A Brief Note on Segmentation Targeting and Positioning

In class, we have defined marketing as a business function responsible for creating and
retaining customers. This means that marketing is about customer management. We have to
identify the customers and by satisfying their needs better than the competition, they can be
retained. Profitability of a firm is a function of effective marketing through which a firm is able
to retain its customers .Understanding the customer requirements and meeting such
requirements is the key in enhancing the profitability of a firm. A firm attempts to meet the
customer requirements through various activities which are typically referred to as the 4 Ps of
marketing or marketing mix.
Customer Differences and Competition
In any market there is competition and every firm has to compete for the customer. It is the
competition that makes marketing complex and challenging. If there is only one firm in a
market, there is no competition present and the customers do not have any available choice to
select. This situation is called a monopoly. In reality such monopoly situations do not easily
occur in markets.
In most markets there is considerable competition. There are many firms trying to market their
products to the same customers. Because of this, customers have many choices and they
prefer those products which provide them with the maximum benefit, those products that
meet their needs better. The attempt of any company through marketing is therefore to do
better than the competition in meeting customer needs. But, it is impossible for one
organisation to meet the needs of all possible customers better than the competition since the
customers vary and their needs also vary. Customers are selective and firms also must be
selective rather than trying to be every thing for every one. If there is one truth in marketing, it
is the diversity of customers and their varied expectations from products.
Marketing to the Customer of One
All customers are not alike. They have different preferences, different expectations and seek
different benefits from products. For example, many customers may use shampoo but what
they want from a shampoo are different things. Some want the shampoo to clean their hair,
still others expect shampoo to be an anti-dandruff remedy, and some others want the benefit
of conditioning the hair. Some people want the shampoo to prevent fall of hair and yet others
want shampoo to de-tangle hair. It is very difficult, or rather impossible for one company to
offer one shampoo that satisfies all the diverse needs of all the customers. So, in the shampoo
market there is space for many brands and many firms promising different benefits.
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Another example is that of a skin lotion. Some people may have dry skin while some others may
have oily skin. People may have diverse likings for the fragrance of the lotion. Hence different
type of products may be preferred by different customers and indeed this is the case with this
product category. One product alone cannot meet everyones requirements.
In fact, we can say that each customer is unique with own needs, own requirements and own
preferences. For example, if you are buying dress material, each one of you may have your own
preferred material, favourite colour, favourite pattern and favourite design. Further, we may
not want to buy a shirt and then find a lot of other people wearing a similar shirt. I might like to
have a white shirt with thin lines running from top to bottom. Another person may prefer
colourful shirts with flower patterns- say in yellow, blue or green. One of the basic lessons of
marketing is that each customer is unique and different from other customers. The market is
composed of such customers of one which is often the expression used to indicate the innate
differences between people and their preferences in a market.
Customised Marketing
However trying to make a product for each individual customer may not be very profitable or
even practical. It will be very expensive and only in the case of certain speciality products like
luxury automobiles such custom manufacturing is ever practised. For example if you buy a
Rolls-Royce car, the company will design the car taking into consideration your specific
requirements. This kind of an approach is called a customised marketing.
Mass Marketing
Another company may decide to ignore these differences between customers and have only
one product for everyone irrespective of their special needs. Such an approach is called mass
marketing. Mass marketing ignore the differences between customers while customised
marketing tries to understand each customer and make a product uniquely for each one. Henry
Ford the famous entrepreneur and car manufacturer was known for his mass marketing
approach. He believed that only one type of car is required for every customer. Henry Ford is
credited with this famous statement you can have any colour you want as long as it is black.
This kind of an approach can be termed mass marketing. Even today many companies practice
mass marketing. What they believe is the differences between people are not large enough and
one product can meet the needs of every customer. If you buy baking soda, you'll find there is
only one type of baking soda available in the market from all the brands and this is which is the
one you can use for all cooking applications. Baking soda is mass manufactured and mass
marketed.

