Introduction

LOGIC/RATIONALE:

• Companies in consumer products & services cannot serve each and every
customer !
• Customers are too numerous, dispersed, varied, in their requirements 
Companies cannot operate effectively !!
• Therefore instead of serving ALL  Companies serve few customers but
operate effectively !!!
• Core of modern strategic marketing  STDP (i.e. SEGMENTATION,
TARGETING, DIFFERENTIATION, & POSITIONING).
 Introduction

LOGIC/RATIONALE:

• 100 yrs ago Ford started mass production of black coloured T-ford car.
• Then GM started offering varieties – Pontiac, Buick, Oldsmobile; in different
colours.
• Germans & Japanese came in with cars targeted for different segments. Eg.:
Mercedes, BMW, Volkswagen, Toyota, Honda. Each leader in their own
segment.
• Extreme end of STP marketing  Customised products !!! Eg.: Rolls-Royce.
 Introduction

Comparison of Segment & Niche:

S. no. Parameter Segment Niche

1 Size Large group Quite narrow
2 Customer needs General Special
3 Competition More Very less
4 Volume / Margin High / Low Low / High

“There will be no market for products that everybody likes a little, but
there will always be for products which somebody like a lot.”
Introduction
 Introduction

Concept of STDP
• Seller identifies various segments in the market.
• Evaluate & Target (i.e. Select) the segments.
• Identify options for suitable Positioning.
• Identify scope of Differentiation & finalize.
• Develop Product & Marketing program customised for each segment.
• Communicate the Position taken to the consumers.
Segmentation – General approach
Segmentation – General approach
 Introduction

• Two attribute preference in ice-cream : Creaminess & Sweetness

• Three patterns emerge:
S.no. Pattern Marketing response
1 Homogeneous All brands offer taste suitable to the centre of the group.
preferences
2 Diffused First brand likely to be in the centre. Subsequently other brands may
preferences occupy corner positions to serve the segment based on the particular
taste.
3 Clustered Company’s response:
preferences 1.Undifferentiated marketing: Offer in the centre of the 3 clusters.
(Natural 2.Concentrated marketing: select and serve the largest / suitable
market cluster.
segment) 3.Differentiated marketing: Offer 3 brands i.e. each targeted to a
cluster.
Marketing Segmentation : simple model

Typical market:
Say “Flats” in India
(in nos. in 2018-19)
Marketing Segmentation : “Flats” in India
(in ‘1000 nos. in 2018-19)

1rk 1bhk 2bhk 3bhk Luxury

NORTH

WEST

SOUTH

EAST
 Bases of Segmenting Consumer markets

• 1st e.g.: Income & Age (both Demographic)

• 2nd e.g.: Creaminess & Sweetness (both preferences based on product

characteristics  to be correlated with segmentation criteria)

• 3rd e.g.: Region & Apartment size (Geographic and Demographic resp)
Bases of Segmenting Consumer markets
Bases of Segmenting Consumer markets
Bases of Segmenting Consumer markets
Bases of Segmenting Consumer markets
 Bases of Segmenting Consumer markets

Psychographic segment: Lifestyle & Personality

Lifestyle:
Especially used by – Car, bike, Real-estate, Alcohol, cigarette, Pan Parag, Suits,
Watches, Shoe, etc.

Personality:
Jeep SUV: Positioning characteristics  Independent, impulsive, masculine,
confidence, adventurous !
Honda City (or any Sedan): Prestige conscious, modern yet family orientation,
typical corporate executive type !!
 Targeting of Market Segments

TARGETING consists of : EVALUATION & SELECTION

1. Evaluation of the identified segments

1. Segment size & growth
2. Structural attractiveness of the segment
3. Company’s objectives & resources

2. Selection of the segments

1. Single segment concentration
2. Selective specialization
3. Product specialization
4. Market specialization
5. Full market coverage
 Targeting: Evaluation

1. Segment size & growth

• Segment should be of “right size”  depends upon Company’s size !

• Large companies shall prefer large volumes  therefore large segment
• Small companies avoid large segment  as they do not have resources

• Growth rate  people always prefer higher growth rate !

