Segmentation, Targeting, Positioning

Federico Della Bella, MBA

Politecnico di Milano

Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 1

 Handbook

Kotler P., Keller K., Brady M., Goodman M., Hansen

T., (2019). Marketing Management, 4° European
Edition, Pearson

Segmentation (chapter 10)

Link

Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 2

 Self Assessment Questionnaire

Use this questionnaire to evaluate your preparation

LINK: https://it.surveymonkey.com/r/H7VD57D

Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 3

 Marketing the
Understanding
◼
Plan 2/2
Market
Market definition
Assessing our Market position
◼ Market shares (by segments)
◼ Market segments ◼ Customer base
◼ Product life cycle ◼ Brand image
◼ Competitive system ◼ Brand position
◼ Distribution system ◼ Customer loyalty
◼ Customer behavior analysis ◼ Customer satisfaction
◼ Market trends ◼ Our resources and skills
Diagnosing Diagnosing
Market Opportunities and Threats our Strengths and Weaknesses

SWOT Analysis

Marketing
Objectives and Strategies
◼ Market segmentation
◼ Market targeting
◼ Market positioning
◼ Establishing a Marketing
intelligence and ◼ Organizing the Marketing
knowledge function and processes
management system Programming the
Marketing mix
◼ Product ◼ Physical
◼ Market research ◼ Place evidence ◼ Marketing structure
Market analysis + Product development process
◼
◼ Price ◼ Personnel ◼
◼ Forecasting CRM process
◼ Promotion ◼ Processes ◼
◼ CRM analysis

Implementation
and control
Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 4
 Mini Case – Acqua Sanpellegrino 1/2

The CASE

Sanpellegrino SPA is an Italian company of mineral water and

assorted real-fruit sodas produced in San Pellegrino Terme,
Province of Bergamo, Lombardy, Italy. San Pellegrino mineral
water has been produced for over 600 years, but the company
was founded in 1899.

Owned by Nestlé since 1997, Sanpellegrino has ten production

sites in Italy, including the headquarters, controls many other
brands in the mineral water sector (eg Levissima, Recoaro, Vera,
…).

The company employs a total of about 1,850 employees, with a

turnover of more than 900 million euro, with a double digit
increase in sales in 2015.

In Italy the San Pellegrino Brand’s are in the top quality segment
of the market. Outside of Italy, San Pellegrino is marketed as
somewhat of a luxury. San Pellegrino is now exported to most
countries in Europe, the Americas, Australasia and the Middle
East, as well as Japan, Taiwan and Hong Kong.(145 countries).

Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 5

 Mini Case – Acqua Sanpellegrino 2/2

Some possible questions…

• In your opinion, what kind of segmentation San Pellegrino is

using to segment the market in the non-domestic countries? Please
show a segmentation process and possible criteria.

• Who are the customers interested in Sanpellegrino products?

• Considering the global mineral water market, what are the

critical marketing strategies, decisions, and levers behind the
success of companies like San Pellegrino?

• Which customer behaviors should monitor Sanpellegrino to

exploit sales? And which to exploit margins?

• Which kind of digital marketing tools / approaches would you

adopt to get customers’ attention? And to increase sales?

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 The structure of chapter - Segmentation

In this section, there is the introduction to:

1. The objectives of segmentation

2. The approaches and the process of segmentation
3. The methods of segmentation

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 Segmenting a market

• Objectives of segmentation

• Segments and their characteristics

• Advantages and disadvantages of segmenting

• The segmentation process

• Segmentation types and variables:

• by product
• by customer (B2B v B2C)

• Methods of segmentation

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 Why segmenting a market?

Marketers segment markets to make them more manageable as:

• Markets are too broad

• What is the food that you eat most often?
• What is your favorite activity for leisure?
• What is the product that you are most willing to spend more
money for?

• Too much diversity in the market

• desires/preferences
• available resources
• geographic locations
• attitudes and buying habits

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 Why segmenting?

Segmentation is a trade-off between two extremes:

“All customers are similar” “Each customer is a market”

ONE PRODUCT
UNIQUE PRODUCTS, ONE PLAN
FOR EVERYONE, ONE PLAN FOR
FOR EACH CUSTOMER
ALL CUSTOMERS

“Customers are diverse, but I can detect

“UNDIFFERENTIATED homogeneous groups with similar needs, ways of “ONE-TO-ONE MARKETING”
MARKETING” APPROACH (OR using the product and expectations” APPROACH
MASS MARKETING)

AD HOC PRODUCT AND APPROACH

FOR “SEGMENTS” OF CUSTOMERS
(GROUPS OF “HOMOGENOUS”
CUSTOMERS)

“Segment marketing” approach

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 Segmentation
DEFINITION

Segmentation

Marketing process through which the company divides

the market into various sub-groups – with different
demand profiles but internally homogenous – on the
basis of which management develops specific
marketing plans to best satisfy their requirements.

