CHAPTER

5
SEGMENTATION,
TARGETING AND
POSITIONING
Subtopics:-
5.1 Market Segmentation
5.2 Target Marketing
5.3 Market Positioning
5.1 MARKET SEGMENTATION

Definition of Market, Market Segment & Market Segmentation

Market Fish market

Night market Supermarket

What comes to mind when you hear the term market?
Do above images come to mind?

A market is people or organizations with needs or wants and with the ability
and the willingness to buy.

Market has several characteristics;

 First, they are composed of people (consumer markets) or
organizations (business markets).
 Second, these people or organizations have wants and needs that can
be satisfied by particular product categories.
 Third, they have the ability to buy the products they seek.
 Fourth, they are willing to exchange their resources, usually money or
credit, for desired products.

A market segment is a subgroup of people or organizations sharing one or

more characteristics that cause them to have similar product needs.

Market segmentation is the process of dividing a market into meaningful,

relatively similar, and identifiable segments or groups.

The purpose of market segmentation is to enable the marketer to tailor

marketing mixes to meet the needs of one or more specific segments.

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 To illustrate the concept of market segmentation, look at a box
which represents a market consisting of seven persons.

This market might vary as follow: one homogeneous market of

seven people, a market consisting of seven individuals segments. A
market composed of two segments based on gender, a market
composed of three age segments, or a market composed of five
age and gender market segments.

No market segmentation Fully segmented market

Market segmentation by Market segmentation by age

gender: group: 1, 2, 3
M, F

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 Market segmentation by gender and age group

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Segmenting Consumer Markets

What comes to mind when you hear the term demographic,

geographic, psychographic or behaviouristic? Regardless of their
definitions in other sectors, in marketing, these four terms would
always be referred to as the variables of market segmentation.

Let us find out for details.

Companies segment markets on the basis of several variables: geographic,

demographic, psychographic, and behaviouristic.

1. Geographic segmentation

Geographic segmentation refers to segmenting markets by region of a

country or the world, market size, market density, or climate.

Climate is commonly used for geographic segmentation because of its

dramatic impact on residents’ needs and purchasing behaviour.

Proton and Perodua cars exported to United Kingdom will have a

different version of cars than that is offered in Malaysia.

2. Demographic segmentation

Demographic segmentation is dividing the whole market into small groups

such as by age and life-cycle, gender, religion, and income.

Age and Life-cycle stage

 Markets can be segmented based on age and life-cycle stage
differences.

Dutch Lady markets several brands and products of its formula milk
targeted to different age segments.

In addition to its growing milk for children (Dutch Lady 123), the firm
also markets formula milk for family (Dutch Lady Milk Powder) and for
young adults (Dutch Lady Iced Latte). These three products

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 obviously are geared to different age segments and life-cycle
stages.

Gender
 Gender has long been used for segmenting markets for clothing, hair
dressing products, cosmetics and magazines.
 Men and women have different preferences for such products.
 Marketers take advantage of differences in taste between genders by
tailoring different products and promotional programs to each.

“Wanita” magazines are meant for women, “Maskulin”

magazines are meant for men.

Religion
 In international market, it is extremely important for the marketers to
understand the cultures and norms of a particular country in their
promotional campaign.
 Local sensitivity must be taken into account.

Kelantan has imposed a rule on female artists to wear the hijab

when taking part in promotional activities.

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Income
 Income level influences consumers’ wants and determines their buying
power.
 Income level indicates their purchasing power.

In a huge shopping complex, where we can see several types of

shops targeting people from different income levels, there is a CK
Boutique for high-income groups and Reject shop for the middle-
income groups.

3. Psychographics segmentation

 Psychographic segmentation is dividing a market into various groups

such as personality, motives, and lifestyles characteristics.

Psychographic
No. Example
segmentation
Personality A Fab advertisement that shows two
women comparing the cleanliness of their
Personality reflects a laundry.
person’s traits, attitudes,
and habits.

1.

Motives TM Streamyx advertisement where it shows

family members connected to each other
2.
When buying certain regardless of their locations. The key point in
product, there must be that advertisement is that a person who uses

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 some reasons which
motivate the purchaser.
The marketers are trying
to appeal to these
motives such as safety,
status, and rationality.
the Streamyx broadband can be
contacted almost everywhere. Thus, this
may appeal to the people to subscribe
Streamyx connection with the motive of
being able to be contacted almost
everywhere.

