Segmentation, Targeting and

Positioning
 The Need for Market
Segmentation
• Marketers understand that they cannot be all
things to all people, all of the time. Buyers and
markets are too complex and diverse for one
simple marketing formula to adequately address
the needs of all.
• Consequently most organisations have switched
from a strategy of mass marketing to target
marketing.
• Target marketing involves identifying market
segments, identifying one or more of them and
then developing products and market mixes
tailored to the characteristics and needs of each
 Segmentation and Positioning
• Target marketing
– Identifies market segments that are bite sized chunks that
organisations can manage.
• Market segmentation
– Identifies markets with common traits.
• Market targeting
– Process of evaluation of the selected segments and then
deciding which market segments to operate within.
• Market positioning
– Process whereby marketers position the product to occupy a
clear and distinctive position relative to other competing
products.
STP Process
 Benefits of STP Process
“80% of profits usually derived by 20% of
customers” Pareto’s Principle

• Enhancing a company’s competitive position by

providing direction & focus for marketing
strategies.
• Examining and identifying growth opportunities in
the market through the identification of new
customers, growth segments or new product uses.
• More effective and efficient matching of company
resources to targeted market segments promising
the greatest ROMI.
Levels of market segmentation
– Mass marketing
• Assumes market is homogenous and uses the same
product, promotion and distribution to all consumers.
– Segment marketing
• Adapting a company’s offerings so they more closely match
the needs of one or more segments.
– Niche marketing
• Adapting a company’s offerings to match the needs of one or
more sub-segments more closely where there is little
competition.
– Micro marketing
• Marketing programmes tailored to suit the needs of specific
individuals and locations. It includes both local marketing and
individual marketing
 Market Segmentation
• Market segmentation is the division of a market into
different groups of customers with distinctly similar
needs and product/service requirements.

• Purpose of market segmentation:

– Leverage scarce resources.
– To ensure that the elements of the marketing mix are
designed to meet particular needs of different customer
groups.
– Allows organisations to focus on specific customers
needs, in the most efficient and effective way.
 Process of Market
Segmentation
• Aim is to identify segments where:
– identifiable differences exist between
segments (segment heterogeneity).
– similarities exist between members within
each segment (members homogeneity).
 Market segmentation
• There is no single way of segmenting a
market.
• Different market segmentation variables to
develop the most effective segmentation
method.
• Major variables used are geographic,
demographic, psychographic and
behavioural.
Segmenting Consumer
Markets
 Segmentation (1)
• Geographic segmentation
– Dividing a market into different geographical units
such as countries, states, regions, towns.
• Demographic segmentation
– Age and life-cycle segmentation.
– Ethnic segmentation.
– Gender segmentation.
– Income segmentation.
• Geo-demographics
– Study of relationship between geographical location
and demographics.
Table 10.2 CCN EuroMOSAIC households across Europe (%)
 Segmentation (2)
• Psychographic segmentation
– Social class
– Lifestyle
• Young and Rubican’s Cross-Cultural Consumer
characterisation:
– The constrained: limited by income, can be ‘resigned
poor’ or ‘struggling poor’.
– The middle majority: ‘aspirers’ and ‘succeeders’.
– The innovators: ‘transitionals’ and ‘reformers’.
– Personality traits
 Segmentation (3)
• Behavioural segmentation
– Markets segmented based upon consumer
knowledge, attitude, use or response to a product.
• Occasion segmentation – when the product is consumed
• Benefit segmentation – identifying the main benefits sought
for in the product
• User status – divided into non-users, ex-users, potential
users, first time users and regular users
• Usage rate – light, medium or heavy users
• Loyalty status – loyal users, somewhat loyal and
promiscuous
• Buyer readiness stage – Users can be unaware, aware,
informed, interested and intend to buy products
• Attitude towards product – Consumers can be positive,
hostile or indifferent about a product
Table 10.3 Benefit segmentation of the toothpaste market
Source: Adapted from Russell J. Haley, ‘Benefit segmentation: a decision-oriented research tool’,
Journal of Marketing (July 1968), pp. 30–5; see also Haley, ‘Benefit segmentation: backwards and
forwards’, Journal of Advertising Research (February–March 1984), pp. 19–25; and Haley, ‘Benefit
segmentation – 20 years later’, Journal of Consumer Marketing, 1 (1984), pp. 5–14.
 Multivariate segmentation

