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A Brief Note on Segmentation Targeting and Positioning

In class, we have defined marketing as a business function responsible for creating and
retaining customers. This means that marketing is about customer management. We have to
identify the customers and by satisfying their needs better than the competition, they can be
retained. Profitability of a firm is a function of effective marketing through which a firm is able
to retain its customers .Understanding the customer requirements and meeting such
requirements is the key in enhancing the profitability of a firm. A firm attempts to meet the
customer requirements through various activities which are typically referred to as the 4 Ps of
marketing or marketing mix.
Customer Differences and Competition
In any market there is competition and every firm has to compete for the customer. It is the
competition that makes marketing complex and challenging. If there is only one firm in a
market, there is no competition present and the customers do not have any available choice to
select. This situation is called a monopoly. In reality such monopoly situations do not easily
occur in markets.
In most markets there is considerable competition. There are many firms trying to market their
products to the same customers. Because of this, customers have many choices and they
prefer those products which provide them with the maximum benefit, those products that
meet their needs better. The attempt of any company through marketing is therefore to do
better than the competition in meeting customer needs. But, it is impossible for one
organisation to meet the needs of all possible customers better than the competition since the
customers vary and their needs also vary. Customers are selective and firms also must be
selective rather than trying to be every thing for every one. If there is one truth in marketing, it
is the diversity of customers and their varied expectations from products.
Marketing to the ‘Customer of One’
All customers are not alike. They have different preferences, different expectations and seek
different benefits from products. For example, many customers may use shampoo but what
they want from a shampoo are different things. Some want the shampoo to clean their hair,
still others expect shampoo to be an anti-dandruff remedy, and some others want the benefit
of conditioning the hair. Some people want the shampoo to prevent fall of hair and yet others
want shampoo to de-tangle hair. It is very difficult, or rather impossible for one company to
offer one shampoo that satisfies all the diverse needs of all the customers. So, in the shampoo
market there is space for many brands and many firms promising different benefits.
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People may have diverse likings for the fragrance of the lotion. In fact. One of the basic lessons of marketing is that each customer is unique and different from other customers. One product alone cannot meet everyone’s requirements. you'll find there is only one type of baking soda available in the market from all the brands and this is which is the one you can use for all cooking applications. 2 . Mass marketing ignore the differences between customers while customised marketing tries to understand each customer and make a product uniquely for each one. we can say that each customer is unique with own needs. the company will design the car taking into consideration your specific requirements. I might like to have a white shirt with thin lines running from top to bottom. He believed that only one type of car is required for every customer. own requirements and own preferences. For example if you buy a Rolls-Royce car. favourite colour. each one of you may have your own preferred material. Hence different type of products may be preferred by different customers and indeed this is the case with this product category. What they believe is the differences between people are not large enough and one product can meet the needs of every customer. For example. It will be very expensive and only in the case of certain speciality products like luxury automobiles such custom manufacturing is ever practised.say in yellow. Such an approach is called mass marketing. favourite pattern and favourite design. Some people may have dry skin while some others may have oily skin. we may not want to buy a shirt and then find a lot of other people wearing a similar shirt. Henry Ford is credited with this famous statement “you can have any colour you want as long as it is black”. if you are buying dress material. Mass Marketing Another company may decide to ignore these differences between customers and have only one product for everyone irrespective of their special needs.Another example is that of a skin lotion. Another person may prefer colourful shirts with flower patterns. blue or green. Further. This kind of an approach is called a customised marketing. Customised Marketing However trying to make a product for each individual customer may not be very profitable or even practical. This kind of an approach can be termed mass marketing. If you buy baking soda. Henry Ford the famous entrepreneur and car manufacturer was known for his mass marketing approach. The market is composed of such ‘customers of one’ which is often the expression used to indicate the innate differences between people and their preferences in a market. Baking soda is mass manufactured and mass marketed. Even today many companies practice mass marketing.

