CHAPTER: FOUR

•MARKET SEGMENTATION,
•TARGETING & POSITIONING Strategy

BY GEBEYEHU Z. 1
 Steps in STP strategies

• Market • Target marketing

• 3. Develop measures of
segmentation segment attractiveness
• Identify basis • 4. Select target
segments
(criteria) for
segmenting the mkt • Market positioning
• 5. Develop positioning for
• Developing mkt target segments
• 6. Develop a mktg mix
profiles strategies for each segments

BY GEBEYEHU Z. 2
 MARKET SEGMENTATION
• Dividing a mkt into distinct groups of buyers
with different needs, characteristics or
behaviour who might require separate
products or mktg mix.

• A shift occurred from mass marketing

“shotgun” approach to mkt segmentation
“rifle” approach (customer-driven mkt
strategy)

BY GEBEYEHU Z. 3
• Why segmentation? – buyers differ in their wants, locations, buying
attitudes, and buying practices

• - buyers have unique needs & wants which demand special

treatment
• - each buyer is potentially a separate market

• - each mkt is getting more & more sophisticated which deserve

special treatment

• competition is getting stiffer and stiffer that companies can not

appeal to all buyers in the mkt place, or at least not to all buyers in
the same way.

BY GEBEYEHU Z. 4
 Basis of segmenting consumer
market
A. Geographic segmentation
• division variables – nations, states, regions,
countries, cities or neighbourhood.
• Ex:- west Europe consumers, middle east
consumers, African consumers, Ethiopian
consumers, urban consumers, rural
consumers, jimma consumers etc

BY GEBEYEHU Z. 5
 B. Demographic Segmentation
•
• Division variables – age, gender, family size, family life cycle,
income, occupation, religion, race, generation, and nationality
• EX: - Perfume, tailor : men vs women
• - married vs unmarried

• NB: this base is the most popular basis for segmenting customer
groups for two reasons:
• Consumer needs, wants and usage rates often vary closely with
demographic variables
• Demographic variables are easier to measure than most other
types of variables

BY GEBEYEHU Z. 6
 C. Psychographic Segmentation
• Segmentation variables: – social class, life
style, and personality characteristics
• Social class:- upper, middle, lower
• Life style:- the way buyers lead their life:
achievers, strivers, believers
• :- buyers’ interest, opinion, activities
• Personality:- compulsive, ambitious,
gregarious, authoritarian etc
BY GEBEYEHU Z. 7
 D. Behavioural Segmentation
• Division variables:- knowledge, attitude, uses or
responses to a product
i. Occasion segmentation: when consumers get the
idea to buy, actually make the purchase, or use
the purchased item

ii. Benefits sought: - functional( performance,

durability, quality) benefit
• - style benefit
• - better value

BY GEBEYEHU Z. 8
• iii) User Status: mkt can be segmented in to
nonusers, ex-users, potential users, first time
users, and regular users of the pdt
• iv) Usage Rate: mkts can be segmented into light,
medium, and heavy users
• V) Loyalty Status: mkts can be segmented into
loyals, some what loyals, and non - loyals

• ☻Behavioural variables are the best starting

point for building mkt segmentation

BY GEBEYEHU Z. 9
 Segmenting Business Market
• Consumer & business marketers use many of the
same variables to segment their mkts.
• Business buyers can be segmented
geographically, demographically, demographically
( type of industry, company size).
• Business mkt also use some additional variables
such as - customer operating characteristics,
purchasing approaches, situational factors, and
personal characteristics

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• By going after segments instead of the whole
mkt, companies can deliver just the right
value proposition to each segment served and
capture more value in return.

BY GEBEYEHU Z. 11
 Requirements for effective mkt
segmentation
• To be useful, mkt segments must be:

• A. Measurable: interms of: - mkt size

• - purchasing power
• - profit
• - mkt share
• - future potential etc . . .

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• B. Accessible:- the mkt should be easy to reach
and serve. Thus, mkt infrastructure (media,
distributors, dealers) availability should be
checked

• C. Substantial:- the mkt should be large or

profitable enough to serve
• - it should be the largest possible
homogenous group worth pursuing with a
tailored mktg program
•

BY GEBEYEHU Z. 13
• D. Differentiable:- the segments should be
conceptually distinguishable and respond
differently to different mktg mix programs

• E. Actionable:- effective program can be

designed for attracting and serving the segment
• – whether the organization has the required
resources to develop separate marketing
program to the identified segment

BY GEBEYEHU Z. 14
 Market Targeting
• Evaluating each market segment’s
attractiveness and selecting one or more of
the mkt segments to enter

• Evaluating mkt segments

• In evaluating d/t mkt segments, a firm must
look at 3 factors

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• 1. Segment size and growth
• indicators are:- current sales
• - sales growth
• - expected profit

* Marketers should focus on “ the right size and

growth”

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 2. Structural Attractiveness
Indicators:- presence of many strong and
aggressive competitors
•Existent of present and potential substitute
products.
•The relative bargaining power of the buyer.