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 Market segments

• Two main characteristics:

• Internal similarity
• External diversity

Segmentation’s aim is to give insights to markets in order to define

the best possible marketing program for every specific group of
customers.

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 Characteristics of a “good” market segment
DEFINITION

• Measurability: it must be possible to measure the size and buying

power of the segments

• Accessibility: real possibility of obtaining the segment using

marketing actions

• Homogeneity: within the segment as regards one or more

characteristics (describers); heterogeneity compared with other
segments

• Importance: a segment large enough to justify a targeted marketing

action

• Duration: possibility of exploiting the segment for a particular period

of time

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 Advantages and disadvantages of segmentation
DEFINITION

Advantages of segmentation

• Reduction in diversity
• More focus of resources & professionals
• Possible creation of entry barriers
• Improvement in customer satisfaction
• Market share defense during maturity
• Higher control on marketing actions
• Risk hedging

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 Advantages and disadvantages of segmentation
DEFINITION

Disadvantages of segmentation

• Different products for different segments (R&D,

engineering)
• Increased production costs
• Increased stocks
• Fragmentation of advertising/promotion costs
• Increased market research costs
• Higher distribution costs
• Inefficient resource exploitation (e.g. duplication)

That’s why companies try to:

Standardize More external variety (breadth of range) v less
Modularize internal variety

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 Segmenting the Market

• Objectives of segmentation

• Segments and their characteristics

• Advantages and disadvantages of segmenting

• The segmentation process

• Segmentation types and variables:

• by product
• by customer (B2B v B2C)

• Methods of segmentation

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 Segmentation process

Choice of the segmentation approach

• By product?
• By customer?

Choice of the segmentation method

• Mathematical?
• Heuristics?

Analyzing the segments obtained

• Segment validation
• Segment description
• Product/market matrix

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 Segmentation approaches

• By PRODUCT characteristics

• By CUSTOMER characteristics

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 Advantages and constraints of segmenting by product
DEFINITION

ADVANTAGES CONSTRAINTS

• Simplicity • Does not consider the

• Immediacy variables related to the
customer’s characteristics
• Clarity and comprehensibility
• Little visibility of the
competition amongst products
• Simplistic

Segmentation by product was meaningful in the past, when the main

problem of companies was product or production or in market with a low
level of competition. As the goal of segmentation is to give insights for
marketing campaigns, in mature and competitive markets, companies
adopt the customer segmentation.
The following example clarifies the differences between approaches.
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 Sanpellegrino Case

Segmentation by products at first level

Question: Are there customer segments behind them?

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 Segmentation by customer

Remembering that one of the first duties for marketers is

knowing customers, getting insights about their needs and
desires, and purchasing behavior, in order to reach them with
valuable offers (valuable for clients).

Considering this, there are 3 main dimensions to consider:

• segmentation by customer CHARACTERISTIC

• segmentation by customer BEHAVIOUR
• segmentation by customer NEED

These approaches are slightly different in the case we are

dealing with:

• Consumer customer
• Industrial customer
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 Segmentation by customer - B2C markets
DEFINITION

Approach Type of Characteristics Example of Variables

Age, gender, family size, family role, income, occupation,

Socio-demographic
social class, religion, etc.

Continent, country, region, type of residence and/or work area

Customer Characteristics Geographic
(city, suburb, or rural), population concentration, etc.

Psychographic Personality, lifestyle (VALS Test)

User/non-user, brand-user/non-brand-user, intensity of usage,

Product usage
type of usage, time of usage, etc.

Customer Behavior
Frequency of purchase, point of sales used, duration of
Buying process purchase process, participants in the purchase process,
loyalty to brand or distributor, etc.

Price, quality, safety, variety, functionality, convenience,

Customer Needs Benefits sought
entertainment, indulgence, status, etc.

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 Segmentation by customer - B2C markets
Customer Characteristics

Knowing customer characteristics, behaviors, and needs is

fundamental to design the marketing plan. Marketers collect
information and then use them with specific objectives.