Though we can say that each customer is unique there are also similarities between them. A company may concentrate on these similarities and decide that there are groups of customers with similar needs who can be focussed or targeted. it is better to be specialised and focus on some customers with some particular needs.Target marketing In between the extremes of customised marketing and mass marketing. Therefore in a competitive market.  Targeting: This is selecting one of more of such sub groups identified in the previous step. They make soaps for babies and they have become very successful at this. 3 . But Johnson & Johnson decided that they will focus only on one group which is the babies. This kind of an approach which falls between customised marketing and mass marketing is called target marketing. Their success is partly due to being focussed. Steps in Target Marketing The target marketing consists of three steps. So we can differentiate between customised marketing. mass distribution and mass promotion of one product to all the buyers.  Positioning: Deciding what you want your product to be perceived by such selected sub groups. Generally such organizations believe in mass production. This method of being focussed in marketing is called target marketing. Over a period of time some companies may develop expertise with certain type of customers having certain specific needs. mass marketing and target marketing. Target marketing is about choosing a group of customers and trying to meet their particular need. different customers need different types of toilet soap. They are  Segmentation: This is the act of analysing customer differences and dividing the market into many sub groups. we can have a compromise approach where we look for similarities between customers and the presence of customer groups. In a competitive market it is always a better strategy to practise target marketing. For example. Mass marketing is the way when a company does not discriminate between customers and offer the same product to everyone. When you try to be everything to every customer you will end up being a failure. in target marketing a company is focused in targeting one particular group of customers with the product designed to appeal to them. Compared to this.

Usually segmentation is done using consumer related variables called consumer characteristics. These criteria can be demographic characteristics like gender. Market segmentation consists of dividing the market into homogeneous groups of customers. The demographic variables which are typically used are gender. We have already seen the use of sex for segmentation. There can be many other consumer characteristics which can be used for segmentation. Market segmentation is therefore identifying groups of such customers having similar preferences in a market. In fact there can be various criteria using which a market can be divided. we have to ask the question whether the created segments are really different or not. income etc. This is easily understood in the case of sex differences like men and women wanting different dresses or perfumes. You have a male market group and female group whose needs are different. different perfumes for men (like Axe for men) and women. For example. age. 4 . income etc. Once such divisions are made. sex.Segmentation The idea of segmentation is that all customers are not alike. These criteria are also called segmentation variables. There are different magazines published for men and women (like ‘Vanitha’ for women). The idea is to have groups which are different from each other but share some similar characteristics within the groups. Such a group of customers may share some characteristics that make them respond similarly to marketing stimulus. Within each market there are groups of customers having similar preferences. The criteria also can be geographic like dividing the Indian market into South Indian market. income etc. Demographic segmentation Demographic segmentation is about the use of demographic variables. community etc. Segmentation Criteria and Variables A market can be divided into various segments based around several criteria like age. the market for dress material can be divided into two basic groups of male and female using sex as criteria. The word ‘demographic’ means some thing describing a population and use of such variables is a very simple way of segmenting a market. age. age. The idea of such segmentation using consumer characteristics is that people who are having different characteristics are different in terms of their expectations from the product. Such groups of customers are called customer segments. north Indian market etc. We can divide any market into sub groups using such variables. These are characteristics that describe the customers like gender. In many cases such segmentation is very useful. income.

