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Chapter 9
Segmentation, Targeting,
and Positioning
Copyright 2022 © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives
Learning Objective 9.1 Outline the different methods of
segmenting a market.
Learning Objective 9.2 Describe how firms determine
whether a segment is attractive and therefore worth
pursuing.
Learning Objective 9.3 Articulate the difference among
targeting strategies: undifferentiated, differentiated,
concentrated, or micromarketing.
Learning Objective 9.4 Determine the value proposition.
Learning Objective 9.5 Define positioning and describe
how firms do it.
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The Segmentation, Targeting, and
Positioning Process
EXHIBIT 9.1 The Segmentation, Targeting, and Positioning (STP) Process
Market segmentation is the
process of dividing a broad
consumer or business market,
normally consisting of existing
and potential customers, into
sub-groups of consumers based
on shared characteristics.
Access the text alternative for slide images.
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Step 1: Establish the Overall Strategy
or Objectives
Derived from mission
and objectives
Consistent with
SWOT
Food marketers, for instance,
divide the traditional pasta sauce
landscape into with or without
meat. This segmentation method is
based on what consumers derive
from the products.
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Step 2: Use Segmentation Methods
EXHIBIT 9.2 Methods for Describing Market Segments
Segmentation Method
Sample Segments
Geographic
Continent: North America, Asia,
Europe, Africa
Within the United States: Pacific,
mountain, central, south, midAtlantic, northeast
Demographic
Age, gender, income, education
Psychographic
Lifestyle, self-concept, self-values
Benefit
Convenience, economy, prestige
Behavioral
Occasion, loyalty
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Geographic Segmentation
Market could be grouped by:
Country.
Region.
• Northeast, Southeast.
Areas within region.
• State, city,
neighborhoods, zip
codes.
Most useful for companies whose
products satisfy needs that vary
by region.
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Demographic segmentation
Most common
segmentation strategy.
Easy to identify.
Easy to measure (age,
gender, income,
education).
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Adding Value 9.1 Dealing with Modern Life by
Playing: LEGO Promises
LEGO is targeting its
bricks and building sets
as the perfect respite for
this demographic
segment, frazzled adults
who just want a break
from modern life.
The casual adult builder
is the new demographic
segment for LEGO.
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LEGO’s latest market segment: frazzled adults seeking
to reduce stress with easy-to-build projects like this
25th anniversary set depicting the Central Perk coffee
shop from the TV sitcom Friends.
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Psychographic Segmentation
How consumers describe
themselves in terms of:
• Self values.
• Lifestyle.
• Self-concept.
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Benefit Segmentation
Dividing the market into
segments whose needs
and wants are best
satisfied by the product’s
benefits can be a very
powerful tool.
How does the movie
industry use a benefit
segmentation strategy?
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Behavioral Segmentation
Occasion segmentation:
• Based on when a product or
service is purchased or
consumed.
• Clothing, snack foods.
Loyalty segmentation:
• Loyal customers are the
most profitable in the long
term.
• Hotels, airlines,
restaurants (Starbucks).
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Using Multiple Segmentation Methods :
Exhibit 9.4 Examples of Tapestry
Tapestry ™ uses a combination of geographic, demographic,
and lifestyle characteristics to classify consumers.
A table divided into four columns
summarizes the examples of the
Tapestry Segmentation System. The
column headers for columns 2 to 4 are
marked as: Segment 01-Top Rung;
Segemnet-18, Cozy and comfortable;
and Segment-52, Inner city tenants.
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PROGRESS CHECK (1 of 2)
1. What are the various segmentation methods?
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Step 3: Evaluate Segment Attractiveness
EXHIBIT 9.5 Evaluate Segment Attractiveness
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Identifiable
Who is in their market?
Are the segments
distinct from one
another?
Does each segment
require a unique
marketing mix?
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Substantial
How large is the market
segment in terms of size
and buying power?
If a market segment is too
small, it won’t generate
sufficient profits.
If its buying power is
insignificant, despite its size,
the marketing mix cannot be
supported.
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Reachable
Can the market be reached through persuasive
communication and product distribution?
The consumer must:
• Know the product exists.
• Understand what it can do.
• Recognize how to buy.
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Responsive
Customers must react similarly and positively to the
firm’s offering.
If a firm cannot provide products and services to
the segment, it shouldn’t be targeted.
If you are looking for a luxury sedan, General Motors hopes you
will choose a Cadillac.
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Profitable
Assess potential profitability of each segment, both
current and future.
Key factors:
• Current market growth rate.
• Future growth rate.
• Market competitiveness.
• Market access costs.
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How to Determine the Profitability of a Segment
Segment = Children under 15
• Segment size = 60 million (
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