CHAPTER 4:

SEGMENTATION, TARGETING &

POSITIONING

By: Marliza Omar

1
 LEARNING OBJECTIVE
1. Define market segmentation, target marketing, and market
positioning.
2. List and discuss the major bases for segmenting consumer and
business markets.
3. Explain how companies identify attractive market segments and
choose a target marketing strategy.
4. You will be able to discuss how companies differentiate and
position their products for maximum competitive advantage.

2
 DEFINITION
Market is the set of all actual and potential buyers of a product or service.
A market is a group of people or organization with wants and needs that can be
satisfied by particular product categories.

3
Market segmentation
Dividing a market into distinct groups of buyers who have different needs, characteristics or behaviours,
and who might require separate marketing strategies or mixes.

Market targeting (targeting)

Evaluating each market segment’s attractiveness and selecting one or more segments to serve.

Differentiation
Differentiating the market offering to create superior customer value.

Positioning
Arranging for a market offering to occupy a clear, distinctive and desirable place relative to competing
products in the minds of target consumers.

4
 Market Segmentation
Market segmentation

Dividing a market into distinct groups of buyers who have different needs,
characteristics or behaviours, and who might require separate marketing
strategies or mixes.

 Segmenting consumer markets

 Segmenting business markets
 Segmenting international markets
 Requirements for effective segmentation

5
Market Segmentation
Segmenting Consumer Markets
Four Bases for segmenting consumer markets

6
 Segmenting Consumer Markets
Four Bases for segmenting consumer markets
Geographic segmentation
Calls for dividing the market into different geographical units, such as nations, regions, states,
counties, cities or even neighbourhoods.

A company may decide to operate in one or a few geographical areas or operate in all areas but
pay attention to geographical differences in needs and wants.

Moreover, many companies today are localizing their products, services, advertising, promotion
and sales efforts to fit the needs of individual regions, cities and other localities.
Example: LOTUS’S

7
Demographic segmentation
Demographic segmentation divides the market into segments based
on variables such as age, life-cycle stage, gender, income,
occupation, education, religion, ethnicity and generation.

Demographic factors are the most popular bases for segmenting

customer groups. One reason is that consumer needs, wants and
usage rates often vary closely with demographic variables.

Age and life-cycle segmentation

Dividing a market into different age and life-cycle groups. Specific age
groups are tremendously attractive markets for a variety of product
categories.

Gender segmentation
Dividing a market into different segments based on gender.
Gender segmentation has long been used in marketing clothing,
cosmetics, toiletries, toys and magazines.

8
Income segmentation
Dividing a market into different income segments.

The marketers of products and services such as cars, clothing,

cosmetics, financial services and travel have long used income
segmentation.

Religion
It is essential for marketers to understand the cultures and
norms of particular country in their promotional campaign.
Local sensitivity must be taken into consideration.

Ethnicity
Some companies offer products based on the needs of the
ethnic group such as the Chinese market, the Indian-Muslim
market or the Malay market in Malaysia.
9
Psychographic segmentation

Psychographic segmentation divides buyers into different segments based

on lifestyle or personality characteristics.

People in the same demographic group can have very different

psychographic characteristics.

Lifestyles
As a result, marketers often segment their markets by consumer lifestyles
and base their marketing strategies on lifestyle appeals. For example,
veganism has become an increasingly popular lifestyle for more and more
people.

Personality
Marketers also use personality variables to segment markets. For example,
some holiday cruise lines target adventure seekers.
10
Behavioral segmentation

Divides buyers into segments based on their knowledge, attitudes,

uses of or responses to a product.

Many marketers believe that behaviour variables are the best

starting point for building market segments.

 Occasions

 Benefits sought

 User status

 Usage rate

 Loyalty status

11
 Market Segmentation
Requirements for Effective Segmentation

To be useful, market segments must be:

Measurable Accessible Substantial

Differentiable Actionable
• Measurable : The size, purchasing power, and profiles of the segments
can be measured.

• Accessible : The market segments can be effectively reached and served.

• Substantial : The market segments are large or profitable enough to serve.

• Differentiable : The segments are conceptually distinguishable and respond

differently to different marketing mix elements and programs. If
men and women respond similarly to marketing efforts for soft
drinks, they do not constitute separate segments.

• Actionable : Effective programs can be designed for attracting and serving

the segments.

13
 Market Targeting
Market targeting (targeting)
Evaluating each market segment’s
attractiveness and selecting one or
more segments to serve.

Target market
A set of buyers who share common
needs or characteristics that a
company decides to serve.

14
 Evaluating Market Segments
Right size and growth
First, a company wants to select segments that have the right size and growth characteristics.
But ‘right size and growth’ is a relative matter.

Structural factors
The company also needs to examine major structural factors that affect long-term segment
attractiveness.

