Unit No.

Segmentation, Targeting
& Positioning (STP)
Prof. (Dr.) D K SAKORE
B.Tech, PGDM (IIMA), NET, Ph.D

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 Definition : Market Segmentation
Dividing large heterogeneous markets into smaller
groups of buyers (segments, which are homogenous)

• distinct needs
• characteristics or
• behaviour

requiring separate marketing strategies or mixes

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 Levels of Market Segmentation

1) Mass Marketing
2) Segment Marketing
3) Niche Marketing
4) Local Marketing
5) Individual Marketing

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 1. Mass Marketing

 Seller engages in mass production, mass distribution

and mass promotion of only ONE product for all types
of Buyers

 Large potential market leads to lower costs which in

turn lead to lower prices or higher margins

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 2. Segment Marketing

 Segment : Group of customers who share a similar set

of needs and wants

 Fine tune the marketing program & activities to better

reflect competitor’s marketing and satisfy the target
market

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 3. Niche Marketing
 Niche : Small part of the Market

 More narrowly defined customer group, Seek a

distinctive mix of benefits & also willing to pay a
Premium

 Attract less competitors than Segments

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 4. Local Marketing
 Based on Geographical area - also called as
Grassroots Marketing ,

 Product / Service is tailored to the needs and

wants of local customer groups

 Strategy is suitable for Small/Local enterprises ???

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 5. Individual Marketing
 Designing and offering a product / service as per
requirements of an Individual Customer

 Customization – modifying according to a single

person

 Gives maximum satisfaction, but expensive

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 Segmenting Consumer Markets

 Major Segmentation variables

1) Geographic Segmentation
2) Demographic Segmentation
3) Psychographic Segmentation
4) Behavioural Segmentation

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 1. Geographic Segmentation
 Dividing the market into different geographical
units such as nations, regions, state, cities or
neighbourhoods

 Population Density – Urban, Suburban & Rural

 Weather / Climate – Northern & Southern

Eg. Foods, Clothes, Houses

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 2. Demographic Segmentation
 Most popular bases for segmenting customer groups

 Needs/wants, usage rates and product/brand

preferences vary closely with demographic variables

 Easier to measure demographic variables

 Based on Age, Income, Gender, family size,

Occupation, Education, Religion 11
 3. Psychographic Segmentation
 Using psychology to better understand customers

 Dividing the market into different groups based on :

• Lifestyle : Pattern of Living

• Personality - human psychological traits

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 4. Behavioural Segmentation
 Dividing the buyers into groups based on :

1) Occasions
2) Benefits sought
3) User status
4) Usage rate
5) Loyalty status

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 Multivariable Segmentation
 Marketers rarely limit their segmentation analysis to
one or few variables

 Use multiple segmentation bases in an effort to

identify smaller better defined target groups

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 Criteria for Effective Segmentation

1) Measurable
2) Substantial
3) Accessible
4) Differentiable
5) Actionable

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 Segmenting Business Markets
1) Demographic variables

a) Industry to be served – Steel / Rubber many uses

b) Company size – MSME, large corporations

c) Location – geographical areas to be covered

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 Segmenting Business Markets
(2) Operating variables

a) Customer Technology to be focussed on

b) User (heavy, light or medium) or Non-user status

c) Customer capabilities – needing many or few services

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 Segmenting Business Markets
3) Purchasing approach

a) Purchasing function – highly centralized or decentralized

b) General purchase policies – prefer leasing, service
contracts, systems purchase or sealed bidding
c) Purchasing criteria – seek quality, service or price
d) Power structure – financially / engineering dominated etc
e) Nature of existing relationships – serve companies having
strong relationships or more desirable companies

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 Segmenting Business Markets
4) Situational factors

a) Urgency – need quick and sudden delivery or service

b) Specific application – focus on certain or all applications

c) Size of order – focus on large or small orders

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 Segmenting Business Markets
5) Personal characteristics

a) Buyer Seller similarity – people & values similar to ours

b) Attitudes towards risk – risk taking or avoiding customers

c) Loyalty – serve companies showing high loyalty to suppliers

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 Market Targeting

 Evaluate each market segment’s attractiveness

and selecting one or more to serve

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 Market Targeting Strategies
1) Single Segment Concentration

2) Selective Specialization

3) Product Specialization

4) Market Specialization

5) Full Market Coverage

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Market Targeting Strategies

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 1) Single Segment Concentration
 Focus on only one particular segment - gain deep knowledge
of the segment’s needs

