Market STP

Market Segmentation
Market Targeting
Product Positioning
 MARKET SEGMENTATION

Markets are Heterogeneous, Segmentation divides them

into Homogeneous Sub-Units

Market Segmentation is the Sub- dividing of customers into

homogenous sub-set of customers where any sub- set may
conceivably selected as market target to be reached with
distinct Marketing Mix.
Philip Kotler
⚫ Market segmentation is a marketing concept which divides the
complete market set up into smaller subsets comprising of
consumers with a similar taste, demand and preference. It is the
process that companies use to divide large heterogeneous markets
into small markets that can be reached more efficiently and
effectively with products and services that match their unique
needs.

⚫ A market segment is a small unit within a large market

comprising of like-minded individuals. One market segment is
totally distinct from the other segment. A market segment
comprises of individuals who think on the same lines and have
similar interests. The individuals from the same segment respond
in a similar way to the fluctuations in the market.

⚫ It can be defined as a “Grouping people according to their

similarity related to a particular product category”.
 Why Market Segmentation?
⚫ Understanding customers & generate greater customer
satisfaction

⚫ Design a Marketing Mix that precisely matches the

expectation of customers in the targeted segment

⚫ Adjustment of product to the market need

⚫ To overcome competition effectively

⚫ To contribute towards achieving company goals

 Levels of Market Segmentation
Companies can apply segmentation at four levels:

⚫ Segments: A market segment consists of a large identifiable

group within a market, with similar wants, purchasing power,
geographical location, buying attitudes, or buying habits.

For example, an automaker may identify four broad segments in the

car market: buyers who are primarily seeking
(1) basic transportation, (2) high performance, (3) luxury, or (4)
safety.

Segment marketing allows a firm to create a more fine-tuned

product or service offering and price it appropriately for the target
audience. The choice of distribution channels and communications
channels becomes much easier, and the firm may find it faces fewer
competitors in certain segments.
 Levels of Market Segmentation
⚫ Niches: A niche is a more narrowly defined group, typically a
small market whose needs are not being well served. In an
attractive niche, customers have a distinct set of needs; they will
pay a premium to the firm that best satisfies their needs; the niche
is not likely to attract other competitors; the nicher gains certain
economies through specialization; and the niche has size, profit,
and growth potential.

⚫ Local areas: Marketing programs that are tailored to the needs

and wants of local customer groups (trading areas
neighbourhoods, even individual stores). Citibank, for instance,
adjusts its banking services in each branch depending on
neighbourhood demographics.

⚫ Individuals: Customized marketing or one-to-one marketing.

Example of segmentation – Titan Watches
 How to select a market segment? /
Effective Segmentation
• Measurable
– Size, purchasing power, and
profile of segment MEASURABL
E

• Accessible
– Can be reached and served
• Substantial ACTIONABL
E
ACCESSIBL
E

– Large and profitable enough to

serve
• Differentiable
– Respond differently
• Actionable DIFFERENTIABL
E
SUSBTANTIA
L

– Knowledge and resources

to cater the need of the
segment
 Pattern of Segmentation
⚫ Market segments can be built up in many ways. One
common method is to identify preference segments.
Eg: Suppose ice cream buyers are asked how much they value
sweetness and creaminess as two product attributes.
Three different patterns can emerge:
⚫ Homogeneous preferences: All of the consumers have roughly
the same preference. We predict that existing brands would be
similar and cluster around the middle of the scale in both
sweetness and creaminess.

⚫ Diffused preferences: At the other extreme, consumer

preferences may be scattered throughout the space , indicating
great variance in consumer preferences.

⚫ Clustered preferences: The market might reveal distinct

preference clusters, called natural market segments. The firm in
this market might choose to appeal to all groups or choose the
largest market segment (concentrated marketing), or develop
several brands for different segments. If the firm has only one
brand, competitors would enter and introduce brands in the other
segments.
 Segmentation Procedure
Marketers use a three-step procedure for identifying market
segments:

1. Survey stage: The researcher conducts exploratory interviews to

gain insight into customer motivations, attitudes, and behaviour. Then
prepares a questionnaire and collects data on attributes like brand
awareness, product-usage patterns, attitudes toward the product
category, and respondents’ demographics, geographic, psychographics
characteristics

2. Analysis stage: Applies cluster analysis to create a specified number

of maximally different segments.