Own objective and resources

Even if a segment has the right size and growth and is structurally attractive, the company must
consider its own objectives and resources.

Some attractive segments can be dismissed quickly because they do not mesh with the
company’s long-term objectives. Or the company may lack the skills and resources needed to
succeed in an attractive segment.
15
 Target Marketing Strategies
Companies can target very broadly ( undifferentiated marketing ), very narrowly ( micromarketing )
or somewhere in between ( differentiated or concentrated marketing ).

 Undifferentiated marketing
Using an undifferentiated marketing (or mass marketing ) strategy, a firm might decide to
ignore market segment differences and target the whole market with one offer.

Such a strategy focuses on what is common in the needs of consumers rather than on what is
different .

Difficulties arise in developing a product or brand that will satisfy all consumers. Moreover,
mass marketers often have trouble competing with more-focused firms that do a better job of
satisfying the needs of specific segments and niches.

Examples: Coca Cola

16
• Differentiated marketing
Using a differentiated marketing (or segmented marketing) strategy, a firm decides to target
several market segments and designs separate offers for each.

By offering product and marketing variations to segments, companies hope for higher sales and a
stronger position within each market segment.

But differentiated marketing also increases the costs of doing business

Thus, the company must weigh increased sales against increased costs when deciding on a
differentiated marketing strategy.

Examples:
Toyota Corporation produces several different brands of cars – from the Prius to Toyota to Lexus.
Unilever and P&G are dominating the laundry detergent market with their various different brands
and product lines targeting different segments.
17
18
 Target Marketing Strategies
• Concentrated marketing
When using a concentrated marketing (or niche marketing) strategy, instead of going after a
small share of a large market, a firm goes after a large share of one or a few smaller segments
or niches.

It can also market more efficiently, targeting its products or services, channels and
communications programs toward only consumers that it can serve best and most profitably.

Niching lets smaller companies focus their limited resources on serving niches that may be
unimportant to or overlooked by larger competitors.

Today, the low cost of setting up shop on the internet makes it even more profitable to serve
seemingly small niches. Concentrated marketing can be highly profitable.

Examples: antique car or furniture, art galleries, weight loss centres, fitness centres.
Harley Davidson, Rolls Royce, Rolex and Munchkin. 19
20
• Micromarketing
Micromarketing is the practice of tailoring products and marketing programs to
suit the tastes of specific individuals and local customer segments.

Rather than seeing a customer in every individual, micro marketers see the
individual in every customer.

Micromarketing includes local marketing and individual marketing.

21
Local marketing
Tailoring brands and marketing to the needs and
wants of local customer segments – cities,
neighbourhoods and even specific stores.

Individual marketing
Tailoring products and marketing programs to the
needs and preferences of individual customers.

Individual marketing has also been labelled one-

to-one marketing, mass customization and
markets-of-one marketing.

22
 Market Targeting
Choosing a Target Market

Depends on:
• Company resources
• Product variability
• Product life-cycle stage
• Market variability
• Competitor’s marketing strategies

23
 Differentiation and Positioning
Product position

The way a product is defined by consumers on important attributes –

the place it occupies in consumers’ minds relative to competing
products.

A product’s position is the complex set of perceptions, impressions and

feelings that consumers have for the product compared with competing
products.

Each firm must differentiate its offer by building a unique bundle of

benefits that appeal to a substantial group within the segment.
24
 Differentiation and Positioning
Positioning maps
show consumer
perceptions of their
brands versus
competing products
on important buying
dimensions.

25
 Choosing a Differentiation and Positioning Strategy

• Identifying a set of possible competitive advantages to build

a position
• Choosing the right competitive advantages
• Selecting an overall positioning strategy
• Communicating and delivering the chosen position to the
market

26
Identifying Possible Value Differences and
Competitive Advantages

Competitive advantage
Is an advantage over competitors gained by offering
consumers greater value, either through lower prices or
by providing more benefits that justify higher prices.

27
 Differentiation and Positioning
Choosing a Differentiation and Positioning Strategy

Identifying a set of possible competitive advantages to build a position by

providing superior value from:

Product differentiation

Service differentiation

Channel differentiation

People differentiation

Image differentiation
28
 Differentiation and Positioning
Choosing the Right Competitive Advantage
• Difference to promote should be:

Important Distinctive Superior

Communicable Preemptive Affordable

Profitable

29
 Tutorial 4
Exercise Essay Questions:

1. Define market, market segmentation, target marketing and market positioning. (6 marks)

2. Explain Five (5) the bases for segmenting consumer market. (10marks)

3. Briefly explain five requirement for effective' segmentation (10marks)

4. Discuss undifferentiated, differentiated and concentrated marketing strategy (9marks)

30