• However  so do the competitors !!
 Targeting: Evaluation

2. Segment structural attractiveness

• Michael Porter model on “Competitive Advantages: Creating & Sustaining

Superior Performance”.
1. Threat of intense segment rivalry
2. Threat of new entrants
3. Threat of substitute products
4. Threat of growing bargaining power of buyers
5. Threat of growing bargaining power of suppliers
Targeting: Evaluation
 Targeting: Evaluation

Entry Barriers

Exit Barriers
 Targeting: Evaluation

3. Company objectives & resources

• A segment may be large, high growth, attractive,.. But ?

• What about the company’s objectives, resource capability ??
• In few cases the segment business does not match the long term
OBJECTIVE  plan is dismissed !
• Sometimes Companies “grab a bigger bite”  may bleed !
• Sometimes Companies lack resources  attractive business is let go !!

• THE COMPANY NEEDS TO EVALUATE VERY CAREFULLY  this is the crux of

evaluation decisions !!!
Targeting: Selection  Product-Market matrix

1. Single segment concentration

• Complete specialization
• Focus of resources
• Economies of scale
• LEADERSHIP in the segment
• High ROI
• High RISK (all eggs in one basket !!!)
• E.g.: Colgate in toothpaste, Amul in
milk products, Cadbury in chocolate.
Targeting: Selection  Product-Market matrix

2. Selective specialization

• Multiple segments selected suitably

• Economies of scope
• RISK mitigated
• High operational & marketing COST
• Each segment needs to be profitable
• E.g.: Unilever global brands;
Surf excel – South Asia
Surf – Europe, Australia, Asia
Wisk – USA (failed against Tide P&G)
Targeting: Selection  Product-Market matrix

3. Product specialization

• Same or similar products for a type of

market.
• Economies of scale.
• RISK: Technology to substitute the
product
• E.g.: Different types of microscope for
various laboratories in University,
Hospitals, Metallurgical, Chemical, etc.
Targeting: Selection  Product-Market matrix

4. Market specialization

• Different products for a selected

market
• Low operational cost
• Strong rapport & reputation of service
• Easy launch of new products
• RISK: All eggs in one basket
• E.g.: Different types of laboratory
instruments for University
laboratories.
Targeting: Selection  Product-Market matrix

5. Full market coverage

• All the major segment are served with

all the products as required
• E.g.: Large companies like HUL, Tata
motors, Maruti Suzuki, Samsung.
• Types:
1. Undifferentiated marketing
2. Differentiated marketing
3. Concentrated marketing
Targeting: Selection  Product-Market matrix

5.1. Undifferentiated marketing

• Company ignores the segments

• Offers same product i.e. centrally
preferred, to ALL !!!
• Mass manufacturing, mass marketing,
lower cost of inventory, channel,
advertising.
• Lower price
• Economies of scale
• Not possible to succeed in todays
competitive world
• Risk of multiple brands in respective
segments !!!
Targeting: Selection  Product-Market matrix

5.2. Differentiated marketing

• Company operates in several market

segments.
• Products, Brands & Market-mix
designed respectively suitably
• Sales & Market shares increase
• Operating cost, inventory, Marketing,
Advertising, Promotion costs
INCREASE
• E.g.: Edison Women shoe USA – 4
major brands for different segments
based on price, style, etc.
Targeting: Selection  Product-Market matrix

5.3. Concentrated marketing

• Company operates in several market

segments.
• Products & Brands designed
respectively suitably
• Market-mix common for ALL the
segments !
• Marketing, Advertising, Promotion
costs LESS than Differentiated
marketing.
• Though the common Market-mix may
not be as effective !!!
 Differentiation & Positioning

• Introduction
• Differentiation – General approach
• Ways to Differentiate
• Positioning Strategy
 Introduction

LOGIC/RATIONALE
• Differentiation: It is a the act of designing a set of meaningful differences to
distinguish the Company’s offer from competitors’ offers.
• Any product or brand can be differentiated !
• Commodity / Undifferentiated product  can be differentiated and offered.
• Buyers have different needs  they are always attracted to the Offer that
suits their needs !!
 Introduction

LOGIC/RATIONALE
• Positioning: It is strategic process to influence consumer perception
compared to competition, by designing the Company’s offer and image so
that it occupies a distinct and valued place in the target customers' minds.
• Each firm wants to promote few differences those were developed to appeal
to its target customers.
• Positioning calls for the company to decide how many differences to develop
and which differences to promote !!
Introduction
 Introduction

Case: Truck market Volvo and competitors

• 4 brands & 4 performance attributes

A: No Differentiation  Positioning not possible !
B: Substantial Differentiation  Each firm Positions itself by promoting the
attribute where it is “strongest” !!
 Differentiation – General approach

Why is Differentiation required?

