Lesson

Lesson 15
15

Market Segmentation,
Targeting, and Positioning
Lesson
Lesson Objectives
Objectives

• When you have completed this lesson you will be able

to;
– Summarise the relationship between market segmentation,
targeting and positioning
– Identify and describe the major variables for consumer
segmentation
– Outline how companies select target markets and implement
segmentation strategies
– Show how market segmentation and the marketing mix are
interlinked in the positioning strategy
The
The STP
STP Process
Process

• Segmentation is the process of classifying customers

into groups which share some common characteristic
• Targeting involves the process of evaluating each
segments attractiveness and selecting one or more
segments to enter
• Positioning is arranging for a product to occupy a
clear, distinctive and desirable place relative to
competing products in the mind of the consumer
Target
Target Market
Market

• A market is a set of all actual and potential buyers

• A target market is a group of people toward whom a

firm markets its goods, services, or ideas with a
strategy designed to satisfy their specific needs and
preferences.
• Any marketing strategy must include a detailed
(specific) description of this.
Advantages
Advantages of
of Segmentation
Segmentation (pp
(pp 164
164 -- 165)
165)

1. The process of breaking up a homogeneous market

into heterogeneous segments forces the marketer to
analyse and consider both the needs of the market
and the company’s ability to competently serve those
needs – thereby making the company better informed
about its customers
2. Competitor offerings and marketing positioning must
also be analysed in this context so the company must
consider what its competitive advantages and
disadvantages are, helping it to clarify its own
positioning strategy
3. Limited resources are used to best advantage,
targeted at those segments that offer the best
potential
Requirements
Requirements for
for Effective
Effective Segmentation
Segmentation

Measurable
Measurable • Size, purchasing power, profiles
of segments can be measured.

Accessible
Accessible • Segments can be effectively
reached and served.

Substantial
Substantial • Segments are large or
profitable enough to serve.

Differential • Segments must respond

Differential
differently to different marketing
mix elements & programs.

Actionable
Actionable • Effective programs can be
designed to attract and serve
the segments.
Steps
Steps in
in Segmentation,
Segmentation, Targeting,
Targeting, and
and
Positioning
Positioning

6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s) Market
3. Develop Selection Criteria
Targeting

2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market
Step
Step 1.
1. Market
Market Segmentation
Segmentation
Levels
Levels of
of Market
Market Segmentation
Segmentation
Mass
Mass Marketing
Marketing
Same
Same product
product to
to all
all consumers
consumers
(no
(no segmentation)
segmentation)
Segment
Segment Marketing
Marketing
Different
Different products
products to
to one
one or
or more
more segments
segments
(some
(some segmentation)
segmentation)
Niche
Niche Marketing
Marketing
Different
Different products
products to
to subgroups
subgroups within
within segments
segments
(more
(more segmentation)
segmentation)
Micromarketing
Micromarketing
Products
Products to
to suit
suit the
the tastes
tastes of
of individuals
individuals and
and locations
locations
(complete
(complete segmentation)
segmentation)
Local Marketing Individual Marketing
Tailoring brands/ promotions Tailoring products/ programs
to local customer groups to individual customers
Step
Step 1.
1. Market
Market Segmentation
Segmentation
Bases
Bases for
for Segmenting
Segmenting Consumer
Consumer
Markets
Markets
Geographic
Nations, states,
regions or cities

Demographic
Age, gender, family size
and life cycle,
or income

Psychographic
Social class, lifestyle,
or personality

Behavioural
Occasions, benefits
sought, user status,
usage rate, loyalty
Step
Step 1.
1. Market
Market Segmentation
Segmentation
Bases
Bases for
for Segmenting
Segmenting Business
Business Markets
Markets

Personal Demographics
Characteristics

Bases
Bases
for
for Segmenting
Segmenting
Business
Business
Situational Operating
Factors Markets
Markets Characteristics

Purchasing
Approaches
Segmenting
Segmenting Business
Business
Markets
Markets

• Segmentation by customer size or geographic location

• Four segments of business customers

– Programmed buyers

– Relationship buyers

– Transaction buyers

– Bargain hunters
Step
Step 1.
1. Market
Market Segmentation
Segmentation
Bases
Bases for
for Segmenting
Segmenting International
International Markets
Markets

Industrial
IndustrialMarkets
Markets

Political/
Political/
Geographic
Geographic Economic
Economic Legal
Legal

Cultural
Cultural Intermarket
Intermarket
Linking
Linking the
the Concepts
Concepts

• Using the segmentation bases you’ve just

heard about, segment the Irish clothing
market.
>Describe each of the major segments and
subsegments.
Step
Step 2.
2. Market
Market Targeting
Targeting
Evaluating
Evaluating Market
Market Segments
Segments (developing
(developing
selection
selection criteria)
criteria)
• Segment Size and Growth
– Analyze sales, growth rates and expected profitability for
various segments.