Lifestyles The new Satria Neo advertisement that

seems to appeal to young and active
Lifestyle segmentation people as well as to the trendsetters.
divides people into
groups according to
the way they spend
their time, the
3.
importance of the
things around them,
their beliefs, and
socioeconomic
characteristics such as
income and education.

4. Behaviouristic segmentation
Behaviouristic segmentation divides buyers into group according to their
knowledge, attitudes, response, and uses towards a product based on
several variables: occasions, benefits, usage rate, user status, and brand
loyalty.

No. Psychographic segmentation Example

Occasions Valentine’s Day and Mother’s Day
Dividing the market into groups are actually designed and
according to occasions when promoted to increase the sale of
1.
buyers get the idea to buy, flowers, cards, and other gifts.
actually make their purchase, or
use the purchased item.

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 Benefit Huggies introduced Huggies Pull-
Benefit segmentation is the Ups Pants, a diaper designed to
process of grouping customers help mummies catch up with
into market segments according active and growing babies.
to the benefits they seek from the
product.
2.

Usage rate A bowling centre may have a

core of regular attendees, an
Usage–rate segmentation divides adequate group of irregular
a market by the amount of attendees who come from time to
product bought or consumed. time, and a large group of
infrequent attendees who may
Such categories used to only come once.
differentiate its consumers are
former users, first-time users, light Identifying the market
or irregular users, medium users, segmentation enables the
and heavy users. management of the bowling
3. centre to make an appropriate
promotional campaign.

User status A beauty centre may need to

come up with an advertisement
4.
Markets can be segmented into that appeals to be safe to
non-users, ex-users, potential potential users. They might also

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 users, first-time users, and regular focus on attracting current users
users. from slipping away from their
products and services.

Brand loyalty In Indonesia, Unilever has

received Indonesia Best Brand
Brand loyalty often is defined Award (IBBA) 2009 organized by
based solely on consumers' SWA magazine and MARS
patterns of repeat purchase marketing research institution for
behavior. its variety of products such as
Sunsilk (shampoo category),
“Rotators” may stick to two or Lifebuoy (soap), Pepsodent
more brands. (toothpaste), Pond’s (face
whitener), Lux (liquid soap), and
Sunlight (dish washer).

The survey conducted by SWA

5 and MARS also considers five
aspects which also includes brand
loyalty.

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Segmenting Business Markets

The business market consists of four major categories of customers:

No. Categories of business buyers Descriptions

Producers Profit-oriented individuals and
organizations that use purchased
goods and services to produce
other products, to incorporate
into other products, or to facilitate
the daily operations of the
1.
organizations.

Examples of producers are

construction, manufacturing,
transportation, finance, and food
service firms.
Resellers Retail and wholesale businesses
that buy finished goods and resell
them for a profit.
2.
A retailer sells mainly to final
consumers; wholesalers sell mostly
to retailers and other
organizational customers.

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 Governments Government organizations such
3. as ministry, agencies, and
departments.
Institutions This segment includes schools,
hospitals, colleges and universities,
4.
foundations, or so called non-
profit organizations.

Business buyers can be segmented by geographically, demographically

(industry, company size), or behaviourally (benefits sought, user status, usage
rate, and loyalty status).

Business marketers also use some additional variables, such as customer

operating characteristics, purchasing approaches, situational factors, and
personal characteristics.

As in consumer segmentation, many marketers believe that buying behaviour

and benefits provide the best basis for segmenting business markets.

Some markets tend to be regional because buyers prefer to

purchase from local suppliers, and distant suppliers may have
difficulty competing in terms of price and service. Therefore, firms
that sells to geographically concentrated industries- aircraft
manufacturing, automobiles, oil-field equipment- benefit by
locating close to their markets.

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Segmenting International Markets

Few companies have either the resources or the will to operate in all, or even
most, of the countries that dot the globe.

Different countries even those that are close together, can vary greatly in
their economic, cultural, and political make-up. Companies can segment
international markets using one or a combination of several variables.

They can segment by geographic location, grouping countries by region.

