Unit 6: Pillars of Marketing –

Market Segmentation, Target

Marketing, Positioning &
Differentiation
Fundamental marketing concepts, trends, and
tasks
• A marketer can rarely satisfy everyone in a
market. Not everyone likes the same
cereal, hotel room, restaurant, automobile,
collage or movie. Therefore, marketers start
by dividing up the market into segments
 SEGMENTATION, TARGETING,
POSITIONING & DIFFERENTIATION
• These are the four key decisions in
transforming one’s analysis into a coherent set
of marketing actions
 SEGMENTATION
• Segmentation is often the key to developing a sustainable
competitive advantage based on differentiation, low cost, or a
focus strategy.
• It is difficult to identify segments, but typically you consider
five, ten or more segmentation variables.
• These variables needs to be evaluated on the basis of their
ability to identify segments for which different strategies are
(or should be) pursued .
• After the segmentation it is possible for the marketers to
evaluate what segments presents the greatest opportunity for
business and make an offer to target this specific segment.
 Segmentation Variables
• Demographic Segmentation
• Geographic Segmentation
• Psychographics Segmentation
• Behavioural Segmentation
 Demographic Segmentation

• Demographics originates from the word ‘demography’

which means a ‘study of population’.
• The population can be divided into age, gender,
income, and family lifecycle amongst other variables.
• As people age their needs and wants change, some
organizations develop specific products aimed at
particular age groups for example  nappies for babies,
toys for children, clothes for teenagers and so on.  
• Gender segmentation is commonly used within the
cosmetics, clothing and magazine industry.
 Demographic Segmentation

Age Gender Income Lifestyle

• Income segmentation is another strategy used
by many organizations.
• In today's globally competitive environment
brands are specifically developed and
positioned within particular income segments
in order to maximize turnover.
• Products and services are also aimed at
different lifecycle segments.
 Geographic Segmentation

• Geographical segmentation divides markets into

different geographical areas.
• Marketers use geographic segmentation because
consumers in different areas may display certain
characteristics and behaviours in that particular
region .
• An area can be divided by the town, the region or the
country.
• McDonalds globally, sell burgers aimed at local
markets, for example, burgers are made from lamb in
India rather then beef because of religious issues.
 Psychographics Segmentation

• Although demographic segmentation is useful,

marketers can use alternative segmentation
variables which aim to develop more accurate
profiles of their target segments.
• Psychographics segmentation can be broken
down into lifestyle, social class, and
personality characteristics.
 Psychographic segmentation

Lifestyle Social class Personality

 Lifestyles Segmentation

• The Oxford English dictionary defines a lifestyle  'as a way of life' 

and lifestyle segmentation aims to examine the way people live.
• Our lifestyle,  our every days activities, our interest, opinions and
beliefs on certain issues dictates who we are. 
• Marketers refer to these as AIO’s (Activities, Interest and
Opinions), and our AIO’s dictate our everyday behaviour from
where we shop to what we buy.
• Marketers develop and aim products/services at particular lifestyle
groups and develop lifestyle profiles on their target market.
• If we understand the lifestyle of a particular group we can sell
them a product/services on the basis that it will enhance their
lifestyle.
 Personality Characteristics

