Chapter Four

Market Segmentation,
Targeting, and
Positioning
 Objectives
At the end of this lesson students should be able
to:
Define market segmentation, targeting and
positioning,
Identify the different bases of market
segmentation,
Explain what targeting is,
Examine the different targeting strategies,
Explain what positioning is?
Identify the steps in the product positioning
strategy.
 4.1 Market Segmentation
4.1.1 Market segmentation Definition
Divide large Heterogeneous markets into smaller
Homogenous markets.
Dividing a market into distinct groups of buyers.
It is the matter of how to divided up market in to separate
 4.1.2 Why Market Segmentation?
List the companies rational behind market segmentation?
_________________________
_________________________
_________________________
_________________________
To have good understanding of their customer
Wise Resource allocation
Customer Difference
Preference
Location
Economic situation, & etc.
Limitation of market segmentation
 Cost and market coverage
 Segmentation increases marketing expenses
 Promotional expenses
 Administrative expenses

Benefits of market segmentation

 Most profitable market can be identified
 Products matches more with market demands
 Appropriate for promotional appeal
 Better chance to compete with big companies.
 Fierce(severe) competition can be done at lower price
 Sellection for lower prices seeker is very easy
 4.1.3 Bases of Market segmentation
1. Geographic segmentation
Geographic segmentation calls for dividing the market
into different geographical units such as nations, states,
regions, counties, cities, or neighborhoods.
2. Demographic Segmentation: consists of dividing the market
into groups based on variables such as age, gender, family size,
family life cycle, income, occupation, education, religion, race
and nationality.
 …contd
3. Psychographic Segmentation
 Psychographic segmentation divides
buyers into groups based on social
class, lifestyle or personality
Characteristics.
4. Behavioral Segmentation
 Behavioral segmentation divides
buyers into groups based on their
knowledge, attitudes, uses or responses
to a product.
 …contd
a. Special Occasion segmentation
b. Benefit sought segmentation
C. User Status: When Markets are segmented
as: Non-users , Ex-users, potential users, First-time
users and regular users of a product.
 …contd
D. Usage Rate: Some markets also segment into Light users ,Medium
users and Heavy-users groups.
 Heavy users are small %age of the market but account for high %age of total
consumption.
 Light users are large %age of the market but account for low %age of total

consumption .
E. Loyalty Status: Many firms are now trying to segment their
markets by loyalty.
F. Readiness stage of the customers to buy a product depending on
their information, interest, intention and degree of awareness of a
product.
G. Attitude in relation to marketing factors.
Bases for Segmenting Industrial Markets
Demographic/Empography
 Industry type: Which industries should we serve?
 Company size: What size companies should we serve?
 Location: What geographical areas should we serve?
Operating Variables
Technology: What customer technologies should we focus
on?
User or nonuser status: Should we serve heavy users,
medium users, light users, or nonusers?
Customer capabilities: Should we serve customers needing
many or few services?
 Purchasing Approaches
 Purchasing-function organization
 Power structure
 Nature of existing relationships
 General purchase policies
 Purchasing criteria
Situational Factors
 Urgency
 Size of order
 Specific application
Personal Characteristic s

 Buyer-seller similarity: Should we serve companies

whose people and values are similar to ours?
 Attitudes toward risk: Should we serve risk-taking or
risk-avoiding customers?
 Loyalty: Should we serve companies that show high
loyalty to their suppliers?
 Bases for Segmenting International market
A. Geographic location
B. Economic factors
C Political and legal factors:
D. Cultural factors:
E. Inter market segmentation-
 4.1.4 Requirements for effective segmentation
Not all segmentations are effective.
To be useful, market segments must have the following
characteristics:
Measurable: The degree to which the size, purchasing
power and profits of a market segment can be
measured.
Accessibility: The degree to which a market segment
can be reached and served.
 …contd
Substantiality: The degree to which market
segment is profitable enough to be served.
Actionable: The degree to which effective
program's can be designed and implemented in
the segment.
Differentiable: The segments are conceptually
distinguishable and respond differently to different marketing
mix elements and program.
 4.2 Market Targeting
 Market targeting is the process of evaluating
each market, segment's attractiveness and
selecting one or more segments to enter
Choosing which customer to serve & decide
how many and which ones to target.
It is designing strategies to build the right
relationship with the right target groups.
 a. Evaluating Market Segments
In evaluating different market segments, a firm
must look at three dimensions:
Segment size and growth
Segment structural attractiveness
 Company objective and resources.
 b. Selecting Target market segments
A target market consists of a set of buyers who
share common needs or characteristics that the
company decides to serve.
After evaluating different segments, the
company must now decide which and how many
segments to serve.
Selecting Target Market Strategy (Market coverage Strategy)