Other demographic variables are there like family size. If we have information on consumer’s psychological characteristics. a company like BMW will be typically targeting the upper income customers while another company like Maruti Suzuki really looks at relatively middle income customers. Say. personality etc. Typically people from different geographic areas respond differently to products and marketing. The idea is to find the most important characteristic that discriminate between customers and useful in dividing the market. For example. So for a company like Macdonald's. they have to consider different religious segments before they decide on the menu. For example. climate etc. brands like Ariel. Geographic Segmentation Geographical variables are also very useful in segmenting the markets. a company manufacturing readymade clothing may be looking at different type of clothing for those from various parts of the country .So the typical geographic variables that are used in market segmentation are geographic regions. people of the upper income groups may buy different types of cars compared to people of lower income. Research suggests that older customers prefer the colour white in their cars while the younger customers may prefer very bright eye catching colours like red. beef may be very sought after. the religions play a major role. In the case of detergents. In a typical case. In the case of certain products like deodorants. For example in the case of food habits. density of population (urban vs rural). there are also different cultural characteristics. It is quite obvious that people can be divided into subgroups based on income and such groups are having different preferences in the case of most of the products. segmentation can be done using a combination of such characteristics.Another very useful variable for demographic segmentation is the income. There are differences in taste preferences. The third important variable in demographics is age. Psychographic Segmentation Another important segmentation variable is the so-called as psychographic variables. pig and beef are taboo in menu while in certain other cases. Henko or Surf target the higher segment while Nirma focus on the lower income segments. Among certain religious groups. nationality etc which are also useful for segmentation. education. In certain cases even climate can be a useful segmentation variable. there may be significant differences between male and female and we cannot ignore it. people of a certain mental make up might prefer action and adventure movies while there could be another group who might prefer 5 . But in the case of certain other products such differences are there only between income groups or in some cases religion. Psychographics is about graphing the mind in terms of lifestyle. People of different age groups have different needs and they respond differently to marketing. religion.

Market targeting is the process of selecting one or more such segments. Targeting This is the second step in target marketing. It is important that the right segments are chosen from the available many and this decision must be made on the basis of attractiveness of the segment. These differences cannot be explained by demography. likes and dislikes before they develop psychographic segmentation approaches. You can divide the markets into segments based on several behavioural variables like usage status. it is important that we must look at whether the segments are actually different in terms of marketing. There are various segments in any market and the firm may not need to select all the segments in a market to operate. Many of these variables individually or in combination can be used for market segmentation. 6 . Selection Criteria for market segment Selection of a market segment is based on several factors to measure its attractiveness. the usage rate. Once you divide a market into segments. There are a variety of ways in which a market can be segmented and all markets are composed of many segments. Often market researchers collect data from consumers using surveys on several aspects of mindset. But we must be able to have some idea of its size which is often arrived at using marketing research.romance and tragedy. there are major differences between the light users of the product and heavy users of the product. values. 1. They may decide only to choose one or a few of such segments to operate. The important factors are the following. What is the size of the market? Is the market big enough? It may not be always possible to estimate accurately the size of all market segments. If there are major differences between the segments in terms of customer profiles and preferences the segmentation variable used is useful and otherwise segmentation may not make sense. but only by psychographics. whether there are loyal to the product or not etc. the benefits sought by the customer from the products. There are several factors that determine the market attractiveness and some important criteria commonly used are given below. Behavioural Segmentation One last type of segmentation variables are the behavioural variables. life styles. For example if you consider the usage rate of any product. The size of the market Bigger markets are better in terms of potential.