Target marketing
In between the extremes of customised marketing and mass marketing, we can have a
compromise approach where we look for similarities between customers and the presence of
customer groups. Though we can say that each customer is unique there are also similarities
between them. A company may concentrate on these similarities and decide that there are
groups of customers with similar needs who can be focussed or targeted.
Over a period of time some companies may develop expertise with certain type of customers
having certain specific needs. When you try to be everything to every customer you will end up
being a failure. Therefore in a competitive market, it is better to be specialised and focus on
some customers with some particular needs. This method of being focussed in marketing is
called target marketing. Target marketing is about choosing a group of customers and trying to
meet their particular need.
For example, different customers need different types of toilet soap. But Johnson & Johnson
decided that they will focus only on one group which is the babies. They make soaps for babies
and they have become very successful at this. Their success is partly due to being focussed. This
kind of an approach which falls between customised marketing and mass marketing is called
target marketing.
So we can differentiate between customised marketing, mass marketing and target marketing.
Mass marketing is the way when a company does not discriminate between customers and
offer the same product to everyone. Generally such organizations believe in mass production,
mass distribution and mass promotion of one product to all the buyers. Compared to this, in
target marketing a company is focused in targeting one particular group of customers with the
product designed to appeal to them. In a competitive market it is always a better strategy to
practise target marketing.
Steps in Target Marketing
The target marketing consists of three steps. They are

Segmentation: This is the act of analysing customer differences and dividing the market
into many sub groups.

Targeting: This is selecting one of more of such sub groups identified in the previous
step.

Positioning: Deciding what you want your product to be perceived by such selected sub
groups.

