Segmentation, Targeting & Positioning

Monday, 9 October, 2017

Learning Objectives
To understand:
 the steps in the target marketing process
 the different dimensions that marketers use to segment consumers
 how marketers evaluate and select potential market segments
 how marketers develop a targeting strategy
 how marketers develop and implement a positioning strategy

How do we use segmentation in marketing?

 We collect data
 Segment consumers
 Target different groups
 And position products

Steps in The Target-Marketing Process (STP Process)

Step 1: Segmentation

Why do we need segmentation?

About dividing the whole into smaller groupings and later select the appropriate market to tap into

Different people want different things for different purposes and for different reasons

Consumer needs are not homogenous on a whole

Market Segmentation

The process of dividing a larger market into smaller pieces based on one or more meaningful shared
characteristics (Solomon et al, 2013, p 223)

Objective: to identify groups of customers with similar requirements so that they can be served
effectively, while being of a sufficient size for the product or service to be supplied efficiently

Have to segment the market into groups that share meaningful characteristics
Advantages of Segmentation

 Match product and services more closely to customers' needs --> greater profit
because satisfy the needs of customers and provide them with more value

 Growth opportunities: can broaden out and target customers from different
countries

 Marketing mix efficiencies: more effective targeting is possible; can reach the
consumers more efficiently

 e.g. if know that our consumers are avid users of social media, can focus advertising through
social media and target a lot of your customers -- efficient

 Enhanced customer retention: different product offerings for different segments;

 Can offer different types of products to customers through different times e.g. cars
[start with a small car; family cars; sports car etc.)

How can we segment consumer markets?

Demographic: observe characteristics based on demography -who our customers are and where we
can find them

Demographics are statistics that measure observable aspects of a population, including age, gender,
ethnic group, income, education, family structure, and place of residence.

 e.g. age, gender, family life cycle, income & social class, ethnicity, geographic

Segmenting by Demographics: Age (Generational marketing)

o Children
 LEGO Christmas
 Rice Krispies Multi-grain Shape: targeted children by making their product into shapes that
appeal to children
 Children affect the spending pattern of families
o Teens
 12-17 year old
 ‘feel-good’ product: video games, cosmetic products
o Millennials: born after 1994
o Generation Y: born between 1977 and 1994
o Generation X : Born between 1965 and 1978
o Baby-boomers : born between 1946 and 1964 - potentially high levels of disposable income
  

Segmenting by Demographics: Gender

 Many products appeal to one sex or the other

 Metrosexual: a straight, urban male who is keenly interested in fashion,
home design, gourmet cooking, and personal care
 Segmentation isn't stereotyping but about identifying groups of people that
share a similar need; addressing their consumption behavior
 Lifestyle variable

Segmenting by Demographics: Family Life Cycle

 Family needs and expenditures change over time

 As families move through stages, different product categories ascend or descent in

importance

 Even if importance is constant, needs within category may change (e.g., furniture)

Segmenting by Demographics: Income and Social Class

 Income

 Strongly connected to buying power

 The more disposable income the person has, the higher the buying power & the
more valuable they are as a customer

 e.g. American express credit card is segmented based on income, rewarded with different
benefits according to the range
 Social Class

 Many consumers buy according to an image they’d like to portray, not their actual
level

 Segment based on 'ideal class' i.e. what class they want to be in instead of what class
they actually belong in to appeal to them

 “Easy credit” may lead consumers to buy cars and homes they can’t truly afford

Segmenting by Demographics: Ethnicity & Place of Residence

 A consumer’s national origin is often a strong indicator of his/her preferences

 E.g. IMAN cosmetics: decided that there is a market for people with different skin
tones

 Geodemography
 People who live in the same area will have some similar characteristics, e.g.
spending pattern, income level etc.
 Combines demographics with geography
  People who live near one another share similar characteristics
 Segmenting Consumer Markets: Demographics no longer say enough to serve as a
basis for marketing strategy (Yankelovich and Meer, 2006)
 They are useful to use alongside psychographic and behavioural segmentation;
cannot just use one

Segmenting Consumer Markets :Psychographic segmentation

Psychographic segmentation: segments markets in terms of customers’ shared activities, interests

and opinions (AIOs)
 About people's lifestyles' and personalities
 e.g. Harley Davidson advertising based on a lifestyle; TV programs offering
different channels based on people's interests/age (kids mix) --> combination of variables

Segmenting Consumer Markets: Behavior

 Most powerful segmenting

 Based on people's behavior

Segmenting by Behavior

 Usually considered a more robust method of segmentation: closest to the

consumption experience (based on actual purchase behaviour)

 Segmentation based on behaviour

 Benefits sought from the product; e.g. sightseeing
 Users and non-users
 Heavy, moderate, light users (level of consumption) *idea behind loyalty
schemes
  Usage occasion; e.g. restaurants separate their market based on usage
occasion

Segmentation in the 21st Century

 The increasing complexity and variety in customer lifestyles is adding a new

dimension to the segmentation challenge (Dibb, 2001)

 Development of more advanced information and communication technologies in

parallel with the rise of the Internet

 Customers can no longer be regarded as a homogenous market (Kuo & Cranage,

2012)

 People do not want to sacrifice their individual differences and they are willing to
pay more for what they want and need (Bardakci & Whitelock, 2004)

 With consumers’ growing interest in expressing individuality and increasing

purchasing power, companies need to think of their consumers as individuals

 Segment of one: Instead of satisfying one segment at a time, customization strategy

satisfies a “finer segment,” that is one customer at a time.