3. Profiling stage: Each cluster is profiled in terms of its distinguishing

attitudes, behaviour, demographics, psychographics, then each segment
is given a name based on its dominant characteristic.
 Discussion Question

Considering the largest Restaurant

in your city or town:

– How might consumers’ needs differ?

– What types of products might meet their needs?

– What advertising media makes sense for the

different segments of consumers?

 Basis for Segmentation
(Consumer Market)
Market controlled by goods and services meant for general
consumption.
Baby boomers (born between 1946 and 1964)
Generation X (born between 1965 and 1981)
Generation Y (born between 1981 and 2000)
Generation Z (born after 2000)
Toothpaste companies produce special toothpaste for kids
Reebok Tone up

Reebok
produces “Tone
up” brand of
shoes for women
that help them
tone their body
NAN
O

KIZAS
HI

SX-
4
 Business class in an Airline

Economy class in an Airline

J &J enjoys huge no. of hardcore loyal consumers.
 Usage Situation
Segmentation – Time/
Objective/ Location of
consumption

Celebrations are advertised for festival gifts

 People buy something because it causes a benefit to
them- Benefit Segmentation

QUES:- What benefit HAPPYDENT is offering ANS:- Whiter

teeth,
 Sweetness without drawbacks of sugar

less sugar, lose weight, zero sugar, high energy

 Basis for Segmentation
(Business Market)
The business market consists of organizations or corporate bodies who engage in
the acquisition of goods and services required for the production of other items
which in turn be sold to others (Kotler & Keller, 2011); these goods could be raw
materials or intermediate goods.
 MARKET
TARGETNG
⚫ Once an organization has identified its most promising
market segments, it must decide whether to target one
segment or several segments (evaluate the segment).
⚫ Each targeted segment will then receive a specially designed
marketing mix — i.e., a specially tailored product, price,
distribution network and/or promotional campaign
Process:

a. Evaluate b. Select the c. Additional

the segment segment Consideration
 a. Evaluate the segment
In evaluating different market segments the firm should
consider two important factors:
⚫ Segment overall attractiveness: the firm must ask whether
a potential segment has the characteristics that make it
generally attractive, such as size, growth profitability, scale
economies, and low risk.
⚫ Company’s objectives and resources: the firm must
consider whether investing in the segment makes sense
given the firm’s objectives and resources. Some attractive
segments could be dismissed because they do not mesh with
the company’s long-run objectives; some should be
dismissed if the company lacks one or more of the
competences needed to offer superior value.
b. Select the segment
⚫ Single-Segment Concentration: Many companies
concentrate on a single segment: Porsche concentrates on the
sports car market.

Through concentrated marketing, the firm gains a thorough

understanding of the segment’s needs and achieves a strong
market presence. Furthermore, the firm enjoys operating
economies by specializing its production, distribution, and
promotion; if it attains segment leadership, it can earn a high
return on its investment.

However, concentrated marketing involves higher than normal

risks if the segment turns sour because of changes in buying
patterns or new competition. For these reasons, many
companies prefer to operate in more than one segment.
⚫ Selective Specialization: Here the firm selects a number of
segments, each objectively attractive and appropriate. This multi
segment coverage strategy has the advantage of diversifying the
firm’s risk.
Eg: Apple
For Business class - Laptop
For Music lovers - ipod
For phone users - iPhones

⚫ Product Specialization: Another approach is to specialize in

making a certain product for several segments.
Eg: Nokia
Cheaper Price class - Nokia 1100
Business class - Nokia E Series
Music lovers class - Nokia X Series
⚫ Market Specialization: the firm concentrates on serving
many needs of a particular customer group..
Eg: Johnson & Johnson for babies only
Powder, Soap, Shampoo etc.

⚫ Full Market Coverage: Here a firm attempts to serve all

customer groups with all of the products they might need.
Only very large firms can undertake a full market coverage
strategy. Large firms can cover a whole market in two broad
ways- through undifferentiated marketing or differentiated
marketing strategies.
Eg: IBM (computer market),
Coca-Cola (drink market).
 Market Targeting Strategies
There are three basic types of strategies:

1. Undifferentiated: A strategy that ignores differences

between groups within a market and offers a single
marketing mix to the entire market. It works when a
product is new to the market and there is minimal or no
competition.

