MOUNT KENYA UNIVERSITY

COURSE: BACHELOR IN BUSINESS MANAGEMENT

UNIT: STRATEGIC MARKETING
UNIT CODE: BBM 4237

LECTURER: MADAM ROSEANN NJOKI

GROUP 2 MEMBERS
S/NO NAME ADMISSION NUMBER
1. FREDRICK MWENDWA BBM/2019/56229
2. DANIEL THUKU BBM/2019/54992

AN ASSIGNMENT SUBMITTED IN PARTIAL FULFILMENT OF THE

REQUIREMENT FOR THE AWARD OF A DEGREE IN BUSINESS MANAGEMENT
TO MOUNT KENYA UNIVERSITY.
Market Segmentation, Targeting and Positioning
Nature and Purpose of market segmentation
Market segmentation is the process of dividing a market of potential customers into groups, or
segments, based on different characteristics. The segments created are composed of consumers
who will respond similarly to marketing strategies and who share traits such as similar interests,
needs, or locations.
To meet the most basic criteria of a market segment, three characteristics must be present. First,
there must be homogeneity among the common needs of the segment. Second, there needs to be a
distinction that makes the segment unique from other groups. Lastly, the presence of a common
reaction, or a similar and somewhat predictable response to marketing, is required. For example,
common characteristics of a market segment include interests, lifestyle, age, gender, etc. Common
examples of market segmentation include geographic, demographic, psychographic, and
behavioral.

Why is market segmentation important for marketers?

Market segmentation makes it easier for marketers to personalize their marketing campaigns.
By arranging their company’s target market into segmented groups, rather than targeting each
potential customer individually, marketers can be more efficient with their time, money, and other
resources than if they were targeting consumers on an individual level. Grouping similar
consumers together allows marketers to target specific audiences in a cost effective manner.
Market segmentation also reduces the risk of an unsuccessful or ineffective marketing campaign.
When marketers divide a market based on key characteristics and personalize their strategies based
on that information, there is a much higher chance of success than if they were to create a generic
campaign and try to implement it across all segments.
Marketers can also us segmentation to prioritize their target audiences. If segmentation shows that
some consumers would be more likely to buy a product than others, marketers can better allocate
their attention and resources.

Purpose of Market Segmentation

i. Market segmentation seeks to identify targeted groups of consumers to tailor products and
branding in a way that is attractive to the group.
ii. Markets can be segmented in several ways such as geographically, demographically, or
behaviorally.
iii. Market segmentation allows a company to focus its resources on efforts that can be the
most profitable.
Basis for market segmentation
1. Demographic Segmentation
Demographics are the statistical description of population characteristics in terms of age, gender,
income, education, family size and so on. People differ for their demographic characteristics and
marketers’ use of these variables as segmentation basis is based on the premise that people with
different characteristics have different needs and in the case of a product these differences may
lead to behavioural differences as well.
Marketers need to focus more on some specific demographic groups and not all, as mentioned
already the group should be distinct for its behaviours. Companies develop products and services
to meet the needs of individual demographic segments and also tailor their messages to those
specific groups. Examples are as follows:
a) Segmenting based on income & occupation
Segmenting by occupation or related demographics, such as income bracket or the level of
education the person has reached. Students are the frequent target of marketers, as a segment who
are easily defined and have unique interests and needs. Perhaps the most common of these
strategies is income-related segmentation.
Marketers find this tool useful as people in different income brackets can have drastically different
approaches to making purchases. Crudely speaking, those in lower brackets are more likely to be
swayed by good value, whereas those with more disposable income will be happier to spend more
for a better product.
b) Segmenting based on family status
We can find our final group of demographic traits in the home – looking at marital statuses, family
structure (for instance, how many children a family has), and the life stages of those in each family.
This could include things like how far each child is into their education, whether the person is
renting their home or owns it and, in the case of the latter, whether or not they have paid their
mortgage off.

