MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Lecture objectives
1. Explain market segmentation, and identify various
possible bases for segmenting markets.
2. Explain the requirements for effective segmentation:
measurability, accessibility, substantiality, actionability.
3. Outline the process of evaluating market segments and
suggest some methods for selecting market segments.
4. Illustrate the concept of positioning for competitive
advantage by offering specific examples.
5. Discuss choosing and implementing a positioning
strategy, and contrast positioning based on product,
service, personnel and image differentiation.

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Designingacustomerdrivenmarketingstrategy

Some truths about Markets

Selectcustomerstoserve

Allmarketers bothB2CandB2B recognisethatthey

cannot(i)appealtoallbuyersinthosemarkets,or(ii)
appealinthesameway.
Buyersaretoonumerous,
toowidelyscatteredand
toovariedintheirneeds
andbuyingpractices.

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Segmentation

Differentiation

Divide the total market

into smaller segments

Differentiate the market

offering to create superior
customer value

Differentcompaniesvary
widelyintheirabilitiesto
servedifferentsegments
ofthemarket.

Create value
for targeted
customers

Ratherthantryingtocompeteinanentiremarket,often
againstsuperiorcompetitors,eachcompanymust
identifythepartsofthemarketthatitcanservebest.
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Decideonavalueproposition

Targeting

Positioning

Select the segment or

segments to enter

Position the market offering

in the minds of target
customers
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Segmentation
Segmenting

the process of dividing the

total market for a good or
service into several smaller
groups
such that the members of
each group are similar with
respect to the factors that
influence demand.

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Target Marketing

Segmentation is
necessary because
customers in a market
have:

Evaluates each segments

attractiveness and selects
one or more segments to
enter.

Differences in buying
habits
Differences in the way the
good or service is used
Different motives for
buying.

A target market is a group of

customers ( people or
organisations) for whom a
seller designs a particular
marketing mix.

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Markets are segmented by:

Intuition based on experience
and judgment
Mimicking competitors and
earlier market entrants
Performing a structured
analysis that includes
Identifying the current and
potential wants that exist within
a market
Identifying the characteristics
that distinguish segments
Finally, determining who has
each want.

Copyright 1997 by The McGraw-Hill Companies, Inc.

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

StepsinSegmentation,Targeting,PositioningandDifferentiation

7.Decideonavalueproposition
6.DevelopMarketingMixforEachSegment
5. DevelopPositioningforEachSegment

Product
Differentiation

Market
Positioning

4. Select Target Segment(s)

Market
Targeting

3. Develop Measures of Attractiveness

2. Develop Profiles of Segments
1. Identify Bases for Segmentation

Bases for Segmenting Consumer Markets

Geographic

Demographic

country,
region
population
density
population
size,
climate

Ageandlife
cycle
Gender
Income
Education
Occupation
Religion
Nationality

Psychographic

Behavioural

Socioeconomic
Status
Values - AIO
Personality

Purchase
occasion
Benefitssought
Usersought
Userrate
Loyaltystatus
Readinessstage
Attitudetowards
product

Market
Segmentation

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Geo-demographic Segmentation

Colgate offers benefits to consumers

Geographic
Segmentation
Variables
(e.g.,SEAsia,City,
Kensington)

Geodemographic
SegmentationVariable

Demographic
Segmentation
Variables

(e.g.,SEAsianMales;Low
incomeCitydwellers;SEAsian
LowIncomeearners;Senior
CitizensofKensingtonetc.)

(e.g.,Male,LowIncome,
seniorcitizens)

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ASEGMENTATIONEXAMPLE

WhyUseAgetoSegment?
Consider these bodily changes that accompany ageing:

Female department store shoppers have been classified into 5

types, based on demographics, values and attitudes. The
groups and their descriptive names are:

Colourdiscrimination Olderpeoplehavedifficultydistinguishing
pastelsandthegreenbluevioletpartofthecolourspectrum.This
haveimpactonpackaging,brochuresanddisplays.
Glare Glareinpackaging,postersandfloorsinretailstoresshould
betoneddownoreliminated.
Hearing25%ofpeopleover65experiencehearingloss;marketers
usingaudiocommunicatorsshouldselectspokespersonswhohave
deepertones.
Tastesensitivity Byage80,twothirdsofourtastesensitivityis
lost(mostforsweettastes,leastforsourtastes).Marketersshould
considerodouramplificationtoenhancethepalatabilityoffoodsand
beverages.
Touch Atage65,a5degreechangeintemperatureisneededto
equalthesensitivitya30yearoldwouldhavefora1degreechange.

