CHAPTER FOUR

Focusing Marketing
Strategy with
Segmentation and
Positioning

For use only with

Perreault and McCarthy
texts.
© 2005 McGraw-Hill
Companies, Inc.
McGraw-Hill/Irwin www.mhhe.com/fourps
When we finish this lecture you should

1. Know about defining generic markets and

product-markets.
2. Know what market segmentation is and how
to segment product-markets into submarkets.
3. Know three approaches to market-oriented
strategy planning.
4. Know dimensions that may be useful for
segmenting markets.
5. Know a seven-step approach to market
segmentation that you can do yourself.
6. Know what positioning is--and why it is
useful.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Market
 group of potential customers with similar needs
who are willing to exchange something of value
with sellers offering various goods or service
Generic market
 a market with broadly similar needs and sellers
offering various ways of satisfying those needs.

Product-market
 a market with very similar needs and sellers
offering various close substitute ways of satisfying
those needs
 narrowing-down process
 describe markets in terms of products
(production-oriented approach)

Opportunities, especially breakthrough opportunities,

come from understanding markets thoroughly

=> provide examples of companies that found new

opportunities by a.) broadening their view of the market; or
b.) narrowing their view of the market?
Search for Opportunities Can Begin by Understanding Markets

Selecting
target
marketing
approach

Segmenting Single
target
Narrowing down to into possible market
specific product-market target markets approach

One Homogeneous Multiple

All Some broad target
customer generic (narrow)
product- product- market
needs market market approach
markets

Combined
target
market
approach
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Naming Product Markets and Generic Markets

Customer
Product Type
Needs

Product-Market
Definition

Geographic
Customer Type
Area

No Product Type in Generic Market Definition

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
2 steps in market segmentation
- Naming broad product-markets, (or
disaggregating)
- Segmenting is an aggregating process

» Market segment
a relatively homogeneous group of consumers
who will respond to a marketing mix in a
similar way.
Market Segmentation Defines Possible Target Markets

Broad product-market (or generic market) name

goes here (The bicycle-riders product-market)

Submarket 1
(Exercisers) Submarket 3 Submarket 4
(Transportation riders) (Socializers)

Submarket 2
(Off-road
adventurers) Submarket 5
(Environmentalists)

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

How Far Should the Aggregating Go?

B. Product-market showing
A.
Status dimension six segments
three segments

Dependability dimension
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Single target market approach
 segmenting the market and picks one of the
homogeneous segments as the firm’s target market

Multiple target market approach

 segmenting the market, chooses two or more
segments, and then treats each segment as a separate
target market needing a different marketing mix

Combined target market approach

 combining two or more submarkets into one larger
target market as a basis for one strategy
Target Marketers Aim at Specific Targets

In a product-market area

A segmenter A combiner

Using single target Using multiple target Using combined target

market approach – market approach – can market approach –
can aim at one aim at two or more can aim at two or more
submarket with one submarkets with different submarkets with the
marketing mix marketing mixes same marketing mix

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• Discussion Question

Suppose you are an entrepreneur who is

preparing to start a small business. Would
you be more likely to select a single or
multiple target market approach? Why?
Segmenting vs. Combining

Combiners
Try to Satisfy
Profit Is the “Pretty Well” Too Much
Balancing Combining Is
Point Risky
Key
Issues
Segment or Segmenters
Combine? Try to Satisfy
“Very Well”
Segmenting
May Produce
Bigger Sales
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
• Discussion Question:

What companies you are familiar with have

suffered because segmenters have “chipped
away” pieces of their target markets?
What Dimensions Are Used to Segment Markets?

Qualifying Determining
Dimensions Dimensions

• Relevant to • Affect the

including a customer’s
customer type in a purchase of a
OR
product market product or brand

• Help identify “core • Can be further

features” segmented

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Segmentation, Targeting, and Positioning -
McDonald's
JW Marriott Hotel Dubai
Global Expansion & Customer Segmentation
Revitalize Footwear & Apparel Brand
What Dimensions Are Used to Segment Markets?

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

What Dimensions Are Used to Segment Markets?

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

• Discussion Question:

Considering the demographic variables of age

and education levels, can you provide
examples of products or services that are
targeted to college students?
What Dimensions Are Used to Segment Markets?

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Determining vs. Qualifying Dimensions

Determining Determining
Dimensions May Dimensions May
Be Very Specific Change

Key Issues

Different Qualifying
Dimensions For Dimensions Are
Different Important Too
Submarkets
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Broader Issues in Selecting
Segmenting Dimensions

Ethical
Exploitation
Issues

Creates
Unnecessary
Wants

Does Harm

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Segmenting Product Markets

Name Broad
Product-Market

List Customer Needs

Form Homogeneous
Submarkets
Identify
Determining Dimensions

Process Name Possible

for Product-Markets
Segmenting Evaluate Product-Market
Product-Markets Segments

Estimate Size of
Product-Market Segments

© 2004 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

More Sophisticated Techniques
May Help in Segmenting

Clustering

Customer Database

Customer Relationship
Management (CRM)
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Cluster Analysis

+
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Positioning

+
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Exhibit 3-12
An Example of Positioning

High moisturizing

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

1
Dial
Lifebuoy
Lava
6

low moisturizing
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
Key Terms
• Market • Combiners
• Generic market • Segmenters
• Product market • Qualifying dimensions
• Market segmentation • Determining dimensions
• Segmenting • Clustering techniques
• Market segment • Customer relationship
• Single target market management (CRM)
approach • Positioning
• Multiple target market
approach
• Combined target
market approach
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin