowledge of desired benefits can be used to position different brands
within the same product category. This project can also be done between small teams or
groups. If time is a problem, select the individuals or small groups that seem to have
performed the exercise the best and have the student’s present results to class as a whole.
2.19 Does your lifestyle differ significantly from your parents’ lifestyle? If so, how are the
two lifestyles different? What factors cause these differences?
Instructor’s Discussion
This is an interesting way to illustrate similarities and differences between the activities,
interests, and opinions of two distinct groups, as the factors that determine one’s lifestyle.
With respect to presenting or discussing the results (if time is a problem), select the
individuals that seem to have performed the exercise the best and have the students present
results to class as a whole. Be sure to probe students as to mechanisms used to determine
their parents (and their own) lifestyles. How could marketers use this information?
2.20 Visit two web sites that you are familiar with and write down every click that you
make, and the patterns and time periods corresponding to your surfing. Then, describe
how a marketer—of a product of your choice—who had tracked your web visits to the
sites, can use the observation of your surfing in designing a customized advertising
message directed at you.
Instructor’s Discussion
The answers to this question will be personal to each student. However, you should expect to
read comments suggesting the advertiser might achieve a greater awareness of the web
surfer’s values, income, lifestyle, lifecycle, occupation, education level and so on. All of
these variables help the advertiser deliver a customized message to the surfer.
2.21 The owners of a local health-food restaurant have asked you to prepare a
psychographic profile of families living in the community surrounding the restaurant's
location. Construct a 10-question psychographic inventory appropriate for segmenting
families on the basis of their dining-out preferences.
Instructor’s Discussion
The psychographic items developed by the students can fall into any of a large number of
dining-out and meal-related categories (price consciousness, food venturesomeness, social
dimensions of eating, home-orientation, etc.). The instructor should maintain an inventory of
student responses to this question and use them to demonstrate good and bad psychographic
statements when this exercise is discussed.
2.22 Find three print advertisements directed at one clusters of the three frameworks listed
in Table 2.3: PRIZM, P$YCLE and ConneXions. Explain your choices.
Instructor’s Discussion
As students consider the effectiveness of each ad, the discussion should focus on the
following issues: When discussing the ad based on a PRIZM cluster, students should make
sure they are discussing issues related to both demographics and behaviors. .PRIZM
classifies the nation’s households into one of 66 segments. ACXIOM consists of seventy
segments that are classified into twenty-one life stage groups.
S.T.A.R. PROJECTS
Ethical Issues in Consumer Behavior
S.T.A.R. Project #1
One of the best and easiest ways to segment a market is on the basis of age. As marketers have
discovered, however, this is a form of segmentation that can become a very sticky proposition.
Consider the number of marketing efforts directed toward the elderly. In this case, marketers
must be aware that, even though they are dealing with experienced consumers, this segment is
considered to be susceptible to deceptive marketing practices. A dilemma exists—how to
aggressively market to a segment that often has substantial income without taking advantage of
the segment’s vulnerability? Visit the American Association of Retired Persons (AARP) Web
site at www.aarp.org for information and guidance in accomplishing the following assignment:
a. Construct a list of five (5) ethical taboos that a marketer should avoid when marketing to
this market segment. Explain the taboos.
b. Find an illustration of a company that you believe markets to the elderly in an ethical
manner. Discuss why you picked the company and why you consider its practices to be
ethical.
Instructor’s Discussion
Students will be able to observe a variety of issues that impact and affect the elderly market
segment via the AARP Web site. To begin a discussion of taboos, consider the following
propositions—thou shall not steal, thou shall not harm, thou shall inform, thou shall not deceive,
and thou shall not pressure. From this simple list, students should be able to create and construct
a list of ethical don’ts. Be sure the students consider the Internet when constructing their list.
Students are free to select any company they wish for excellent elderly business practices. A
good illustration to begin with would be McDonald’s. This company often designates special
discounts and coffee times for seniors.
S.T.A.R. Project #2
Few subjects are as controversial in the United States today as gun control. Given the violence in
our society, the number of incidents in which guns are weapons of destruction, and the growing
void between those that demand the right to own guns and those that want all guns destroyed, the
National Rifle Association is at the center of a whirlwind of controversy. The NRA (see
www.nra.org) has been singled out as an organization that is either a defender of the Constitution
or evil (depending on one’s point of view). Ethical situation—assuming that you have been given
the task of evaluating a request from the NRA to sponsor a local civic event in your area (for
example, a 10K run benefiting cancer patients), conduct the following activities:
a. What evidence do you find on the NRA Web site that it is concerned about public
welfare?
b. What evidence do you find on the Web site that the NRA is an effective marketer?
c. What ethical issues might be present should the NRA request to sponsor your civic
event be granted? How would you deal with these issues?
d. What market segments would be impacted by your evaluation of the NRA request?
e. What would you personally do in this illustration? Explain why?
Instructor’s Discussion
This is a controversial assignment that is designed to get students to think about an issue from
several perspectives. Certainly the amount of violence (and the use of guns with respect to this
violence) will temper decisions and comments in this area. If students learn to deal with difficult
issues now, however, they will be better prepared to address difficult issues in the future. No one
can disagree that this organization is an effective marketer to a select group of people. Students
can learn about this particular market segment by examining the opening page of the Web site
and the various folders present. The ethical dilemma is more difficult to deal with. The NRA has
deep pockets and many civic projects might need this support. Some will feel uncomfortable
accepting the support. Is acceptance any different, however, than accepting support from
cigarette, alcohol, or other controversial product manufacturers? That is the real issue to be
discussed. Please feel free to change this assignment to fit circumstances and preferences. Please
be forewarned that this assignment may not be for everyone.
Small Group Projects
S.T.A.R. Project #3
One of the hardest assignments for a marketing manager is how to reinvigorate a brand that has
been around for a long time. Time-tested brands have met the needs of their consumers but often
forget to keep pace with changes in the marketplace and new market segments that are constantly
forming. One such time-tested brand is Rit Dye (see www.ritdye.com). Your group’s assignment
is to learn about Rit Dye and propose a new segmentation strategy for the organization that
would boost sales. Consider existing segments and look for new ones. Be sure to justify your
ideas. Visit the company’s Web site to learn tips about of dyeing, view project suggestions, learn
