978-1259637155 Chapter 7

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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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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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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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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

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