However because of tremendous competition in the segment it may not make sense for a new company to enter into this particular market segment. This is perhaps one of the biggest markets in passenger cars. market growth and intensity of competition that we use to decide whether it makes sense in selecting a particular market segment. Therefore it does not make any sense in entering into such a market making CD playing music equipments. Also the highly specialized nature of the segment makes it difficult for many companies to operate. A company may choose such a small market segment and become so much of an expert in meeting the highly specialised requirements of the customers in that segment. You must not get into a market if it is not growing. They specialise in the narrow segment and make baby soaps. Beat from General Motors. The criteria are the size of the market (is the market big enough?) the growth of the market (how fast is the market segment growing?) and the level of competition the market segment. it can be called ‘niche marketing’ and such a small but often highly profitable segment is called a niche segment. 7 . you find that a lot companies are having their products in the lower segment. but it is not a growing market and new products like MP3 players are taking over the market. Degree of Competition What is the level of competition in the market segment? If the competition in the market segment is very high. Based on these criteria. When a company does this as a strategy. Swift and Ritz from Maruti. Getz and I20 from Hyundai. it does not make much sense in entering this particular market. Indica Vista from Tatas and Grande Punto from Fiat are all competing in the same market between a price age of four to six lakhs rupees. Polo from Volkswagen. Fabia from Skoda. If the market is stagnant or shrinking it is not a good idea to enter into such a market. In the case of bathing soaps. segment of babies can be called a very small but a very attractive market segment. Typically these are the three criteria namely the market size.2. 3. Niche Segments and Niche Marketing Sometimes there could be very small market segments which are not big enough to accommodate more than one player. Even now there may be a market for audio CD players. Figo from Ford. If you look at the car market. This segment is one where the competition is relatively less and the parents are prepared to pay a premium for the soap. Market growth What is the growth of the market? Growing markets are attractive markets. However Johnson and Johnson is a leader in this market and what they practice is niche marketing. the market segments must be evaluated to determine the attractiveness of each segment.

There are many other examples where companies have successfully differentiated their products. customers do not see any advantages in buying one product over another. When differentiation is successfully done. over a period of time has successfully differentiated their bikes as high on mileage. What is product Differentiation? So what is product differentiation? Basically product differentiation is about designing differences in a company's product compared to competition and communicating and convincing customers about such differences as advantageous to them. In a competitive market if all the products are similar. For example. When all products in the market appear the same to the customer. For example it is seen that customers in India do not have any particular choice for petrol or diesel. Here the customer may not feel there are any differences between competing products and as a result may not have any strong preferences. customers perceive the firm’s offer as different from the competition. People still believe it.Differentiation and Positioning Differentiation and Positioning are the steps in target marketing that follow segmentation and targeting. Whether it is Indian oil (IOC) or Hindustan Petroleum (HP). In a commoditised market product differences do not exist. 8 . We say that in such markets product differentiation does not exist. they are least bothered. This is the result of many years of effective advertising and consistent product quality. When there are no differences between different products in a market such products exist as commodities. Commodities and product Differentiation Once we have done the segmentation and selected one or more segments to target. Petrol and diesel are therefore commodities. Customers may not be prepared to pay a higher price for one firm’s product over another. the product can be said to be a commodity. Differentiation is about building differences into a firm’s product compared to the competing offers while positioning is about making the customer perceive the product as unique and distinct. Differentiation Defined Differentiation can be defined as the act of designing a set of meaningful differences to distinguish the companies offer from competitor’s offers. In such a market there will be heavy competition and the profitability will suffer. Though in today’s market there are many other bike makers providing equally high mileage. the next step is positioning and differentiation. the company Hero Honda. no company will get any advantage. still people relate fuel efficiency to Hero Honda.

performance. The functional lives of products are different and this life can be designed to be different by the company. A company can differentiate their products along for basic dimensions which are the product. Here the differences are designed into the product which helps differentiates BMW from any other company’s cars. is about designing meaningful differences in the product itself. People are prepared to pay a premium for Rayban sunglasses primarily because of the style. If you look at the mobile phone market. BMW cars are known as the ultimate diving machines or the best driver’s car. There are products that are designed and manufactured to last for a lifetime while other products may last only for a few years. personal or image. services. Style describes how well the product looks and feels to the buyer. this is a feature based differentiation. style etc. Godrej Safes and locks are known to last longer and the company differentiates their products on durability. Products available in the market can be differentiated based on different levels of performance quality at which they are designed to perform.None of the players in the market then will get any advantage and the competition will be primarily based on price and credit. 9 . Sometimes it can be a real and tangible difference and sometimes intangible. 1. iPhone is manufactured to a higher quality level compared to lower priced brands like Micro Max and Lava. Style is an intangible variable on which many products are differentiated. When LG markets their 3-D televisions as flicker free. Differentiation can be done in many ways. Product Differentiation Product differentiation as the term implies. Durability Durability is a measure of the product’s expected life. Performance Performance or performance quality can be defined as the levels at which the product’s primary characteristic operate. Features Features are characteristics that supplement the product’s basic functioning. durability. Similarly Rolex is a brand manufactured to higher performance quality compared to another brand like Titan. Style Style is subjective and is in the eye of the beholder. Product differentiation can be done based on many aspects like features.