2. Geographic Segmentation
Depending on their area of location, consumers are often found to have differences in their
consumption behaviour. Marketers divide the markets into different geographical units at national,
regional. State, local or neighbourhood level. These locations differ for their spread as well as for
the extent and types of differences and the level of complexity. The message and media strategies,
therefore, differ for each of the location. Small firms targeting a local area employ local media as
against national marketers who develop specific advertising and marketing programmes for
specific regions of the country. The multinational firm operating in different nations requires
greater adaptations to suit the differences in culture and language. Examples are as follows:
 a) What is an example of geographic segmentation? A great example of geographic
segmentation is a clothing retailer that presents online customers with different products
based on the weather or season in the region they reside in. A customer in New York will
require much different clothing in the winter months than one living in Los Angeles.

b) What companies use geographic segmentation? Geographic segmentation is used by

companies across many sectors, but it’s most useful to businesses selling goods that might
be affected by changes in climate or local customs. Companies with very defined regional
interest, like sports teams, or small businesses offering local delivery, also benefit from
marketing targeted this way.

3. Psychographic/Lifestyle Segmentation
Information about consumers’ psychographics or lifestyle factors adds richness to the demographic
information because it attempts to explain that why demographically alike people buy different
products or require different message appeals to approach them. Psychographic profiles are
prepared on the basis of patterns of responses that emerge from people’s activities, interests and
opinions. With the help of various market analysis techniques marketers identify such groups
which exhibit unique lifestyle patterns and thus generate market segments based on differences in
their lifestyle. Lifestyle as a segmentation variable is found useful mainly for product categories
where user’s self/image is important. When the differences in lifestyle are correlated with the
consumers’ product, brand and/or media usage, it allows for a fine-tuning of marketing strategies,
particularly media and message strategies. An example is as follows:

a) Social status, daily activities, food habits, and opinions of certain subjects. For example, to
monitor the sleep habits of people, a sleep survey is conducted. The sleep survey template
consists of various questions about the sleeping habits of a respondent which help in
drawing conclusions about what habits impact sleep and the factors that cause
sleeplessness.
b) A product or service based organization has to keep its customers in mind as these products
are created for the customers’ consumption. Customer demands and expectations play a
pivotal role in designing and developing a product. These demands and expectations evolve
with time and customer understanding also evolves with an increase in family income or
age or any other demographic examples. An organization will be able to perform better if
it understands its customers’ psychology and it will be able to provide market-driven
products.
 4. Segmentation Based on Product Usage
There may be different usage occasions for the product and consumers seek different benefits in
different usage occasions. Ad campaigns promote the different use occasions for the product to
make the consumer learn about new uses for the product. This is done to push forward the product
usage rate.
Usage rate segmentation divides consumers according to how much they use a product. They are
divided into groups of non-users and light, medium, and heavy product users, and companies often
seek to target one heavy user rather than several light users. This is due to the fact that heavy users
constitute a small percentage of the market but account for a high percentage of the total buying.
Thus, a company should seek to adapt their marketing strategy according to these customers.
However, it should be mentioned that it is important not to exclude non-users, due to the fact that
they may provide a positive prospect for future expansions. The usage rate variable may sometimes
overlap with brand loyalty, as it looks at the rate and regularity with which consumers use a product
or access a service. When analyzing demand for a product in terms of behavioral segmentation, it
might be divided distinctly into those customers who use the product heavily or frequently, and
those who are no less loyal, but only use the product occasionally. An example is as follows;

a) When evaluating how consumers make wine buying decisions may be to look at differences
by sex. It has been found that sex differences in wine consumption are likely to be
associated more strongly with volume (and perhaps) wine style and grape variety. There
has been a shift in sex roles, and in an Australian study on wine consumption and household
income, females reported a higher incidence of being the decision-maker in wine
purchasing. In the USA, women account for 60% of high-end wine buying. That is, they
match two of the three following criteria: purchase wine costing more than US$15
occasionally to frequently, have more than 12 bottles on hand at home, and would buy a
wine costing more than US$15 for a casual meal at home.

