Segmentation, Targeting,

Positioning
A concise introduction
Syed Mohammad Zubair Azam
MS-PHD Scholar
Zubairazam6@gmail.com

Zubairazam6@hotmail.com
 Table of Contents

Topic Page
1. What is Marketing? 1

2. Marketing mix and strategy 1

3. Segmentation 2

a. Characteristics of good segment and outcome 3

4. Targeting 3

a. Factors to be considered 4

b. Targeting strategies 4

5. Positioning 5

a. Criteria of successful positioning 5

b. Approaches 6

6. Market Definition 7

a. Dimensions 7

b. Scope of served Market 8

c. BU’s competitive advantage, Relative cost and 9

growth

7. References 9
Marketing Strategy Regarding Segmentation, Targeting and Positioning

Marketing is defined by the American Marketing Association [AMA] as "the activity, set of institutions,
and processes for creating, communicating, delivering, and exchanging offerings that have value for
customers, clients, partners, and society at large”.

As every Department in the organization has its own worth, and thus they have their own goals and
objectives to meet which further lead towards organizational efficiency. Marketing department also has
several objectives as shown in figure 1.

Figure 1: What Marketing is all about

To achieve all above objectives, marketers use to Develop Marketing Mix for their offerings. A bird’s eye
view of this process is illustrated in figure 2.

Now as this is clear that marketing mix is customer

centric so lets have a look on what a market is all
about? How to Segment it? What needs to do for
Focused targeting and what sort of positioning will be
feasible and with what sort of appropriate tactics?

The market for any product is normally made up of

several segments. A ‘market’ after all is the aggregate
of consumers of a given product. And, consumer (the
end user), who makes a market, are of varying
characteristics and buying behavior. In order to
capture the Maximum Market share, Marketers use to

Figure 2: Marketing Mix

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divide the market in different distinct segments and then they come up with most suitable tactics for
each segment, and this approach is known as segmentation. However, Importance of STP
(Segmentation, Targeting and Positioning) can be Determined from Figure 3.

Segmentation

Through segmentation, the marketer can look at the differences among the customer groups and decide
on appropriate strategies/offers for each group. This is precisely why some marketing gurus/experts
have described segmentation as a strategy of dividing the markets for conquering them.

Table 1 shows major approaches that how segmentation can be done.

Segmentation Type Description Example—Variables

Geographics Divides market into different Country, Region, City

geographical units

Demographics Divides market on the basis of age-, gender, income

demographic variables

Firmographics Divides market on the basis of Number of employees,

company-specific variables company size

Behavioral Divides market based on how Website loyality, prior

customers actually buy or use the purchases
product & service

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Occasion (situational) Divides market based on the Routine occasion, special
situation that leads to a product occasion
need, purchase, or use

Psychographics Divides market based on lifestyle Thrill seekers, fun lovers, risk
and personality takers.

Benefits Divides market based on benefits Convenience, economy, quality

or qualities sought from the
product

A very effectively segmented Market obviously leads to certain benefit. Figure 4 depicts the
characteristics of a good segment and its outcomes in the market.

•Facilitates proper
choice of target
marketing
•Higher Profits
•Facilitates tapping of
•Identifiable the market, adapting
•Accesible the offer to the
•sizeable target
Attributes of Reasons/Objecti
•Profitable •Stimulating Innovation
effective ves of Market
•Unique Needs •Makes the marketing
Segmentation •Durable
Segmentation effort more efficient
•measurable and economic
•Compatible •Benefits the customer
•Sustainable customer
relationships in all
phases of customer
life cycle
•Higher Market Share

Figure 4: Characteristics of a good segment and outcomes

Targeting
Once a segment has been identified, a firm must ascertain whether the segment is beneficial for them to
service. The DAMP, meaning Discernible, Accessible, Measurable and Profitable, are used as criteria to
gauge the viability of a target market. DAMP is explained in further detail below:

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Approach Description
Discernible/Distinguishable How a segment can be differentiated from other segments.
Accessible How a segment can be accessed via Marketing Communications produced
by a firm.
Measurable Can the segment be quantified and its size determined?
Profitable Can a sufficient return on investment be attained from a segment's
servicing?
The next step in the targeting process is the level of differentiation involved in a segment serving. Three
modes of differentiation exist, which are commonly applied by firms.