How to use customer characteristics

• Estimate the size of a segment

• Assist in product design and pricing decisions
• Provide implication for the content and channel of marketing
communication
• Aware of ethically, politically, or religiously sensitive issues
• ...

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 Segmentation by customer - B2C markets
Customer Characteristics

Psychographic (VALS MODEL)

VALS segments US adults into 8 distinct types—or
mindsets—using a specific set of psychological traits
and key demographics that drive consumer behavior.

The US Framework, a graphic representation of VALS,

illustrates the 8 types and two critical concepts for
understanding consumers: primary
motivation (Ideals, Achievement, and Self-
Expression) and resources (Energy, self-confidence,
intellectualism, novelty seeking, innovativeness,
impulsiveness, leadership, and vanity).

The combination of motivations and resources

determines how a person will express himself or
herself in the marketplace as a consumer.

http://www.strategicbusinessinsights.com/vals/ustypes.shtml

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 Segmentation by customer - B2C markets
Customer Behavior

Knowing customer characteristics, behaviors, and needs is

fundamental to design the marketing plan. Marketers collect
information and then use them with specific objectives.
How to use customer behaviors

• Sustain and even expand the usage of current users;

• Convince non-users with the product/brand benefits over the
competing product/brand
• High usage intensity indicate customers loyal to the brand, who
purchase in multiple occasions and multiple POS
• If customers are loyal to POS instead, being present in the right
channel has higher priority
• Purchase process: regular or impulsive, etc.
• Roles in purchase process
• ...
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 Segmentation by customer - B2C markets
Customer Behavior and Marketing Funnel

Customer Behavior: Usage of product / service

Marketers have to move customers along the Marketing Funnel

Follow clients along the marketing channels and check the abandonment
rate at any stage, in order to redesign the process.

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 Segmentation by customer - B2C markets
Customer Needs

Knowing customer characteristics, behaviors, and needs is

fundamental to design the marketing plan. Marketers collect
information and then use them with specific objectives.

How to use customer need (benefit sought)

• Design the product addressing the needs
• Design the marketing communication addressing the motivation which
customers are more likely to respond to

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 Segmentation by customer - B2B markets
DEFINITION

Approach Type of Characteristics Example of Variables

Company size, sector, type of activity, type of

Socio-demographic management, etc.
Customer
Characteristics Continent, country, region, location (industrial/non-
Geographic industrial area), etc.

User/non-user, consumption volume, product

Product usage application type, etc.

Customer Behavior
Purchase lot size, complexity of buying process, roles in
Buying process burying process, distributor to purchase from, loyalty to
distributors, etc.
Punctuality of delivery, speed of delivery, supply
Customer Needs Benefits sought continuity, technical support, certification, price,
level of customization, etc.

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 Segmentation by customer
Comments

• An insightful and actionable approach to segmentation does not

necessarily mean to choose one best from the different approaches,
but rather combining them in sensible way.

• We need to understand from our segmentation, who are in the

segment (demographic/geographic characteristics), what are they
doing (behavior), and why are they doing that (needs)

• Different dimensions provide rich understanding of a segment. Their

relevance, however, may vary according to the decision in need to be
supported

Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 29

 Segmenting the Marketing

• Objectives of segmentation

• Segments and their characteristics

• Advantages and disadvantages of segmenting

• The segmentation process

• Segmentation types and variables:

• by product
• by customer (B2B v B2C)

• Methods of segmentation

Strategy & Marketing - a.y. 2024/2025 – Ing. Federico Della Bella 30

 Segmentation methods
DEFINITION

• Mathematical
• Using statistical-mathematical techniques and
algorithms.
• Require data (a representative sample) on which to
make an analysis.

• Heuristic
• Empirical (generally qualitative) methods based on the
experience of the marketer

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 Statistical-mathematical methods
DEFINITION

Survey research
• Information gathering about possible segmentation variables
• Focus groups or other qualitative research
• Questionnaires
• Etc.

Data analysis
• Elimination of correlated variables
• Definition of clusters

Segment profiling
• Description of the segments obtained
• Listing of the key characteristics

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 Heuristic segmentation methods
DEFINITION

Heuristic methods to segment a market

• Successive elimination approach (Porter, 1987)

• Two-phase approach (Wind and Cardozo, 1974)

• Multi-phase approach, “Nested approach” (Bonoma

and Shapiro, 1982)

Insight: Mathematical methods are strongly based on data

collection and analysis through focus groups, survey research,
market tests. Digitalization of business have strongly improved
(and reduced the cost) of these activities.

