CHAPTER FOUR

MARKET SEGMENTATION, TARGETING, AND POSITIONING

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 CONT….
CHAPTER OBJECTIVES
 At the end of this chapter, the students will be able to:
• Define market segmentation, market targeting, and
positioning
• List and explain the levels and patterns of market
segmentation
• List and discuss the primary bases for segmenting
consumer, business and international markets.
• Explain how companies identify attractive market segments
• What targeting strategies can a company use to select and
enter the most attractive market segments?
• How companies identify and select positioning strategies

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 Cont..
• Organizations that sell to consumer and business
markets recognize that they cannot appeal to all
buyers in those markets, or at least not to all
buyers in the same way. This is B/C:

 Buyers are too numerous, too widely scattered

and too varied in their needs and buying practices.

 Companies vary widely in their abilities to serve

different segments of the market.
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 Cont…
• Few companies now use mass marketing.
• Instead, they practice target marketing - identifying
market segments, selecting one or more of them, and
developing products and marketing mixes tailored to
each.
• In this way, sellers can develop the right product for
each target market and adjust their prices, distribution
channels and advertising to reach the target market
efficiently.
• Instead of scattering their marketing efforts, they can
focus on the buyers who have greater purchase interest.

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 Market Segmentation
 It is dividing a market in to smaller groups of buyer with
distinct need characteristics, or behavior who might
require separate product or marketing mixes.

 Markets consist of buyers, and buyers differ in one or

more ways. They may differ in their wants, resources,
locations, buying attitudes and buying practices.

 Through market segmentation, companies divide large,

heterogeneous markets into smaller segments that can be
reached more efficiently with products and services that
match their unique needs.
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  Levels of Market Segmentation

• market segmentation can be carried out at many different

levels.
• Companies can practice no segmentation (mass
marketing), complete segmentation (micromarketing) or
something in between (segment marketing or niche
marketing).

undifferentiated (Mass) marketing

• mass producing, mass distributing and mass promoting
about the same product in about the same way to all
consumers.
• It focus on commonness but it ignore the d/t
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 Cont…

 The main advantage of this target is achieving

economies of scale.
 The limitations are: problems arise in appealing all the
customers with one offer and difficult in penetrating
focused markets
 The traditional argument for mass marketing is that it
creates the largest potential market, which leads to the
lowest costs, which in turn can translate into either lower
prices or higher margins.
• However, many factors now make mass marketing more
difficult.
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 Cont..

• For example:
 the world's mass markets have slowly splintered into a
profusion of smaller segments
 The proliferation of advertising media and distribution
channels has also made it difficult to practice 'one
size fits all' marketing:
 Generally, No wonder some have claimed that mass
marketing is dying.
• Not surprisingly, many companies are retreating from
mass marketing and turning to segmented marketing.

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  Segmenting Markets
• A company that practices segment marketing recognizes
that buyers differ in their needs, perceptions and buying
behaviors.
• The company tries to isolate broad segments that make up
a market and adapts its offers to match more closely the
needs of one or more segments.
• It focus on d/t but ignore commonness.
• With this strategy a firm decides to target several market
segment and design separate offers for each.
• Advantage: The company hopes increasing sales and
strong position with in each market segment
• The main problem is increasing cost.
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  Concentrating or Niche Marketing strategy
 It is applicable when the company resource is limited.
It mainly focus on small groups.
Advantage: increase sales
Disadvantage: it involves higher risks. i.e. If the
competitors decide to enter the market, the company
automatically destroyed.

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 Cont…

• Niche marketing focuses on subgroups within these

segments.
• A niche is a more narrowly defined group, usually
identified by dividing a segment into sub segments or by
defining a group with a distinctive set of traits who may
seek a special combination of benefits.

• Niche offers smaller companies an opportunity to

compete by focusing their limited resources on serving
niches that may be unimportant to or overlooked by
larger competitors.
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  Micro marketing

• Micromarketing is the practice of tailoring

products and marketing programs to suit the
tastes of specific individuals and locations.
•  Micromarketing includes:
1. local marketing (tailoring brands and
promotions to the needs and wants of local
customer groups - cities, neighborhoods and
even specific stores)

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 Cont…

2. individual marketing.(tailoring products and

marketing programs to the needs and
preferences of individual customers)

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 Benefits of Market Segmentation

Specifically the advantages of market segmentation

can be listed as follows:
 Channeling money and effort to a particularly most profitable
market.
 Designing and developing products, which really match with the
market demand because it focuses on selected target markets.
 It helps to determine an appropriate promotional appeal for a firm.
 Market segmentation enables small business organizations to have a
better chance to compete with big companies.
 Flexibility of organizational resources and programs in the time of
fierce competition can be done at a lower cost.
 Choosing the best promotional activity and channel of distribution
at a relatively lower cost may be easier.
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Bases Segmenting Consumer Markets

Geographic Demographic
segmentation segmentation

Psychographic Behavioral
segmentation segmentation

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• Geographic segmentation calls for dividing the market into
different geographical units, such as:
 nations
 states
Regions
 counties
 cities or
 neighbourhoods.

• A company may decide to operate in one or a few

geographical areas, or to operate in all areas but pay
attention to geographical differences in needs and wants.
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• 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.

. Demographic factors are the most popular bases

for segmenting customer groups. B/C of :
1. consumer needs, wants and usage rates often
vary closely with demographic variables.
2. demographic variables are easier to measure
than most other types of variable.

