CHAPTER VI: Segmentation, Positioning, and

Target Marketing
Objectives:

At the end of the chapter, the student shall be able to:

➢ Discuss market segmentation
➢ Identify the positioning strategies
➢ Define the business and consumer market segmentation
➢ Create a perceptual map

What is Target Segmentation

Market segmentation is the process of dividing a market of potential customers into groups,
or segments, based on different characteristics. The segments created are composed of consumers
who will respond similarly to marketing strategies and who share traits such as similar interests,
needs, or locations.

Why is market segmentation important for marketers?

Market segmentation makes it easier for marketers to personalize their marketing

campaigns.

By arranging their company’s target market into segmented groups, rather than targeting
each potential customer individually, marketers can be more efficient with their time, money, and
other resources than if they were targeting consumers on an individual level. Grouping similar
consumers together allows marketers to target specific audiences in a cost effective manner.

Market segmentation also reduces the risk of an unsuccessful or ineffective marketing

campaign. When marketers divide a market based on key characteristics and personalize their
strategies based on that information, there is a much higher chance of success than if they were to
create a generic campaign and try to implement it across all segments.

Marketers can also us segmentation to prioritize their target audiences. If segmentation

shows that some consumers would be more likely to buy a product than others, marketers can
better allocate their attention and resources.

65
Criteria for Successful Segmentation

Market segmentation is practiced by most businesses in one form or another, as a way of

streamlining their marketing strategy by dividing broad-based target markets into specific group
of consumers, and devising marketing methods that will appeal to each group.

Clearly defined market segmentation criteria not only ensure that customers are more
likely to identify – and purchase – the product that is right for them; it also minimizes wastage of
resources, reducing the time spent marketing the wrong products to the wrong customers. It is
important, however, to focus resources on market segments whose size, growth and profitability
is good, both immediately and in the long run. The following 5 market segmentation criteria should
be useful when planning your own company’s market segmentation strategy.

A market segment should be:

1. Measurable

Market segments are usually measured in terms of sales value or volume (i.e. the number
of customers within the segment). Reliable market research should be able to identify the size
of a market segment to a reasonable degree of accuracy, so that strategists can then decide
whether, how, and to what extent they should focus their efforts on marketing to this segment.

2. Substantial

Simply put, there would be no point in wasting marketing budget on a market segment that
is insufficiently large, or has negligible spending power. A viable market segment is usually a
homogenous group with clearly defined characteristics such as age group, socio-economic
background and brand perception. Longevity is also important here: no market segmentation
expert would recommend focusing on an unstable customer group that is likely to disperse, or
change beyond recognition within a year or two.

3. Accessible

When demarcating a market segment, it is important to consider how the group might be
accessed and, crucially, whether this falls within the strengths and abilities of the company’s
marketing department. Different segments might respond better to outdoor advertising, social
media campaigns, television infomercials, or any number of other approaches.

4. Differentiable

66
 An ideal market segment should be internally homogeneous (i.e. all customers within the
segment have similar preferences and characteristics), but externally heterogeneous.
Differences between market segments should be clearly defined, so that the campaigns,
products and marketing tools applied to them can be implemented without overlap.

5. Actionable:

The market segment must have practical value – its characteristics must provide supporting
data for a marketing position or sales approach, and this in turn must have outcomes that are
easily quantified, ideally in relation to the existing measurements of the market segment as
defined by initial market research.

A good understanding of the principles of market segmentation is an important building

block of your company’s marketing strategy – the foundation for an efficient, streamlined and
ultimately successful approach to customers, and a means of targeting your products and services
accurately, with the minimum of wastage.

Consumer Market Segmentation

The four bases for segmenting consumer market are as follows: Demographic
Segmentation, Geographic Segmentation, Psychographic Segmentation, and Behavioral
Segmentation.

