Segmentation, Targeting
and Positioning
Session 6
Marketing Management
Prof. Natalie Mizik
Developing Marketing
Strategy
Identify
Market COLLABORATORS CUSTOMERS COMPANY COMPETITION CONTEXT
Opportunities
ACQUISITION-
Set Strategy
SEGMENTATION TARGETING POSITIONING
RETENTION
• Segment the market • Evaluate segment • Develop positioning concepts
• Develop profiles of attractiveness for each target segment
segments • Select target • Select, develop, and communicate
segments the chosen concept
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Prof. Natalie Mizik – 2010 MIT 15.810
Segmentation
What is segmentation
Why segment the market
Characteristics of a good segmentation
Bases for segmentation
Techniques for segmentation
Examples
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Prof. Natalie Mizik – 2010 MIT 15.810
Why Segment
Hospital A Hospital B Total
Died 63 16 79
Survived 2037 784 2821
Total 2100 800 2900
Death Rate 0.03 0.02 0.027
Hospital A Hospital B Total Hospital A Hospital B Total
Died 6 8 14 57 8 65
Survived 594 592 1186 1443 192 1635
Total 600 600 1200 1500 200 1700
Death Rate 0.010 0.013 0.012 0.038 0.040 0.038
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Prof. Natalie Mizik – 2010 MIT 15.810
Benefits of Segmentation
To the Firm: To the Customer:
Identification of Customized products
valuable customers & services
More targeted Personalized
promotions & experience
marketing comms Increased customer
Higher CLV satisfaction
Sustainable Profit Growth
Customer Loyalty & Retention
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Prof. Natalie Mizik – 2010 MIT 15.810
Characteristics of Good
Segmentation
Large
Identifiable
Distinctive
Stable
Actionable / Respond differently
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Prof. Natalie Mizik – 2010 MIT 15.810
Bases for Segmentation
Descriptors Bases Behaviors
“Who” “Why” “What”
Age Needs Usage
Income/ Preferences Loyalty
Education Decision Deal proneness
Profession processes
Responsiveness
Media Habits Lifestyles to marketing mix
Industry Strategic
Size importance
Location
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Prof. Natalie Mizik – 2010 MIT 15.810
Statistically Speaking
Effective Descriptor Ineffective Descriptor
Do Not Own Own Low Education
Fraction of Customers
Microwave Microwave High Education
20% 80% 30% 40%
Likelihood of buying Frozen Dinner Likelihood of buying Frozen Dinner
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Prof. Natalie Mizik – 2010 MIT 15.810
Dog Food Market
SEGMENTS
Attribute Functionalist Family Mutt Baby Substitute Nutritionist
Demo Central/South East West East/Central
Low income Low income High income High income
Children Children No children Urban
Dogs Several One, average One, small Several,
size large
Attitudes No bother, Little interest Attached, High
dog outdoor dog fragile attachment
Feeding Basic feeders Heavy usage, Soft moist, Many feedings
behavior low priced biscuits, lots high priced
of cans
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Prof. Natalie Mizik – 2010 MIT 15.810
Product Line Segmentation
Banana Republic
Income GAP
Shared values:
OLD NAVY Urban, fashionable
Age, aspirations
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Prof. Natalie Mizik – 2010 MIT 15.810
Techniques for
Segmentation
Perceptions/Ratings
Segmentation
for one respondent:
CustomerValues
. .
Methods:
. . .
A.. .
. . ..
. D .
.. ... .
.. .
Durability
(Importance)
Judgment
. Distance between
segments C and D
Data-based:
•Cluster Analysis
. .
B. .
.. ... .
.. .
C. .
.. .... .
.. .
A,B,C,D:
Location of
segment centers.
Typical members:
•Regression A: schools
B: light commercial
C: indoor/outdoor
Water carpeting
D: health clubs
Resistance
(Importance)
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Prof. Natalie Mizik – 2010 MIT 15.810
Choosing your Target
Market(s)
Market Opportunities (Customer):
• Segment Size
• Growth rate/potential
Target
Market
Company “Fit”
Selection • With Objectives
Competition: • With Competencies
• Competitors’ Strengths • With Customer Base
• Competitive Intensity • With Resources
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Prof. Natalie Mizik – 2010 MIT 15.810
Taxonomy at the Pump: Mobil’s Five Types of Gasoline Buyers
Road Warriors: True Blues: Usually Generation F3: (for Homebodies: Price Shoppers:
Generally higher men and women with fuel, food and fast): Usually housewives Generally aren’t
income middle-aged moderate to high Upwardly mobile men who shuttle their loyal to either a
men who drive 25,000 incomes who are loyal and women - half children around brand or a particular
to 50,000 miles a to a brand and under 25 years of age- during the day and station, and rarely
year…buy premium sometimes to a who are constantly on use whatever buy the premium
with a credit particular the go…drive a lot and gasoline station is line…frequently on
card…purchase station..frequently buy snack heavily from the based in town or tight
sandwiches and drinks premium gasoline and convenience store along their route of budgets…efforts to
from the convenience pay in cash travel. woo them have been
store…will sometimes the base of marketing
wash their cars at the strategies for years.
carwash.