Segmentation
The idea of segmentation is that all customers are not alike. Within each market there are
groups of customers having similar preferences. Such groups of customers are called customer
segments. Market segmentation is therefore identifying groups of such customers having
similar preferences in a market.
Market segmentation consists of dividing the market into homogeneous groups of customers.
The idea is to have groups which are different from each other but share some similar
characteristics within the groups. Such a group of customers may share some characteristics
that make them respond similarly to marketing stimulus.
Segmentation Criteria and Variables
A market can be divided into various segments based around several criteria like age, sex,
income, community etc. These criteria are also called segmentation variables. Usually
segmentation is done using consumer related variables called consumer characteristics. These
are characteristics that describe the customers like gender, age, income etc. We can divide any
market into sub groups using such variables. For example, the market for dress material can be
divided into two basic groups of male and female using sex as criteria. You have a male market
group and female group whose needs are different. There are different magazines published for
men and women (like Vanitha for women), different perfumes for men (like Axe for men) and
women.
The idea of such segmentation using consumer characteristics is that people who are having
different characteristics are different in terms of their expectations from the product. This is
easily understood in the case of sex differences like men and women wanting different dresses
or perfumes. There can be many other consumer characteristics which can be used for
segmentation. These criteria can be demographic characteristics like gender, age, income etc.
The criteria also can be geographic like dividing the Indian market into South Indian market,
north Indian market etc. In fact there can be various criteria using which a market can be
divided. Once such divisions are made, we have to ask the question whether the created
segments are really different or not.
Demographic segmentation
Demographic segmentation is about the use of demographic variables. The demographic
variables which are typically used are gender, age, income etc. The word demographic means
some thing describing a population and use of such variables is a very simple way of
segmenting a market. In many cases such segmentation is very useful. We have already seen
the use of sex for segmentation.
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Another very useful variable for demographic segmentation is the income. It is quite obvious
that people can be divided into subgroups based on income and such groups are having
different preferences in the case of most of the products. For example, people of the upper
income groups may buy different types of cars compared to people of lower income. Say, a
company like BMW will be typically targeting the upper income customers while another
company like Maruti Suzuki really looks at relatively middle income customers. In the case of
detergents, brands like Ariel, Henko or Surf target the higher segment while Nirma focus on the
lower income segments.
The third important variable in demographics is age. People of different age groups have
different needs and they respond differently to marketing. Research suggests that older
customers prefer the colour white in their cars while the younger customers may prefer very
bright eye catching colours like red.
Other demographic variables are there like family size, education, religion, nationality etc which
are also useful for segmentation. The idea is to find the most important characteristic that
discriminate between customers and useful in dividing the market. In the case of certain
products like deodorants, there may be significant differences between male and female and
we cannot ignore it. But in the case of certain other products such differences are there only
between income groups or in some cases religion. For example in the case of food habits, the
religions play a major role. So for a company like Macdonald's, they have to consider different
religious segments before they decide on the menu. Among certain religious groups, pig and
beef are taboo in menu while in certain other cases; beef may be very sought after.
Geographic Segmentation
Geographical variables are also very useful in segmenting the markets. Typically people from
different geographic areas respond differently to products and marketing. There are
differences in taste preferences; there are also different cultural characteristics. In certain
cases even climate can be a useful segmentation variable. In a typical case, a company
manufacturing readymade clothing may be looking at different type of clothing for those from
various parts of the country .So the typical geographic variables that are used in market
segmentation are geographic regions, density of population (urban vs rural), climate etc.
Psychographic Segmentation
Another important segmentation variable is the so-called as psychographic variables.
Psychographics is about graphing the mind in terms of lifestyle, personality etc. If we have
information on consumers psychological characteristics, segmentation can be done using a
combination of such characteristics. For example, people of a certain mental make up might
prefer action and adventure movies while there could be another group who might prefer
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romance and tragedy. These differences cannot be explained by demography, but only by
psychographics. Often market researchers collect data from consumers using surveys on
several aspects of mindset, values, life styles, likes and dislikes before they develop
psychographic segmentation approaches.
Behavioural Segmentation
One last type of segmentation variables are the behavioural variables. You can divide the
markets into segments based on several behavioural variables like usage status, the benefits
sought by the customer from the products, the usage rate, whether there are loyal to the
product or not etc. For example if you consider the usage rate of any product, there are major
differences between the light users of the product and heavy users of the product.
Many of these variables individually or in combination can be used for market segmentation.
Once you divide a market into segments, it is important that we must look at whether the
segments are actually different in terms of marketing. If there are major differences between
the segments in terms of customer profiles and preferences the segmentation variable used is
useful and otherwise segmentation may not make sense.
Targeting
This is the second step in target marketing. There are a variety of ways in which a market can be
segmented and all markets are composed of many segments. There are various segments in
any market and the firm may not need to select all the segments in a market to operate. They
may decide only to choose one or a few of such segments to operate. Market targeting is the
process of selecting one or more such segments. It is important that the right segments are
chosen from the available many and this decision must be made on the basis of attractiveness
of the segment. There are several factors that determine the market attractiveness and some
important criteria commonly used are given below.
Selection Criteria for market segment
Selection of a market segment is based on several factors to measure its attractiveness. The
important factors are the following.
1. The size of the market
Bigger markets are better in terms of potential. What is the size of the market? Is the market
big enough? It may not be always possible to estimate accurately the size of all market
segments. But we must be able to have some idea of its size which is often arrived at using
marketing research.