1. Demographic Segmentation

Demographic segmentation divides the markets into groups based on variables such as age,
gender, family size, income, occupation, education, religion, race and nationality. Demographic
factors are the most popular bases for segmenting the consumer group. One reason is that consumer

67
needs, wants, and usage rates often vary closely with the demographic variables. Moreover,
demographic factors are easier to measure than most other type of variables.

• Age

It is one of the most common demographic variables used to segment markets. Some com-
panies offer different products, or use different marketing approaches for different age groups. For
example, McDonald’s targets children, teens, adults and seniors with different ads and media.
Markets that are commonly segmented by age includes clothing, toys, music, automobiles, soaps,
shampoos and foods.

• Gender

Gender segmentation is used in clothing, cosmetics and magazines.

• Income

Markets are also segmented on the basis of income. Income is used to divide the markets
because it influences the people’s product purchase. It affects a consumer’s buying power and style
of living. Income includes housing, furniture, automobile, clothing, alcoholic, beverages, food,
sporting goods, luxury goods, financial services and travel.

• Family cycle

Product needs vary according to age, number of persons in the household, marital status,
and number and age of children. These variables can be combined into a single variable called
family life cycle. Housing, home appliances, furniture, food and automobile are few of the
numerous product markets segmented by the family cycle stages. Social class can be divided into
upper class, middle class and lower class. Many companies deal in clothing, home furnishing,
leisure activities, design products and services for specific social classes.

2. Geographic Segmentation

Geographic segmentation refers to dividing a market into different geographical units such
as nations, states, regions, cities, or neighborhoods. For example, national newspapers are
published and distributed to different cities in different languages to cater to the needs of the
consumers.

68
 Geographic variables such as climate, terrain, natural resources, and population density
also influence consumer product needs. Companies may divide markets into regions because the
differences in geographic variables can cause consumer needs and wants to differ from one region
to another.

3. Psychographic Segmentation

Psychographic segmentation pertains to lifestyle and personality traits. In the case of

certain products, buying behavior predominantly depends on lifestyle and personality
characteristics.

• Personality characteristics

It refers to a person’s individual character traits, attitudes and habits. Here markets are
segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc. This
type of segmentation is used when a product is similar to many competing products, and consumer
needs for products are not affected by other segmentation variables.

• Lifestyle

It is the manner in which people live and spend their time and money. Lifestyle analysis
provides marketers with a broad view of consumers because it segments the markets into groups
on the basis of activities, interests, beliefs and opinions. Companies making cosmetics, alcoholic
beverages and furniture’s segment market according to the lifestyle.

4. Behavioral Segmentation

In behavioral segmentation, buyers are divided into groups on the basis of their knowledge
of, attitude towards, use of, or response to a product. Behavioral segmentation includes
segmentation on the basis of occasions, user status, usage rate loyalty status, buyer-readiness stage
and attitude.

• Occasion

Buyers can be distinguished according to the occasions when they purchase a product, use
a product, or develop a need to use a product. It helps the firm expand the product usage. For
example, Cadbury’s advertising to promote the product during wedding season is an example of
occasion segmentation.

• User status

69
 Sometimes the markets are segmented on the basis of user status, that is, on the basis of
non-user, ex-user, potential user, first-time user and regular user of the product. Large companies
usually target potential users, whereas smaller firms focus on current users.

• Usage rate

Markets can be distinguished on the basis of usage rate, that is, on the basis of light,
medium and heavy users. Heavy users are often a small percentage of the market, but account for
a high percentage of the total consumption. Marketers usually prefer to attract a heavy user rather
than several light users, and vary their promotional efforts accordingly.

• Loyalty status

Buyers can be divided on the basis of their loyalty status—hardcore loyal (consumer who
buy one brand all the time), split loyal (consumers who are loyal to two or three brands), shifting
loyal (consumers who shift from one brand to another), and switchers (consumers who show no
loyalty to any brand).

