Chapter 8:
Segmentation, Targeting, Differentiation, and Positioning
Strategies
Learning Objectives
Segmentation and Targeting Overview
Market segmentation is the process of aggregating individuals or businesses along
similar characteristics that pertain to the use, consumption, or benefits of a
product or service. A market segment can be any size from one person to millions
of people.
Three Markets
Business Market
The business market involves the marketing of products to businesses,
Government Market
Market Segmentation Bases and Variables
Marketers base their segmentation on demographics, geographic location,
psychographics, and behaviors with regard to the product. Firms often combine
bases and focus on categories such as geodemographics (geography and
demographics).
Geographic Segments
Geographic location of computers in cyberspace is not important;
Important Geographic Segments for E-Marketing
Sixty-seven country markets have more than 50% Internet penetration,
with the China leading at 513 million users. One barrier to e-marketers is
Demographic Segments
In the early years, the typical Internet user was a young male, college
educated, with a high income. The following sections describe three
market segments that have recently caught the attention of e-marketers.
Millennials – Those born between 1979 and 1994, over 95% use
the Internet. These individuals are good at multitasking and are
better able to handle information overload. Millennials are the first
Psychographic Segments
Psychographics include personality, values, lifestyle, activities, interests,
and opinions (AIO).
Interest Communities – The Internet is an ideal gathering place for
people from anywhere in the world with similar interests and tasks.
People can connect through social networking and similar
practices. Exhibit 8.7 shows ten types of online communities.
Online communities can be targeted through chat rooms or
discussion boards, advertisements on other sites, or actually joining
a community and posting messages as member.
Behavior Segments
Two commonly used behavioral segmentation variables are benefits
sought and product usage.
Benefit Segments – The Internet offers something for everyone:
Targeting Online Customers
E-marketers have four approaches for segmenting online consumers. Mass
marketing (or undifferentiated targeting) uses one marketing mix for the entire
Differentiation Online
Differentiation is the process of adding a set of meaningful and valued differences
to distinguish the company’s offering from competitors’ offerings. This can be
achieved through:
Product Innovation – new products or applications
Mass Customization – the ability for consumers to customize their own
products.
Service Differentiation – using outstanding or above-par service to set the
company apart.
Customer Relationship Management (CRM) – gaining a 360-degree view
of the customer through many different touchpoints.
Online Positioning Bases
Positioning is the process of creating this image, and a position is the resulting
Chapter Summary
E-business occurs primarily in three markets – business-to-business
(B2B), business-to-consumer (B2C), and business-to-government (B2G),
although business also become involved in the consumer-to-consumer (C2C)
market. The majority of dollars change hands in the B2B market, with many
firms connected to the Internet. Information technology is creating efficiencies
The four consumer market segmentation bases are demographics,
geographic location, psychographics, and behavior with respect to the product.
Each basis is further refined into segmentation variables – such as age and gender
variables within demographics. Currently e-marketers are targeting a number of
demographic niches, and look forward to newly important segments: millennials
and kids. Different strategies are used to target each segment
User psychographics include personality, values, lifestyle, attitudes,
interests, and opinions. The internet is an excellent way to gather people with
similar interests and tasks into online communities for effective targeting. An
important segmenting variable to predict online purchase behavior is attitude
toward technology. Important behavioral segmentation variables commonly used
Chapter Outline
Opening Vignette: 1-800-Flowers
Have the class read the opening vignette on 1-800-Flowers. What type of market
segments would 1-800-Flowers be targeting to succeed online? How does the
varying consumer needs affect the level of service provided by 1-800-Flowers?
How is the SAS software related to the success or failure of the business? Has
anyone in the class used 1-800-Flowers? If so, discuss.
I. Segmentation and Targeting Overview
For firms to clearly understand the needs and behaviors of its various targets,
they must have in-depth market knowledge and devise a perceptive segmentation
and targeting strategy.