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Example: based on age

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• Psychographic segmentation divides buyers
into groups based on:
social class
lifestyle or
personality characteristics.

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Behavioral segmentation divides buyers into groups
based on their knowledge, attitudes, uses, or
responses to a product

• Occasions
• Benefits sought
• User status
• Usage rate
• Loyalty status

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Loyalty Status

Hard-core

Split loyal

Shifting loyal

Switchers

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Segmenting for Business Markets

Demographic
Demographic

Operating
Operating Variable
Variable

Purchasing
Purchasing Approaches
Approaches

Situational
Situational Factors
Factors
Personal
Personal
Characteristics
Characteristics
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 Demographic
• Industry
• Company size.
• Location.

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 Operating variables
• Technology
• User/non-user status:
heavy, medium or light users, or non-users?
• Customer capabilities.

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 Purchasing approaches

• Purchasing function
organizations.
• Power structure.
• Nature of existing relationships
• General purchase policies.

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 Situational factors

• Urgency,
• Specific application.
• Size of order.

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 Personal characteristics

• Buyer-seller similarity
• Attitudes towards risk.
• Loyalty.

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Effective Segmentation Criteria
Measurable
Measurable

Substantial
Substantial

Accessible
Accessible

Differentiable
Differentiable

Actionable
Actionable

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 Target market
• Not all segments that a marketer identifies are
going to be served in most cases.
• Some of the buyer groups may not be considered
because of different reasons; (i.e. focus on selected
segment / target market).

• Target market: is a set of buyers sharing common

needs or characteristics that the company decides
to serve.

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 Evaluating Market Segments
• Evaluating Market Segments at three basic factors.

1. Segment size and growth

2.Segment's structural attractiveness –
competitors, Existences of many actual or
potential substitute products and buyers with
strong bargaining power
3. The company objectives and resources.
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 Selection Strategies

• The company should enter only segments in which it can offer superior value
and gain advantages over its rivals. There are different strategies for
market selection.
1. Single segment concentration : This strategy involves selecting one
segment from within the total market. A single segment strategy
enables a seller to penetrate one market in depth and to acquire
reputation as a specialist or an expert in the limited market.
• Advantages:
• Specialization in need identification and satisfaction
• Using overall effort to one group of customers (market)
• Low cost operation (avoids cost wastage)
• Disadvantages
• Change of consumers from one to other place
• Loss if preferences /or tastes of consumes change b/c no other segment
is under the marketer.
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 2. Selective Specialization
• In selective specialization, a firm focuses on selected
segments for profitability. The segments are assumed to
have no basic similarity and all are profitable.
• Advantage: diversifying the firm’s risk.
3. Product Specialization
 Another approach is to specialize in making a certain
product for several segments.
 The approach is more workable when the firm’s capacity
and the technology changes are harmonized.
 The downside risk is that the product may be
supplanted by an entirely new technology.
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 Cont..

4. Market specialization
• Firms following this approach provide different products
to the same market.
 However, the downside risk is that the customer group
may have its budgets cut.
5. Full Market Coverage
• a firm attempts to serve all customer groups with all of
the products they might need.
• Only very large firms can undertake a full market
coverage strategy in 2 broad ways: through
undifferentiated marketing or differentiated marketing.

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 THE CONCEPT OF POSITIONING
 Definition of positioning 
• Positioning is the act of designing the company's offering
and image to occupy a distinctive place in the mind of the
target market.

• It involves inserting the brand's unique benefits and

differentiation in customers' minds.
• The end result of positioning is the successful creation of a
customer focused value proposition - a basic reason why
the target market should buy the product.
• Positioning is not what you do to a product but what you
do to the mind of the prospect.
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 CONT..

 Positioning involves the ffo tasks or steps:

1. identifying a set of possible competitive advantages
2. Choosing the right competitive advantage
3. Selecting an over all positing strategy
4. Communicating and delivering the choosen position
Competitive advantage: refers to the gain of the company
from the customer either by offering low price or other
factors.
 Differentiation actors are: product, price, people,
service, channels and image

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 2nd step
The positioning idea (difference) to be
promoted is worth promoting to the extent that
it satisfies the following criteria.

Important Distinctive

Communic
Superior able 37
 Cont…

 a company must avoid four major positioning errors.

• Under positioning: Some companies discover that buyers have only a
vague idea of the brand. The brand is seen as just another entry in a
crowded marketplace.
• Over positioning: Buyers may have too narrow image of the brand.
Thus, a consumer might think that the offering is very expensive and
something unachievable when in fact it may be affordable for an average
consumer.
• Confused positioning: Buyers might have a confused image of a brand
resulting from the company’s making too many claims or changing the
brand’s positioning too frequently.
• Doubtful positioning: Buyers may find it hard to believe the brand
claims in view of the product’s features, price or manufacturer.
Positioning statements and claims should be well supported with
product’s performances.
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Positioning Strategies

• More for more

• More for the same
• The same for less
• Less for much less
• More for less

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 Cont…

• The important thing is that each company

must develop its own winning positioning
strategy. i.e. the same for the same.
• “the same for more”, “less for more”, and”
less for the same” – will inevitably fail.
• Here, customers soon realize that they have
been undeserved, tell others, and abandon
the brand.

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. Six steps in market segmentation, targeting and
positioning

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