MKTG600 – Marketing Management

LO3: Apply the concepts of

segmentation, target
marketing and positioning
 Learning Steps

1 Identify the bases for segmentation

2 Discuss how to evaluate market segments

Discuss how to select market segments for targeting

3
Discuss the process of developing a positioning
4 statement

5 Practice segmentation, targeting and positioning.

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 Market Segmentation

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 Market Segmentation

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 Segmentation
• Psychologists:
• Consumers have different motivations that drive their
purchases
• Economists:
• Imperfect competition exists; consumers have
heterogeneous needs
• Marketers:
• The market is comprised of different segments

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 Segmentation

• Segmentation
• Breaking the market
into more
homogeneous
consumer groups
• A single product,
price, promotion is
unlikely
to satisfy all
consumers’ needs

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 Segments Defined

• Market segment
• A group of customers who share similar inclinations toward a
brand
• Marketers’ Goal
• Create marketing mixes that meet the segment’s needs

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 Marketing Segmentation

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 One-to-One Marketing

• Each customer serves as his own segment

• Product is tailored for each person’s desires
• Is usually more effective in meeting customers’ needs but hard to achieve
efficiently and may involve quality issues

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 Mass Marketing

• All customers are

treated the same
• Is usually more
efficient but not
effective in meeting
customer needs

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 Segmentation
• Segmentation falls between one-to-one and mass marketing
• Niche Marketing: Targeting small market that firm serves well

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 Segmentation - Demographics
• Marketers may change marketing mix based on demographic
factors:
•Gender, age, stage in life cycle, education, income, ethnicity

• Demographic variables are clear and easy to recognize

• However, they may not determine interests

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 Segmentation - Geographic
• Geographic distinctions
between customers can
change preferences/needs.
For example:
•Cultural differences
can exist between
countries or within a
country
•Urban living is different
than small town
•Hot climates require
different products than
cold climates
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 Segmentation - Geographic

• Exercise: Discuss products

that are different
geographical
• What are some products that
are ONLY available in Canada
or similar climates?
• Identify examples of products
or brands that are marketed
differently in other countries or
geographic areas?
• Report back to the class

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 Segmentation

• Combining geographic and demographic information can provide

powerful segmentation opportunities

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 Segmentation - Psychological

• Psychological: get inside the heads and hearts of customers

• Attitudes
• Knowledge & awareness
• Wants and needs
• Affiliations
• Traits
• Expertise & involvement
• Brand attributes sought
• Risk orientation
• Aspirations
• Vary in terms of relevancy to the product

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 Segmentation - Psychological

• Psychological & Lifestyle

• Tie together attitude and interests (ex. Gardeners, Foodies, etc.)
• VALS – Psychographic Segmentation tool
• Framework for market segmentation, provides key pre-defined categories

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 Segmentation - Behavioural

• Behavioral: behaviors people engage in

• Attitudes can’t be observed; behaviors can
• Intentions do not always equal behaviors
• Behaviors help predict future behavior
• Non users may use competitors or don’t buy
• 80:20: 80% of sales come from 20% of customers
• It costs 6 times more to acquire new customer
compared to retaining loyal
• Patterns of co-purchasing

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 Segmentation

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 Segmentation – B2C vs. B2B

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 How to Segment

• Iterate between two approaches

• Managerial: top-down ideation 
• Customer-based: bottom-up customer
needs assessment
• Segment market using cluster analysis
• Survey customers; identify questions where
there is variability in responses
• If no variability in responses, do not segment
on that variable

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 How to Evaluate Segmentation Schemes

• The segmentation scheme needs to have ...

1. Data to identify segments
2. Databases to access segments
3. Profitability
4. Fit with corporate goals
5. Actionable

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 Segmentation Strategies

Multiple segments in a market Breadth Strategy

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 Segmentation Strategies

Depth Strategy Tailored Strategy

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 Targeting

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 Targeting

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 Targeting

• Once the market is

segmented, marketers select
(target) one or more of those
markets to pursue
• Firms select target markets
which are a good fit with the
firm and have good profit
potential

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 How to Choose a Target
• Top down: strategic fit
• Does this market fit with who we are? 
• Understand firm’s resources, strengths weaknesses,
brand personalities, etc.
• Bottom up: profitability
• How profitable will this segment be? 
• Function of the current market size, its anticipated
growth, current and anticipated levels of competition,
customer behavior and expectations

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 How to Choose a Target

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 SWOT Analysis

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 SWOT Analysis
SWOT Breakdown
The elements of SWOT are easy to remember but difficult to apply. “S”
and “O” are good. “W” and “T” are bad. The differences between the two
positive forces and the two negative forces lies in where they originate.
Strengths and weaknesses come from within and are totally controlled
by the firm. Opportunities and threats come from outside and are
uncontrollable by the firm. Assign an S, W, O, or T to the statements on
the right.