• Buyer readiness stage

The six psychological stages through which a person passes when deciding to purchase a
product. The six stages are awareness of the product, knowledge of what it does, interest in the
product, preference over competing products, conviction of the product’s suitability, and purchase.
Marketing campaigns exist in large part to move the target audience through the buyer readiness
stages.

Business Market Segmentation

Business markets can be segmented in a variety of ways depending on the marketer's

overall objectives and product and service offerings. The more specifically and precisely the
market can be segmented, the greater the odds that the marketer will be able to connect with the
audience and compel desired action.

• Geographic Segmentation Based on Location

Geographic segmentation is used to identify business target markets based on where the
businesses are located. In some cases, business marketers will be attempting to appeal to a very
local market segment, such as cleaning services, for instance. In other cases, the market reach
might be much broader, even expanding into global market segments. Geographic segmentation
can be useful for identifying media and marketing channels designed to reach certain geographic
areas most effectively both through marketing messages, as well as through distribution channels.

• Segmentation by Size

70
 Business to business, or B2B, marketers sometimes choose to target potential business
customers based on their size. Size might be measured in terms of number of employees or in
terms of annual sales. Larger companies may represent the potential for more significant sales,
while smaller companies hold value by virtue of the fact that there will be many more of them to
target as potential customers.

Size will also become an issue in determining how to best connect with these organizations
and which individuals within the organizations to target for communications. In small companies,
for example, this task will be much more straight-forward; in larger companies, it can be
challenging to identify the key decision-makers accurately.

• Segmentation by Industry

Industry segmentation may be used by marketers who are selling products with specific
appeal in certain industry segments. For instance, companies that make specialized computer
components will want to identify companies that use the components and then segment these
companies into a targeted group for communications and outreach. Different industry segments
may also have specific needs and challenges that can be addressed through key messaging in
communications. Industry segmentation also holds an advantage in that there are a multitude of
industry-specific trade associations that can be used to connect with these audiences.

• Business Need Segmentation

Segmentation based on business need allows marketers to identify and connect with
businesses that span geographies, size and industry, but share a common need addressed by the
marketer's products or services. For example, virtually every business needs telephone systems
and computers. Marketers may choose to combine segmentation to more narrowly identify their
audience, such as businesses that need accounting software that are located within a certain radius
and are part of the energy utility industry.

Selecting Target Markets

Target market represents a group of individuals who have similar needs, perceptions and
interests. They show inclination towards similar brands and respond equally to market fluctuations.

Individuals who think on the same lines and have similar preferences form the target
audience. Target market includes individuals who have almost similar expectations from the
organizations or marketers.

Given the current state of the economy, having a well-defined target market is more
important than ever. No one can afford to target everyone. Small businesses can effectively
compete with large companies by targeting a niche market.

71
 Many businesses say they target "anyone interested in my services." Some say they target
small-business owners, homeowners, or stay-at-home moms. All of these targets are too general.

Targeting a specific market does not mean that you are excluding people who do not fit
your criteria. Rather, target marketing allows you to focus your marketing dollars and brand
message on a specific market that is more likely to buy from you than other markets. This is a
much more affordable, efficient, and effective way to reach potential clients and generate business.

With a clearly defined target audience, it is much easier to determine where and how to
market your company. Here are some tips to help you define your target market.

• Look at your current customer base.

Who are your current customers, and why do they buy from you? Look for common
characteristics and interests. Which ones bring in the most business? It is very likely that other
people like them could also benefit from your product/service.

• Check out your competition.

Who are your competitors targeting? Who are their current customers? Don't go after the
same market. You may find a niche market that they are overlooking.

• Analyze your product/service.

Write out a list of each feature of your product or service. Next to each feature, list the
benefits it provides (and the benefits of those benefits). For example, a graphic designer offers
high-quality design services. The benefit is a professional company image. A professional image
will attract more customers because they see the company as professional and trustworthy. So
ultimately, the benefit of high-quality design is gaining more customers and making more money.
Once you have your benefits listed, make a list of people who have a need that your benefit fulfills.