5. Segmentation Based on Brand Loyalty

Market for the product may differ on the basis of user’s status also. There are always some users
and some non-users of the product category. The users of the product are of .various types-new
category users, brand loyal users, frequent brand switchers, other brand switchers, or other brand
loyal. The potential brand purchaser belongs to any of these five groups which are mutually
exclusive and also define the potential customers of the product.
New category users do not always provide good sales potential for the product as it all depends
upon the level of awareness about the product in the market. Among the category users those who
buy the brand on a regular basis are referred to as brand loyal. Frequent brand switchers of the
product hold moderately favorable attitude towards the brand.
 a) The most common examples of customer loyalty segmentation can be reflected in the travel
industry which regularly promotes frequent flier programs and the finance industry who
offer rewards for big-spending platinum credit card members

6. Segmentation Based on Benefits

Markets are also segmented for the benefits that the customer seeks in product use. The rationale
for a benefit based market segmentation lies in the fact that products are actually the bundle of
benefits and various products available in the market serve not all but some benefits to the
customers. Different customers seek different benefits from the product; marketers choose some
specific products and communicate those benefits using specific promotional programmes.
The classic example for benefit segmentation toothpaste market, where most of the product
offerings are targeted at benefit segments. For example, you can buy toothpaste for:
b) Fresh breath
c) Teeth whitening
d) Cavity protection
e) Sensitive teeth
Even the Colgate website uses the word benefit when outlining their choice of products, as shown
in the above image.

7. Segmentation Based on Attitudes

There are different attitude groups in the market. There may be some who feel enthusiastic about
the product, while others may just hold a positive attitude but less excitement about the product.
There are some who seem to be neutral, some as indifferent and some with a negative attitude for
the product.
At times marketers decide about targeting specific attitude groups and carry out required ad
campaigns to sustain the declining product sale or to give a further boost to it. Honda, the
manufactures of motor bikes in Japan, once initiated aggressive ad campaigns to change potential
customers’ negative attitude that motorbikes are used by bad people. Through an appropriate ad
campaign saying ‘one meets good people while riding on motorbikes’, people were made to feel
positive towards motorbikes.
Advantages of Market Segmentation:
(i) The marketer can spot and compare marketing opportunities. He can examine the needs of each
segment and determine to what extent the current offering satisfies these needs. Segments which
have low level of satisfaction from current offerings represent excellent opportunities for the
marketer.
(ii) With the help of knowledge about different segments, the marketer can better allocate the total
marketing budget. Differences in customer response to different marketing tools serve as the basis
for deciding on the allocation of market funds to different customer groups.
(iii) The marketer can modify his product/service and marketing appeals to suit the target segment.
(iv) Segmentation facilitates setting up of realistic selling targets and priorities.
(v) Management can identify new profitable segments which deserve special attention.
(vi) It is possible to deal with competition more effectively by using resources more effectively.
(vii) Appropriate service packages can be developed for each market segment.

Disadvantages of Market Segmentation:

(i) Segmentation increases costs. When a firm attempts to serve several market segments, there is
a proliferation of products. Cost of production rises due to shorter production runs and product
variations.
(ii) Larger inventory has to be maintained by both the manufacturer and the distributors.
(iii) Promotion and distribution expenditures increase when separate programme are used for
different market segments.
(iv) When characteristics of a market segment change, investment made already might become
useless.
Approaches to segmenting industrial markets
1. Demographics
The outermost nest contains the most general segmentation criteria, demographics. These variables
give abroad description of the company and relate to general customer needs and usage patterns.
They can be determined without visiting the customer and include industry, company size, and
customer location.

2. Operating Variables
The second segmentation nest contains a variety of segmentation criteria called “operating
variables.” Most of these enable more precise identification of existing and potential customers
within demographic categories. Operating variables are generally stable and include technology,
user/nonuser status (by product and brand), and customer capabilities (operating, technical, and
financial).