16% of buyers 16% of buyers 27% of buyers 21% of buyers 20% of buyers
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Prof. Natalie Mizik – 2010 MIT 15.810
Selecting segments based
on segment profitability
“Convenience Seekers” “Bargain Hunters”
$60 $20
Profit per Custom
Profit per Custom
$40
$0
$20
$0 -$20
-$20 -$40
-$40
Breakeven
Point -$60
-$60
Breakeven
-$80
-$80
Point
0 6 12 18 24 30 36 0 6 12 18 24 30 36
Months Since First Purchase Months Since First Purchase
Acquisition Cost Base Profit Revenue Growth Referrals
Source: Bain/Mainspring Online Retailing Survey (Groceries, n=297), Oct 99.
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Prof. Natalie Mizik – 2010 MIT 15.810
Early Pregnancy Tests
Q: Are there differences in consumer
needs in this market? What are they?
Q: What are the descriptors of these
segments?
Q: What is the best positioning in these
segments?
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Prof. Natalie Mizik – 2010 MIT 15.810
How is the packaging and positioning different?
What customer values are the products
appealing to?
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Prof. Natalie Mizik – 2010 MIT 15.810
Product Differentiation &
Positioning
“There is no such thing as a commodity”
Differentiation can be achieved on
product attributes
service factors
Image
Positioning: the image created in the minds
of target consumers
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Prof. Natalie Mizik – 2010 MIT 15.810
Positioning statement
To customers who are (target summary)
Our product offers (state what the
product does from the consumers’ point of
view)
Relative to (competitive alternatives)
“For World Wide Web users who enjoy books, Amazon.com is a retail bookseller
that provides instant access to over 1.1 million books. Unlike traditional book
retailers, Amazon.com provides a combination of extraordinary convenience, low
prices, and comprehensive selection.”
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Prof. Natalie Mizik – 2010 MIT 15.810
Positioning strategies
More/
Smaller/
Vertical Cheaper/
Faster/
positioning
Horizontal
positioning
Different/
Lifestyle/
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Prof. Natalie Mizik – 2010 MIT 15.810
Vertical positioning
The Razor Battle
Schick Quattro
Gillette Mach 3 Turbo
Image courtesy of Rene Schwietzke on Flickr.
Gillette Trac II
Gillette ups the ante, unveils 5-blade razor
Image courtesy of Maskington San Francisco on Flickr.
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Prof. Natalie Mizik – 2010 MIT 15.810
Positioning the ED drugs
36h
4h ~4h
Viagra Levitra Cialis
(Pfizer) (Bayer/GSK) (Lilly/Icos)
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Prof. Natalie Mizik – 2010 MIT 15.810
Example of a Perceptual Map:
Mapping a
Store’s Personality Lord & Taylor
Patriotism
TRADITION
Maturity
Saks Fifth Avenue Macy's Family
Wholesomeness
Kindness
Power Quality Variety
Bergdore Goodman Simplicity
LUXURY A&S THRIFTINESS
Sophistication
Bloomingdale's
Physical Beauty
Attractiveness Vitality Shoppers’ feelings about eight stores
helped researchers place those stores
Henri Bendel
on a ‘map’ of perceptions. On this
map, the vertical axis ranges from
Individuality Creativity tradition to innovation; the horizontal,
from luxury to thriftiness. Other
Upscale qualities shoppers associated with one
Barney's New York
or more stores appear near those
Masculinity INNOVATION stores, revealing shoppers’ relative
perceptions.
Source: BBDO
Prof. Natalie Mizik – 2010 MIT 15.810
Developing a Positioning
Strategy: Guiding Questions
Which positions are of greatest value to our target customers,
given their needs?
Which of these positions are “taken,” and which positions are
relatively free of competition?
Which of the available positions fits best with our objectives
and our distinctive capabilities, i.e., can we back up the
chosen positioning by demonstrable product attributes or
benefits?
Can we “change the rules” of the game by discovering new
critical points of differentiation?
Are all our positioning messages consistent?
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Prof. Natalie Mizik – 2010 MIT 15.810
Conclusion:
STP as Marketing Strategy
Segmentation
Identify segmentation bases and segment the market
Develop profile of resulting segments
Targeting
Evaluate attractiveness of each segment based on 3Cs
Select target segments
Positioning
Use perceptual map to identify current positions
Identify positioning concepts for each target segment
Select, develop, and communicate the chosen concept
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Prof. Natalie Mizik – 2010 MIT 15.810
An Afterward:
What about personalization? And mass
customization?
Information technology lowers the cost of
Gathering information about consumers
Changing the product
But there is still the trade-off:
Finer, smaller segments are expensive
Must produce increase in loyalty, satisfaction, and
ultimately profits
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Prof. Natalie Mizik – 2010 MIT 15.810
Listening to the Customer
15.821 H1
• Understand strengths and weakness
of the most important qualitative
research methods
• Learn how to get quick customer
input, skipping the market research
middleman
• Do a Voice of the Customer project
• For everyone (marketing, product
development, consulting..)
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Prof. Natalie Mizik – 2010 MIT 15.810
Strategic Market Measurement
15.822 H2
• Learn how to create, interpret and
analyze a market research survey
• Emphasis on market structure and
segmentation
• Hands-on conjoint and cluster analysis
• For consulting, market research careers
• 15.821 NOT a prerequisite
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Prof. Natalie Mizik – 2010 MIT 15.810
MIT OpenCourseWare
http://ocw.mit.edu
15.810 Marketing Management
Fall 2010
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