Undifferentiated Where a company produces a like product for all of a market segment.
Differentiated In which a firm produced slight modifications of a product within a
segment.
Niche In which an organisation forges a product to satisfy a specialised target market

Factors to be considered while Targeting the selected market

Two important factors to consider when selecting a target market segment are the attractiveness of the
segment and the fit between the segment and the firm's objectives, resources, and capabilities.

Attractiveness of the segment Suitability of Market Segments

to the Firm
size of the
segment Whether the firm can
offer superior value to
Growth Rate of the customers in the
the Segment segment

competition in The impact of serving

the segment the segment on the
firm's image
Brand Loyalty of
current customers
Access to distribution
attainable channels
Market share
The firm's resources
Sales vs. capital investment
Potential required
Profit
Margin

TARGET MARKET STRATEGIES

There are several different target-market strategies that may be followed. Targeting strategies usually
can be categorized as one of the following:

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 Single-segment strategy - Also known as a concentrated strategy. One market segment (not the
entire market) is served with one marketing mix. A single-segment approach often is the
strategy of choice for smaller companies with limited resources.
Selective specialization- This is a multiple-segment strategy, also known as a differentiated
strategy. Different marketing mixes are offered to different segments. The product itself may or
may not be different - in many cases only the promotional message or distribution channels
vary.
Product specialization- The firm specializes in a particular product and tailors it to different
market segments.
Market specialization- The firm specializes in serving a particular market segment and offers
that segment an array of different products.
Full market coverage - The firm attempts to serve the entire market. This coverage can be
achieved by means of either a mass market strategy in which a single undifferentiated
marketing mix is offered to the entire market, or by a differentiated strategy in which a separate
marketing mix is offered to each segment.

Positioning
Positioning concerns how to position a product in the minds of consumers. A firm often performs this by
producing a perceptual map, which denotes products produced in its industry according to how
consumers perceive their price and quality. From a product's placing on the map, a firm would tailor its
marketing communications to suit meld with the product's perception among consumers.

Generally, there are three types of positioning concepts:

Functional positions Symbolic positions Experiential positions

Solve problems. Self-image enhancement. Provide sensory

Provide benefits to Ego identification. stimulation.
customers. Belongingness and social Provide cognitive
Get favorable perception meaningfulness. stimulation.
by investors (stock profile) Affective fulfillment
and lenders.

CRITERIA’S FOR SUCCESSFUL POSITIONING

Certain criteria are needed to be fulfilled for successful positioning are:-

a. Clarity: - While positioning its brand the firm must be able to position itself in both distinct
value, proposition, and to its target audience.

b. Consistency: - Consistency in positioning means keeping the positioning plank/bases intact

for longtime. Planks should be carefully chosen while positioning. But it does not mean that the
firm must change its positioning bases even though its survival is at stake. The firm must be

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 flexible to the changing environment.

c. Credibility: - The firm must deliver trustworthy and believable value proposition. There
should be perfect match between promise and action.

d. Competitiveness: - For surviving in this competitive and changing environment innovative

resources, talent pool, competitive advantage, strong financial backup etc are very important.

Approaches to Positioning

Approach Description Example

Customer benefit approach Involves putting the brand above Procter & Gamble’s Head &
competitors, based on specific shoulder shampoo functions as
brand attributes and customer anti dandruff and anti hairfall
benefit. shampoo.
Price quality approach Sometimes brands attempts to Rado, Timex, Givenchi, Rolex etc.
offer more in term of service,
feature, quality, or performance.
Manufacturer of such brands
charge higher prices partly to
cover the cost and partly to
communicate the fact that they
are of high quality
The use and application How the product can be used IBM, BlackBerry, Nokia N and E
approach and what features are there? series etc.
The product user approach What kind of Users are using the Zong’s recent ad of Blackberry.
product. User Imagery is being Indigo and Honda ads.
inforced.
The product class approach This approach is use so that the Dove, LUX, Caltex etc.
brand is associated with a
particular product category. This
is generally used when a
category is too crowded
The cultural symbol approach The positioning strategy is based Marlboro, Bonanza ads in
on deeply entrenched cultural Pakistan.
symbol. The use of cultural
symbol can help to differentiate
the brand from competitors
brands.
The competitor approach Many brands use competitor as Ufone’s ad of ganta free, Zongs
a dominant plank in their ad of Free msgs when mobilink
campaign. These brands are withdraw its package of free
positioned following its messages near eid.
competitor. This is an offensive
strategy.

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 Note on Market Definition and Segmentation

Market Definition:
Basically there is no single way to define the market for a given business unit, so market is defined in
various ways along each of several dimensions. The main dimensions include products, type of
customers, geography and stages in the production –distribution system.

Products: products can be defined relatively narrowly or very broadly. The two main dimensions of
products are its functions and the technology used in the product. In a product for every feature, it has a
function. Functions tell the use of the product and what is the product all about. Whether the product is
tangible r intangible, the main thing is t o define the “product” scope of a market by the range of its uses
or functions to be included. Technology and materials used in the product define the industry for the
particular product.

Customers: for industrial products manufacturers, a natural way to classify customers is by industries.
Even within an industry group, customer needs and buying patterns can be different due to different
factors like size location etc. for every product there is a different class and set of customers.

Geography: For a product distribution, first the manufacturer has to decide whether he will go regional,
national or international. The products which are bulky, fragile or perishable limit their operations to
regional markets because of freight costs. When the manufacturer decides to go beyond national
boundaries, tariffs and other barriers may serve as constraints and may lead to cost differentials related
to scope of that particular market.

Level of Production/Distribution: It is very important for a business unit to determine the particular
level at which the business itself and its competitors will operate and which production-distribution level
will they have. Producers of raw material may choose to sell only to other downstream producers or
they may produce finished products themselves, or even both. The producer may choose to do the
vertical integration.

Multidimensional Market Definition:

Market can also be defined with multiple variables i.e. it may be defined by grouping some main
dimensions like customers,functions,and technology. In this way market cells can be made which give a
broader definition of the market. If dimensions of geography and level of production/distribution is also
added, then it will lead to a more elaborate set of possibilities to define the market.

Managers may need to use different definitions of the market to satisfy different purposes but It is
important to note that an appropriate served market definition at one point may not be appropriate
later on, because of changes in customer needs, technology or competitors activities.

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Strategic market Definition:

In order to formulate a business strategy one must consider the scope of the market served by the
business unit, and how more than one strategy can be employed for distinct submarkets or segments
within a served market.

Scope of the served Market:

The served market in which a BU actually competes may be coextensive with a total market in which the
overall effectiveness of competitive performance should be evaluated. Generally the served market will
be considerably narrower in scope and smaller in size than the total market. It’s important to note that
the choices involved in defining the scope of served market are not always the result of conscious and
deliberate decision making. Small business units have resource limitation which restricts the range of
possibilities. However, any set of market cells could constitute a market. To classify some common
approaches to served market definition, we can analyze theoretical possibilities under the area of the
following main categories

1-Breadth of Product line

The businesses which are specialized in technology and have a broad range of product uses, businesses
which are specialized in product uses and have multiple technologies etc

2-Types of Customers

Customers can be categorized as segments of single customer and multiple customer segments

3-Geographic scope

It classifies the business unit as regional, national or international.

4-Level of Production

It helps in determining whether the BU is of raw or semi finished materials or components, finished
products or wholesale or retail distribution.

Customer segmentation

Market segment is defined as an identifiable group of customers with requirements in common that are,
or may become, significant in determining a separate product strategy.

For the purpose of strategy formulation customer segments must have some characteristics that are
common to members of a segment and some characteristics which differ from other segments.

Criteria for Segmentation

It’s important to see that when does a particular segment require the differential strategic treatment?
the general criteria for it includes size of the segment(in actual or potential sales) the incremental costs,

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the magnitude of inter segment differences ,the durability of differences, the cyclical vitality(whether
the segment is more variable then others in relation to overall business cycle or not),the links with other
segments, the utilization of the distinctive competences( it depends on the fit between the
characteristics of the segment and distinctive competences of the BU),and the competition.

BU’s Competitive effectiveness, Relative Costs and Growth Potential:

For the purpose of evaluating the BU’s competitive effectiveness, it seems reasonable that all of the
market shares i.e. share in each served segment, combined share in both segments and share of total
market including irrelevant segments, are relative measures. Cost of a BU generally depends on relative
scale and experience in each of several key” cost sectors” corresponding to different components of
total cost. For the purpose of evaluating future growth and opportunities and potential competitive
threats, we need to view the market more broadly. Potential competitors may include firms selling in
the immediately adjacent market; firms operating in related cost sectors, firms in other geographic
regions and producers of functionally related products whose offerings might be modify to compete
with those of the business unit. Each of these possibilities represents a potential direction for the BU’s
future growth and a new source of competition.

References

Note on Market Definition and Segmentation, Robert D. Buzzell, HBS, 1978

International Marketing, 11/e. Philip R. Cateora
Marketing Management, Philip Kotler