 For a unique or almost unique product for us; customization

 Mass customized products: level of choice given so that people feel that they are
offered an individual product but they are actually offered a menu of choices available to them

 e.g. customizing trainers, build a bear

Segmentation activity

Consider HOTELS or BREAKFAST CEREAL as your product category; identify at least three different
variables that you think would be important in defining the segmentation strategy for this
particular product category.

Hotels: income; family life cycle; usage frequency

Cereals: Gender; age; lifestyle

Step 2: Targeting

Steps in The Target-Marketing Process

Phases of Targeting
 Evaluation of Market Segments

 A viable market segment should:

 Have members with similar wants and needs that are different from those in
other segments (should be homogenous within but should be different from other segments)

 Be measurable in size and purchasing power

 Be large enough to be profitable

 Be reachable by marketing communications

 Have needs the marketer can address

Developing Segment Profiles

 After segments are identified, marketers should develop profiles or descriptions of

the typical customers within a segment

 A segment profile is a description of a “typical” customer in that segment

 It might include customer demographics, location, lifestyle information and product-usage

characteristics

o Segments are usually defined on multiple bases (e.g. a combination of the behavioral,
psychographic and demographic bases)

 E.g. Mosaic profiles

Choosing a Targeting Strategy

 Undifferentiated

 Differentiated

 Concentrated

 Customized
Undifferentiated Targeting Strategy

 Offer or product to the whole market

 E.g. Henry Ford and the model T car; one product, one price to one market

 However it is currently hard to find such a targeting strategy now

Differentiated Targeting Strategy

 Companies shave multiple target market segments and each different; have a
different marketing mix offering for each different segment

 E.g. Procter and Gamble: own different brands in different industries and each brand have
different target market segments

 Also see Arcadia: can make tailored offerings to each specific segments

Concentrated Targeting Strategy

Select one segment and develop marketing mix for that one segment
  Usually for smaller companies because they lack the resources to satisfy different
segments

 e.g. Bang & Olufsen: focus on upmarket consumers

Customized Targeting Strategy

 Specific marketing mix for each customer

 Tightly defined products/individualized products for every customer

 Very common in biz to biz market

Mass Customization

 Modify a basic good or service to meet the needs of an individual

 The goal of mass-customization is to provide sufficient varieties in products or

services so that each individual can find exactly what he or she wants at a reasonable price.

 Markets of one, that is, meeting the tailored needs of individual customers and
doing so on a mass-basis.

 Aims to satisfy as many needs as possible for each individual

Targeting activity

Think about the product category we discussed before (HOTELS or BREAKFAST CEREALS)

 select the segment profile(s) you consider as having the most potential (most
profitable)

 recommend the most appropriate targeting strategy

Step 3: Positioning
Steps in The Target-Marketing Process

Positioning means developing a marketing strategy aimed at influencing how a particular market
segment perceives a good or service in comparison to the competition

The act of designing the company’s offering so that it occupies a meaningful and distinct position in
the target customer’s mind.

 Consumers need to believe that you are positioned in the way that you make it up to
be

 Need to know where your competitors sit in the market

Repositioning

Change of positioning strategy. e.g. Lucozade: when it was first launched, it was a drink that would
build back the health of a child after it was sick. Now it has repositioned itself to be a sports drink.

Reason: markets do not stay still; consumer trends change constantly

Perceptual Map
 It is a visual representation of consumer perceptions of a brand and its competitors,
using attributes (dimensions) that are important to consumers. (Fahy and Jobber, 2015, p. 133)
 A vivid way to construct a picture of where products or brands are “located” in
consumers’ minds

Positioning activity

- Think about the product category we discussed before (HOTELS or BREAKFAST CEREALS)
Outline what positioning approach you would aim for when trying to target this market with your own
product. You may want to draw a perceptual map of where you think your product would fit in with
other competitor products in the marketplace.

“Rather than ask what we are good at and what else can we do with that skill, you ask, who are our
customers? What do they need?

And then you say we’re going ‘to give that to them regardless of whether we have the skills to do so,
and we will learn these skills no matter how long it takes…

There is a tendency I think for executives to think that the right course of action is to stick to the
knitting—stick with what you are good at. That may be a generally good rule, but the problem is the
world changes out from under you if you are not constantly adding to your skill set.”

- Evaluating the different segments and work out which one will be the most profitable
- Elements of marketing mix must be coherent and match the target market segment