• Choose specific demographics to target.

Figure out not only who has a need for your product or service, but also who is most likely
to buy it. Think about the following factors:

o Age
o Location
o Gender
o Income level
o Education level
72
 o Marital or family status
o Occupation
o Ethnic background

• Consider the psychographics of your target.

Psychographics are the more personal characteristics of a person, including:

o Personality
o Attitudes
o Values
o Interests/hobbies
o Lifestyles
o Behavior

Determine how your product or service will fit into your target's lifestyle. How and when
will your target use the product? What features are most appealing to your target? What media
does your target turn to for information? Does your target read the newspaper, search online, or
attend particular events?

• Evaluate your decision.

Once you've decided on a target market, be sure to consider these questions:

o Are there enough people who fit my criteria?

o Will my target really benefit from my product/service? Will they see a need for it?
o Do I understand what drives my target to make decisions?
o Can they afford my product/service?
o Can I reach them with my message? Are they easily accessible?

Consider if your marketing message should be different for each niche. If you can reach
both niches effectively with the same message, then maybe you have broken down your market
too far. Also, if you find there are only 50 people that fit all of your criteria, maybe you should
reevaluate your target. The trick is to find that perfect balance.

You may be asking, "How do I find all this information?" Try searching online for research
others have done on your target. Search for magazine articles and blogs that talk about or to your
target market. Search for blogs and forums where people in your target market communicate their

73
opinions. Look for survey results, or consider conducting a survey of your own. Ask your current
customers for feedback.

Defining your target market is the hard part. Once you know who you are targeting, it is
much easier to figure out which media you can use to reach them and what marketing messages
will resonate with them. Instead of sending direct mail to everyone in your ZIP code, you can send
it only to those who fit your criteria. Save money and get a better return on investment by defining
your target audience.

Positioning Strategies

Positioning strategies can be conceived and developed in a variety of ways. It can be

derived from the object attributes, competition, application, the types of consumers involved, or
the characteristics of the product class. All these attributes represent a different approach in
developing positioning strategies, even though all of them have the common objective of
projecting a favorable image in the minds of the consumers or audience. There are seven
approaches to positioning strategies:

1. Using Product characteristics or Customer Benefits as a positioning strategy

This strategy basically focuses upon the characteristics of the product or customer benefits.
For example, imported items it basically tell or illustrate a variety of product characteristics such
as durability, economy or reliability etc. Some motorbikes are emphasizing on fuel economy, some
on power, looks and others stress on their durability.

You would have seen this in the case of toothpaste market, most toothpaste insists on
‘freshness’ and ‘cavity fighter’ as the product characteristics. It is always tempting to try to position
along several product characteristics, as it is frustrating to have some good characteristics that are
not communicated.

2. Pricing as a positioning strategy

Quality Approach or Positioning by Price-Quality – Lets take an example and understand

this approach just suppose you have to go and buy a pair of jeans, as soon as you enter in the shop
you will find different price rage jeans in the showroom say price ranging from 350 PHP to 2000
PHP. As soon as look at the jeans of 350 PHP you say that it is not good in quality.

Why? Basically because of perception, as most of us perceive that if a product is expensive

will be a quality product where as product that is cheap is lower in quality. If we look at this Price
– quality approach it is important and is largely used in product positioning. In many product
categories, there are brands that deliberately attempt to offer more in terms of service, features

74
or performance. They charge more, partly to cover higher costs and partly to let the consumers
believe that the product is, certainly of higher quality.

3. Positioning strategy based on Use or Application

Basically this type of positioning-by-use represents a second or third position for the brand,
such type of positioning is done deliberately to expand the brand’s market. If you are introducing
new uses of the product that will automatically expand the brand’s market. Nescafe Coffee for
many years positioned itself as a winter product and advertised mainly in winter but the
introduction of cold coffee has developed a positioning strategy for the summer months also.

