ASSIGNMENT 2

Read this introduction. Then read Chapter 2, “Segmentation,

Targeting, and Positioning” pages 39–69, in your textbook,
Consumer Behavior.

Mass Marketing
The Model-T automobile was efficiently and economically pro-
duced in a standardized version, available in just one color.
History shows, though, that the eventual failure of Henry Ford’s
Model-T can largely be attributed to his employment of a mass-
market strategy, which assumed a homogenous marketplace
made up of consumers sharing virtually identical needs and
preferences.
Many firms quickly learned and have come to acknowledge as
a reality that consumers want choice and flexibility in purchas-
ing goods and services. The marketplace, in fact, is highly
diverse, comprised of many smaller subgroups, or segments,
each with a distinctive set of needs and wants.
To succeed in such a diverse marketplace, most firms
employ a three-step market-matching strategy, as illustrated
in Exhibit 2.1 on page 42. The first step is segmentation, which
is dividing the general marketplace into a variety of smaller
submarkets, made up of consumers who want or need differ-
ent marketing mixes of products and/or services. The second
step is targeting, which means examining specific submarkets
and determining which of them to pursue. The final step is
positioning, which consists of developing, in the mind of the
consumer, a distinctive and attractive image for the product
or service.

Market Segmentation
Market segmentation is a process of defining or describing
different submarkets, or niches, through identifying common
needs and wants within a segment, as well as of distinguishing
between different segments. Your textbook provides examples.
Commercial airlines, for instance, typically separate segments
into business and leisure travelers. Forrester Research, a
technology consultant firm, has identified 10 segments
according to various criteria.

16 Consumer Behavior
As illustrated in Exhibit 2.2 on page 43, there are five basic
variables commonly used to segment consumer markets: geo-
graphic, demographic, geodemographic, psychographic, and
behavioral.

Geographic Segmentation
Geographic segmentation is segmentation by location, such
as by region, county, city, or town. Geography represents a
significant variable because differences in climate, location,
distance, and landscape can all influence attitudes and
behaviors, and people in different regions therefore want or
need different types of products or services and tend to respond
differently to marketing programs. To make the most of these
differences, many firms employ specifically regionalized or
localized marketing strategies to appeal to consumers in
different geographical locations.

Demographic Segmentation
Demographic segmentation uses variables such as age, gender,
family life cycle, income, occupation, education, and ethnicity.
For example, toy manufacturers typically market to children.
Certain breakfast food companies develop and market some
brands and products geared for children and others tailored
to appeal to adults. Likewise, Harley Davidson, which manu-
factures motorcycles, discovered through research that it could
extend its market share by introducing new product lines
that appealed to a demographic younger than its traditional
demographic.
The family life cycle—the series of stages through which families
typically progress—is also a key determinant in understanding
and marketing to families as they undergo changes in needs,
resources, and spending habits. Hotel chains are prime exam-
ples of firms that develop and market services that appeal to
families in different stages of the family life cycle—for example
offering weekend discounts for families with young children
and offering special amenities, such as children’s menus,
cribs, and video games.

Lesson 1 17
 Gender is another important demographic factor, influencing
the decision to produce products and services specifically tai-
lored for women and for men. Race and ethnicity are also
significant variables, especially given the growth of Hispanic-
American, African-American, and Asian-America populations.
Each of these demographic subsegments has nuanced needs
and preferences, and firms have developed products and
services to appeal to them.
Although education, income, and occupation are seen by many
researchers to be interconnected, many firms have identified
occupation as a significant demographic factor on its own.
Accordingly, many firms develop and market products espe-
cially aimed at members of a particular profession. As your
textbook notes, many pharmaceutical companies target doctors
in their marketing strategy.

Geodemographic Segmentation
Through integrating geographic and demographic variables,
marketers identify an even more-focused description of a
segment than either of the two characteristics considered
separately. Geodemographic segmentation means segmenting
a market by honing in on data on neighborhoods, ZIP codes,
or census reports, under the assumption that consumers in
particular cluster systems will behave similarly. This type of
segmentation is especially valuable for highly directed, precise
marketing.
Over the years, several geodemographic analysis systems
have been developed. One of the earliest, known as Potential
Rating Index by Zip Market (PRIZM), combines data from census
records, past purchasing behavior, media preferences and other
factors, along with zip codes to identify extremely precise seg-
ments. Other systems include CACI, ACORN, ESRI Tapestry,
and PersonicX.

Psychographic Segmentation
Psychographic segmentation divides a market into groups
according to factors such as self-values, self-concept, and
lifestyle. Psychographic profiles are most commonly identified
through large-scale surveys aimed at determining people’s

18 Consumer Behavior
activities, interests, and opinions, which are commonly referred
to as AIO inventories. A more recently developed technique,
known as attitudinal data framing, uses information drawn
from a firm’s computer database to determine the motivation
behind purchase decisions. One of the most broadly employed
psychographic survey tools is VALS, which identifies consumer
segments in terms of eight different clusters.