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3. Company Objectives and Resources

• Indicators:- long-run objectives of the

company
• - skills and resources of the company
Selecting Target Market Segments
A target segment:- consists of a set of buyers
who share common needs or characteristics
that the company decides to serve.

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 Market Coverage Strategy
1. Undifferentiated/mass marketing
• - targeting broadly
•The firm decides to ignore mkt segment d/cs & go after
the whole mkt with one offer
•☻it focuses on common needs of consumers
•☻it designs product & other mktg program that applies
to all. Thus, it involve:
• - mass production
• - mass distribution
• - mass promotion Ex:- soft drinks
• - common or same price

BY GEBEYEHU Z. 19
 2. Differentiated Marketing
• The firm decides to target several target mkts
and designs separate offer for each
• ☻each segment identified & selected are offered
with unique mktg program - product
• - price
• - distribution
• - promotion
• Ex:- Harara bear: - Harar sofi
• - Hakim staut

BY GEBEYEHU Z. 20
 3. Concentrated Marketing
• ♠ niche marketing
• The firm decides to go after a large share of one or a
few segments or niches. Helps the firm to avoid
competition with giant firms. Small firms may focus on
the segment of the market where the most
competitors don’t focus.
• Applicable when – company resources are limited
• - there is greater knowledge of
customers
• - there is professional specialization
• Ex:- Dentist

BY GEBEYEHU Z. 21
• Concentrated marketing can be highly
profitable. At the same time it involves higher
–than- normal risk. If larger firms decide to
inter the market, the opportunities will be
lost.

• Thus, just consider the saying “don’t put all

your eggs in a basket”

BY GEBEYEHU Z. 22
 4. Micromarketing
• It is the practice of tailoring marketing
programs to the needs & wants of specific
individuals & local customer groups
• This includes:-
i) local marketing:- tailoring brands &
promotions to the needs & wants of local
customer groups: cities, neighbourhoods, and
even specific stores

BY GEBEYEHU Z. 23
 ii) Individual Marketing
• Tailoring products & mktg programs to the
needs & preferences of individual customers:
also called “markets - of - one marketing”,
“customized marketing”, and “one-to-one
marketing”

BY GEBEYEHU Z. 24
 Product Positioning
• Product position is defined as the way the
product is defined by consumers on important
attributes

• The place the occupies in consumers mind as

compared to competitive products.

• The complex set of perceptions, impressions and

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

BY GEBEYEHU Z. 25
• Positioning strategies differ for different product type
and market structures
• Product can be positioned on the benefit they offer;
• ex:- Colgate teeth soap is positioned on the
benefit – fresh breath
• - teeth strength
• - cavity protection
• ii) Usage occasions:- summer
• - winter
• - graduation celebration
• - public & national holiday

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• iii) Positioning against competitors
• iv) Product attributes:- price, performance,
quality etc.

• Choosing and implementing positioning

strategy
• The positioning task consists of three steps
• 1) Identifying possible competitive advantages

BY GEBEYEHU Z. 27
• An advantage over competitors gained by
offering consumer greater value, either through
lower price or providing more benefits that
justify higher price.
• Competitive advantage could be:
• - product quality
• - price
• - service
• - durability
• - reliability etc

BY GEBEYEHU Z. 28
 2. Choosing the right competitive
advantage
• The question here is to determine how many
differences to promote
• Marketers vary on the number of differences
to promote. Some choose only one, while
others prefer to promote more
benefits/differences
• In this regard, companies should avoid three
major positioning errors

BY GEBEYEHU Z. 29
a) Under positioning:- failing to really
position at all.
•consumers will develop vague idea due to this
problem
b) Over positioning:- giving buyers too narrow
picture of the company.
• - consumers due to this problem think the
company produces only ‘A’ product which is
unaffordable while it produces ‘B’ product which is
affordable

BY GEBEYEHU Z. 30
c) Confused positioning:- leaving consumers with a
confused image of the company.

♠ While selecting the difference to promote, the

difference selected should be:
- important - adds some value to buyers
- distinctive – unique & others don’t offer it
- communicable - visible & can be told
- pre-emptive - can’t be copied by competitors
- affordable- buyers should be able to pay for it
- profitable

BY GEBEYEHU Z. 31
 3. Select an overall positioning
strategy
• The selected benefit or feature of the product
should answer consumers’ question “why should
I buy the brand”
• Then, develop a positioning statement ; the
statement to be told that emphasizes:-
• More for more
• More for same
• The same for less
• Less for much less
• More for less

BY GEBEYEHU Z. 32