A. Marketing Segmentation
1. Defined – the process of aggregating individuals or businesses
3. May range from one person to several million people
B. Market Targeting
1. Defined – the process of selecting the market segments that are
2. Criteria for segment selecting may be:
a. Accessibility
II. Three Markets
Three important markets that both sell and buy to each other: businesses,
consumers and governments.
A. Business Market
1. Marketing of products to business, governments, and
institutions for use in the business operations.
2. Information technology creates tremendous efficiencies
a. Globalization is causing increased competition
3. Internet allows for strange bedfellows
a. Unlikely industries find partnerships due to the
B. Government Market
1. U.S. government is the world’s largest buyer
2. Unique challenges
a. Rules
b. Paperwork
C. Consumer Market – Involves marketing goods and services to the end
consumer.
III. Market Segmentation Bases and Variables
Marketers can base their segmentation of consumer markets on demographics,
geographic location, psychographics, and behavior with regard to the product.
To understand this, realize that segmentations are bases are a few general
organizing categories, and segmentation variables include numerous
subcategories. Another important thing to remember is that marketers create
segments based on variables that can be used to identify and reach the right
people at the right time.
A. Geographic Segments
2. It is very important to organizations
a. Firms target specific cities, regions, states, or
B. Important Geographic Segments for E-Marketing
1. Sizes:
2. 67 country markets have at least 50% Internet penetration
3. Global Facebook and Search Engine Adoption
4. Languages on Web Pages
a. English – 33%
5. Local Marketing
a. Yahoo! Local
C. Demographic Segments – In the early years, Internet users were
young, college educated males with above average income. Marketers
are constantly looking for demographic niches:
1. Millennials – born between 1979 – 1994
a. 95% use the Internet
b. Adept at multitasking
c. Able to handle the information overload
d. The first generation to ignore marketers
e. Media channels used
i.Text
2. Kids
a. Spending power of $40 Billion
b. Under 17 online group increasing
c. Under 11 group jumped to 20 million in 201
d. Online activities include:
i.Online gaming
ii.Homework
iii.Music
D. Psychographic Segments – includes personality, values, lifestyle,
activities, interests, and opinions.
1. Interest Communities – people can gather from anywhere with
a common interest or similar task (see figure 8.7)
a. Social networking – expanding the number of one’s
business and social contacts
b. Six degrees of separation
c. Three ways to target online communities
2. Attitudes and Behaviors
3. Attitudes Toward Technology – Exhibit 8.9
a. Will users buy when they surf the web?
b. Technographics – measures consumer and business
attitudes toward technology
i. Are you optimistic or pessimistic toward
technology?
4. Influentials
a. Online journalists
E. Behavior Segments – normally categorized by benefits sought and
product usage.
1. Benefit Segments – the Internet offers something for everyone
a. Best way to determine is to look at what people
actually do online
2. Usage Segments – categorize users according to how they use
the Internet
a. Mobile Access – using smartphones to access Internet
apps
i. 93% use a smartphone at home
ii. 81% browse the internet
iii. 89% access a social networking site
ix. 27% purchase on a mobile website
b. Online Engagement Level
i. Creators
ii. Conversationalists
iii. Critics
iv. Collectors
v. Joiners
vi. Spectators
vii. Inactives
c. Industry-Specific Usage Segments – varies from
industry to industry. Some categories from the auto
industry:
IV. Targeting Online Customers
After determining what segments to market, e-marketers must decide what
approach to use.
A. Niche Marketing
1. Defined – when a firm selects one segment and develops one
or more marketing mixes to meet the needs of that segment
3. Can be risky because competitors may be drawn into lucrative
markets
V. Differentiation Online
Differentiation is the process of adding a set of meaningful and valued differences
to distinguish the company’s offering from competitors’ offerings.
A. Differentiation
1. Product innovation
3. Service differentiation
5. Personnel differentiation
7. Image differentiation
9. User-generated content (UGC)
10. Efficient and timely order processing
VI. Online Positioning Bases
Positioning is a strategy to create a desired image for a company and its products
in the minds of a chosen user segment.
A. Determine the product category in which the brand competes