• Products and brands can also be aimed at

particular personalities.
• Often marketers try to develop personalities
for their brands and products that mimic that
of their target market.
• Ask yourself if Nike or Levi’s was a person,
what type of person would they be?
Socio Economic Classes
• From the 1960s we measure the socioeconomic
classification to see the economic development of the
country.
• SEC is a classification of Indians on the basis of
predefined factors and conditions. 
• The SEC system is used to classify households in
India to be and it is based on two variables, they are:
– Education of Chief Wage Earner
– The Number of Consumer Durables owned by a family.
• There are about 11 consumer durable products that Govt has
identified. Every household is measured on the education
qualification of the wage earner and the number of durables out of
11 that they own
– Electricity Connection
– Ceiling Fan
– Gas Stove
– Refrigerator
– Two wheeler
– Washing Machine
– Colour TV
– Computer/Laptop
– Four wheeler
– Air Conditioner
– Agricultural Land
• This classification is more stable than one based on
income alone and being reflective of lifestyle is more
relevant to the examination of consumption behaviour
• Here, ‘high’ socioeconomic classes refers to SEC A&B,
• ‘mid’ socioeconomic class refers to SEC C and
• ‘low’ socioeconomic classes refers to SEC D&E
• Data sourced from Indian Readership Survey (*IRS
1998-1999) gives the education and occupation profile
of the chief wage earner of households.
• The CWEs of nearly half the SEC A households work in
executive positions.
• The other half comprises mainly of
industrialist/businessmen or shop owners. Almost all of
them are either graduates or post graduates.
• CWEs of SEC B households are primarily employed at
clerical or supervisory levels, shopkeepers while are
industrialist/businessmen
• Less than half are graduates or post graduates are educated
till the 10th or 12th grade, while have had some college
education.
• MRUC & Hansa Research have come up with
a new concept of Household Potential Index
(HPI) to reclassify consumers, SEC continues
to remain universally referenced classification
of consuming classes.
 The HPI Concept 
• What is premium? A car or a Video Camera? Colour TV or
a handy cam? Right, it is Video Camera or a handy cam,
believes many. Something that is “wanted by many” but
“consumed by few” is our definition of Premiumness.
• Simply put, premuimness is defined as the inverse of
penetration. For example 41 per cent of all homes in India
have Television. But only 2 per cent have a flat TV. Hence
homes with a flat TV is considered to be “premium” by HPI
measure.
• The concept of HPI allocates high scores for less penetrated
product categories and services
 Social Class Segmentation

• Divides society into  6 distinct groups based

solely on occupation.
• A    Professional staff
• B    Middle management
• C1   Junior management
• C2   Skilled manual
• D     Semi-skilled and unskilled workers.
• E     Those dependent on the state.
• Social class segmentation works on the
assumption that the higher your profession the
more you will earn. Thus the more affluent
lifestyle you will lead. 
• Marketers use this type of information to sell
products and services based on lifestyle
behaviour, and your profession does have an
impact on the way you behave.
 Behavioural Segmentation

• Refers to why people purchase a product or service.

Behavioural segmentation can be broken down into
the benefit a consumer seeks from purchasing a
product.
• How will the product enhance their overall lifestyle.
When purchasing a computer the benefit
sought maybe of ‘ease of use’ to the ‘need for speed’. 
• Occasion is another variable. When should a product
be purchased? Occasion segmentation aims to increase
the ‘reason to buy factor' and thus increase sales. 
 Behavioural
Segmentation

Benefit Occasion Usage

• Usage rate divides customers into light,
medium and heavy users.
• Heavy users obviously contribute more to
turnover then light or medium users, the
objective of an organization should be to
attract heavy users who will make a greater
contribution to company sales.
Targeting
• Targeting is the second stage of
the SEGMENT "TARGET" POSITION (STP)
process.
• After the market has been separated into its
segments, the marketer will select a segment
or series of segments and 'target' it/them.
 Segment 1

Segment 2

Single segment with single product

Segment 3
Supplier

Segment 4

Segment 5

Segment 6
• The first is the single segment with a single
product. In other word, the marketer targets a
single product offering at a single segment in a
market with many segments.
 Segment 1

Segment 2

Segment 3
One product for all segments
Supplier

Segment 4

Segment 5

Segment 6
• Secondly the marketer could ignore the
differences in the segments, and choose to aim
a single product at all segments i.e. the whole
market.
• This is typical in 'mass marketing' or where
differentiation is less important than cost. An
example of this is the approach taken by
budget airlines such as Go/
 SEGMENT 1

SEGMENT 2
Brand A
Brand B
Brand C SEGMENT 3
SUPPLIER Brand D
Brand E
Brand F SEGMENT 4

SEGMENT 5

SEGMENT 6
• Finally there is a multi-segment approach.
Here a marketer will target a variety of
different segments with a series of
differentiated products.
• This is typical in the motor industry. Here
there are a variety of products such as diesel,
four-wheel-drive, sports saloons, and so on.
Targeting is to make a thing or group of things a
target, to select it or them to be acted upon.

