Chapter Seven
Segmenting, Targeting and Positioning
Authors’ Comments
Segmentation is just as important in business-to-business markets as it is in consumer
markets. Even when there are relatively few customers to address, very often there
are multiple buying centers within each one and they differ in terms of needs and
buying behavior. The value chain gives a good rationale for finding segments based
on differences in value sought and we make case for thinking about segments in the
value chain framework.
Opening Vignette
Panasonic Targets the Rugged Laptop Segment
In 1996, Panasonic was eager to enter the laptop computer market, but realized that
as a late entrant, they would, at best, be a “me too” product. Instead, Panasonic
created a different class of notebook computer, the Toughbook, targeted at those
market players exist, Panasonic still “owns” the market they first developed.
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Learning Objective
Reinforce the student’s understanding of segmentation as a tool to
manage markets and resources.
Students will have been exposed to the idea of market segmentation in a
Marketing Principles course.
Targeting (PowerPoint 7.3) a segment means to produce an offering that
meets the needs of customers in the segment better than competitor’s offerings
and reaching that segment through communications and distribution channels
so that customers realize the superior value offered.
Marketers strive to choose segments to target that are (PowerPoint 7.4):
• Measurable
• Accessible
• Substantial
• Actionable
While these four characteristics are universal definitions of the
Positioning (PowerPoint 7.6) is the relationship of the product and marketing
activities−relative to other segment participants−such that prospective
Learning Objective
Recognize segmentation as an effective management tool.
Three possible strategies for addressing Market Segments
(Porter, 1980)
(PowerPoint 7.7)
• Competitive advantage through low cost position.
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As discussed throughout the text, these three strategies can apply
to the same offering, depending on where the offering happens to be
in the PLC.
• Maturity−advantage through low cost position
Learning Objective
Develop an understanding of segmentation based on the concepts of
value and the value chain.
The value chain concept depicts the chain of value creating activities producing
the offering that is offered to a “segment” of customers. When the customers
are relatively homogeneous in the value they seek, the offering can be
Exhibit 7-2a, Segments and the Value Chain (PowerPoint 7.9)
If the value produced is costly, a segment that highly values this offering–the
ToughBook illustrate this idea well.
Exhibit 7-2b, Segments and the Value Chain (PowerPoint 7.10)
Learning Objectives
Introduce the market information needs necessary for successful
segmentation.
Understand when and how an analytic approach to segmentation is
useful.
Understand how segmentation supports business-to-business
marketing decisions.
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An idea not discussed in many marketing texts is the difference between an
Analytical approach develops two sets of data: (PowerPoint 7.11)
• Determine the relative size and growth potential of segments
• Determine individual segment needs and buying behavior
Learning Objective
Understand customer involvement in business-to-business segment
translation and evolution.
Innovation Translation: (PowerPoint 7.14)
The process of looking for these new customers−verifying the existence of a
segment by translating the technology of the offering from the first customer
Ideas are offered to customers and discussed in depth. If some early
products are available, innovation translation may be accomplished by
showing an existing or prototype product to prospective customers. This
collaboration, if successful, results in an offering tailored to the specific
needs of the new customer.
Innovation Translation is often the primary responsibility of Field Market
Development (FMD) personnel or other industry specific title
Consider relating successful innovation translation to Market
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Learning Objective
Understand segment evaluation and the targeting process to
maximize market opportunities.
Exhibit 7-6: Factors in Assessing Segment Attractiveness (PowerPoint 7.15)
There is a certain logic to the analysis of market segments. It follows this
sequence (PowerPoint 7.16):
• Setting goals; these usually include achieving a certain sales level,
For each segment, determine how attractive the segment is.
• Market Attractiveness–size and growth of the segment; profit
Determine the extent to which the goals can be reached if the segment were
targeted–this requires assessing the response that can be obtained from each
segment, considering a differentiated offering that competes against offerings
likely to be provided by competitors;
To pursue this approach, the distinction of segments on important dimensions
must be doable. This usually means that secondary data are available or that
primary market data have been collected.
Exhibit 7-7: Segment Attractiveness for Hypothetical Example (PowerPoint 7.17)
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Walking the students through the calculations in the hypothetical example in
This hypothetical example sets up the approach to analyzing the Townsend
Productivity Resources case.
Learning Objective
Reinforce market-positioning philosophy through an understanding of
its importance as a tool to enhance both customer and vendor value.