• Companies generally integrate ways of

segmentation in the following manner:
– Simple multivariate segmentation
• Gender and age
– Advanced multivariate segmentation
• Geodemographic, lifestyle as well as behavioural
– Multistage segmentation
• Use a combination of macro and micro
segmentation – often the former is demographic
while the latter is psychographic or behavioural
 Developing market segments
• Research based exercise that incorporates several
stages:
– Qualitative research
• Exploratory techniques to determine motivations and attitudes.
– Quantitative research
• Structured questionnaire to gain information.
– Analysis
• Factor and cluster analysis. Automatic Interaction Detection and
conjoint analysis.
– Validation
• Statistical validation – are the segments real or have they
appeared by chance?
– Profiling
• Distinguishing attitudes and behaviours – clusters are often
given descriptive names
 Targeting
• To determine which, if any, of the segments
uncovered should be targeted
• Evaluation of Market Segments - DAMP
– Distinct – is each segment clearly different from other
segments?
– Accessible – can buyers be reached through
appropriate promotional programmes and distribution
channels?
– Measurable – is the segment easy to identify and
measure?
– Profitable – is the segment sufficiently large to provide
a stream of constant future revenues and profits?
 Segment Attractiveness
Factors
• Rating approach for different segment attractiveness
factors:
– Market growth
– Segment profitability
– Segment size
– Competitive intensity within the segment
– Cyclical nature of the industry

• Each of these attractiveness factors is rated on a scale

of 0-10 and loosely categorized as high, medium or low
in attractiveness.
 Positioning
• The act of designing the company’s offering and
image so that offer meaningful benefits to
targeted consumers and are able to differentiate
themselves from competitors
• Two fundamental elements:
– Physical attributes - the functionality and capability that
a brand offers.
– Communication - the way in which a brand is
communicated and how consumers perceive the brand
relative to other competing brands in the market place.
Perceptual Maps
 Positioning Strategies
• Position a brand either functionally or expressively
(symbolically)
• Functional
– Features
– Quality
– Use
• Expressively
– User
– Benefit
– Heritage
 Differentiation
• Marketers strive for competitive
advantage defined as a comparative
advantage over the competitor gained by
offering greater value, either by lower
prices or by offering higher quality
benefits.
 Differentiating markets
• Value positioning
– A range of positioning alternatives based on the value an
offering delivers and its price.
• More for more
– Premium product and premium price, supported by a premium image.
E.g. Mont Blanc pens
• More for the same
– Brand offering comparable quality at a lower price. E.g. Lexus versus
the Mercedes-Benz.
• The same for less
– Value proposition e.g. Amazon.com
• Less for much less
– Trade off between luxury and necessity. E.g. Five star hotel versus a
budget hotel. Lower performance for much lower cost.
• More for less
– No-name house brands versus the big brands.
 Choosing and implementing a
positioning strategy
• Ad man Rosser Reeves states that every company
should have a unique selling proposition (USP).
– The USP is the unique product benefit that a firm
aggressively promotes in a consistent manner to its
target market. The benefit usually reflects functional
superiority: best quality, best services, lowest price,
most advanced technology.
• Difficulty of maintaining functional superiority
forces firms to attempt a more emotional influence
by developing an emotional selling proposition
(ESP).
Essential criteria to accomplish
a good positioning strategy
• Features and benefits must be important to the
consumer.
• Must be distinctive from the competition.
• Must deliver superior quality or service.
• Difference must be communicable and visible to
buyers.
• Pre-emptive and competitors unable to replicate.
• Affordable
• Profitable
 Repositioning Srategies
1. Change the tangible attributes and then
communicate the new product to the same market

2. Change the way a product is communicated to the

original market

3. Change the target market and deliver the same

product

4. Change both the product (attributes) and the target

market