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1.FashionStatementsmostaffluentandeducated,usecredit
cards,expecttobetreatedwellbyretailpersonnel.

2.WannabuyssimilartoFashionStatementsbutwithless
income.Enjoybuyingonimpulse.

3.FamilyValuesrepresentlargefamilies,oftenareprofessionals,
buyingfocusesonchildrenorthehome.

4.DowntoBasicsmostlikelytohavechildren,notcollege
educated,carefulspenders,prefernottousecredit,likecoupons.

5.Matriarchsolder,oftenretired,theylikedepartmentstoresbut
areriskaverseandhavefewpurchaseplans.

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Signode CorporationsFourSegments
More
Profitable

Identifying and Analysing Business Market Segments

Personal
Characteristics

Demographic
Operating variables
Purchasing approaches
Situational factors
Personal characteristics

Demographics

Relationship Buyers. This group views Signodes packaging as

moderately important. They are knowledgeable about competitors
offerings. They remain loyal if prices are competitive. Typically, they
receive a small discount and a modest level of service.

Bases
for Segmenting
Business
Situational
Operating
Markets
Factors
Variables

Transaction Buyers. This group sees Signodes products as very

important to their business. They are price and service sensitive.
They receive above average service and a 10% discount. They will
switch for a better price.
Less
Profitable

Purchasing
Approaches

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Intermarket

Geographic

Factors
for
Segmenting
International
Cultural
Economic
Markets

CommonLanguage
Religion
Customs

Organizationmustbe
abletoidentifyand Measurable
measureeachsegment

SouthAsia
MiddleEast
Australasia

Marketersshould
beabletodesignActionable
Actionable
effective
programstoserve
themarket

NIE
OECD
ECM

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Companymust
evaluateitsown
objectives,resources,
constraints,strengths
andweaknesses
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Shouldbelarge
Substantial enoughtobe

profitable

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Segmentsizeandgrowth
collectandanalysedataoncurrentdollarsales,projectedsales
growthratesandexpectedprofitmarginsforthevarious
segmentstoselectsegmentsthathavetherightsizeandgrowth
characteristics,butrightsizegrowthisarelativematter.

Desirablesizeandgrowth
doesnotensurehigh
profitability.Structural
factors[competition,
substitutes,powerof
buyer/sellers]areimportant

Segmentstructuralattractiveness
desirablesizeandgrowthmaynotprovideattractive
profitability.Thecompanymustexamineseveralmajor
structuralfactorsthataffectlongrunsegmentattractiveness.

Marketingorganisationobjectivesandresources

Company
Objectives
and

Themarket
segmentcanbe
effectivelyreached
andserved

Evaluating Market Segments II

Segmentationrevealsthemarketsegmentopportunitiesfacingafirm.
Thefirmhastoevaluatethevarioussegmentsandchoosetheonestoserve.

Sizeand
Growth

Accessible

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EvaluatingMarketSegmentsI

[e.g., go for the Niche

market]

Requirements
Foreffective
segmentation

Organizationmustbe
abletodistinguishthe
Differentiable
segmentandrespond
toitsneedsdifferently

Politicallyvolatile

Select the segment

with the right size
growth.

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Requirementsforeffectivesegmentation

Political/
Legal

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BargainHunters.ThisgroupseesSignodes productsasveryimportantto
theirbusinessanddemandthedeepestdiscountandhighestlevelofservice.
Theyknowtheirsuppliersandbargainhard.Theirlargevolumeisneeded
buttheyarenotveryprofitable.

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SegmentingInternationalMarkets
Segmenting
consumerswith
similarneedsand
buyingbehavioreven
thoughtheyare
locatedindifferent
geographical
Locations.

Programmed Buyers. This group buys products as a routine

purchase, pays full price, and accepts below average service. This
segment is highly profitable.

Structural

positivesizegrowthandstructuralattractivenessmustmatch
thecompanysownobjectivesandresourcesinrelationtothat
segment.Someattractivesegmentscouldbequicklydismissed
becausetheydonotmeshwiththecompanyslongrun
objectives.

Attractiveness

Resources

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

MarketTargetingStrategiesI

MarketTargetingStrategiesII

Afterevaluatingdifferentsegments,thecompanymustdecidewhichand
howmanysegmentsitwilltarget.Atargetmarketconsistsofasetof
buyerswhosharecommonneedsthatthecompanydecidestoserve.

Mass
Marketing

Undifferentiated
marketing

Segmented
Marketing

Differentiated
marketing

Niche
Marketing

Concentrated
marketing

Company
Marketing
Mix

Localor
Individual
Marketing

A. Undifferentiated Marketing

Micromarketing

Targeting
broadly

Market

Company Mix 1

Segment 1

Company Mix 2

Segment 2

Company Mix 3

Segment 3

Ignoremarketsegmentation;focus
onwhatiscommonratherthanwhatis
different.Designaproductandmarketing
programthatappealstolargestnumber
ofbuyers.Steel,Applesareexamples.
Targetseveralmarketsanddesign
separateofferforeach.Caterforevery
purse,price,andpersonality(Toyota).
Examples:ColesMyerSupermarket,
Bilo,Myerstores

B. Differentiated Marketing
Segment 1

Company
Marketing
Mix

Targeting
narrowly

Segment 2
Segment 3

Goforlargeshareofoneorfewsub
marketsratherthanforsmallsharesof
manymarkets.DELL[PC],CRAY
[Mainframe],APOLLO[Workstation]

C. Concentrated Marketing
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CUSTOM SEGMENTATION
A special version of concentrated marketing

ChoosingaMarketCoverageStrategy
Limitedresource?
Goforconcentrated

Competitorusessegmentation?
Cannotuseundifferentiated.

Ideally,marketersshouldbeabletodefinesegmentsso
preciselythattheycanofferproductsandservicesthat
exactlymeettheuniqueneedsofeverycustomer.

Competitors
Strategies

Commonfordoctors,lawyersandhairstylists.

Doesnothappeninreality;itisneitherpracticalnorpossible.

Buyershavethe
sametaste?
Gofor
Market
undifferentiated Variability

ParticularlytrueforB2Borindustrialmarkets.
Theygoforcustommarketingstrategyandusecustom
segments.

In customsegmentationmanufacturerstendtoworkwith
oneorafewlargeclientsanddevelopproductsorservices
thatonlythesecustomerswoulduse.

Company
Resources

Factors
Affecting
Strategy
Decisions

Uniformproducts?
Undifferentiated.
Product Manyproducts?
Variability Differentiated.

Stage in
Life Cycle

Anewproductintroducedinthemarket?
Goforundifferentiatedorconcentrated
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MarketPositioningoftheProduct

ChoosingaDifferentiationandPositioningStrategy

Afterdecidingwhichsegment(orsegments)ofthemarket
toenter,thefirmmustdecidewhichpositionitwantsto
occupyinthosesegments.

Athreestepprocess
1. Identifyingasetofdifferentiatingcompetitiveadvantages
uponwhichtobuildaposition
2. Identifyingandchoosingtherightcompetitiveadvantages
3. Selectinganoverallpositioningstrategy.

Positioningiscustomerperceptionsofaproductimageorbenefits
versuscompetitionsproducts.

Productposition isthewaytheproductisdefinedby
consumersonimportantattributes.

Step1:Identifyingasetofdifferentiatingcompetitive

Drive ispositionedasanallpurposefamilywashingdetergent;
Softlyasawashingdetergentfordelicatefabricssuchaswool.

advantagesuponwhichtobuildaposition
Canbedonethoughperceptualmappinganalysis.

Positioningisdifferentfromproductdifferentiation.

Perceptualmapisamultidimensionalmapwhichidentifiesfactors
thatdiscriminatebetweenbrands.
Itisausefultoolforplottingmovesovertimebycompetitorsas

Differentiatedvalueiscreatedbythevaluepropositionusedby
marketersforthesegmentedmarket.
Valuepropositionreferstothefeaturesthatdifferentiateaproduct
fromcompetitorsofferings

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wellastheresultsofafirmsownbrandpositioningstrategy.
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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

PerceptualMapping

Perceptual Mapping and Positioning Decisions

Based upon research using existing or prospective

consumers:

Upscale, Classy

Mercedes
Lincoln Volvo
Cadillac Chrysler
Buick

management determines those dimensions most important

to consumers in evaluating brands; and
how consumers see competitive products in terms of their
performance on these dimensions.

Perceptual maps are valuable in:

Porsche
BMW

Saab
Honda

Conservative

determining consumer perceptions of existing products;

offering insights to new product opportunities;
gaps in the perceptual space may suggest positions for new
offerings in the market.

Sporty

Ford

Nissan

Dodge
Plymouth

Toyota
Chevrolet
Hyundai

CostPerformance
Gap

Practical, Affordable
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Step2.IdentifyingandchoosingtherightcompetitiveadvantageI

Brandpositionofdepartmentstores

Consumerschooseproductsandservicesthatoffergreatest
value.Competitiveadvantagecanbeprovidedby:

High perceived quality and status

Productdifferentiation
Highlystandardisedproducts(e.g.,chicken,steel,aspirin)vs.
highlydifferentiatedproducts,(e.g.,motorcars,furniture,
camera).

David Jones
Myer
Limited
service
Less
personal

Target

Features,performance,style,design,consistency,durability,
reliabilityandreparabilityareallareasofpossible
differentiation.

Extensive
personalised
service

Servicesdifferentiation
differentiate theservicesthataccompanytheproduct.

Kmart

e.g.,intermsofdelivery,installation,repairandcustomer
trainingservices.
Low perceived quality and status
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Step2.IdentifyingandchoosingtherightcompetitiveadvantageIII

Step2.IdentifyingandchoosingtherightcompetitiveadvantageII

Personneldifferentiation

Howmanydifferencestopromote?
Whichdifferencestopromote?

Byhiringandtrainingbetterpeoplethantheircompetitors.
Requiresacompanytoselectitscustomercontactpeoplecarefully
andtrainthemwell.

Mustavoidthreemajor
positioningerrors:

Imagedifferentiation

Underpositioning failingto
positionthecompanyatall.
Overpositioning giving
buyerstoonarrowapicture
ofthecompany.
Confused positioning
leavingbuyerswitha
confusedimageofthe
company.

Worktoestablishimagesthatdifferentiatethemfromcompetitors.
Acompanyorbrandimageshouldconveyasingularanddistinctive
messagethatcommunicatestheproductsmajorbenefitsand
positioning.
Symbolscanprovidestrongcompanyorbrandrecognitionandimage
differentiation.
Acompanycanalsocreateanimagethroughthetypesofeventit
sponsors.
.
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Important
Criteria Distinctive
for
Determining
Which
Differences
Affordable
Superior
to
Promote

Profitable

Pre-emptive

Communicable

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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

WhichDifferencestoPromote?

Various Possible Positioning Strategies

Adifferenceisworthestablishingtotheextentit
satisfiesthefollowingcriteria:

Product
Class

Important thedifferencedeliversahighlyvaluedbenefit.
Distinctive competitorsdonotofferthedifference.
Superior thedifferenceissuperiortootherwaysinwhichthe
customersmayobtainthesamebenefit.
Communicable thedifferenceiscommunicableandvisibleto
buyers.
Preemptive competitorscannoteasilycopythedifference.
Affordable thebuyerscanaffordthedifference.
Profitable thedifferencecanbeintroducethedifference
profitably.

Awayfrom
Competitors

Product
Attributes
Benefits
Offered

G
H

Againsta
Competitor

D
E
B

Usage
Occasions

Users

Source: Kotler Brown Adam Armstrong

Marketing 5th Ed Copyright 2001 Pearson Education Australia

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ExamplesofPositioningStrategies

SelectinganOverallPositioningStrategy
Thefullpositionofabrandistermedthebrandsvalue
proposition.

