24109: Marketing and
Customer Value
Lecture 4:
Segmentation, Targeting and Positioning
UTS CRICOS 00099F
Lecture 4: Segmentation, Targeting and Positioning
Learning objectives
Explain the broad concept of a ‘market’ and the
target marketing concept
Identify market segmentation variables for
consumer and business markets, and develop
market segment profiles
Select specific target markets based on evaluation
of potential market segments
Understand how to effectively position an offering
to a target market in relation to competitors, and
develop an appropriate marketing mix.
Lecture 4: Segmentation, Targeting and Positioning
Knowing the market
• A market is a group of customers with heterogeneous
needs and wants.
• Consumers and businesses vary considerably in their
needs, wants and demands.
• It is virtually impossible for an organisation to successfully
appeal to every consumer or business.
• To overcome this problem, marketers seeks to identify and
understand those parts of the total market to which it can
offer the most value.
Lecture 4: Segmentation, Targeting and Positioning
Introduction
• Identifying potential customers and understanding their
needs is fundamental to market success.
• Consumer markets consist of households and individuals
that buy products for private consumption.
• Market segmentation enables the organisation to form a
strategy for a group, or segment, that has common features,
rather than try to market to everyone.
• The organisation develops the most effective marketing mix
for each segment. This approach is known as the target
marketing concept.
Lecture 4: Segmentation, Targeting and Positioning
Target marketing
• Individuals and organisations in a market have
different wants, needs and demands.
• The choice of marketing strategy typically involves a
degree of compromise.
• Compromise between the necessity to respond to
the particular desires of potential customers and the
objective of achieving the lowest possible
production and marketing costs
• Principally done through achieving economies of
scale.
Lecture 4: Segmentation, Targeting and Positioning
Target marketing
• Target marketing is based on three premises.
• Individual buyers or groups of buyers can be identified.
• Sellers understand the needs of buyers.
• Sellers seek to shape their offer to meet the needs of target buyers.
Lecture 4: Segmentation, Targeting and Positioning
Target marketing
• Buyers have common wants, needs and demands.
Mass marketing
• Buyers have unique wants, needs and demands.
One-to-one marketing
• The market contains subgroups.
Target marketing: target specific subgroups
Lecture 4: Segmentation, Targeting and Positioning
Mass marketing
• A mass marketer sees buyers as having common
wants, needs and demands.
• A single product offering is created, communicated
and delivered to meet the needs of most people in
the market.
• This is an undifferentiated approach to marketing.
• Organisations that practice mass marketing can
capture very large markets at very low cost per unit,
ensuring high levels of profitability.
• This strategy is characteristic of commodity
products and global mass market products.
Lecture 4: Segmentation, Targeting and Positioning
Mass marketing
Lecture 4: Segmentation, Targeting and Positioning
One-to-one marketing
• The one‐to‐one marketer seeks to appeal to each
customer by providing a unique, customised
offering that will meet their individual needs.
• Many small services businesses take a one‐to‐one
marketing approach.
• A one-to one approach usually results in higher unit
costs and a more restricted market.
• These conditions typically form the basis of a focus
or niche strategy.
Lecture 4: Segmentation, Targeting and Positioning
One-to-one marketing
Lecture 4: Segmentation, Targeting and Positioning
Target marketing
• When choosing target markets, the organisation will
generally consider three factors.
1. Its own resources
2. Market demand
3. Competition.
• With a differentiated targeting strategy, an
organisation identifies a range of target market
segments
• These cover the majority of the total market.
• For each market segment the organisation develops
a tailored marketing mix.
Lecture 4: Segmentation, Targeting and Positioning
Target marketing
Lecture 4: Segmentation, Targeting and Positioning
Product and market specialisation
• Small organisations with limited financial resources
frequently adopt one of the following specialised
approaches to target marketing.
• Product specialisation
• Market specialisation
• Product–market specialisation.
Lecture 4: Segmentation, Targeting and Positioning
Product and market specialisation
• Specialisation approaches work if:
(1) The market is characterised by a wide range of needs and
product preferences.
(2) Clear market segments/product categories are identified.
(3) Market is clearly divided
(4) Market segments/product categories are profitable enough.
(5) Segments/product categories are actionable.
Lecture 4: Segmentation, Targeting and Positioning
The target marketing process
• The target marketing process is a fundamental
component of marketing strategy for any
organisation.
• The process involves three main stages, with each
requiring detailed analysis and decision making.
• Segmentation
• Targeting
• Positioning.
Lecture 4: Segmentation, Targeting and Positioning
Market segmentation
• The first stage of the target marketing process is
market segmentation.
• There are two steps in the market segmentation
phase.
1. Identifying variables that can be used to define
meaningful market segments
2. Profiling the market segments so they can be
assessed in the second stage of the target
marketing process.
Lecture 4: Segmentation, Targeting and Positioning
Identify segmentation variables
• Segmentation variables are characteristics that
buyers (i.e. individuals, groups or organisations)
have in common and that might be closely related
to their purchasing behaviour.
• The possible variables for segmenting consumer
markets fall into four broad categories.
1. Geographic
2. Demographic
3. Psychographic
4. Behavioural.
Lecture 4: Segmentation, Targeting and Positioning
Geographic segmentation
• Geographic variables are reliable predictors of
customer needs and purchasing behaviours for a
wide range of products.