Maruti Suzuki is able to do well in the market because of the superior quality of service they provide. 4. Better employees always contribute to higher customer satisfaction. Image differentiation Image differentiation is another intangible method of differentiating the company’s offer from competition. What is positioning? A firm may design a product to have several differences. But it doesn't mean that these differences are meaningful or significant to the customer. you feel like patronising the supermarket. If in the case of a product the customers see the product as significantly different and unique we call it well positioned. If you visit MacDonald’s or Pizza Hut outlets you'll be able to experience a higher quality of customer service. 3. installation. Many products may be different. Many lifestyle and fashion brands are differentiated more on image than on any significant product differences. There can be significant differences in services like delivery. Despite severe competition. This is an example of personal differentiation. Tata Indicom tries to differentiate their products from competitors by the superior level of service which they call their ‘Customer Charter’. Positioning is the act of designing the firm’s offer in such a manner that it occupies a unique and distinct place in the consumer's mind. Personnel differentiation Personal differentiation is providing superior customer service by using better trained and motivated employees to serve the customer. In a way. When you enter a supermarket. For example Kingfisher airline used to be differentiated from many other airlines on the quality of service that they provide to the customer at the time of check-in as well as during the flight. positioning goes beyond differentiation. 10 .2. the company make a pledge to the customer about the minimum levels of service they can expect. So the philosophy of personal differentiation is to use highly trained personnel to deliver consistently superior quality of customer experience. Services differentiation A company can differentiate their products not only by building such differences into the physical product but also by excelling in services that are provided to the customer. when the store employees greet you and give you a shopping cart and also help you in selecting what you want. In the customer Charter. after sales service and customer service at the time of purchase. but they may not be seen as different and unique by the customers.

When a company is able to establish their product as different and unique we will say they have positioned it successfully. But ‘Moov’ was introduced as a balm primarily for the backache. It is not always done by making the product different but by influencing the customer to see the product differently. The same product can be positioned differently so that people look at it differently. Most of them are generic in the sense that they can be used for any kind of aches and pains anywhere on the body. The same product with a different colour. The vehicle Maruti Omni can be seen as a van and as a car. you think of backache balm. When it is mixed with appropriate colour. Positioning is a mind game. but what you do to the consumer’s mind to alter the product perception.A classic example for positioning is the pain balm brand ‘Moov’. Positioning defined Positioning is the act of designing a firm’s offer to the customer so that it occupies a distinct and unique place in the target customers mind. fragrance and another name can be packaged differently and marketed as a solution for cracked heels in winter. For example there is this chemical called petroleum jelly which is a commodity. So the ingredients in the product are the same. This is the reason why it is said that positioning is more of a mind the game. There are many positioning strategies that are available. fragrance and the additional ingredients. Some of the 11 . one or more of differences are selected and communicated effectively to occupy such a unique slot in the consumer's mind. They have succeeded in making the customer see ‘Moov’ as a backache balm. Then only positioning success will lead to business success. So whenever you think of ‘Moov’. This is the case where a product ‘Moov’ is seen as different and unique. it is positioning success. While differentiation is trying to make the product appear different. but people see it differently. The positioning strategy indicates how a firm wants the customers to think about the product relative to competition. There are many pain balms available in the market. What we must keep in mind is that the unique and distinct position we chose to have in the consumer’s mind must be relevant to the consumer. It does not mean that you cannot use Moov for headache or knee ache. it is marketed as a solution for cracked lips in winter. Positioning strategy Choosing how to position a product is one of the more critical decisions a company can make. But typically people may not use Moov for headache. in positioning we go one step beyond in an attempt to occupy a unique and distinct position in the consumer's mind. Among the many perceived differences. The company would like the customers to perceive it more as a car than as a van and if customers share this view. Instead they may even buy another balm like Amrithanjan or tiger balm for headache. Positioning is not what you do to the product.