Geographic segmentation assumes that nations close to one another will
have many common traits and behaviours. Although this is often the case,
there are many exceptions:

 World markets can also be segmented on the basis of economic

factors
 Countries might be grouped by population income levels or by their
overall level of economic development.
 Countries can be segmented by political and legal factors such as the
type and stability of government, receptivity to foreign firms, monetary
regulations, and the amount of bureaucracy.
 Cultural factors can also be used, grouping markets according to
common languages, religions, values and attitudes, customs, and
behavioural patterns.

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5.2 MARKET TARGETING

If segmenting is the process by which marketers identify groups of consumers

with similar wants and needs, targeting is the act of evaluating and
comparing the identified groups, and then selecting one or more of them as
the prospects with the highest potential.

Evaluating Market Segments

In evaluating different market segments, a firm must look at three factors:
segment size and growth, segment structural attractiveness, and company
objectives and resources.

The company must first collect and analyze data on current segment sales,
growth rates, and expected profitability for various segments.
 Current segment size and growth potential
o It will be interested in segments that have the right size and
growth characteristics. But ‘right size and growth’ is a relative
matter
o Is the market segment currently large enough that it presents a
company with the opportunity to make a profit? If it is not large
enough or profitable enough nowadays, does it has high growth
potential so that it is attractive in terms of a company’s long-term
strategy?

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 The opportunity for automobile
manufacturers is greater in
China. China has 1.2 million
passenger cars, one car for
every 20,000 Chinese. The
market in China is growing at
an annual rate of 33%,
therefore, a tremendous
potential market exists there.

 Segment Attractiveness
o The company also needs to examine major structural factors that
affect long-run segment attractiveness.
o A segment is less attractive if it already contains many strong and
aggressive competitors.
o A market or market segment characterized by strong
competition may be a segment to avoid or one in which to
utilize a different strategy.
o Often a local brand may present competition to the entering
multinational
o The existence of many actual or potential substitute products
may limit prices and the profits that can be earned in a segment.

In Peru, Inch Kola is a popular Coca-Cola. In India, Thumbs Up is a

major brand. The multinational might try more or different
promotions or may acquire the local company or form an alliance
with it.

 Company Objectives and resources

o Even if a segment has the right size and growth and is structurally
attractive, the company must consider its own objectives and
resources.

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 o In many cases, reaching market segments requires considerable
resources such as expenditures for distribution and market
research.
o Another question is whether the pursuit of a particular segment is
compatible with the company’s overall goals and established
sources of competitive advantage.
o Some attractive segments can be dismissed quickly because
they do not mesh with the company’s long-term objectives.

Selecting target Market Segments

After evaluating different segments, a decision of which and how many

segments must be made.

A target market consists of a set of buyers who share common needs or

characteristics that the company decides to serve.

Three basic categories of target marketing strategy are undifferentiated

marketing, differentiated marketing, and concentrated marketing.

1. Undifferentiated Marketing
 Undifferentiated marketing is a market-coverage strategy in which a
firm decides to ignore market segment differences and go after the
whole market with one offer.
 This strategy focuses on what is common in the needs of consumers
rather than on what is different.
 The advantages of this strategy are greater sales volume, lower
production costs, and greater profitability. In addition, lower
production costs and, if done well, higher quality and greater
effectiveness of marketing communications.

Coca-Cola uses the appeal youthful fun in its global advertising.

Its sponsorship programme is global and is adapted to events
that are popular in specific countries such as soccer in other
parts of the world versus football in the United States.

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2. Differentiated Marketing

 This is also known as segmented marketing.

 Differentiated marketing is a market-coverage in which a firm decides
to target several market segments and designs separate offers for
each.
 By offering product and marketing variations to segments, companies
hope for higher sales and a stronger position within each market
segment.
 However, differentiated marketing also increases the costs of doing
business. Developing separate marketing plans for the separate
segments requires extra marketing research, forecasting, sales analysis,
promotion, planning, and channel management moreover; trying to
reach different market segments with different advertising increases
promotion costs.
 Thus, the company must weigh increased sales against increased costs
when deciding on a differentiated marketing strategy.

Procter and Gamble

markets six different
laundry detergent
brands, which
compete with each
other on supermarket
shelves.