2. Market growth
What is the growth of the market? Growing markets are attractive markets. If the market is
stagnant or shrinking it is not a good idea to enter into such a market. You must not get into a
market if it is not growing. Even now there may be a market for audio CD players, but it is not a
growing market and new products like MP3 players are taking over the market. Therefore it
does not make any sense in entering into such a market making CD playing music equipments.
3. Degree of Competition
What is the level of competition in the market segment? If the competition in the market
segment is very high, it does not make much sense in entering this particular market. If you
look at the car market, you find that a lot companies are having their products in the lower
segment. Swift and Ritz from Maruti, Getz and I20 from Hyundai, Beat from General Motors,
Polo from Volkswagen, Fabia from Skoda, Figo from Ford, Indica Vista from Tatas and Grande
Punto from Fiat are all competing in the same market between a price age of four to six lakhs
rupees. This is perhaps one of the biggest markets in passenger cars. However because of
tremendous competition in the segment it may not make sense for a new company to enter
into this particular market segment.
Typically these are the three criteria namely the market size, market growth and intensity of
competition that we use to decide whether it makes sense in selecting a particular market
segment. The criteria are the size of the market (is the market big enough?) the growth of the
market (how fast is the market segment growing?) and the level of competition the market
segment. Based on these criteria, the market segments must be evaluated to determine the
attractiveness of each segment.
Niche Segments and Niche Marketing
Sometimes there could be very small market segments which are not big enough to
accommodate more than one player. A company may choose such a small market segment and
become so much of an expert in meeting the highly specialised requirements of the customers
in that segment. When a company does this as a strategy, it can be called niche marketing
and such a small but often highly profitable segment is called a niche segment. In the case of
bathing soaps, segment of babies can be called a very small but a very attractive market
segment. This segment is one where the competition is relatively less and the parents are
prepared to pay a premium for the soap. Also the highly specialized nature of the segment
makes it difficult for many companies to operate. However Johnson and Johnson is a leader in
this market and what they practice is niche marketing. They specialise in the narrow segment
and make baby soaps.
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Differentiation and Positioning

Differentiation and Positioning are the steps in target marketing that follow segmentation and
targeting. Differentiation is about building differences into a firms product compared to the
competing offers while positioning is about making the customer perceive the product as
unique and distinct.
Commodities and product Differentiation
Once we have done the segmentation and selected one or more segments to target, the next
step is positioning and differentiation. In a competitive market if all the products are similar, no
company will get any advantage. In such a market there will be heavy competition and the
profitability will suffer. When there are no differences between different products in a market
such products exist as commodities. Here the customer may not feel there are any differences
between competing products and as a result may not have any strong preferences.
For example it is seen that customers in India do not have any particular choice for petrol or
diesel. Whether it is Indian oil (IOC) or Hindustan Petroleum (HP), they are least bothered.
Petrol and diesel are therefore commodities. In a commoditised market product differences do
not exist, customers do not see any advantages in buying one product over another. Customers
may not be prepared to pay a higher price for one firms product over another. We say that in
such markets product differentiation does not exist.
What is product Differentiation?
So what is product differentiation? Basically product differentiation is about designing
differences in a company's product compared to competition and communicating and
convincing customers about such differences as advantageous to them. For example, the
company Hero Honda, over a period of time has successfully differentiated their bikes as high
on mileage. This is the result of many years of effective advertising and consistent product
quality. People still believe it. Though in todays market there are many other bike makers
providing equally high mileage, still people relate fuel efficiency to Hero Honda. There are many
other examples where companies have successfully differentiated their products.
Differentiation Defined
Differentiation can be defined as the act of designing a set of meaningful differences to
distinguish the companies offer from competitors offers. When differentiation is successfully
done, customers perceive the firms offer as different from the competition. When all products
in the market appear the same to the customer, the product can be said to be a commodity.

None of the players in the market then will get any advantage and the competition will be
primarily based on price and credit.
Differentiation can be done in many ways. Sometimes it can be a real and tangible difference
and sometimes intangible. A company can differentiate their products along for basic
dimensions which are the product, services, personal or image.
1. Product Differentiation
Product differentiation as the term implies, is about designing meaningful differences in the
product itself. BMW cars are known as the ultimate diving machines or the best drivers car.
Here the differences are designed into the product which helps differentiates BMW from any
other companys cars. Product differentiation can be done based on many aspects like features,
performance, durability, style etc.
Features
Features are characteristics that supplement the products basic functioning. When LG markets
their 3-D televisions as flicker free, this is a feature based differentiation.
Performance
Performance or performance quality can be defined as the levels at which the products
primary characteristic operate. Products available in the market can be differentiated based on
different levels of performance quality at which they are designed to perform. If you look at the
mobile phone market, iPhone is manufactured to a higher quality level compared to lower
priced brands like Micro Max and Lava. Similarly Rolex is a brand manufactured to higher
performance quality compared to another brand like Titan.
Durability
Durability is a measure of the products expected life. The functional lives of products are
different and this life can be designed to be different by the company. There are products that
are designed and manufactured to last for a lifetime while other products may last only for a
few years. Godrej Safes and locks are known to last longer and the company differentiates their
products on durability.
Style
Style is subjective and is in the eye of the beholder. Style describes how well the product looks
and feels to the buyer. People are prepared to pay a premium for Rayban sunglasses primarily
because of the style. Style is an intangible variable on which many products are differentiated.
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2. Services differentiation
A company can differentiate their products not only by building such differences into the
physical product but also by excelling in services that are provided to the customer. There can
be significant differences in services like delivery, installation, after sales service and customer
service at the time of purchase. For example Kingfisher airline used to be differentiated from
many other airlines on the quality of service that they provide to the customer at the time of
check-in as well as during the flight. Tata Indicom tries to differentiate their products from
competitors by the superior level of service which they call their Customer Charter. In the
customer Charter, the company make a pledge to the customer about the minimum levels of
service they can expect. Despite severe competition, Maruti Suzuki is able to do well in the
market because of the superior quality of service they provide.
3. Personnel differentiation
Personal differentiation is providing superior customer service by using better trained and
motivated employees to serve the customer. Better employees always contribute to higher
customer satisfaction. So the philosophy of personal differentiation is to use highly trained
personnel to deliver consistently superior quality of customer experience. If you visit
MacDonalds or Pizza Hut outlets you'll be able to experience a higher quality of customer
service. When you enter a supermarket, when the store employees greet you and give you a
shopping cart and also help you in selecting what you want, you feel like patronising the
supermarket. This is an example of personal differentiation.
4. Image differentiation
Image differentiation is another intangible method of differentiating the companys offer from
competition. Many lifestyle and fashion brands are differentiated more on image than on any
significant product differences.

What is positioning?
A firm may design a product to have several differences. But it doesn't mean that these
differences are meaningful or significant to the customer. Positioning is the act of designing the
firms offer in such a manner that it occupies a unique and distinct place in the consumer's
mind.
In a way, positioning goes beyond differentiation. Many products may be different, but they
may not be seen as different and unique by the customers. If in the case of a product the
customers see the product as significantly different and unique we call it well positioned.
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A classic example for positioning is the pain balm brand Moov. There are many pain balms
available in the market. Most of them are generic in the sense that they can be used for any
kind of aches and pains anywhere on the body. But Moov was introduced as a balm primarily
for the backache. They have succeeded in making the customer see Moov as a backache balm.
So whenever you think of Moov, you think of backache balm. It does not mean that you
cannot use Moov for headache or knee ache. But typically people may not use Moov for
headache. Instead they may even buy another balm like Amrithanjan or tiger balm for
headache. This is the case where a product Moov is seen as different and unique. When a
company is able to establish their product as different and unique we will say they have
positioned it successfully.
Positioning is a mind game. The same product can be positioned differently so that people look
at it differently. It is not always done by making the product different but by influencing the
customer to see the product differently. For example there is this chemical called petroleum
jelly which is a commodity. When it is mixed with appropriate colour, fragrance and the
additional ingredients, it is marketed as a solution for cracked lips in winter. The same product
with a different colour, fragrance and another name can be packaged differently and marketed
as a solution for cracked heels in winter. So the ingredients in the product are the same, but
people see it differently. This is the reason why it is said that positioning is more of a mind the
game. Positioning is not what you do to the product, but what you do to the consumers mind
to alter the product perception. The vehicle Maruti Omni can be seen as a van and as a car. The
company would like the customers to perceive it more as a car than as a van and if customers
share this view, it is positioning success.
Positioning defined
Positioning is the act of designing a firms offer to the customer so that it occupies a distinct
and unique place in the target customers mind. While differentiation is trying to make the
product appear different, in positioning we go one step beyond in an attempt to occupy a
unique and distinct position in the consumer's mind. Among the many perceived differences,
one or more of differences are selected and communicated effectively to occupy such a unique
slot in the consumer's mind. What we must keep in mind is that the unique and distinct
position we chose to have in the consumers mind must be relevant to the consumer. Then only
positioning success will lead to business success.
Positioning strategy
Choosing how to position a product is one of the more critical decisions a company can make.
The positioning strategy indicates how a firm wants the customers to think about the product
relative to competition. There are many positioning strategies that are available. Some of the
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common positioning strategies are attributing positioning, benefit positioning, use or