For example despite competition even now. One very commonly used template for developing a positioning statement is given below. Benefit positioning Benefit positioning is identifying a relevant benefit which the customer is looking for. Attribute positioning Attribute positioning is the positioning strategy based on leadership on one of the product attributes. For example all of you may remember the first 3D film in India. A classic example is Johnson & Johnson baby soaps which is identified and known as soaps for babies. benefit positioning. Often it is useful to develop a clear positioning statement that captures the essence of position which a company want to occupy in the consumer's mind. In attribute positioning what you're trying to do is to be the first on at least one dimension which is relevant to the customer. Positioning statement A positioning statement is a statement that expresses how a firm want their products to be perceived by the customers. This is true with brands also. Developing a positioning strategy and converting that into a positioning statement is more of an art than a science. Use or application positioning This is to position a brand for a particular use or application. There are various approaches and templates to do the same. User positioning User positioning is developing the positioning strategy based on a very narrowly defined the user group. Hero Honda is perceived as the fuel-efficient bike. 12 . Though cornflakes can be eaten at any occasion. Customers will always remember the first brand on any attribute though they may not remember what the second is.common positioning strategies are attributing positioning. Similarly though Maggi noodles are consumed by many for breakfast. the positioning is more as a snack rather than as a staple food. use or application positioning and user positioning. Head and shoulders shampoo is positioned as an antidandruff shampoo. but very few will be able to recall the second or the third. most of the corn flakes brands are positioned as breakfast cereals.

It is important that the brand name is also something that contributes to recall and if possible communicate the positioning to the customer. positioning statement for a brand can be developed. For example. In the earlier example. Point of difference Within the product category our product must be different from competition on one or more dimensions. In marketing speak the single unique point of difference which a company promote to the customer is also called the ‘Unique Selling Proposition’ or USP. Frame of reference Frame of reference defines in which market category that you want your product to belong. In any positioning statement. 13 . A positioning statement is much more useful when we are able to define the target segment very precisely. For example. _______________ (name the brand) is the brand of ______________________ (frame of reference) that ___________________ (point of Difference) because of __________________________ (justification) By completing the blanks. Titan watches and Ajanta clocks are positioned more as a gift and so they compete more with other gift items available in the market. Define Target segment We already know what the target segment is.Positioning Template Example For the _____________________ (define target segment). Complan is a brand targeted at growing children and their mothers (buyers) who are worried about children’s growth. Complan is the brand which is simple to remember and carries a meaning of complete planned food. It is important that we select the difference on which we can base our position and marketing decisions. This template primarily uses the following concepts which need to be identified and filled in. Brand Ultimately brand is what is positioned as unique and different in the consumer's mind. the first step is to define the target segment. Complan helps children grow tall faster while the competitor Boost focus on keywords like stamina and energy than on growth. Complan is positioned in the health beverage category rather than as a tasty chocolate or mango drink.

Justification Justification is a reason to believe which you must provide to the customer. Complan (name the brand) is the brand of health beverage (frame of reference) that help them grow faster (point of Difference) because of 23 vital nutrients it contains which growing children need (justification) Can you use the positioning statement template to develop such a positioning statement for any brand of your choice? 14 . we may use the template and write the positioning statement as follows. For Children (define target segment). Why should the customer believe you? It must be something that is convincing to the customer. Now if we take the example of Complan. Complan suggest that it helps children grow faster because it contains the 23 vital nutrients that growing children need.