Customer’s beliefs about the positioning of the offering depend on the value
they experience. This comes, in part, from the marketer:
The Technology Adoption Life Cycle (PowerPoint 7.18)
(Also PowerPoint 2.21)
Adopter Categories: (PowerPoint 7.19)
•
Technophiles
adopt the very newest technologies, just to try
them out and experiment. These adopters do not require a
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Adopter categories of the TALC are a special case of segmentation with
implications for targeting and positioning (PowerPoint 7.20):
• Technophiles – their principal needs are curiosity; target them early in
the TALC to get feedback on the technical aspects of innovative products
and to get initial notice from technology gurus
• Visionaries – want to get a jump on their competition and will pay for it;
Positioning of a product line
Products in the line will be aimed at segments that have similar, yet
distinct sets of needs.
The problem–or opportunity–customers will perceive similarities in
positioning of the products in the line, whether this is intended or not.
Goal is to get members of the different segments to see and value both
the differences and similarities (PowerPoint 7.21).
• Relate to the overall corporate brand positioning, or at least
considered in light of it.
• A flagship product may be desired.
Example: iphone product in the line is already
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Key Terms
accessibility
actionability
niche
North American Industry Classification System (NAICS)
positioning
positioning statement
Answers to Questions for Review and Discussion
1. Consider the following segmentation basis variables and note potential
strengths and weaknesses of employing each in a segmentation framework:
a. Demographics
Segmentation basis variables…strengths and weaknesses:
DEMOGRAPHICS:
Strengths
Data are usually most available for demographic groupings–by size of
company, SIC or NAICS, geographic location, etc., because governments and
trade associations usually collect data this way.
Weaknesses
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Weaknesses
There can still be a great deal of variation in needs and buying behavior within
groups formed around technology used.
PERCEIVED VALUE SUBJECT TO INDUSTRY STANDARDS:
Strengths
Can align needs/wants to benchmarks. Groups are based on value, rather than
some proxy variable(s).
Weaknesses
POINT OF TECHNOLOGY ADOPTION OF THE CUSTOMERS’ CUSTOMERS:
Strengths
Reflects differences in needs at different points on the Technology Adoption
Life Cycle.
Weaknesses
2. How do the concepts of value and the value chain define how marketers should
try to segment markets?
When a segment of customers seek similar kinds of value, the supplier can address that
3. What is the difference between the analytic approach to segmentation and the
innovation translation approach to segmentation?
The analytic approach is based on finding targetable segments with a pre-determined set of
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4. What factors do you think will influence how strong the airlines’ perceived need
will be for super jumbo jets seating 600+ passengers in the year 2010?
The factors that will influence how strong the airlines’ perceived need will be for super jumbo
5. Why would you say the market for super jumbo jets is a
market segment
, even
though the customers–the airlines–are the same customers who also buy
jumbo jets and other kinds of airliners?
6. In Exhibit 7-7, the last column of the table shows that there is a lot of variation
in the strength of the need perceived by segment members and in the strength
of competition in meeting functional improvement needs within this segment.
Why would these observations argue against choosing this segment as a target
segment?
These data argue against choosing this segment, the last one, because of the high variability
7. What should a marketer do if, in choosing target segments, he or she runs out
of attractive segments to add to the list of targeted segments and it does not
appear that objectives can be met?
If a marketer “runs out of attractive segments” before his/her objectives are likely to be met
8. Why can marketers only hope to influence positioning and not create it?
Marketers can only hope to influence positioning rather than create it because it is generated in
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9. Compare the importance of positioning in business–to-business markets with
positioning in consumer markets.
Positioning is important in both consumer and business–to–business markets. The customers’
10. How is positioning an offering for new customers different from positioning for
existing customers?
Positioning an offering for new customers relies on faster insights into buyer needs/wants than
11. Explain why mass markets require offerings with fewer distinctions than niche
markets.
12. What is the difference between a niche and a market segment?
The distinction between a niche and a segment is largely a difference in popular usage. If
13. How is McKenna’s philosophy of market ownership, discussed in Chapter 2,
reinforced by the TALC positioning strategies suggested in this chapter?
The TALC suggests that a “gorilla” will emerge during a tornado. Standards are built around
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14. Define the business segments addressed and positioning of your business
school or marketing program. What could your school do to change or improve
your target segments chosen? Your positioning?
Business segments addressed and positioned for a business school or marketing program may