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

and time