about color formulas and watch video tutorials in the Rit Studio. Write a short report about your
experience and your segmentation strategy for the company.
Instructor’s Discussion
Rit Dye has been an excellent marketer through the years and has provided products that have
met a real need. When, however, is the last time you dyed something? That is the crux of Rit
Dye’s problem. Have students examine how the brand is used today and how its use might be
expanded in the future. Notice the segments on the Web page devoted to tie-dyeing (yes, the
same tie-dyeing that was done in the Flower Power ’60s). This might give students a clue as to
potential segments for the future.
S.T.A.R. Project #4
Given the business challenges of the last few years, companies must always look for new ways
to retain customers and enhance the value experience brought to them. One company that has
specialized in this art is Carnival Cruise Lines. Carnival has learned how to target potential
customers, provide fun and excitement for current customers, and bring loyal customers back
again and again. Personal attention, e-mail reminders, and an interactive Web site have aided the
company in building and maintaining relationships with customers. Your group’s assignment is
to construct a segmentation profile of Carnival’s first time customers, current customers, and
past customers. Though information specifics will be beyond your grasp, general information
about these groups can be obtained via the company’s Web site (see www.carnival.com). Your
profiles should consider age, income, lifestyle, and other variables found in the chapter. Be
creative (or contact a travel agent). Present your profiles to the class. How did your group’s
profiles match those of other groups? Based on your profiles, comment on any new perceived
opportunities for Carnival based on your segmentation work.
Instructor’s Discussion
The Carnival Web site provides a wealth of information about itself and its customers. Some of
the information is straightforward and some must be presumed. Students are encouraged to
create with this exercise. The experience will aid them in understanding how to use different
bases of segmentation and construct segmentation profiles. This exercise can also be a
springboard to the lifestyle information presented in the chapter.
Consumer-Focused Strategy: Segmentation and Positioning
One of the most important ways marketers discover and satisfy customer needs and wants
efficiently is through a “divide and conquer” process of market segmentation and positioning.
Market segmentation is the process of dividing the large and diverse mass market into
subsets of consumers who share common needs, characteristics, or behaviors, and then targeting
one or more of those segments with a distinct marketing mix. By identifying groups of highly
similar consumers, a marketer is able to develop products and services specifically tailored to
that group’s needs that also closely match the capabilities of the organization, thus maximizing
the chances of profit and success.
Marketers make two underlying assumptions related to market segmentation: (1)
consumer preferences vary, and (2) by tailoring a product or service to a segment’s needs, firms
can make the offer so appealing that segment members are willing to pay a price that offsets the
higher associated costs.
In addition to these assumptions, four factors influence a company’s market segmentation
strategy:
1. Consumer preference heterogeneity (the idea that consumer preferences vary).
2. Majority fallacy (the risk of focusing on large, average segments and neglecting
smaller, less typical segments).
3. Sales-cost trade-off (the fact that market segmentation increases sales and costs
simultaneously).
4. Potential for cannibalization (when different products offered by the same company
are very similar, they compete with each other).
Bases of segmentation include demographic, geographic, psychographic,
attributes/benefits, and behavioral. Demographic-based segmentation divides customers
according to vital population statistics. In geographic-based segmentation, the market is divided
based on the physical location of potential customers. An underlying assumption of this market
segmentation base is that consumers located in geographic proximity share similar needs and
preferences for some products. Geo-demographic-based segmentation combines geography and
demographic segmentation bases. Psychographic-based segmentation centers on customers’
lifestyles. One of the leading lifestyle segmentation systems is the VALS System. Behavioralbased segmentation involves segmenting consumers based on consumer preferences for a
particular product attribute or benefit, usage occasion, user status, rate of product usage, and
loyalty status.
Positioning is the process of communicating with target market(s) through specifically
chosen marketing mix variables to help consumers differentiate a product from its competition
and perceive how this product best satisfies their needs. Sometimes marketers use terms like
value proposition or The Big Idea to describe a brand, product, or positioning strategy.
Like the bases of segmentation, companies use several strategies to position their
products. The best positioning strategy depends on the characteristics of the product, market
segmentation bases used, the competition, and the type of mental associations marketers want
consumers to form. If a brand is the pioneer, that should be emphasized in its promotion. If the
brand is markedly different on a single, easy-to-communicate, and important dimension, a single
core benefit proposition should be used. If the brand is very similar to competitors’ offerings or
difficult to differentiate by product attribute, then price, usage situation, or user are ways of
differentiating it. If competing brands have an exploitable weakness, repositioning is a possible
strategy. Finally, marketers use perceptual mapping to measure consumer preferences and
develop competitive strategies.
A Divide and Conquer Strategy
This section defines market segmentation as dividing mass markets into subsets of consumers
who share common needs, characteristics, or behaviors, and then selecting one or more of those
segments to serve with a distinct marketing mix. This two-step process is referred to as a “divide
and conquer” strategy.
1. Dividing involves disaggregating and aggregating the market into homogeneous
subgroups.
2. Conquering involves targeting one or more segments for business.
The Benefits of Marketing Segmentation
1. Firms benefit by more efficiently using their resources, i.e., it’s more efficient to
target a homogeneous subgroup of consumers than to try and please a mass market.
Firms can also avoid direct competition by selecting an underserved market or
specializing.
2. Consumers benefit because their unique needs are more likely to be satisfied. In
addition, their search costs are reduced.
3. Society benefits because target marketing encourages the development of new and
better products and services.
Factors Influencing Marketing Segmentation Strategies
This section describes key factors that influence the way the market is segmented. The
fundamental premise of market segmentation is that consumers are not all alike. This begs the
question: To what extent do consumers differ in their preferences for products and services?
1. Preference heterogeneity is the extent to which consumers differ in their needs and wants.
The greater the preference heterogeneity is, the more finely segmented the market can be.
The extremes of preference heterogeneity are defined at one end by a mass market and at
the other end by a picomarket, or individual consumer.
2. The majority fallacy describes a situation where marketers focus on larger segments that
exhibit “average” preferences and neglect smaller, less typical market segments. The
fallacy lies in the assumption that the larger markets will generate more profits. Often, the
opposite is true: Smaller, more extreme groups are less crowded and underserved.