• Useful geographic variables include:
• climate
• local population density
• region
• topography
• urban, suburban and rural location.
Lecture 4: Segmentation, Targeting and Positioning
Demographic segmentation
• Demographic segmentation is based on
demographic variables, which are related to the
quantifiable social characteristics of populations.
• Useful demographic variables include:
• age
• ethnicity
• household composition
• income
• gender.
Lecture 4: Segmentation, Targeting and Positioning
Demographic segmentation
Lecture 4: Segmentation, Targeting and Positioning
Psychographic segmentation
• Like demographic and geographic variables,
psychographic variables (psychology plus
demographics) are based on consumer
characteristics.
• Psychographic segmentation is based on
differences in:
• psychological traits (personality attributes and
motives)
• geodemographics
• lifestyles (the expression of the two former
categories).
Lecture 4: Segmentation, Targeting and Positioning
Psychographic segmentation
Lecture 4: Segmentation, Targeting and Positioning
Behavioural segmentation
• Behavioural segmentation is not based on
consumer characteristics.
• Likely to be a better indicator of market segments
and their purchasing behaviour.
• Behavioural variables include:
• benefit expectations
• brand loyalty
• occasion
• price sensitivity
• volume of usage.
Lecture 4: Segmentation, Targeting and Positioning
Segmenting business markets
• Business markets are often characterised by a
small number of buyers, each of which might
display a very close relationship with the seller
• Traditional market segmentation variables may be
less relevant.
• ‘Customised’ or ‘one‐to‐one’ marketing may be the
most logical approach.
• Demographic equivalent relates to industry.
• Geographic indicator of buyers in a certain area.
Lecture 4: Segmentation, Targeting and Positioning
Effective segmentation criteria
• An almost limitless number of segments can be
created using segmentation variables.
• It is crucial that the segments are evaluated against
the following criteria to ensure the segment is
worthwhile in pursuing.
• Measurability
• Accessibility
• Substantiality
• Practicability.
Lecture 4: Segmentation, Targeting and Positioning
Profile market segments
• Having identified the range of ways in which market
segments can be described, the next task is to
develop a market segment profile.
• This describes the typical potential customer in the
market segment — the common features shared by
members of market segments and how they differ
between market segments.
• Segment profiles will typically be described in terms
of a number of segmentation variables.
Lecture 4: Segmentation, Targeting and Positioning
Market targeting
• Market targeting involves a systematic examination
of the range of possible market segments.
• Potential sales volume
• Potential revenues
• Ability of the organisation to satisfy the expectations.
• It requires a close understanding of competitors
• How their offerings are seen by potential target
market segments.
• It is important to realise that no company or brand
can be all things to all people.
Lecture 4: Segmentation, Targeting and Positioning
Evaluate potential segments
• The evaluation of potential market segments involves
detailed and rigorous analysis of:
• sales potential
• competitive situation
• cost structure.
• SWOT is a good tool to use.
• Strengths & weaknesses:
Evaluate what the company’s strengths & weaknesses are
• Opportunities & threats:
Evaluate whether target market is attractive
Evaluate whether target market is good fit with the
company’s strengths & weaknesses
Lecture 4: Segmentation, Targeting and Positioning
Select target markets
• Estimating market potential in each target market
segment is important.
• It determines whether the chosen target market
strategy will lead to healthy sales volumes and
sustainable profitability.
• Selecting particular market segments (and deciding
to ignore others) is therefore at the heart of the
marketing concept.
• The organisation is no longer referring to an
individual buyer or the entire mass market — it is
now a target market segment or segments.
Lecture 4: Segmentation, Targeting and Positioning
Positioning
• Positioning describes how target markets perceive
the organisation’s offer relative to competing offers.
• It is how customers distinguish the organisation, its
products and its brands from competitors.
• Consideration for when they are selecting from
among the available alternatives.
• Notice that positioning is based on customer
perceptions.
• May or may not closely correspond with the
product’s objective characteristics.
Lecture 4: Segmentation, Targeting and Positioning
Determine positioning for each segment
• To determine the appropriate positioning for its
products, an organisation needs to undertake
detailed market research
• To understand its current position in the minds of its
target market segments.
• A common technique for determining positioning is
called perceptual mapping.
• Typically produces two‐dimensional maps showing
how each of the competing brands relate to each
other in terms of a range of product attributes.
Lecture 4: Segmentation, Targeting and Positioning
Brand positioning
Lecture 4: Segmentation, Targeting and Positioning
Brand re-positioning
Lecture 4: Segmentation, Targeting and Positioning
Analysing current positioning
• Establishing an organisation’s current positioning is
of strategic importance.
• It should be undertaken based on rigorous analysis
and market research.
• Some commonly used positioning variables include:
• attributes
• use/application
• product user
• price and quality
• product class.
Lecture 4: Segmentation, Targeting and Positioning
Determine the marketing mix for each segment
• The final step in the target marketing process is to
determine an appropriate marketing mix for each
target market segment.
• The marketing mix for each segment should:
• be consistent with the desired positioning
• be internally consistent
• be sustainable in the long term.
Lecture 4: Segmentation, Targeting and Positioning
Wrapping up
Next week Product
Quiz next week during your tutorial location
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