After evaluating different segments, the company

must now decide which and how many segments it

will target.
A target market consists of a set of buyers who share

common needs or characteristics that the company

decides to serve. For these reason, companies use the
following market coverage strategy:
 1. Undifferentiated (Mass Marketing)
It is market coverage strategy where by
firms decide to ignore market segment
differences and go after the whole market
with one offer.
It focuses on what is common in the needs of
consumers rather than on what is different.
 2. Differentiated (Segmented marketing strategy)
differentiated marketing is a market-
coverage strategy in which a firm decides to
target several market segments and designs
separate offers for each.
Developing a stronger position
within several segments creates
more sales than undifferentiated
marketing across all segments
3. Concentrated (Niche Marketing strategy)
Concentrated Marketing strategy is a
market-coverage strategy in which a firm
goes after a large share of one or a few
submarkets.
concentrated marketing, is especially
appealing when company resources are
limited.
4. Micromarketing (Local or individual marketing)
The practice of tailoring products and marketing
programs to the needs and wants of specific
individuals and local customer groups. It includes:
Local Marketing: tailoring of products and brands
to the needs and wants of local customer groups-
cities, …
 Individual marketing: tailoring of products and
marketing programs to the needs and preferences
of individual customers. E.g. internet marketing
 Choosing a Market-Coverage Strategy
Many factors need considering when choosing a market-
coverage strategy.
 The best strategy also depends on: company resources,
market variability, the degree of product variability and
competitors’ marketing strategies .
Considerations Strategy
 company resources: Concentrated market for small firms
 degree of product variability: differentiated for variable products
 product's stage in the life cycle: Undifferentiated for new
products
 market variability: Undifferentiated for customers having same
test
 competitors' marketing strategies: Undifferentiated Vs
Differentiated
a. company’s resources:
 When the firm’s resources are limited, concentrated marketing
makes the most sense.
b. Degree of product variability:
 Undifferentiated marketing is more suited for uniform products
 Products that can vary in design like automobiles are more suited to
differentiation or concentration.
c. The products life cycle stage: When a firm introduces a new product,
undifferentiated marketing or concentrated marketing may make the
most sense.
 In the mature stage of the product life cycle, however, differentiated
marketing begins to make more sense.
d. the market variability:
If most buyers have the same tastes, buy the
same amounts, and react the same way to
marketing efforts, undifferentiated
marketing is appropriate.
e. The competitors’ marketing strategies:
When competitors use differentiated or concentrated
marketing, undifferentiated marketing can be suicidal.
Conversely, when competitors use undifferentiated
marketing, a firm can gain an advantage by using
differentiated or concentrated marketing.
 4.3 Positioning
Product position: The way the product is
defined by consumers on important attributes.
The place the product occupies in Consumers‘
minds relative to competing products.
For example Volvo position its product based on safety,
Toyota as low fuel consumption, Sheraton Addis as luxury
collection, Paris on perfume, Italy on leather products…
 4.3.1 Choosing positioning strategy
The positioning task consists of three steps:
1.Identifying possible competitive advantages
Competitive advantage is an advantage over
competitors gained by offering consumers greater value,
either through lower price or by providing more
benefits that justify higher price.
 …contd
2. Selecting the Right Competitive Advantages
 Suppose a company is fortunate enough to have
several potential competitive advantages.
 It must now choose the ones upon which it will
build its positioning strategy.
 It must decide how many differences to promote
and which ones?
 How Many Differences to Promote?
Many marketers think that companies should
aggressively promote only one benefit to the
target market by developing USP for each
product
Unique selling proposition (USP): The unique
product benefit that a firm aggressively promotes
in a consistent manner to its target market.
The benefit usually reflects functional
superiority: best quality, best services, lowest
price, most advanced technology.
 …contd
Other marketers think that companies should
position themselves on more than one
differentiating factor.
This may be necessary if two or more firms
are claiming to be best on the same attribute.
For example, Beecham promotes its Aqua
fresh toothpaste as offering three benefits:
'anti-cavity protection', 'better breath' and
'whiter teeth'.
 Which Differences to Promote?
Not all brand differences are meaningful or
worthwhile Nor every difference makes a good
differentiator.
A difference is worth establishing insofar as it
satisfies the following criteria:
Important: The difference delivers a highly valued
benefit to target buyers.
Distinctive: Competitors do not offer the difference, or
the company can offer it in a more distinctive way.
 …contd
Superior: The difference is superior to other ways that
customers might obtain the same benefit.
Communicable: The difference is communicable and
visible to buyers.
Pre-emptive: Competitors cannot easily copy the
difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference
profitably.
 …contd
3. Selecting an overall positioning strategy.
Marketers want to position their brands on the
key benefits that they offer best relative to
competing brands.
The full positioning of a brand is called the
brand’s value proposition- the full mix of
benefits upon which the brand is positioned.
for example, Volvo value proposition hinges
on safety but also includes reliability,
roominess and styling.
 …contd
Fig. 4.1 Possible value propositions
Price
The same Less
More
More
More For More for More for
Benefits

more same less

The same
The same
for less
Less Less for
less
PREPOSITION
1. More-for-More:- the company offer most upscale product and
charging a higher price to cover a higher cost to produce the
product.
2. More-for-The Same:-companies can attract a competitor’s more
for more Positioning by introducing a brand which gives the
more benefit but lower price than that of more- for- more.
3. The Same-for-less:- The same-for-less can be power full value
preposition because everyone likes good deal (Price sensitive).
4. Less-for-much Less:- A marketer almost always exists for
product that offer less quality and therefore, the cost of
production is less. Less for much less positioning involves
meeting consumer lower performance or quality requirement
at much less price.
5. More-for-less:- Company tries to offer quality product than
before and set low price than before.
 4. Communicating and delivering the chosen position
Once it has chosen a position, the company must
take strong steps to deliver and communicate the
desired position to target consumers.
All the company's marketing-mix efforts must
support the positioning strategy. Positioning the
company calls for concrete action - it is not just
talk.
Designing the marketing mix - product, price,
place and promotion – involves working out the
tactical details of the positioning strategy.
 Summarizing Questions
1. What is segmentation?
2. What are the bases of market segmentation?
3. What are the criteria's for a segment to be
effective?
4. What is targeting?
5. What are the different market targeting
strategies
6. How do companies select their target market?
7. What is product positioning?
8. How companies will position their product?
 o u !
k y
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