• It is VITAL in competitive market with multiple brands / products  top of the
mind recall !
• Enables extra Value perceived by & delivered to the customers.
• To gain market share by appealing to the target customers.
• Possibility to charge premium.

Four ways to create differentiation:

‐ BETTER
‐ NEWER
‐ FASTER
‐ CHEAPER (should not be used solely!!!)
 Differentiation – General approach

Strategies to successfully Differentiate

S.no. Strategy Description Example

1 Operational Reliable product & services at Dell, Wal-Mart,
excellence competitive price. Fed-ex
2 Customer Know the customer well & Home depot, Ikea,
intimacy respond quickly D-Mart
3 Product Innovative products & services Apple, Nike, Sony
leadership outperforming competitors
 Differentiation – General approach

No. of opportunities to Differentiate

 Differentiation – General approach

No. of opportunities to Differentiate

S. no. Industry Description Example

1 Volume Large service industries Internet, Mobile, Banks
2 StalematedCommodity and mass consumption Steel, Cement, Electricity
products.
3 Fragmented Small service firms Restaurant, Boutique,
Hospital
4 Specialized Industry where products or Projects, Machinery
services are Customized.
 Ways to Differentiate

Product Differentiation

1. Features
2. Performance
3. Conformance
4. Durability
5. Reliability
6. Repairability
7. Style
8. Design
 Ways to Differentiate

Services Differentiation

1. Delivery
2. Installation
3. Customer Training
4. Consulting services
5. Repair
6. Miscellaneous
 Ways to Differentiate

Personnel Differentiation

1. Competence
2. Courtesy
3. Credibility
4. Reliability
5. Responsiveness
6. Communication
 Ways to Differentiate

Image Differentiation

1. Symbol
2. Media
3. Atmosphere
4. Events
 Positioning Strategy

• Any product or brand can be differentiated !

• Positioning calls for the company to decide how many differences to develop and
which differences to promote !!
• Each “difference” comes with COST (for Company) & BENEFIT (for Customers),
which needs to be analysed !
• And each “difference” is NOT meaningful or worthwhile !!
• Therefore POSITIONING must be carefully done !!!
 Positioning Strategy

Difference is selected based on the following criteria:

S. no. Criteria Description
1 Important High value benefit to a substantial % of the customers /segment
2 Distinctive To be offered more distinctively compared to the competitors
3 Superior The difference is superior to other means obtaining same benefit
4 Communicable Easily communicable and visible to the buyers
5 Pre-emptive To be implemented before any competitor does
6 Affordable Buyer could afford to pay the premium if any
7 Profitable Most importantly the Company finds the difference profitable
 Positioning Strategy

How many differences to promote?

No. of Description Example
Benefit
1 *Develop an USP (Unique Selling Proposition) for each brand. Crest (anti cavity),
*One consistent message  easier for customers memory ! Mercedes (great
*Be and promote no.1 of “something”  Worlds’ best, lowest automotive engg)
price, best service, best quality, most advanced technology,….
2 Required if any close competitor claims the same benefit. Volvo (safest &
The benefits may be closer to each other. most durable)
3 GSK’s Aquafresh toothpaste : anti-cavity protection, better Aquafresh: paste
breath & whiter teeth !!! in 3 colours !!!
≥4 AVOID
 Positioning Strategy

Avoid the following positioning errors:

S. no. Error Description

1 Under- Buyers don’t really sense anything special about the brand; may be
positioning just a vague idea. Eg.: India tourism in foreign.
2 Over- Buyers may have too narrow an image of the brand. Eg.: Many
positioning customer still think Mercedes price may be well over Rs 50 lak as
against actual Rs 30 lak.
3 Confused Confused image in buyers due to frequent changes in positioning &
positioning too many claims. Eg.: Idea cellular ran 3 different ads
simultaneously.
4 Doubtful Buyers may not believe the claims reg products’ features, price, or
positioning manufacturer. Eg.: stain remover Surf.