Figure 2.1 depicts the majority fallacy with a graph of normally distributed
preferences.
3. Sales/Cost Trade-offs recognize that as market segmentation increases, sales also increase
because a firm’s marketing mix is more likely to align with consumers’ preferences. On
the other hand, costs also increase because multi-product strategies are more expensive to
implement. Thus, marketers must carefully evaluate both the costs and benefits of
increased segmentation.
4. Cannibalization occurs when products offered by the same firm are so similar that they
compete among themselves, creating a situation of oversegmentation. Here, one brand
may “eat away” market share from another brand in the same family (e.g., Diet Pepsi
Lime and Diet Pepsi Vanilla).
Bases of Segmentation
This section outlines the four primary bases of segmentation: demographic, geographic,
psychographic, and behavioral.

Table 2.1 lists the four segmentation categories, along with sub-variables and illustrative
examples.
1. Demography refers to the study of populations. Thus, variables based on vital population
statistics provide measureable means to segment product markets. Markets segmented
this way use data on age, gender, income, education, occupation, marital status, family
life cycle, ethnicity, and religion to split mass markets into segments.
2. Geography refers to the physical location of consumers. Variables such as total
population, density, regional differences in culture, and climate can be used to
differentiate market segments.
3. Geo-demography combines geographic and demographic segmentation bases. It is
sometimes referred to as ZIP-Code marketing. The basic tenet is “birds of a feather flock
together.” PRIZM by Claritas provides 66 distinct segments, combined into 14 broad
social groups.
4. Psychography involves the measurement of lifestyle, often combined with attitudes,
beliefs, and personalities. Psychographic segmentation can be summarized with the AIO
model (activities, interests, and opinions). Another way to capture psychography is to
determine where consumers spend their leisure time and disposable income. The VALS
System by SRIC-BI provides a two-dimensional model of psychographic segmentation.

Figure 2.2 and Table 2.2 describe the VALS Segments.
5. Behavioral segmentation groups consumers based on their preferences for a specific
benefit, use occasion, user status, rate of product usage, and loyalty status.

Benefit-based segmentation centers on consumers’ preferences for specific
attributes or outcomes delivered by a product (e.g., picture resolution or price for
a digital camera).

Figure 2.3 describes benefit segmentation based on price.

Usage occasion and product usage describes purchasing and consuming products
at different times of the day (e.g., drinking orange juice in the morning or
evening), different times of the year (taking vacations in the summer vs. winter),
at different events (e.g., birthdays), or on different occasions (e.g., holidays).
Positioning
This section defines positioning as the place that a brand occupies in the mind of the consumer,
relative to competitors’ products. Two important clarifications surround this definition:
1. A firm must position in terms of the competition.
2. Marketing communication (e.g., advertising and promotion) creates positioning—not
product design and development.
Positioning Strategies
1. Positioning as a leader is usually reserved for pioneering brands—those brands first
to enter and define a market (e.g., Coke, Xerox, Kleenex, Linoleum).
2. Positioning as a follower occurs when a brand creates a new category (e.g., Michelob
Ultra), does the “opposite” (e.g., 7-Up), or promotes itself as the underdog (e.g.,
Avis).
3. Positioning linked to segmentation parallels the segmentation bases discussed above
(benefit, price, product use situation, product user).
Repositioning
Repositioning involves changing how consumers perceive a brand, relative to its
competitors.

Tylenol repositioned as “the brand that won’t upset your stomach.”