1. A slow economy will decrease consumer demand. ____

2. The firm has a high customer satisfaction rating. _____
3. The firm will postpone expansion due to shortage of capital. _____
4. There is a growing demand for the firm’s type of goods. _____

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 SWOT Analysis

Exercise:
In groups, we will look at different manufacturers in the auto industry
and conduct a detailed SWOT analysis.

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 Competitive Comparisons
• Perceptual maps show customers’ perceptions of firm’s
strengths/weaknesses relative to competitors 

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 Competitive Comparisons

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 Market Sizing

• Use the purchase decision making process

•Population, awareness, trial and repeat

• Multiply by quantity and frequency

• Multiply by average retail price paid

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 Market Sizing Considerations
• Some estimates are less firm than others
• Give intervals and “what if” scenarios
• Each estimate should be as precise as possible 
• The more precisely defined the segment, the easier the
numbers are to estimate

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 Market Sizing Discussion

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 Positioning

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 Positioning

• Who your brand or

company is in the
marketplace, vis-à-vis
the competition, and
in the eyes of the
customer

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 Positioning

• Describe the positioning for each brand.

• How does a firm gain their market position?

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 Positioning

• Positioning is determined by the marketing mix

• Product offered 
• Pricing charged
• Distribution implemented, and
• Message communicated

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 Positioning Using Perceptual Maps
• Perceptual maps show graphical depictions of where brands are, and
where their competitors are, in the minds of their customers

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 Competitive Analysis

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 Competitive Analysis

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 Competitive Analysis

Importance
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 Positioning Considerations

• Companies usually can’t be

great at everything due to
limited resources
• Marketers need to determine
the “best” position for the
firm

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 4P's (Marketing Mix) Matrix

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 Suboptimal Matches

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 Quality & Price Align
• Optimal matches:
• High-End & Value 

• Suboptimal matches:
• Overpriced: customers stop buying; firms drop price, increase quality or leave
market
• Good value: firms increase price or lower quality 

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 Promotion & Distribution Align
• Optimal matches
• Mass and Niche

• Suboptimal matches
• Hard to get: Why promote heavily if consumers can’t find the product?
• Under-advertised: If a brand has an exclusive image, why distribute it
everywhere?

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 Optimal Mix

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 Brands in the 4P's Matrix
1. Low price, low quality, wide distribution, heavy promotion
2. Low price, high quality, wide distribution, heavy promotion
3. High price, low quality, wide distribution, heavy promotion
4. High price, high quality, wide distribution, heavy promotion
5. Low price, low quality, exclusive distribution, heavy promotion
6. Low price, high quality, exclusive distribution, heavy promotion
7. High price, low quality, exclusive distribution, heavy promotion
8. High price, high quality, exclusive distribution, heavy promotion
9. Low price, low quality, wide distribution, light promotion
10. Low price, high quality, wide distribution, light promotion
11. High price, low quality, wide distribution, light promotion
12. High price, high quality, wide distribution, light promotion
13. Low price, low quality, exclusive distribution, light promotion
14. Low price, high quality, exclusive distribution, light promotion
15. High price, low quality, exclusive distribution, light promotion
16. High price, High quality, exclusive distribution, light promotion

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 Brands in the 4P's Matrix

: ____________________________

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 Optimal Mix and Business Strategy
• The two extremes in the matrix are consistent with management gurus
• Treacy and Wiersema
1. Operational excellence (Southwest)
2. Product leadership (Johnson & Johnson)
3. Customer intimacy (Nordstrom)
• Michael Porter
1. Keeping costs down and prices competitive

2. Leading by differentiation 

3. Niche positioning

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 Positioning Statements
• Positioning statement: Succinctly communicates parameters of a position 
• Consider
• Your target market – who are you trying to persuade?

• Your unique selling proposition (USP) – how are you differentiated or

better than your competitors?
• e.g., For customers who want {target}, our brand is the best at {USP}.

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 Learning Outcome Recap

1 Identify the bases for segmentation

2 Discuss how to evaluate market segments

Discuss how to select market segments for targeting

3
Discuss the process of developing a positioning
4 statement

5 Practice segmentation, targeting and positioning.

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 Questions

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