MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

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Lecture objectives
1. Explain market segmentation, and identify various
possible bases for segmenting markets.
2. Explain the requirements for effective segmentation:
measurability, accessibility, substantiality, actionability.
3. Outline the process of evaluating market segments and
suggest some methods for selecting market segments.
4. Illustrate the concept of positioning for competitive
advantage by offering specific examples.
5. Discuss choosing and implementing a positioning
strategy, and contrast positioning based on product,
service, personnel and image differentiation.

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Some truths about Markets

Allmarketers bothB2CandB2B recognisethatthey
cannot(i)appealtoallbuyersinthosemarkets,or(ii)
appealinthesameway.
Buyersaretoonumerous,
toowidelyscatteredand
toovariedintheirneeds
andbuyingpractices.

Differentcompaniesvary
widelyintheirabilitiesto
servedifferentsegments
ofthemarket.

Ratherthantryingtocompeteinanentiremarket,often
againstsuperiorcompetitors,eachcompanymust
identifythepartsofthemarketthatitcanservebest.
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Designingacustomerdrivenmarketingstrategy
Selectcustomerstoserve

Decideonavalueproposition

Segmentation

Differentiation

Divide the total market

into smaller segments

Differentiate the market

offering to create superior
customer value

Create value
for targeted
customers

Targeting

Positioning

Select the segment or

segments to enter

Position the market offering

in the minds of target
customers
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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Segmenting

Target Marketing

the process of dividing the

total market for a good or
service into several smaller
groups
such that the members of
each group are similar with
respect to the factors that
influence demand.

Evaluates each segments

attractiveness and selects
one or more segments to
enter.
A target market is a group of
customers ( people or
organisations) for whom a
seller designs a particular
marketing mix.

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Segmentation
Segmentation is
necessary because
customers in a market
have:
Differences in buying
habits
Differences in the way the
good or service is used
Different motives for
buying.

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Markets are segmented by:

Intuition based on experience
and judgment
Mimicking competitors and
earlier market entrants
Performing a structured
analysis that includes
Identifying the current and
potential wants that exist within
a market
Identifying the characteristics
that distinguish segments
Finally, determining who has
each want.

Copyright 1997 by The McGraw-Hill Companies, Inc.

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

StepsinSegmentation,Targeting,PositioningandDifferentiation

7.Decideonavalueproposition
6.DevelopMarketingMixforEachSegment
5. DevelopPositioningforEachSegment
4. Select Target Segment(s)
3. Develop Measures of Attractiveness
2. Develop Profiles of Segments

Product
Differentiation

Market
Positioning
Market
Targeting
Market
Segmentation

1. Identify Bases for Segmentation

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Bases for Segmenting Consumer Markets

Geographic
country,
region
population
density
population
size,
climate

Demographic
Ageandlife
cycle
Gender
Income
Education
Occupation
Religion
Nationality

Psychographic

Behavioural

Socioeconomic
Status
Values - AIO
Personality

Purchase
occasion
Benefitssought
Usersought
Userrate
Loyaltystatus
Readinessstage
Attitudetowards
product

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Colgate offers benefits to consumers

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Geo-demographic Segmentation
Geographic
Segmentation
Variables
(e.g.,SEAsia,City,
Kensington)

Geodemographic
SegmentationVariable
(e.g.,SEAsianMales;Low
incomeCitydwellers;SEAsian
LowIncomeearners;Senior
CitizensofKensingtonetc.)

Demographic
Segmentation
Variables
(e.g.,Male,LowIncome,
seniorcitizens)

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

WhyUseAgetoSegment?
Consider these bodily changes that accompany ageing:
Colourdiscrimination Olderpeoplehavedifficultydistinguishing
pastelsandthegreenbluevioletpartofthecolourspectrum.This
haveimpactonpackaging,brochuresanddisplays.
Glare Glareinpackaging,postersandfloorsinretailstoresshould
betoneddownoreliminated.
Hearing25%ofpeopleover65experiencehearingloss;marketers
usingaudiocommunicatorsshouldselectspokespersonswhohave
deepertones.
Tastesensitivity Byage80,twothirdsofourtastesensitivityis
lost(mostforsweettastes,leastforsourtastes).Marketersshould
considerodouramplificationtoenhancethepalatabilityoffoodsand
beverages.
Touch Atage65,a5degreechangeintemperatureisneededto
equalthesensitivitya30yearoldwouldhavefora1degreechange.