Royal Doulton china changed consumers’ perceptions by repositioning competitor
Lenox as a brand from New Jersey.

Scope repositioned itself as delivering “fresh minty breath.”
Perceptual Mapping
This section describes how consumer perceptions can be depicted on graphs, with the x-axis
indicating product attributes. A perceptual map tells marketers who their direct competitors are
(plotted in nearby Cartesian space) and what brands represent less serious competition. Blank
spaces on the maps indicate potential gaps in the market, which could be:




A true opportunity
A combination of attributes that nobody wants (undesirables)
A combination of attributes that is impossible to deliver (infeasibilities)
Figure 2.4 depicts a perceptual map of the soft-drink market.
Answers to Review and Discussion Questions
1. Clearly distinguish between the following terms: demographics, psychographic, lifestyle,
and positioning.
Demographic characteristics are vital population statistics, such as age, gender, income,
education, occupation, social class, marital status, household size, family life cycle, and
culture or ethnicity. Psychographics is the measurement of lifestyle, often combined with
measures of attitudes, beliefs, and personalities. Lifestyle, which is simply how we live, is
traditionally defined in terms of a person’s activities, interests, and opinions. Positioning is
the process of communicating with target market(s) in such a way as to help consumers
differentiate the firm’s product from other products and understand how the product can
specifically satisfy their needs and wants.
2. What are the two underlying assumptions of market segmentation?
Two key assumptions underlie market segmentation. First, consumer preferences vary. And,
by tailoring a product or service to a segment’s specific needs, marketers can make the
offering so appealing that the members of the segment are willing to pay a price that offsets
the costs associated with catering to the specialized needs of the segment.
3. How do the majority fallacy and the potential for cannibalization influence market
segmentation decisions?
The majority fallacy is the assumption that the largest market segment is going to be the most
profitable. This may cause a marketer to ignore potentially profitable niche segments.
Cannibalization occurs when products offered by the same firm are so similar that they
compete among themselves. This may create a case of over-segmentation, where additional
products can’t be justified.
4. According to the VALS technique, what type of consumer would probably buy a digital
video camera? What type of consumer would take a fishing vacation trip? Justify your
answer.
An innovator might buy a digital video camera. Innovators tend to be curious and
sophisticated, probably an early adopter of a high-tech, high-price product such as this. A
maker might take a fishing trip. They value self-sufficiency and choose “hands-on”
activities.
5. Describe how marketers of Tropicana Orange Juice could use usage situation to broaden
the product’s segment.
Students may suggest a variety of strategies. For example, the brand could try to expand
orange juice beyond morning. They could stress the vitamin C benefits, and encourage
people to drink the beverage when they have the cold or flu.
6. Why might the pioneering advantage be even stronger for services than it is for physical
products? Give one example.
Service attributes tend to be more ambiguous than product attributes. Thus, consumers
should be even more likely to let a service pioneer serve as the ideal point. Students may give
various examples.
7. How might a leading brand of personal music players, such as Apple’s iPod, best position
itself? Give specific examples.
Examples may vary, but should include a discussion of how this leading product could set a
“standard of comparison,” or talk about how they “invented” the category.
8. What steps might a follower brand of personal music players, such as Sony, do in terms of
positioning to increase its chances of success? Give specific examples.
Examples may vary, but they should include a discussion of how a follower brand could
adapt a “do the opposite strategy” or turn the brand’s number two position into an advantage,
or create a new category. Other examples might draw from positioning on core benefits,
price, usage situation, or users.
9. Describe when it is best to position using a core benefit proposition. Why?
It is useful to position by core attributes if the attributes are uniquely advantageous to a
brand. If the attribute is easily copied or easily turned against the brand by another firm then
it could be a dangerous strategy.
10. Describe the three situations that gaps in perceptual maps represent.
Gaps typically indicate (a) a true opportunity in the market that we might be able to pursue;
(b) a combination of attributes that nobody actually needs or wants, which is why there is not
competitor there; (c) a combination of attributes that is impossible to deliver to the consumer
without the development of new technology.

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