3. Purchasing Approaches
One of the most neglected but valuable methods of segmenting an industrial market involves
consumers’ purchasing approaches and company philosophy. The factors in this middle
segmentation nest include the formal organization of the purchasing function, the power structures,
the nature of buyer-seller relationships, the general purchasing policies, and the purchasing criteria.

4. Situational Factors
Up to this point we have focused on the grouping of customer companies. Now we consider the
role of the purchase situation, even single-line entries on the order form. Situational factors
resemble operating variables but are temporary and require a more detailed knowledge of the
customer. They include the urgency of order fulfillment, product application, and the size of order.

5. Buyers’ Personal Characteristics

People, not companies, make purchase decisions, although the organizational framework in which
they work and company policies and needs may constrain their choices. Marketers for industrial
goods, like those for consumer products, can segment markets according to the individuals
involved in a purchase in terms of buyer-seller similarity, buyer motivation, individual perceptions,
and risk-management strategies.
Market targeting and product positioning
Market Targeting
Market targeting is a process of selecting the target market from the entire market. Target market
consists of group/groups of buyers to whom the company wants to satisfy or for whom product is
manufactured, price is set, promotion efforts are made, and distribution network is prepared.

Marketing Targeting Strategies

1. Undifferentiated marketing:
This strategy can occur by default. Companies which lack a marketing orientation may practice
this strategy because of lack of customer knowledge. It is convenient since a single product has to
be developed. A company using an undifferentiated targeting strategy essentially adopts a mass-
market philosophy. It views the market as one big market with no individual segments. The
company uses one marketing mix for the entire market. The company assumes that individual
customers have similar needs that can be met with a common marketing mix.
Companies following undifferentiated targeting strategies save on production and marketing costs.
Since only one product is produced, the company achieves economies of mass production.
Marketing costs are also lower as only one product has to be promoted and there is a single channel
of distribution.
2. Differentiated marketing or multi-segment targeting:
When market segmentation reveals several potential target segments that the company can serve
profitably, specific marketing mixes can be developed to appeal to all or some of the segments. A
differentiated marketing strategy exploits the differences between marketing segments by
designing a specific marketing mix for each segment.
It is the most sought after target market strategy because it has the potential to generate sales
volume, higher profits, larger market share and economies of scale in manufacturing and
marketing. But the strategy involves greater product design, production, promotion, inventory,
marketing research and management costs.
3. Focus or concentrated targeting:
Several segments may be identified but a company may not serve all of them. Some may be
unattractive or out of line with the company’s business strengths. A company may target just one
segment with a single marketing mix. It understands the needs, and motives of the segment’s
customers and designs a specialized marketing mix.
The strategy is suited for companies with limited resources as these resources may be too stretched
if it competes in many segments. Focused marketing allows R&D expenditure to be concentrated
on meeting needs of one set of customers and managerial activities are devoted to understanding
and catering to their needs.
Companies following concentrated targeting strategies are obviously putting all their eggs in one
basket. If their chosen segments were to become unprofitable or shrink in size, the companies will
be in problem. Such companies also face problems when they want to move to some other
segments, especially when they have been serving a segment for a long time.

4. Customized marketing:
In some markets, the requirements of individual customers are unique and their purchasing power
is sufficient to make designing a separate marketing mix for each customer a viable option. Many
service providers such as advertising, marketing research firms, architects and solicitors vary their
offerings on a customer to customer basis.
They will discuss face to face with each customer their requirements and tailor their services
accordingly. Customized marketing is also found within organizational markets because of high
value of orders and special needs of customers.
Customized marketing is associated with close relationships between the supplier and customer
because the high value of an order justifies large marketing and sales efforts being focused on each
buyer.