• Targeted advertising , to select a demographic

or other group of people to advertise  to, and
create advertisements appropriately
• Behavioural targeting , in marketing
Positioning 
 Positioning
• To create an image or identity in the minds of
their target market for its product, brand, or
organization
• A product's position is how potential buyers
see the product
• For example, Mercedes is positioned as a
luxury brand, and Volvo is positioned for
safety.
• It is the 'relative competitive comparison' their
product occupies in a given market as perceived by
the target market.
• Re-positioning involves changing the identity of a
product, relative to the identity of competing
products, in the collective minds of the target market.
• De-positioning involves attempting to change the
identity of competing products, relative to the identity
of your own product, in the collective minds of the
target market.
• Positioning is a concept in marketing which
was first popularized by Al Ries and Jack
Trout in their bestseller book " Positioning - a
battle for your mind".
 The product positioning process involves:

• Defining the market in which the product or brand will compete

(who the relevant buyers are)
• Identifying the attributes (also called dimensions) that define the
product 'space'
• Collecting information from a sample of customers about their
perceptions of each product on the relevant attributes
• Determine each product's  share of mind
• Determine each product's current location in the product space
• Determine the target market's preferred combination of attributes
(referred to as an ideal vector) Examine the fit between:
– The position of your product
– The position of the ideal vector
• Position.
 Positioning concepts

• More generally, there are three types of positioning concepts:

• Functional positions
– Solve problems
– Provide benefits to customers
– Get favorable perception by investors and lenders
• Symbolic positions
– Self-image enhancement
– Ego identification
– Belongingness and social meaningfulness
– Affective fulfillment
• Experiential positions
– Provide sensory stimulation
– Provide cognitive stimulation
A six-step question framework for successful
positioning:

• What position do you currently own?

• What position do you want to own?
• Whom you have to defeat to own the position
you want.
• Do you have the resources to do it?
• Can you persist until you get there?
• Are your tactics supporting the positioning
objective you set?
 Repositioning a company

• In volatile markets, it can be necessary - even urgent - to

reposition an entire company, rather than just a product line
or brand.
• Repositioning a company involves more than a marketing
challenge.
• It involves making hard decisions about how a market is
shifting and how a firm's competitors will react.
• Often these decisions must be made without the benefit of
sufficient information, simply because the definition of
"volatility" is that change becomes difficult or impossible to
predict.
Differentiation
• Definition: is the act of designing a set of 
meaningful differences to distinguish the
company's offering from competitor's
offerings.
• In business terms, to differentiate means to create a
benefit that customers perceive as being of greater
value to them than what they can get elsewhere.
• It's not enough for you to be different--a potential
customer has to take note of the difference and must
feel that the difference somehow fits their need
better.
• Competitive Advantage; Unique Selling
Proposition; or Value Proposition.)
• Differentiation is a source of competitive advantage.
• Although research in a niche market may result in changing
your product in order to improve differentiation, the changes
themselves are not differentiation.
• Marketing or product differentiation is the process of describing
the differences between products or services, or the resulting list
of differences.
• This is done in order to demonstrate the unique aspects of your
product and create a sense of value.
• Marketing textbooks are firm on the point that any
differentiation must be valued by buyers .
• The term unique selling proposition refers to advertising to
communicate a product's differentiation.
The various methods of differentiating your businesses fall into four
general categories:

• Price Differentiation
• Focus Differentiation
• Product/Service Differentiation
• Customer Service Differentiation
 Price Differentiation

• Differentiating on price is probably the most common and

easily understood method.
• On the one hand, potential customers might expect a lower
price from you than from your larger competition because
they perceive you as having less overhead, etc.
• On the other hand, cheaper prices can evoke perceptions of
lower quality, a less-stable business, etc.
• If you compete on price against competitors with deeper
pockets, you can price yourself right into bankruptcy.
• Be creative with this differentiator by competing on
something other than straight price. For example, you might
offer:
• More value - offer more products or services
for the same price.
• Freebies - accessories, companion products,
free upgrades, and coupons for future purchases.
• Free shipping, etc. - convenience sells,
especially when it is free!
• Discounts - includes offering regular sales,
coupons, etc. (see cautions above)
 Focus Differentiation