application positioning and user positioning.
Attribute positioning
Attribute positioning is the positioning strategy based on leadership on one of the product
attributes. Customers will always remember the first brand on any attribute though they may
not remember what the second is. For example all of you may remember the first 3D film in
India, but very few will be able to recall the second or the third. This is true with brands also. In
attribute positioning what you're trying to do is to be the first on at least one dimension which
is relevant to the customer. For example despite competition even now, Hero Honda is
perceived as the fuel-efficient bike.
Benefit positioning
Benefit positioning is identifying a relevant benefit which the customer is looking for. Head and
shoulders shampoo is positioned as an antidandruff shampoo.
Use or application positioning
This is to position a brand for a particular use or application. Though cornflakes can be eaten at
any occasion, most of the corn flakes brands are positioned as breakfast cereals. Similarly
though Maggi noodles are consumed by many for breakfast, the positioning is more as a snack
rather than as a staple food.
User positioning
User positioning is developing the positioning strategy based on a very narrowly defined the
user group. A classic example is Johnson & Johnson baby soaps which is identified and known
as soaps for babies.
Positioning statement
A positioning statement is a statement that expresses how a firm want their products to be
perceived by the customers. Often it is useful to develop a clear positioning statement that
captures the essence of position which a company want to occupy in the consumer's mind.
Developing a positioning strategy and converting that into a positioning statement is more of
an art than a science. There are various approaches and templates to do the same. One very
commonly used template for developing a positioning statement is given below.

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Positioning Template Example

For the _____________________ (define target segment), _______________ (name the
brand) is the brand of ______________________ (frame of reference) that
___________________ (point of Difference) because of __________________________
(justification)
By completing the blanks, positioning statement for a brand can be developed. This template
primarily uses the following concepts which need to be identified and filled in.
Define Target segment
We already know what the target segment is. In any positioning statement, the first step is to
define the target segment. A positioning statement is much more useful when we are able to
define the target segment very precisely. For example, Complan is a brand targeted at growing
children and their mothers (buyers) who are worried about childrens growth.
Brand
Ultimately brand is what is positioned as unique and different in the consumer's mind. It is
important that the brand name is also something that contributes to recall and if possible
communicate the positioning to the customer. In the earlier example, Complan is the brand
which is simple to remember and carries a meaning of complete planned food.
Frame of reference
Frame of reference defines in which market category that you want your product to belong. For
example, Titan watches and Ajanta clocks are positioned more as a gift and so they compete
more with other gift items available in the market. Complan is positioned in the health
beverage category rather than as a tasty chocolate or mango drink.
Point of difference
Within the product category our product must be different from competition on one or more
dimensions. It is important that we select the difference on which we can base our position and
marketing decisions. Complan helps children grow tall faster while the competitor Boost focus
on keywords like stamina and energy than on growth. In marketing speak the single unique
point of difference which a company promote to the customer is also called the Unique Selling
Proposition or USP.

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Justification
Justification is a reason to believe which you must provide to the customer. Why should the
customer believe you? It must be something that is convincing to the customer. Complan
suggest that it helps children grow faster because it contains the 23 vital nutrients that growing
children need.
Now if we take the example of Complan, we may use the template and write the positioning
statement as follows.

For Children (define target segment), Complan (name the brand) is the brand of health
beverage (frame of reference) that help them grow faster (point of Difference) because of 23
vital nutrients it contains which growing children need (justification)

Can you use the positioning statement template to develop such a positioning statement for
any brand of your choice?

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