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ASEGMENTATIONEXAMPLE
Female department store shoppers have been classified into 5
types, based on demographics, values and attitudes. The
groups and their descriptive names are:
1.FashionStatementsmostaffluentandeducated,usecredit
cards,expecttobetreatedwellbyretailpersonnel.

2.WannabuyssimilartoFashionStatementsbutwithless
income.Enjoybuyingonimpulse.

3.FamilyValuesrepresentlargefamilies,oftenareprofessionals,
buyingfocusesonchildrenorthehome.

4.DowntoBasicsmostlikelytohavechildren,notcollege
educated,carefulspenders,prefernottousecredit,likecoupons.

5.Matriarchsolder,oftenretired,theylikedepartmentstoresbut
areriskaverseandhavefewpurchaseplans.

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Identifying and Analysing Business Market Segments

Personal
Characteristics

Demographic
Operating variables
Purchasing approaches
Situational factors
Personal characteristics

Bases
for Segmenting
Business
Situational
Operating
Markets
Factors
Variables

Purchasing
Approaches

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More
Profitable

Signode CorporationsFourSegments
Programmed Buyers. This group buys products as a routine
purchase, pays full price, and accepts below average service. This
segment is highly profitable.
Relationship Buyers. This group views Signodes packaging as
moderately important. They are knowledgeable about competitors
offerings. They remain loyal if prices are competitive. Typically, they
receive a small discount and a modest level of service.

Transaction Buyers. This group sees Signodes products as very

important to their business. They are price and service sensitive.
They receive above average service and a 10% discount. They will
switch for a better price.
Less
Profitable

Demographics

BargainHunters.ThisgroupseesSignodes productsasveryimportantto
theirbusinessanddemandthedeepestdiscountandhighestlevelofservice.
Theyknowtheirsuppliersandbargainhard.Theirlargevolumeisneeded
buttheyarenotveryprofitable.
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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

SegmentingInternationalMarkets
Segmenting
consumerswith
similarneedsand
buyingbehavioreven
thoughtheyare
locatedindifferent
geographical
Locations.

Intermarket

SouthAsia
MiddleEast
Australasia

Geographic

Factors
for
Segmenting
International
Cultural
Economic
Markets

CommonLanguage
Religion
Customs

NIE
OECD
ECM

Political/
Legal

Politicallyvolatile

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Requirementsforeffectivesegmentation
Organizationmustbe
abletoidentifyand Measurable
measureeachsegment

Marketersshould
beabletodesignActionable
Actionable
effective
programstoserve
themarket

Requirements
Foreffective
segmentation

Organizationmustbe
abletodistinguishthe
Differentiable
segmentandrespond
toitsneedsdifferently

Accessible

Themarket
segmentcanbe
effectivelyreached
andserved

Shouldbelarge
Substantial enoughtobe

profitable

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

EvaluatingMarketSegmentsI
Segmentationrevealsthemarketsegmentopportunitiesfacingafirm.
Thefirmhastoevaluatethevarioussegmentsandchoosetheonestoserve.
Select the segment
with the right size
growth.

Desirablesizeandgrowth
doesnotensurehigh
profitability.Structural
factors[competition,
substitutes,powerof
buyer/sellers]areimportant

Sizeand
Growth

[e.g., go for the Niche

market]

Company
Companymust
evaluateitsown
objectives,resources,
constraints,strengths
andweaknesses

Structural

Objectives
and

Attractiveness

Resources

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Evaluating Market Segments II

Segmentsizeandgrowth
collectandanalysedataoncurrentdollarsales,projectedsales
growthratesandexpectedprofitmarginsforthevarious
segmentstoselectsegmentsthathavetherightsizeandgrowth
characteristics,butrightsizegrowthisarelativematter.

Segmentstructuralattractiveness
desirablesizeandgrowthmaynotprovideattractive
profitability.Thecompanymustexamineseveralmajor
structuralfactorsthataffectlongrunsegmentattractiveness.