2. Multi segment (Differentiated): Targeting two or more

segments with different marketing mixes for each (the firm
operates in several market segments and designs different
programs and separate strategy for each segment but cover
all segments).
Eg: General Motors does this with its various vehicle brands
and models; Intel does this with chips and programs for
consumer, business, small business, networking, digital
imaging, and video markets.

Pros and Cons: Differentiated marketing typically creates more

total sales than does undifferentiated marketing, Minimizes
risks, as losses in one segment can be made up for in others.
Unique product features allow for higher prices.

However, the need for different products and marketing

programs also increases the firm’s costs for product
modification, manufacturing, administration, inventory, and
promotion.
3. Concentration (Niche): Concentrated marketing is often called
‘niche marketing’ Focus on one sub-market and puts all of its focus
on one, or a few, narrow, specific consumer groups.
Pros:
- Greater knowledge of customers’ needs
- Economies of scale
Cons:
- Entry of a strong competitor
- Change in size or tastes of the segment

Eg: Lush- eco-friendly cosmetics retailer sets itself apart from the
competition by seeping its strong, undying ethical message from
every physical and digital pore available. This is clear when looking
at their website’s homepage alone:
A great example of a brand that successfully uses
micromarketing is Groupon. Groupon is a digital marketplace
where users are able to access coupons online for, well, almost
anything. From holidays and retail products to sports and date
nights. Groupon allows users to get location-based deals from
almost any digital device. It was launched in 2008 and since
then, Groupon has grown to be the most popular website for
discounts and promotions in the United States. Yes, the global
e-commerce marketplace is a pro when it comes to targeting
users incredibly specifically.
 Product Positioning

“Positioning is the act of designing the

company’s offerings and image to occupy a
distinctive place in the target market’s
mind.”
Philip Kotler
⚫ Product positioning is the creation of a clear image in the
minds of consumers within the targeted segment about the
nature of the product and the benefits to be gained from
purchasing the product.

⚫ A product’s position is how potential buyers see the product.

⚫ Positioning is expressed relative to, the position of
competitors.
⚫ Positioning is something (perception) that happens in the
minds of the target market.
⚫ It is the aggregate perception the market has of a particular
company, product or service in relation to their perceptions
of the competitors in the same category.
 Types of Positioning

⚫ Organizational Positioning: It defines the quality, value

and differentiation of an org by occupying unique space in
the mind of the target market.

⚫ Brand Positioning (done with POPs and POD)

⚫ Product Positioning
 Points of Parity (POP)
Points of Parity (POP) are usually the attributes or functionalities or
benefits or any other marketing mix elements that are not unique to
the brand and might be shared by some or all the competitors, as they
mostly include the basic necessities for a brand to be considered in a
particular category.
Example: Toilet Paper
Everyone has toilet paper in their home. It’s a basic necessity with
basic points of parity like:
⚫ It needs to be made of a durable softwood fiber paper that won’t
tear.
⚫ The tube should fit standard toilet paper holders.
⚫ It has to be flushable so it won’t clog the toilet.

2 types of POP:
1. Category POP
2. Competitive POP
1. Category Points of Parity: Category POPs are perceived
obligation characteristics a brand has to provide to exist in a
specific category.

Example:
⚫ A bank would lose out to competitors if it wouldn’t be able to
ensure adequate access to ATMs.

⚫ Jaguar realized that their brand was excluded by customers

who wanted a car with all-wheel drive. When this group
reached a significant proportion of car sales in key regional
markets for Jaguar, the company launched a model with
all-wheel drive. It didn’t have to be better than the Audi
Quattro or others, but only good enough to no longer give
some customers any reason to exclude Jaguar.
2. Competitive Points of Parity: Competitive POPs are
designed to negate a competitor’s point of difference. Many
brands have, for example, the problem that their offer is
perceived as inferior in quality in comparison to the competition.

Example:
1. In the 90's Hyundai built cars of low quality. When the
quality problem was resolved around ten years later,
however, the customers continued to forgo the brand, as the
image of poor quality stuck. It took Hyundai years, but
eventually with different communication programs using a
variety of channels the company succeeded to communicate
the new level of quality and could catch up in this point with
the competition. The quality was at least perceived as good
enough to draw attention to PODs, such as price, design, gas
mileage and warranty.
2. Another good example is McDonalds which had a
competitive parity problem when it began losing customers
concerned with healthy eating. So McDonalds began to offer
grilled chicken sandwiches, a variety of salads and fruit
smoothies, besides starting to make their signature fries with
dramatically healthier fats. The goal was not to make
McDonalds a destination for the healthy-eating segment, but
to create enough parity to reduce the number of customers
who wouldn’t even consider the brand.
 Points of Difference (POD)
Also known as points of differentiation, is what you need to
determine once the points of parity have been covered. These are
the things that are truly unique to your business and that give you
a competitive edge.
It give consumers good reasons to prefer your brand, since the
key to winning is assumed to be differentiation.