• Segment Structural Attractiveness

– Consider effects of: Competitors, Availability of Substitute
Products and, the Power of Buyers & Suppliers.

• Company Objectives and Resources

– Company skills & resources relative to the segment(s).
– Look for Competitive Advantages.
Step
Step 2.
2. Market
Market Targeting
Targeting
Market
Market Coverage
Coverage Strategies
Strategies
Company
Company
Marketing
Marketing Market
Market
Mix
Mix

A. Undifferentiated Marketing
Company
Company
Marketing Segment
Segment11
MarketingMix
Mix11
Company
Company Segment
Segment22
Marketing
MarketingMix
Mix22
Company
Company Segment
Segment33
Marketing
MarketingMix
Mix33
B. Differentiated Marketing

Segment
Segment11
Company
Company
Marketing
Marketing Segment
Mix Segment22
Mix
Segment
Segment33
C. Concentrated Marketing
Step
Step 2.
2. Market
Market Targeting
Targeting
Choosing
Choosing aa Market-Coverage
Market-Coverage
Strategy
Strategy
Company
Resources

Product
Variability

Product’s Life-Cycle
Stage

Market
Variability

Competitors’
Marketing Strategies
Linking
Linking the
the Concepts
Concepts

• At the last ‘linking the concepts’, you segmented

the Irish clothing market.
> Now, pick two companies that serve this market and
describe their segmentation and targeting strategies.
> Can you come up with one that targets many different
segments versus another that focuses on only one or
a few segments?
• How does each company you choose
differentiate its marketing offer and image?
• How has each done a good job of establishing
this differentiation in the minds of targeted
consumers?
Step
Step 3.
3. Positioning
Positioning for
for Competitive
Competitive
Advantage
Advantage
• Product’s Position - the way the product is
defined by consumers on important
attributes - the place the product occupies
in consumers’ minds relative to competing
products.

• Marketers must:
– Plan positions to give their products the
greatest advantage in selected target markets,
– Design marketing mixes to create these
planned positions.
Step
Step 3.
3. Positioning
Positioning for
for Competitive
Competitive
Advantage:
Advantage: Strategies
Strategies

Product
Product Product
Product
Class
Class Attributes
Attributes

Away
Away from
from Benefits
Benefits
Competitors
Competitors HH
GG
Offered
Offered
CC

A
A
DD
Against
Against aa E
E
B
Usage
Usage
B
Competitor
Competitor
FF
Occasions
Occasions

User
User Class
Class
Steps
Steps to
to Choosing
Choosing and
and Implementing
Implementing
aa Positioning
Positioning Strategy
Strategy
• Step 1. Identifying Possible Competitive
Advantages: Competitive Differentiation.

• Step 2. Selecting the Right Competitive Advantage:

Unique Selling Proposition (USP).

• Step 3. Communicating and Delivering the Chosen

Position.

• Step 4. Support the positioning strategy with a

unique marketing mix
Developing
Developing Competitive
Competitive
Differentiation
Differentiation
Product
Product Service
Service

Areas
Areas for
for Competitive
Competitive
Differentiation
Differentiation

Image
Image People
People
Selecting
Selecting the
the Right
Right Competitive
Competitive
Advantages
Advantages

Important
Important

Profitable
Profitable Criteria
Criteria Distinctive
Distinctive
for
for
Determining
Determining
Which
Which
Differences
Differences
Affordable
Affordable to
to Superior
Superior
Promote
Promote

Preemptive
Preemptive Communicable
Communicable
Step
Step 44 –– Supporting
Supporting the
the
positioning
positioning strategy
strategy

• At this stage the company has decided on its

positioning strategy and must now design a marketing

mix to support this strategy. The next part of the

course looks at ‘Developing the Marketing Mix’

Reviewing
Reviewing the
the Concepts
Concepts

• Define the three steps of target marketing: market

segmentation, market targeting, and market
positioning.
• List and discuss the major levels of market
segmentation and bases for segmenting consumer
and business markets.
• Explain how companies identify attractive market
segments and choose a market coverage strategy.
• Discuss how companies position their products
for maximum competitive advantage in the
marketplace.