Marketingorganisationobjectivesandresources
positivesizegrowthandstructuralattractivenessmustmatch
thecompanysownobjectivesandresourcesinrelationtothat
segment.Someattractivesegmentscouldbequicklydismissed
becausetheydonotmeshwiththecompanyslongrun
objectives.
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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

MarketTargetingStrategiesI
Afterevaluatingdifferentsegments,thecompanymustdecidewhichand
howmanysegmentsitwilltarget.Atargetmarketconsistsofasetof
buyerswhosharecommonneedsthatthecompanydecidestoserve.

Mass
Marketing

Segmented
Marketing

Niche
Marketing

Undifferentiated
marketing

Differentiated
marketing

Concentrated
marketing

Targeting
broadly

Localor
Individual
Marketing

Micromarketing

Targeting
narrowly

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MarketTargetingStrategiesII
Company
Marketing
Mix

Market

A. Undifferentiated Marketing
Company Mix 1

Segment 1

Company Mix 2

Segment 2

Company Mix 3

Segment 3

Ignoremarketsegmentation;focus
onwhatiscommonratherthanwhatis
different.Designaproductandmarketing
programthatappealstolargestnumber
ofbuyers.Steel,Applesareexamples.
Targetseveralmarketsanddesign
separateofferforeach.Caterforevery
purse,price,andpersonality(Toyota).
Examples:ColesMyerSupermarket,
Bilo,Myerstores

B. Differentiated Marketing
Company
Marketing
Mix

Segment 1
Segment 2
Segment 3

Goforlargeshareofoneorfewsub
marketsratherthanforsmallsharesof
manymarkets.DELL[PC],CRAY
[Mainframe],APOLLO[Workstation]

C. Concentrated Marketing
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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

CUSTOM SEGMENTATION
A special version of concentrated marketing
Ideally,marketersshouldbeabletodefinesegmentsso
preciselythattheycanofferproductsandservicesthat
exactlymeettheuniqueneedsofeverycustomer.
Commonfordoctors,lawyersandhairstylists.

Doesnothappeninreality;itisneitherpracticalnorpossible.
ParticularlytrueforB2Borindustrialmarkets.
Theygoforcustommarketingstrategyandusecustom
segments.

In customsegmentationmanufacturerstendtoworkwith
oneorafewlargeclientsanddevelopproductsorservices
thatonlythesecustomerswoulduse.

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ChoosingaMarketCoverageStrategy
Limitedresource?
Goforconcentrated

Competitorusessegmentation?
Cannotuseundifferentiated.
Competitors
Strategies

Buyershavethe
sametaste?
Gofor
undifferentiated

Market
Variability

Company
Resources

Factors
Affecting
Strategy
Decisions

Product
Variability

Uniformproducts?
Undifferentiated.
Manyproducts?
Differentiated.

Stage in
Life Cycle

Anewproductintroducedinthemarket?
Goforundifferentiatedorconcentrated
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Market Segmentation, Targeting and Positioning

MarketPositioningoftheProduct
Afterdecidingwhichsegment(orsegments)ofthemarket
toenter,thefirmmustdecidewhichpositionitwantsto
occupyinthosesegments.
Positioningiscustomerperceptionsofaproductimageorbenefits
versuscompetitionsproducts.

Productposition isthewaytheproductisdefinedby
consumersonimportantattributes.
Drive ispositionedasanallpurposefamilywashingdetergent;
Softlyasawashingdetergentfordelicatefabricssuchaswool.

Positioningisdifferentfromproductdifferentiation.
Differentiatedvalueiscreatedbythevaluepropositionusedby
marketersforthesegmentedmarket.
Valuepropositionreferstothefeaturesthatdifferentiateaproduct
fromcompetitorsofferings

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ChoosingaDifferentiationandPositioningStrategy

Athreestepprocess
1. Identifyingasetofdifferentiatingcompetitiveadvantages
uponwhichtobuildaposition
2. Identifyingandchoosingtherightcompetitiveadvantages
3. Selectinganoverallpositioningstrategy.