Competitors POP
McDonald’s POP
and POD
 Example
POP POD

Balance between POP and POD is desirable

 Examples of Positioning
⚫ Kelvinator refrigerator used to be advertised for its coolest
compressors.

⚫ Hero Honda has emphasized the economy and reliability of

its automobiles and has become the leader in the number of
units sold.
⚫ Cadbury’s Chocolates are positioned as associated with
celebrations and could make it to enter into the evoked set
for gift giving.
⚫ Dettol, an antiseptic lotion, must be found in every house,
is now shown as a cleaning agent to give a germ free
environment in the house.
⚫ The ads for sugar free suggest it as not just an alternative
to sugar for diabetic patients, but as health product to keep
the body slim.
 Repositioning
To change or alter brand’s position in the market is termed as brand
repositioning.
⚫ Brand repositioning is done to sustain the declining product sale
or to give a boost to stagnant product sale or to avail the
anticipated market opportunities in the market.
⚫ At times brands need repositioning to meet the challenges of
competition or if the original positioning was incorrect.

Levels:
⚫ Among existing users – by the promotion of more varied uses of a
product
⚫ Among new users – this requires the product to be presented with
a different image to the people who have so far rejected it.
⚫ For new users – here one has to search for latent uses of the
product.
 Examples
⚫ The case of LUX international soap repositioned as a soap having
a unisex appeal and not just a gender specific product. Even the
use of a celebrity like Shah Rukh Khan could not achieve the
very purpose of brand repositioning and very soon the ad
campaign was withdrawn from media.

⚫ Cadbury’s has been repositioned as choice of all age groups and

not just for kids. However, brand repositioning strategy always
involves the risk of failure as it is difficult to achieve in view of
customers’ entrenched perceptions and attitudes towards the
product or brand.

⚫ IODEX is the classic case of brand repositioning where the brand

has been repositioned time and again to counter the rising
competition of MOVE and other pain relieving ointments in the
market.
When products are associated with certain users or a class of
users, it is called positioning by product user. Here the use of
celebrities as an endorser for the product is done to associate that
celebrity’s image or personality with that of the product with an
expectation that this will have an impact on product’s image and
characteristics. There are instances both of durable and
non-durable brands which have gained in terms of their sales and
market share after being endorsed by celebrities.

For Yamaha motorbikes,

having John Abraham as
the brand ambassador was
a serious strategy.
⚫ Yamaha as a brand was struggling with its own set of problems –
a fuddy-duddy image and a growing disconnect between the
brand and its core target audience- the youth. This was reflected
in the number of walking at its showrooms. To fix the problem it
was decided to switch the positioning from utility biking to
pleasure biking and John Abraham was the perfect fit. John
Abraham – a suburban Mumbai boy and a Bollywood actor
became popular as a stylish biker following his role in Dhoom.

⚫ This led the marketer to seek him out and associate him with
brand like Yamaha. There was a true brand connection with John
and the attributes Yamaha stands for- stylish, sporty and
innovative. Also, it was a fit at another level. Abraham has been a
bike enthusiast for a long time and research gave him green signal
too, as he frequently shows up on listings of youth icons.
⚫ Though some kind of implicit comparison with the
competitor is always involved in product promotion, this
can actually be the part of product’s positioning.
Explicitly, the focus is on some competitor from within
the product class. This is known as positioning by
competitor which involves comparison with the
competitor’s product or competitor’s position in the
market.
⚫ Competitor’s image can be taken as reference to build
one’s own image. By using comparative advertising, the
product is explicitly compared with the characteristics,
particularly price and quality, of the competitor’s product.
Examples
STP Process
 1. Select Key Criteria

2. Develop Position Map

Product 3. Plot competitors’

Positioning products

Steps
4. Look for niches

5. Develop Marketing Plan

 Marketing (Positioning)Map
It illustrates the range of positions that a product can take in a
market based on two dimensions that are important to the
customers.