• This is the most important method of differentiation, and in

many ways, the easiest.
• Why? Because you simply can't be everything to everybody,
so you must pick a specific way to focus your business.
• Once you have done that, you have an automatic advantage
over larger companies because you can become more of an
expert in that one field --and you can build close relationships
with key customers that will be hard to duplicate
• For example, you might differentiate yourself through:
• Location - take advantage your closeness to prospective
customers.
• Customer specialization - be very specific about what
characteristics your customers will have for example, racing
bicycle enthusiasts or companies with a spiritual conscience.
• Customer relationships - know customers really well, form
partnerships with them, and get them to speak for you!
• Affinity relationships - associate your product/service with a
well-known person or organization.
• One-stop shopping - offer everything your target market needs, in
your area of expertise.
• Wide selection (within your niche) although this one may seem to
be the opposite of focus - the key is to be very specific in one
dimension and very broad in another.
 Product/Service Offering Differentiation

• How much you are able to differentiate your product or

service offering will vary based on what type of business
you are in.
– For instance, if you are in a highly regulated business, your
options may be limited.
• Explore a totally new market or type of product or service,
however, and the possibilities abound.
• The key to successful differentiation in this category,
again, is to know your customers, really, really well.
– For example, your product or service could stand out in one of
these ways:
• Quality - create a product or service that is exceptional in
one or more ways. Examples: Lasts longer --Better --Easier
to use --Safer
• New/First - be the first one to offer something in your
location/field.
• Features/Options - offer lots of choices, unusual
combinations, or solve a problem for a customer in a way
no one else does.
• Customization - as a Solo Entrepreneur, you may be able
to more easily handle special orders than big, mass-market
competitors.
 Customer Service Differentiation

• Have you noticed how customer service seems to be out of

vogue these days? This situation makes excellent customer
service a great opportunity for differentiation
• Build your reputation on making customers feel really good
about doing business with you.
• Works great with referral marketing, too.
• Examples:
• Deliver Fast - next day, or one-hour--make it faster than
customers think possible.
• Unique channel - offer a service over the phone or Internet
instead of in person or in their office rather than yours.
• Service-delight customers! - it may seem expensive to offer
exceptional service--but it pays off in word-of-mouth
advertising.
• Before/during/after-sales support - provide technical or other
support to customers using your product.
• You might use joint ventures to provide that support--but
customers will perceive it as being from you!
• Guarantee/warranty - offer 100% money-back, or free
replacement parts.
• YOU - offer yourself, your unique blend of talents and skills,
to attract customers. Make sure they get access to you, too!
 Keys to Successful Differentiation:

• Know your customers, really, really well.

• Pick a blend of differentiation methods that, in the
eyes of your customers, truly sets you apart.
• Talk about your differentiation in terms of
customer benefits.
• Tell everyone about what differentiates you--
often.
• Keep your differentiation fresh by listening for
changing customer needs.
 Making A Business Stand Out From Its Competitors

• Business differentiation is a marketing strategy used by

many successful entrepreneurs.
• Some business experts believe it is one of the most important
and effective marketing tools available to small business
owners and entrepreneurs today because of its flexibility,
ease of use and general low implementation cost.
• Also called positioning, business differentiation is what sets
a business apart from the others in its field, geographical
area, market or demographic.
• Essentially, it is what a client or customer would say when
asked, "What's so special about business XYZ?"
Why Business Differentiation Is Important

• Without business differentiation, all businesses selling

the same product or service would be challenged to
compete against one another, as the market's perception
of the business can make or break an entrepreneur
• The goal is to discover a niche in the marketplace that:
– Is large enough to make money;
– Small enough to position the business in a different light than
the others in the market or area;
– Is well suited to the needs, skills, interests and strengths of the
business, and;
– Fills a need in the marketplace.