Step1:Identifyingasetofdifferentiatingcompetitive
advantagesuponwhichtobuildaposition
Canbedonethoughperceptualmappinganalysis.
Perceptualmapisamultidimensionalmapwhichidentifiesfactors
thatdiscriminatebetweenbrands.
Itisausefultoolforplottingmovesovertimebycompetitorsas
wellastheresultsofafirmsownbrandpositioningstrategy.
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Market Segmentation, Targeting and Positioning

PerceptualMapping
Based upon research using existing or prospective
consumers:
management determines those dimensions most important
to consumers in evaluating brands; and
how consumers see competitive products in terms of their
performance on these dimensions.

Perceptual maps are valuable in:

determining consumer perceptions of existing products;
offering insights to new product opportunities;
gaps in the perceptual space may suggest positions for new
offerings in the market.

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Perceptual Mapping and Positioning Decisions

Upscale, Classy

Mercedes
Lincoln Volvo
Cadillac Chrysler
Buick

Porsche
BMW

Saab
Honda

Conservative

Sporty

Ford

Nissan

Dodge
Plymouth

Toyota
Chevrolet
Hyundai

CostPerformance
Gap

Practical, Affordable
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Market Segmentation, Targeting and Positioning

Brandpositionofdepartmentstores
High perceived quality and status

David Jones
Myer
Limited
service
Less
personal

Target

Extensive
personalised
service

Kmart

Low perceived quality and status

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Step2.IdentifyingandchoosingtherightcompetitiveadvantageI

Consumerschooseproductsandservicesthatoffergreatest
value.Competitiveadvantagecanbeprovidedby:
Productdifferentiation
Highlystandardisedproducts(e.g.,chicken,steel,aspirin)vs.
highlydifferentiatedproducts,(e.g.,motorcars,furniture,
camera).
Features,performance,style,design,consistency,durability,
reliabilityandreparabilityareallareasofpossible
differentiation.

Servicesdifferentiation
differentiate theservicesthataccompanytheproduct.
e.g.,intermsofdelivery,installation,repairandcustomer
trainingservices.
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Market Segmentation, Targeting and Positioning

Step2.IdentifyingandchoosingtherightcompetitiveadvantageII

Personneldifferentiation
Byhiringandtrainingbetterpeoplethantheircompetitors.
Requiresacompanytoselectitscustomercontactpeoplecarefully
andtrainthemwell.

Imagedifferentiation
Worktoestablishimagesthatdifferentiatethemfromcompetitors.
Acompanyorbrandimageshouldconveyasingularanddistinctive
messagethatcommunicatestheproductsmajorbenefitsand
positioning.
Symbolscanprovidestrongcompanyorbrandrecognitionandimage
differentiation.
Acompanycanalsocreateanimagethroughthetypesofeventit
sponsors.
.
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Step2.IdentifyingandchoosingtherightcompetitiveadvantageIII

Howmanydifferencestopromote?
Whichdifferencestopromote?
Mustavoidthreemajor
positioningerrors:

Important

Underpositioning failingto
positionthecompanyatall.
Overpositioning giving
buyerstoonarrowapicture
ofthecompany.
Confused positioning
leavingbuyerswitha
confusedimageofthe
company.

Criteria Distinctive
for
Determining
Which
Differences
Affordable
Superior
to
Promote

Profitable

Pre-emptive

Communicable

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Market Segmentation, Targeting and Positioning

WhichDifferencestoPromote?
Adifferenceisworthestablishingtotheextentit
satisfiesthefollowingcriteria:
Important thedifferencedeliversahighlyvaluedbenefit.
Distinctive competitorsdonotofferthedifference.
Superior thedifferenceissuperiortootherwaysinwhichthe
customersmayobtainthesamebenefit.
Communicable thedifferenceiscommunicableandvisibleto
buyers.
Preemptive competitorscannoteasilycopythedifference.
Affordable thebuyerscanaffordthedifference.
Profitable thedifferencecanbeintroducethedifference
profitably.