Some of the common dimensions of Market positioning map

 How is it done?
Firms use perceptual or positioning maps to help them develop a
market positioning strategy for their product or service.

As the maps are based on the perception of the buyer they are
sometimes called perceptual maps.

Positioning maps show where existing products and services

are positioned in the market so that the firm can decide where
they would like to place (position) their product.

Firms have two options they can either position their product so
that it fills a gap in the market or if they would like to compete
against their competitors they can position it where
existing brands have placed their product.
 High
Convenience

•
Firm 1
Firm 2
•
High Low
Customer Customer
Loyalty Loyalty

•
Firm 3
Low
Convenience
Perceptual Map of UK chocolate confectionery Brands
Belgium Chocolates are high quality and high price so they
are placed in the top right hand box, whilst Twix is an
affordable "every day" treat chocolate so it has been placed in
the bottom left hand square, in the low quality low price brand
box.

The Purpose Of Perceptual Maps

Perceptual maps can help identify where (in the market) an
organisation could position a new brand. In the example
this could be at the medium price and medium
quality position, as there is a gap there. There is also a gap in
high price low quality but consumers will not want to pay a lot
of money for a low quality product. Similarly the low price
high quality box is empty because manufacturers would find it
difficult to make a high quality chocolate for a cheap price or
make a profit from selling a high quality product at a low
price.
Major rules in product positioning
Establish a definition of positioning

Keep it simple

Make it unique

Excavate(bring out) product benefits and market needs

Construct a credible position

Ensure strong support by starting early

Follow the market dynamics

Make positioning visible in all communications

Test alternative positioning options

 Risk Involved
Perceptual maps are based on the buyer's perception this is
challenging: what may be viewed as a quality product by one
buyer, may not be perceived as a quality product by another
buyer. Perceptual maps help firms understand how customers
view their products. However as perception is very subjective,
firms need to ensure that the data they use to plot the map is
accurate. If customer perception data is wrong, the map will
be wrong and this will affect the success of any marketing
strategy based on the perceptual (positioning) map.
Perceptual maps may help organisations identify gaps in the
market. Before deciding to fill any gaps in the market firms
need to ensure that there is likely to be a demand for
a product positioned in that gap.
 PRODUCT DIFFERENTIATION
The challenge before the product marketers is to create
relevant and distinctive product differentiation. The product
differentiation may be based on :

⚫ Physical Differences: Eg- features, performance,

conformance, durability, reliability, design, style,
packaging.

⚫ Availability Differences: Eg- available from stores or

orderable by phone, mail, fax, internet.
⚫ Service Differences : Eg- delivery, installation, training,
consulting, maintenance, repair .

⚫ Price Differences : Eg- very high price, medium price,

low price, very low price.

⚫ Image Differences: Eg- symbols, atmosphere, events,

media.
 Positioning Strategies
1. By attribute or benefit-
This is the most frequently used positioning strategy. For a
light
beer, it might be that it tastes great. For toothpaste, it might be
the mint taste.

2. By use or application-
The users of Apple computers can design and use graphics
more easily than with Windows or UNIX. Apple positions its
computers based on how the computer will be used.

3. By user-
Facebook is a social networking site used exclusively by Gen
Z.
4. By product or service class-
Margarine competes as an alternative to butter. Margarine is
positioned as a lower cost and healthier alternative to butter,
while butter provides better taste and wholesome ingredients.

5. By competitor-
BMW and Mercedes often compare themselves to each other
segmenting the market to just the crème de la crème of the
automobile market. Ford and Chevy need not apply.

6. By price or quality-
Tiffany and Costco both sell diamonds. Tiffany wants us to
believe that their diamonds are of the highest quality, while
Costco tells us that diamonds are diamonds and that only a
chump(fool) will pay Tiffany prices.
7. Positioning strategy based on Cultural Symbols –
In today’s world many advertisers are using deeply
entrenched cultural symbols to differentiate their brands
from that of competitors. The essential task is to identify
something that is very meaningful to people that other
competitors are not using and associate this brand with
that symbol. Air India uses maharaja as its logo, by this
they are trying to show that we welcome guest and give
them royal treatment with lot of respect and it also
highlights Indian tradition. Using and popularizing
trademarks generally follow this type of positioning.