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3. Concentrated Marketing

 Concentrated marketing is also known as niche marketing. Niches are

smaller and may attract only one or a few competitors.
 Niching offers smaller companies an opportunity to compete by
focusing their limited resources on serving niches that may be
unimportant to or overlooked by larger competitors.
 The low cost of setting up shop on the Internet makes it even more
profitable to serve seemingly minuscule niches.
 Concentrated marketing can be highly profitable. At the same time, it
involves higher-than-normal risks. Companies that rely on one or a few
segments for all of their business will suffer greatly if the segment turns
sour. Or large competitors may decide to enter the same segment with
greater resources.

In cosmetics, the Chanel and

other cosmetic brands that
target upscale prestige
segment of the market have
used this approach
successfully.

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5.3 MARKET POSITIONING

What is Market Positioning?

Based on the phrase above, what does the positioning expert try
to tell us? Let us find out.

Positioning is arranging for a product to occupy a clear, distinctive, and

desirable place relative to competing products in the mind of target market
consumer.

In short, positioning is the location of your product in the

mind of your customer.

Thus, one of the most powerful tools of marketing is not

something that a marketer can do to the product or to
any element of the marketing mix: Positioning is what
happens in the mind of the customer.

Positioning is important because it is the means by which products and

services can be differentiated from one another and thereby giving
consumer a reason to buy.

A product’s position is the way the product is defined by consumers on

important attributes-the place the product occupies in consumers’ minds
relative to competing products. Positioning involves implanting the brand’s
unique benefits and differentiation in customers’ minds.

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 Dynamo is positioned as an effective detergent in removing
stubborn stains, and Downy is positioned as the liquid fabric
softener for clothes feeling soft and smelling fresh with only 1/4
cup.

Positioning Map

Perceptual positioning map is a means of displaying or graphing, in two or

more dimensions, the location of products, brands, or groups of products in
customers’ minds.

Remember this important point. Positioning is all about 'perception'. As

perception differs from person to person, so do the results of the positioning
map such as what you perceive as quality, value for money, is different to my
perception. However, there will be similarities.

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  The marketer would draw out the map and decide upon a label for
each axis.
 They could be Price (variable one) and Quality (variable two), or
Comfort (variable one) and Price (variable two).
 The individual products are then mapped out next to each other. Any
gaps could be regarded as possible areas for new products.

High Quality

 Belgium
Chocolate

 Ferrero
Rocher

 Milk Tray Cadburys

Roses
Low Price High Price

 Cadburys
Fruit & Nut

 Mar Bar
 Twix

Low Quality

This is an example of a very basic perceptual map of the UK

chocolate market. The brands are categorized from low to high
price and low to high quality. Belgium chocolates are plotted as
high quality and high price, and Twix is plotted one low quality and
low price brand.

Once completed, the perceptual map could help identify where

an organization could launch a new brand perhaps at the
medium price and quality range. In the above map, it seems that
there is not much competition within medium quality and medium
price chocolate area.

However, perceptual maps are plotted based on someone’s

perception; what may be a quality product to one person may not
be perceived as quality to another.

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Positioning Bases
Firms use a variety of bases for positioning, including the following:

1. Product features: This strategy implies that the product can be

separated from its competitors based on attributes, features, or
benefits.
2. Price and Quality: The price and quality ladder is, according to most
researchers, the most effective of all eight-attribute ladders. If a
product has a high price, it automatically indicates a high quality of
the product to the consumer whereas a low price indicates a low
quality.
3. Use or application: The product is marketed as when or how it can be
used as a strategy to win an empty slot in the customers’ mind.
4. Product user: This strategy indicates that the company clearly can
identify and know the consumers and their needs.
5. Product class: The product class dissociation ladder implies that a
product or company can be positioned as superior to its competitors or
that the product is so different compared to its competitors or that it
almost not fit the same product category.
6. User: This strategy indicates that the company clearly can identify and
know the consumers and their needs.
7. Competitor: This strategy to position a product is done by positioning
directly against or away from the competitors’ position.

Bata Comfit shoes are positioned as a comfortable brand that is

available in a range of styles from working shoes to dress shoes. “Get
Comfortable Today” is a tagline commonly associated with these
range of shoes.

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 REFERENCES

Abu, N., & Kamarulzaman, Y. (2009). Principles of Marketing. Kuala

Lumpur: Oxford University Press.

Kotler, P., & Armstrong, G. (2010). Principles of Marketing. New

Jersey: Pearson Prentice Hall.

McDaniel C, L. C., & JF, H. (2008). Introduction to Marketing. Ohio:

Thomson South-Western.

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