Position
on specific product attributes [Hyundai Excel>>low price]
on the benefits offered [Colgate>>cavity prevention]
according to usage occasions [Sustagen>>replaces body fluids]
for certain classes of users [Mothercare>> baby products]
against a competitor [Tandy and Compaq vis--vis IBM]
away from competitors [7-up, the un-cola >>vs Coke and Pepsi]
for different product classes [Margarines vs butter; margarines
vs cooking oil]
using combination strategies [J&Js affinity Brand is a hair
conditioner for women over 40 >> product class and user]

Companyandbrandpositioningshouldbesummedupina
positioningstatement.
Thesameforless a
Moreformorepositioning
involvesprovidingthemost
powerfulvalueproposition
upscaleproductorserviceand
offeringgooddeals.
chargingahigherpriceforhigher
Lessformuchless meets
costs.
thedemandforproducts
Moreforthesamecompanies
thatofferlessandcostless.
canattackacompetitorsmore
formorepositioningby
Moreforless awinning
introducingabrandofferingof
valuepropositionbutmay
comparablequalityatalower
beimpossibletomaintainin
price.
thelongrun.

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PossibleValuePropositions

Morefor
more

Morefor
thesame

Benefits

More

The Same

Companyandbrandpositioningshouldbesummed
upinapositioningstatementoftheform:

Less

Thesame
forless

Less

Lessfor
muchless
Losing value
propositions

To(targetsegmentandneed)our(brand)is
(concept)that(pointofdifference).
Example:Tobusy,mobileprofessionalswhoneedtobe
alwaysintheloop,Blackberry isawirelessconnectivity
solution thatallowsyoutostayconnectedtodata,

Morefor
less

The
Same

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DevelopingapositioningstatementProduct

Price
More

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peopleandresourceswhileonthego,easilyandreliably
moresothancompetingtechnologies.

Winning value
propositions
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MARK1012: Lecture 5: Razzaque

Market Segmentation, Targeting and Positioning

Step3:Designmarketingprogramtocommunicatebenefits
andpersuadecustomers.

The positioning
statement
addresses three
key questions:

Afterselectingaposition,thecompany
musttakestrongstepstodeliverandcommunicatethe
desiredpositiontotargetcustomers.
Themarketingmixeffortsmustsupportthepositioning
strategy.
Designingthemarketingmixinvolvesworkingoutthe
tacticaldetailsofthepositioningstrategy.

prospectsmind?
1. Whoisthetarget
customer?
2.Whyshouldthe
customerbuy?
3.Whatareweselling?

inconsumerneedsandcompetitorsstrategies.
shouldevolvegraduallyasitadaptstotheeverchanging
marketingenvironment.

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Some Confusing Terms to Note

The features that make a product distinct

from competitors offerings.
You have chosen a segment ..

Positioning
Differentiation
You are talking about

1. whose size can be determined.

2. you know where your customers live, where
they shop, what media they are exposed to etc.
3. you expect the segment to yield sufficient profit
4. you have enough resource to get the product to
the market.
Company A sells an Deluxe range of matching products for kitchen.
They are following a ____________ marketing strategy.
Company A also sells a basic range of different products for kitchen.
They are following a ____________ marketing strategy.
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3. Whichcompaniesposegreatest
challengeagainstthisposition?
4. Dowehaveenoughfinancialsupportto
gainandholdthisposition?
5. Dowehavethecouragetostickwith
oneconsistentpositioningconcept?
6. Doesourcreativeapproach(4Ps)match
ourchosenpositioningstrategy?

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Customer perceptions of a product image or

benefits versus competitions products.

1. Whatisourpresentpositioninthe
2. Whatpositionwouldweliketoown?

Theposition
mustbemonitoredandadaptedovertimetomatchchanges

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Six Questions to Ask When

Applying a Positioning Strategy

Measurability
Accessability
Substantiality
Actionability

Custom

Undifferentiated

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