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 Heuristic segmentation methods
#1 Successive elimination approach description

STEPS TO FOLLOW IN THE ELIMINATION APPROACH

1. Check-list of possible segmentation variables.

2. Variables identified as relevant are compared in pairs using
a matrix.
3. Unimportant “crossovers” and contradictions are
eliminated.
4. Variables are gradually combined to reduce the number of
combinations.
5. Products are entered according also to the different use
functions.
6. The final product-market (segments) matrix is built

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 Heuristic segmentation methods
#2 Two phase approach description
✦ Hierarchical selection of segmentation bases:
1. Macro segmentation based on the external characteristics
and purchase situations
2. Micro segmentation based on the characteristics of the
individuals

All potential customers

Mainly demographic
Basis for macro-segmentation and operational variables

Macro segment 1 Macro segment 2 Macro segment N

Basis for micro-segmentation Mainly behavioural variables

Micro segment 1 Micro segment 2 Micro segment N

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 Heuristic segmentation methods
#3 Multi-phase (nested) approach

5 step hierarchical approachThe more we move towards the

center, the harder is to find information

(e.g., activity type, sector, micro-sector,

DEMOGRAPHIC VARIABLES
size, location , age, etc.…)
(Technology, technical, operational and financial
OPERATIONAL VARIABLES
characteristics, existing customer or not, etc.)

BUYING PROCESS (roles in purchase processes, phases of buying

process, buying methods, criteria, etc.)

SITUATIONAL FACTORS (Quantity purchased, benefits sought, etc.)

PERSONAL
(Individual motivations, risk inclination, etc.)
FACTORS

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 Definition and qualification of a segment

You should now by able to define and qualify every segment in the market

PRODUCT: SEGMENT:

SEGMENT SIZE

CUSTOMER CHARACTERISTICS

TYPE OF USE OF PRODUCT

LEVEL OF PURCHASES/YEAR

BUYING PROCESS METHODS

ROLES IN THE BUYING PROCESS

CUSTOMER’S PRINCIPAL NEEDS

CURRENT/EXPECTED TRENDS AND DEVELOPMENTS

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 Sanpellegrino Case

A couple of questions

• Describe the best segmentation dimension most relevant to segment

Sanpellegrino market.

• Describe the segmentation method that Sanpellegrino should adopt.

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 Sanpellegrino Case

SANPELLEGRINO: LIvE IN ITALIAN

https://www.youtube.com/watch?v=t-j9C4xWXHM&feature=emb_rel_end

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 Sanpellegrino Case

SANPELLEGRINO: LIvE IN ITALIAN

https://www.sanpellegrino.com/it/it/italian-inspiration-n1

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 Sanpellegrino Case

Acqua Panna: Creata dalla Natura

https://www.acquapanna.com/it/

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 Sanpellegrino Case

Describe the target segments behind Acqua Panna

https://www.sanpellegrino-corporate.it/it/prodotti/acqua-panna

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 Sanpellegrino Case

Perrier: Say No to Ordinary

https://www.adsoftheworld.com/media/digital/perrier_say_no_to_ordinary_office

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 Sanpellegrino Case

Describe the target segments behind Perrier

https://www.sanpellegrino-corporate.it/it/prodotti/perrier

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 Targeting

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 Criteria for Target Market
DEFINITION

1. Size
2. Expected Growth
3. Competitive position
4. Cost of reaching the market
5. Compatibility with the organization’s objectives
and resources

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 Targeting strategies: choice of target segments

A matrix to classify and select the segments to target first

H
High-interest segments, Segments with high
but high investment entry/presence priority

Attractiveness
of segments

Segments of no interest Segments to defend only

with marginal spaces
(self-financing)
L
L Compatibility of segments with the H
company's new strategies and resources

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 Positioning

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 Positioning

Segmentation: market clustering

Targeting: selection of the segments to focus on

It’s time for building the market offer

Positioning

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 Positioning – some definitions

Positioning
“Position” refers to the concept of “space”
But what space are we talking about?
“Positioning is something that happens in the mind of the customer, not in the
product nor the producer”
(Ries and Trout, 1972)
“Positioning is a deliberate, proactive, iterative process to define, modify and
monitor the perceptions that consumers have of a marketable product”
(Arnott, 1992)

The space is customer’s mind!!!

