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Chapter 07
Segmentation, Target Marketing, and Positioning
7-1
LEARNING OBJECTIVES
LO 7-1 Explain the criteria for effective segmentation.
LO 7-3 Describe the steps in target marketing.
LO 7-5 Use and interpret perceptual maps.
LO 7-7 Avoid potential positioning errors.
CHAPTER OUTLINE
I. FULFILLING CONSUMER NEEDS AND WANTS
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Segmentation, Target Marketing, and Positioning
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II. WHAT IS SEGMENTATION?
A. Criteria for Effective Segmentation
III. SEGMENTING CONSUMER MARKETS
A. Geographic Segmentation
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B. Demographic Segmentation
i. Age
ii. Generational Group
iii. Gender
iv. Family and Household
v. Race and Ethnicity
vi. Income
vii. Occupation
viii. Education
ix. Social Class
x. Geodemographics
C. Psychographic Segmentation
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D. Behavioral Segmentation
i. Benefits Sought
ii. Usage Patterns
E. Firms use Multiple Segmentation Approaches
Simultaneously
F. SEGMENTING BUSINESS MARKETS
IV. TARGET MARKETING
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Segmentation, Target Marketing, and Positioning
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A. Analyze Market Segments
i. Segment Size and Growth Potential
ii. Competitive Forces Related to the Segment
iii. Strategic Fit of the Segment
B. Develop Profiles of Each Potential Target Market
C. Select a Target Marketing Approach
i. Undifferentiated Target Marketing
ii. Differentiated Target Marketing
iii. Concentrated Target Marketing
iv. Customized (One-to-One) Marketing
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V. POSITIONING
A. Perceptual Maps
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B. Sources of Differentiation
C. Positioning Errors
VI. SUMMARY
KEY TERMS
market segmentation Dividing a market into meaningful smaller markets or submarkets based
on common characteristics.
target marketing Evaluating market segments and making a decision about which among them
shows the most promise for development.
positioning The communication of sources of value to customers so they can easily make the
connection between their needs and wants and what the product has to offer.
positioning strategy The execution of the chosen positioning approach through the development
of unique combinations of marketing mix variables.
differentiation Communicating and delivering value in different ways to different customer
groups.
geographic segmentation Dividing consumer groups based on physical location.
demographic segmentation Dividing consumer groups based on a variety of readily measurable
descriptive factors about the group.
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family life cycle A series of life stages defined by age, marital status, number of children, and
other factors.
tertiary target markets Market segments that may develop emerging attractiveness for
investment in the future but that do not appear attractive at present.
undifferentiated target marketing The broadest approach to target marketing that involves
offering a product or service that can be perceived as valuable to a very generalized group of
consumers.
APPLICATION QUESTIONS
1. Go to the Claritas website, click on MyBestSegments, and find the Zip Code Look-Up. There
you will find a demo that allows you to type in a zip code of your choice and find out what
PRIZM clusters predominate in that geographic area.
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a. What do the findings tell you about the overall composition of potential customers within
that zip code?
b. Based on the array of clusters represented, what kinds of start-up businesses might
flourish within the geographic area? Why do you believe those businesses in particular
would be successful?
2. Go to the Strategic Business Insights (SBI) website ( www.strategicbusinessinsights.com)
and click through to the section on VALSTM . Find the VALSTM survey and complete the
questionnaire.
a. Are the results surprising? Why or why not? Do you see yourself as part of the
identified VALSTM segment?
b. If you are comfortable doing so, share your results with a few other people in the class
and ask if they mind sharing their results with you. What is the consensus among the
group about whether the survey actually captured a relevant profile about yourself and
your classmates?
c. How might each of these brands benefit from the use of VALSTM as a psychographic
segmentation tool?
i. Chipotle
ii. Walt Disney World Theme Park
iii. Target Stores
iv. Samsung
v. Porsche
3. Assume for a moment that you are in marketing for Staples (the office supply company) and
that the clients you are responsible for are business users (not end-user consumers). What
five business market segmentation variables do think will be most useful to consider as you
move toward honing in on the Staples’ business target markets with the best ROI? Justify
your choice of each.
The following are some suggestions:
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Segmentation, Target Marketing, and Positioning
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4. Consider each of the brands below. Review the list of potential sources of differential
competitive advantage (differentiation) highlighted in the chapter. For each: (a) indicate
which one differentiation source you believe is most important to them currently and (b)
indicate which other differentiation sources you believe might hold promise for development
for them in the near future and why.
a. Norwegian Cruise Lines
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MANAGEMENT DECISION CASE
Crafty Credit Card Competitor “Chases” Amex for Share of Millennials’ Wallets
Questions for Consideration
1. Why is the millennial generation, in particular, so important to Amex?
As noted in the case, the millennials are the largest age cohort in the US (larger than the
2. This case focuses primarily on the battle between Chase and Amex over millennial
consumers. But, as the content in this chapter points out, lumping all older consumers into a
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generalized segment overlooks some important variables. Looking at the generational groups
and their representative values (see Exhibit 7.7), where would you suggest Amex focus its
marketing efforts, and why?
Each of these segments meets one of the main criteria for a target segment, which is to be of
sufficient size as to matter towards the company’s goals. Each of these segments is also
3. As noted in the chapter, an external positioning statement is not just about being able to
describe how your product benefits the customer—it also needs to explain how your product
is different from the competition. Chase’s “It’s not your father’s credit card” external
positioning statement sums up in six words the idea that Chase is young while its competitors
are old. The statement leads millennial consumers to consider what this card could do for
them, beyond what their father’s card could. Amex’s positioning has always been that its
card is for the successful professional—what would happen if Amex changed that
positioning? (As a bonus, try to create a short external positioning phrase for Amex to use
with millennials.)
This, of course, would depend on the segment one chose to target. Assuming we used a
Chapter 07
Segmentation, Target Marketing, and Positioning
SUGGESTED VIDEO
New Balance: Targeting Multiple Segments (4:25 minutes)
Description: New Balance is the third largest athletic shoe company in the U.S. Their reputation
for creating innovative performance footwear available in multiple widths has helped them
achieve a loyal customer base. Segmentation and targeting is at the center of their marketing plan
to expand and grow. Their product line is divided into 7 segments.
1. By segmenting their product line into 7 segments, has New Balance selected the optimal
amount of segments?
There is no universal standard for the optimal number of segments to target. New Balance
can evaluate each segment’s attractiveness on factors such as”:
1
https://www.census.gov/newsroom/blogs/random-samplings/2016/06/americas-age-profile-told-through-
population-pyramids.html
2
http://www.businessinsider.com/mobile-payment-technology-contactless-payments-explained-2016-11