Behavioral Segmentation
Behavioral segmentation means differentiating consumers
into segments based on their attitudes toward or reaction
to a product. These behavioral factors include
■ Usage rate, the frequency or quantity in which people
purchase or use a specific product or service

■ Benefits sought, an evaluation of the different benefits

consumers seek as they examine similar products or
services

■ Brand and store loyalty, the tendency to purchase goods

or services exclusively from a particular company or store

■ Marketing tactic sensitivity, the response to various types

of marketing tactics, such as perception of quality, coupons,
promotions, customer service, advertising appeals, and
salesperson interaction

Market Targeting
The analysis that goes into market segmentation results in a
market profile, a detailed representation of the various segments
within the broader market, the characteristics of members of
each segment, and the position of competitors within each
segment.
Dividing the total market into smaller, relatively homogeneous
groups, or segments, is necessary for a marketer to focus on
and plan strategies for targeting specific market groups. Once
the market is segmented, the firm must then decide which of
those segments is attractive enough and sufficiently feasible
to target. Due to variations in size, resources, technical capacity,

Lesson 1 19
 and marketing capabilities, firms typically aim to fit their
business attributes and models to the needs and wants of
consumers as precisely as possible.
For targeting to be successful, firms must determine the
overall marketing-target strategy and goals. The four main
strategies are
■ Undifferentiated

■ Multisegment

■ Concentration

■ Customization

Undifferentiated Strategy
An undifferentiated strategy entails an approach to the
marketplace as a single, homogeneous arena offering products
or services understood as providing the same benefits to all
consumers. This approach is best suited to marketing staples
such as corn, wheat, flour, sugar, and salt. It’s also useful
when introducing new products into the market where com-
petition is negligible. Production, distribution, and other costs
can be contained through this strategy, but as seen in the case
of the Model-T, undifferentiated targeting can make firms vul-
nerable as competitors enter the field and offer more variety
and other differentiating factors.

Multisegment Strategy
A multisegment strategy targets several segments and offers a
different marketing mix to appeal to each segment. Automobile
firms, for example, can offer vehicles aimed at a variety of
segments by adjusting all marketing mix elements (including
product design and function, price, and promotion) to suit
the needs and preferences of various segments. Technology
firms like Apple can offer a variety of products that attract
different segments.
Offering diverse product lines to serve multiple segments can
reduce market risk. Declines in some segments can be offset
by gains in others. However, the business costs associated
with developing and marketing a diverse line often escalate

20 Consumer Behavior
exponentially according to the variety of products offered.
Even so, targeting products that appeal to the characteristics
of a particular segment can allow firms to charge a premium
price.

Concentration Strategy
Using a concentration strategy means focusing all a firm’s
resources on delivering a product or set of products specifically
aimed at meeting a particular segment’s needs and wants—
for example, marketing clothing for tall or large men. The
advantages of employing a concentration strategy include
gaining a dominant share of a particular market and mini-
mizing operating costs. The risks associated with such a
strategy include a decline in the segment as a whole, a
shrinking of the segment’s purchasing power, changes in
consumer tastes, or the entrance of a strong competitor.

Customization Strategy
A customization strategy is a specialized approach aimed at
satisfying the wants and needs of a single customer through
a “custom designed” offering. This approach can be seen in
neighborhood stores that cater to local customers. It’s also
seen in the targeted ads that now appear in many online sites,
which draw from large databases of information gathered
from online interactions.
In recent years, some firms have moved toward a mass
customization strategy, integrating technological know-how
and customer input to provide products and services to the
needs and preferences of individual customers. Many computer
manufacturers, for example, allow customers who visit their
sites to “build” their own computers, offer upgrades and
accessories, and provide the opportunity to “chat” with
representatives. Some firms go even further, offering options
for personalization, allowing customers to customize their
products in a way that uniquely meets their needs and
preferences.

Lesson 1 21
 Targeting Considerations
Few firms enjoy unlimited resources, so choosing the most
viable target market or markets to serve is one of the most
important tasks marketers face. Several criteria must there-
fore be considered when making this decision, including
■ Size: Is the segment large enough to merit the costs and
labor of the targeting effort?

■ Potential: Is there a genuine need for the product or service

among consumers in a particular segment, together with
customer willingness and resources to purchase it?

■ Measurability: Can the firm obtain reliable information

about the size, nature, behavior, and profitability of the
segment?

■ Accessibility: Can the firm reach segments through

advertising programs or distribution channels?

■ Compatibility: Do the products or services and marketing

mix fit the firm’s objectives, resources, and other capacities?