Product Positioning
Product positioning is a form of marketing that presents the benefits of your product to a particular
target audience. Through market research and focus groups, marketers can determine which
audience to target based on favorable responses to the product.
Product positioning is an important component of any marketing plan, but it doesn’t have to be
limited to one audience. For example, a product may have a main target audience and also a
secondary audience that is also interested in the product, but perhaps in a different way. Each
audience will find the product appealing for different reasons, which is why it’s important to tailor
marketing messages to focus on the benefits each audience values most.
Examples of Product Positioning
Product positioning can involve a number of different elements. A product can be positioned in a
favorable way for a target audience through advertising, the channels advertised through, the
product packaging, and even the way the product is priced. For example, market research may
have revealed that the product is popular among mothers. What do they like about the product?
What should be highlighted about the product to attract them? And where should the product be
advertised to reach them? With the answers to these questions, an effective marketing campaign
can be created to send benefit-driven messages to the target audience wherever they may be (such
as Facebook, where targeted ads can be purchased based on demographics and interests).
Positioning Strategies:
1) Using Product Characteristics or Customer Benefits:
Probably the most-used positioning strategy is to associate an object with a product characteristic
or customer benefit. For example, Honda and Toyota have emphasized economy and reliability
and have become the leaders in the number of units sold. Volvo have stressed safety and durability.
Although this may be a successful way to indicate product superiority, consumers are generally
more interested in what such features mean to them, that is, how they can benefit by the product.

2) Positioning by Price and Quality:

The price quality product characteristic is so useful and pervasive that it is appropriate to consider
it separately. In many product categories, there exist brands that deliberately attempt to offer more
in terms of service, features or performance. Manufacturers of such brands charge more, partly to
cover higher costs, and partly to help communicate the fact that they are of higher quality.
Conversely, in the same product class there are usually other brands that appeal on the basis of
price, although they might also try to be perceived as having comparable at least adequate quality.

3) Positioning by Use or Application:

Another way to communicate an image is to associate the product with a use, or application.
Products can of course, have multiple positioning strategies, although increasing the number
involves obvious difficulties and risks. Often a positioning-by-use strategy represents a second or
third position for the brand, a position that deliberately attempts to expand the brand’s market.
For e.g. – Campbell’s Soup for many years was positioned for use in lunch time and advertised
extensively over noon time radio. It now stresses a variety of uses for soup/recipes are on labels
and a broader time for consumption, with the more general theme “Soup is good food”.

4) Positioning by Product User:

Another positioning approach is to associate a product with a user or a class of users. Some
cosmetics companies seek a successful, highly visible model as their spokesperson as the
association for their brand. Michael Jordan, for example was used by products as diverse as Nike,
McDonald’s etc.
5) Positioning by Product Class:
Some products need to make critical positioning decisions that involve product-class associations.
For example, Dove positioned itself apart from the soap category, as a cleansing cream product,
for women with dry skin.

6) Positioning by Cultural Symbols:

Many marketers use deeply entrenched cultural symbols to differentiate their brand from
competitors. The essential task is to identify something that is very meaningful to people that other
competitors are not using and associate the brand with that symbol. Pillsbury’s “doughboy” is an
example that illustrates this type of positioning strategy.

7) Positioning by Competitors:
In most positioning strategies, an explicit or implicit frame of reference is one or more competitors.
In some cases the reference competitors can be the dominant aspect of the positioning strategy. It
is useful to consider positioning with respect to a competitor for two reasons.
First, a competitor may have a firm, well crystallized image developed over many years.
Second, sometimes it is not important how good customers think you are; it is just important that
they believe you are better than a given competitor.

REFERENCES
Skyword Staff., (2014) Market Segementation
Evan Tarver., (2020) Market Segmentation: What is Market Segementation.
Manashree C., Bases of Market Segmentation: Demographic, Geographic, Geodemographic,
Psychographic and Behavioural Segmentation
Benson P. Shapiro & Thomas V. Bonoma, (1984). How to Segment Industrial Markets
Mark Camilleri, (2018). Market Segmentation, Targeting and Positioning
Adam Hayes., (2020) Market Segment
Stephen Rötzsch Thomas., (2020) Demographic Segmentation Defined with 5 Marketing
Examples
Kelley K, Hyde J, Bruwer J., (2015) Usage rate segmentation: enriching the US wine market
profile
Article Shared by Sandhya M, Product Positioning