 Achieve strong market presence by designing a specialized

marketing mix

 Segment leaders can earn high ROI - Strategy is more

profitable but highly Risky

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 2) Selective Specialization
 Select a number of segments - Multiple

 Develop distinct marketing mix for each segment -

involves higher investments in R & D, Production and
Marketing

 Multi-segment strategy diversifies Business Risk


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 3) Product Specialization
 Make only a certain type of Product - become
experts

 Sell it to several different market segments

 Downside risk if product is replaced by new

technology (Kodak)

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 4) Market Specialization
 Serving many needs of a particular customer group –
by offering an assortment of products / services

 Gain strong reputation among the customer group

 Downside risk is that the customer group may suffer

budget cuts or shrink in size

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 5) Full Market Coverage
 Serve all customer groups with all products they may
need

 Suitable for large companies (Corporations)

 2 broad ways :
i) Undifferentiated marketing
ii) Differentiated marketing
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 i) Undifferentiated Marketing

 Ignore segment differences and provide single offer -

appeal to broadest number of buyers

 Use mass production, distribution & advertising

 Economies of scale to attract price sensitive

customers

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 ii) Differentiated Marketing
 Operate in several market segments

 Design different products/services for each segment

 High investments in Production, R&D - also need

more Marketing expertise

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 POP’s & POD’s
• POP’s – Points of Parity (Equal or similar)

• POD’s – Points of Difference (Distinction)

Both are essentially Opposite in nature on key

attributes / benefits

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 Differentiation

 Attributes / Benefits, Consumers strongly associate

with a Brand ,

 Positively Evaluate and

 Believe they cannot find to the same extent with

Competition

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 Differentiation

 Can be done along the following lines –

1) Product 4) Personnel

2) Service 5) Image

3) Channel 6) Price

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 1. Product Differentiation
 Marketing Strategy whereby businesses attempt to
make their product UNIQUE, to stand out from
Competitors

 Does not last long in the market, can be copied

soon by competitors

 Based on Ingredients, features, packaging, form,

durability, quality, style etc
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 2. Service Differentiation
 More defendable than Product Differentiation

 Depends on Types of Services & Level of Service

provided

 Ease of Ordering, Quick Delivery, Faster Installation,

Repair & Maintenance etc

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 3. Channel Differentiation
 Refers to Marketing / Distribution Channel of the
Company

 Includes : Agents, Distributors, Dealers, Franchisee,

Salesmen as well as Online

 Includes Channel image, location, coverage,

expertise and performance
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 4. Personnel Differentiation
 Based on quality and performance of Employees

 Recruitment & Selection, Rigorous Training,

Motivation and Teamwork – become crucial

 Competence, courtesy, credibility, reliability,

communication, responsiveness

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 5. Image Differentiation

 Includes Corporate / Brand Image

(brand history, company culture, media stories)

 Public Perception of Company / Products (Mind)

 Provides Emotional power

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 6. Price Differentiation

 Competing on the basis of Price

 Offering lowest price in the market - to gain

business rapidly

 Also suitable for Regional / Local Brands

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 Brand Positioning

 Act of designing the Company’s Offering and Image

to occupy a Clear, Distinctive and Desirable place in
the MINDS of the target market (relative to
competing products)

 Re – Positioning

 Hybrid Positioning
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 Unique Selling Proposition (USP)
 Unique – clearly sets you apart from your
competition, positioning you as the more logical
choice (superior)

 Selling – it persuades another to exchange money for

a product / service

 Proposition – proposal or offer suggested for

acceptance
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 Value Proposition

 Why should I buy your Brand ?

 Whole cluster of benefits the company promises to

deliver to the customers

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 USP & Value Proposition

 Both go hand in hand and neither can exist without

the other

 USP is always a part of Value Proposition

 A company cannot sell just on the basis of USP, it has

to have a value proposition along with it.

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 Long Tail Marketing
• Some businesses : dominated by Huge Market leader

• Others small companies can shift their focus

• Target large number of Niche markets (product/service)

• Less demand individually but lucrative when combined

• Eg. Big Bazaar Vs Amazon
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 Market Potential

 Estimated Maximum Total Sales of all Sellers of a

product in a market during a specific time period

 Represents Highest limit of Market Demand for a

Product

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 Market Share

 Percentage of Sales that a Company can expect to

get from the Total Market

 Usually in terms of volume (no. of units – quantity)

 Can also be in terms of Value (Rupees)

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Enjoy and Celebrate Life

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