■ Stability: Is the segment growing or at least enduring?

■ Defendability: Can the firm withstand the emergence of a

strong competitor?

Positioning
Marketers use product positioning to create and maintain
an image that uniquely identifies a product or service and
distinguishes it from the competition in each segment they
wish to reach. Positioning strategies may include differentia-
tion based on value, distinctive product attributes, unique
symbols that define a product, and/or the relationship of a
brand, product, or service to something similar offered by
a competitor.

22 Consumer Behavior
When developing a positioning strategy, many firms create a
perceptual map to distinguish a product in the minds of con-
sumers. Exhibit 2.4 on page 65 illustrates a perceptual map
for images of pain relievers. Additionally, when positioning a
product, marketers typically focus on one or more distin-
guishing features as a basis. The four most important criteria
noted in your textbook are desirability, uniqueness, visibility,
and affordability.

Irrelevant Attributes and Positioning

Irrelevant attributes are characteristics that appear to distin-
guish a product from a similar one. For example, soaps may
be distinguished by their scent or color, which doesn’t really
impact their effectiveness. In the short term, irrelevant attrib-
utes may boost sales, but over time their effectiveness as an
incentive often diminishes in the face of competition.

Selecting a Unique Selling Proposition

When firms select and focus their marketing efforts on a single
benefit that distinguishes a product or service, they’re employ-
ing what’s known as a unique selling proposition (USP). As
your textbook notes, Volvo has highlighted its excellent safety
record as a feature across all of its marketing materials. This
focus has established Volvo in the minds of consumers as
number one in safety along with what some researchers
refer to as a mental product ladder. Another USP is creating
a personality for the brand or product, which serves as the
basis for a large promise of benefits for the customer.

Repositioning
Of course, it’s possible that the competitive environment may
change. If that happens, marketers must adapt their positioning
strategies and reposition the brand by modifying its formulation,
emphasizing new or different uses or benefits, or changing
the brand image or design. Repositioning is typically supple-
mented through promotion, advertisement, and different
pricing strategies. Communication efforts, which can be
quite expensive and time-consuming, are also critical to a
repositioning effort.

Lesson 1 23
 Key Terms

Term Page

mass-market strategy 41

market segmentation 41

market targeting 41

positioning 42

geographic segmentation 44

demographic segmentation 45

geodemographic segmentation 50

psychographic segmentation 54

AIO inventories 54

behavioral segmentation 55

market profile 57

undifferentiated strategy 58

multisegment strategy 59

concentration strategy 61

customization strategy 61

mass customization 61

personalization 62

perceptual map 64

repositioning 66

Review any material you found difficult. Then complete Self-

Check 2 and Chapter 2 Homework. Check your answers with
those provided. Review the material for any of the questions
you missed.
After you complete Self-Check 2 and Chapter 2 Homework,
review any material from Assignments 1 and 2 that you
found difficult. When you’re sure you understand the
information covered in Lesson 1, take the examination.
When you complete the exam, you’ll be ready to begin Lesson 2.

24 Consumer Behavior
 Self-Check 2
Questions 1–5: Indicate whether each of the following statements is True or False.

______ 1. Market targeting is the act of dissecting the overall marketplace into a number of sub-
markets that may require different products or services and thus can be approached
with different marketing mixes.

______ 2. A manufacturer that subdivides the market based on age is using

demographic segmentation.

______ 3. A retailer who subdivides the market by stage in the family life cycle is using
behavioral segmentation.

______ 4. PRIZM, ESRI Tapestry, and PersonicX are all basic geodemographic
segmentation systems.

______ 5. In a concentration targeting strategy, the company individualizes its products and
services to meet each customer’s specific requirements.

(Continued)

Lesson 1 25
 Self-Check 2
Questions 6–10: Select the one best answer to each question.

6. A _______ strategy is based on the assumption that there’s a single, large, homogeneous
marketplace with common needs.

a. multisegment c. concentration
b. mass market d. customizing

7. A health club that targets persons who enjoy aerobics employs _______ segmentation.
a. demographic c. geodemographic
b. geographic d. psychographic

8. An undifferentiated targeting strategy would most likely be used when a

a. product is relatively new to the marketplace.

b. product’s price is higher than the competing products.
c. product faces intense competition.
d. product is heavily advertised.

9. Factory 121, a Swiss watch company, established a website where customers can create and
design their own individually made Swiss timepieces in a fun and playful manner. This manner
of conducting business exemplifies a(n) _______ strategy.
a. undifferentiated c. concentration
b. multisegment d. mass customization

10. A product’s _______ refers to the manner in which it’s perceived by consumers in relation to
similar products offered by the competition.

a. position c. portrait
b. market share d. placement

Check your answers with those on page 139.

26 Consumer Behavior