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 Positioning
DEFINITION

Positioning is…

““The act of designing the company’s offering

and image to occupy a distinctive place in the
mind of the target market”
(Kotler, 2000)

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 Positioning

Once defined the “desired” positioning by the company,

how is it possible to “transmit” it to the market?

Through marketing mix levers

Product
Price
Promotion
Place
Personal selling
etc.
Thus, it is necessary to be internally and externally consistent
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 Positioning

Positioning Acting on perceptions

How it works?

Offering Firm

Customer Perceptions

Offering Competitors

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 Positioning

Positioning Acting on perceptions

The customer compares our offering with our
competitors’

Customer
perceptions

Competitors’ Our
Value proposition Value proposition
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 Positioning

Positioning Acting on perception

The customer compares our offering with our
competitors’

Customer evaluates alternatives to pick the most

attractive one

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 Positioning

What are the implications for companies?

Making our offering being perceived as different and

better than competitors’

Positioning is strongly entwined with differentiation

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 Positioning

Positioning Differentiation

Differentiating means characterizing our value

proposition through attributes different and better
than competitors in a way that increases customer
value

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 Positioning

How to reach differentiation?

Product
Price
Promotion
Place
Personal selling
etc.

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 Positioning

Some examples of differentiation

- Product design - Customers perceive differences (real or

“imaginary”)
- Product presentation
- Customer service - Customers develop brand preferences
- Publicity - The brand becomes more well-known
- Distribution methods and stronger

- Innovative actions - The brand can use its “market power”

- .....
- The brand can command higher prices
(“premium price”)

- Product differentiation becomes a

barrier to the entry of new competitors

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 Positioning

Relationship between marketing investment and

differentiability

Differentiability

Differentiation

Marketing investment

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 Strategic product positioning

Objectives

- Tounderstand which factors customers use to evaluate the

offerings (value proposition) in a particular sector/market

- Tounderstand the importance of each of these factors in

the customer’s decision process

- Toevaluate/understand the customer’s attitude towards

competitors’ offerings with relation to the factors
identified

- Toidentify the spaces available for a “distinctive”

positioning

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 Strategic product positioning

Steps:

1. To identify which attributes the customer considers

important for purchase
2. To relate the product/service to these.
3. To carry out the same operation on the competitors’
products/services.

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 Strategic product positioning

Tools for positioning analysis

Perceptual map

Perception 1

Perception 2

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 Strategic product positioning

Tools for analysing positioning

Value curve

High
Relative positioning

Low

Variable 1 Variable 2 Variable 3 …

Key variables in the product/service

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 Strategic product positioning

Example: beer

Key-variables
Strong
- sweetness
- alcohol content

Guinness
Tennet’s

Adelscott
Ceres

Bitter Sweet
Budweiser

Tsingtao

Drive beer

Light

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 Strategic product positioning

Choice of the key-variables

Specfic for each product/market

They may be technical, functional, economic, image-
driven in nature

Cars Toothpastes
-prestige - Freshness
-innovation - Whiteness
-sportiness - Hygiene
-comfort - Taste
-security - Sizing
-durability - Children-friendliness
-… -…

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 Strategic product positioning
DEFINITION

Critical success factors for positioning

1.Addressed to a specific target

2.Corresponding to a mental category already existing in

customer’s mind

3.Relevant for that segment’s customers

4.Circumscribed, even though it seems to make it

limitative

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 Strategic product positioning
DEFINITION

Critical success factors for positioning

5.Simple, clear, univocal.

6.Able to offer, in customers’ perception, an exclusive

advantage, or at least superior if compared to
competitors’

7.Durable

8.Consistent in time

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 Strategic product positioning

Repositioning
It can be necessary to modify positioning in response
to changes in:

environment
demand
competition

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 Strategic product positioning

Repositioning
When?

Dramatic changes in the customers

Attack by competitors

How?
Generally, product positioning is deeply grounded in customer’s
mind

Maintaining continuity to facilitate the shift

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 Strategic product positioning

Repositioning strategies

Modifying the perception about attributes acting on one or

more marketing levers

XI

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 Strategic product positioning

Repositioning strategies

New product launch (or variation) on different segments with

different perceptions

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 Strategic product positioning

Repositioning strategies

Focus on the product itself (e.g., revitalizing, stressing on

perceptions or widening perceptions)

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 Strategic product positioning

Ex. repositioning
PEUGEOT

UNILEVER DEGREE

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