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Various Possible Positioning Strategies

Product
Class
Awayfrom
Competitors

Product
Attributes
Benefits
Offered

G
H

Againsta
Competitor

D
E
B

Usage
Occasions

Users

Source: Kotler Brown Adam Armstrong

Marketing 5th Ed Copyright 2001 Pearson Education Australia

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Market Segmentation, Targeting and Positioning

ExamplesofPositioningStrategies
Position
on specific product attributes [Hyundai Excel>>low price]
on the benefits offered [Colgate>>cavity prevention]
according to usage occasions [Sustagen>>replaces body fluids]
for certain classes of users [Mothercare>> baby products]
against a competitor [Tandy and Compaq vis--vis IBM]
away from competitors [7-up, the un-cola >>vs Coke and Pepsi]
for different product classes [Margarines vs butter; margarines
vs cooking oil]
using combination strategies [J&Js affinity Brand is a hair
conditioner for women over 40 >> product class and user]

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SelectinganOverallPositioningStrategy
Thefullpositionofabrandistermedthebrandsvalue
proposition.
Companyandbrandpositioningshouldbesummedupina
positioningstatement.
Moreformorepositioning
Thesameforless a
involvesprovidingthemost
powerfulvalueproposition
upscaleproductorserviceand
offeringgooddeals.
chargingahigherpriceforhigher
Lessformuchless meets
costs.
thedemandforproducts
Moreforthesamecompanies
thatofferlessandcostless.
canattackacompetitorsmore
formorepositioningby
Moreforless awinning
introducingabrandofferingof
valuepropositionbutmay
comparablequalityatalower
beimpossibletomaintainin
price.
thelongrun.
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Market Segmentation, Targeting and Positioning

PossibleValuePropositions
Price
More

Morefor
more

Morefor
thesame

Benefits

More

The Same

Less

Morefor
less

The
Same

Thesame
forless

Less

Lessfor
muchless
Losing value
propositions

Winning value
propositions
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DevelopingapositioningstatementProduct
Companyandbrandpositioningshouldbesummed
upinapositioningstatementoftheform:

To(targetsegmentandneed)our(brand)is
(concept)that(pointofdifference).
Example:Tobusy,mobileprofessionalswhoneedtobe
alwaysintheloop,Blackberry isawirelessconnectivity
solution thatallowsyoutostayconnectedtodata,
peopleandresourceswhileonthego,easilyandreliably
moresothancompetingtechnologies.

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Market Segmentation, Targeting and Positioning

Step3:Designmarketingprogramtocommunicatebenefits
andpersuadecustomers.
Afterselectingaposition,thecompany
musttakestrongstepstodeliverandcommunicatethe
desiredpositiontotargetcustomers.
Themarketingmixeffortsmustsupportthepositioning
strategy.
Designingthemarketingmixinvolvesworkingoutthe
tacticaldetailsofthepositioningstrategy.

Theposition
mustbemonitoredandadaptedovertimetomatchchanges
inconsumerneedsandcompetitorsstrategies.
shouldevolvegraduallyasitadaptstotheeverchanging
marketingenvironment.

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The positioning
statement
addresses three
key questions:

1. Whoisthetarget
customer?
2.Whyshouldthe
customerbuy?
3.Whatareweselling?

Six Questions to Ask When

Applying a Positioning Strategy
1. Whatisourpresentpositioninthe
prospectsmind?
2. Whatpositionwouldweliketoown?
3. Whichcompaniesposegreatest
challengeagainstthisposition?
4. Dowehaveenoughfinancialsupportto
gainandholdthisposition?
5. Dowehavethecouragetostickwith
oneconsistentpositioningconcept?
6. Doesourcreativeapproach(4Ps)match
ourchosenpositioningstrategy?

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Market Segmentation, Targeting and Positioning

Some Confusing Terms to Note

Customer perceptions of a product image or
benefits versus competitions products.
The features that make a product distinct
from competitors offerings.
You have chosen a segment ..

Positioning
Differentiation
You are talking about

1. whose size can be determined.

2. you know where your customers live, where

they shop, what media they are exposed to etc.
3. you expect the segment to yield sufficient profit
4. you have enough resource to get the product to
the market.
Company A sells an Deluxe range of matching products for kitchen.
They are following a ____________ marketing strategy.
Company A also sells a basic range of different products for kitchen.
They are following a ____________ marketing strategy.

Measurability
Accessability
Substantiality
Actionability

Custom

Undifferentiated

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