4. Positioning strategy based on Product Process

Another positioning approach is to associate the product with its users or a class of users.
Makes of casual clothing like jeans have introduced ‘designer labels’ to develop a fashion image.
In this case the expectation is that the model or personality will influence the product’s image by
reflecting the characteristics and image of the model or personality communicated as a product
user.

Johnson and Johnson repositioned its shampoo from one used for babies to one used
by people who wash their hair frequently and therefore need a mild people who wash their hair
frequently and therefore need a mild shampoo. This repositioning resulted in a market share.

5. Positioning strategy based on Product Class

In some product class we have to make sure critical positioning decisions For example,
freeze dried coffee needed to positions itself with respect to regular and instant coffee and similarly
in case of dried milk makers came out with instant breakfast positioned as a breakfast substitute
and virtually identical product positioned as a dietary meal substitute.

6. Positioning strategy based on Cultural Symbols

In today’s world many advertisers are using deeply entrenched cultural symbols
to differentiate their brands from that of competitors. The essential task is to identify something
that is very meaningful to people that other competitors are not using and associate this brand with
that symbol.

7. Positioning strategy based on Competitors

In this type of positioning strategies, an implicit or explicit frame of reference is one or

more competitors. In some cases, reference competitor(s) can be the dominant aspect of the

75
positioning strategies of the firm, the firm either uses the same of similar positioning strategies as
used by the competitors or the advertiser uses a new strategy taking the competitors’ strategy as
the base.

A good example of this would be Colgate and Pepsodent. Colgate when entered into the
market focused on to family protection but when Pepsodent entered into the market with focus on
24 hour protection and basically for kids, Colgate changed its focus from family protection to kid’s
teeth protection which was a positioning strategy adopted because of competition.

Perceptual Mapping

A perceptual map is a visual representation of the perceptions of customers or potential

customers about specific attributes of an organization, brand, product, service, or idea. This
diagrammatic technique (perceptual mapping) asks participants to place products relative to one
another along 2 or more axis. The resulting map shows how consumers see the strengths of
competing products in a particular market.

Perceptual maps are also referred to as position maps and market maps. Examples include:

• Quality vs Price
• Functionality vs Price
• Healthiness vs Tastiness
• Price vs Performance
• Price vs Safety & Reliability

Why create a Perceptual Map

Understanding what your customers think about you and your competitors is crucial to
your success. A perceptual map helps organizations to:

• Understand the thoughts and behaviors of consumers.

• Gain insight into their competition
• Track market trends
• Identify gaps in the market

Use it for:

• Environmental scanning prior to planning

• Developing marketing, branding, and positioning strategies
• Informing product and service development initiatives
• Tracking the performance of new products
• Identifying the extent of damage to products on the decline
• Regular reviews to determine market changes and new trends

76
Who should use Perceptual Maps

Perceptual maps are useful for any organization that wants to identify gaps in the market,
monitor their own products, or look for potential partners or takeover/merger targets.

Perceptual Map Template

The most common format for a perceptual map template is a two-dimensional chart where
the horizontal and vertical axes represent different attributes that you rate on a scale
e.g., Low to High. The map is straightforward and simple to construct and interpret.

Examples of attributes used on a perceptual map template include: price, quality,

performance, packaging, size, features, safety and reliability.

How to create a Perceptual Map

Assemble a group of consumers or across a range of relevant demographics. The quality

of the outcomes is dependent on the insight of the participants, and a diverse group helps to gain a
better insight into the market.

Gathering a large group in one location can be expensive and difficult to coordinate. Using
an online collaborative tool such as Groupmap enables facilitators to engage consumers in different
places at different times and effortlessly combine the results to get an overview.

An example of consumers perception of price and quality of brands in the automobile

industry are mapped below:

77
Communicating Positioning Strategy

Effective communications employ both creativity and strategy to build and maintain the
strong perceptions that attract your target audience and grow your business. Essentially, consistent,
integrated brand communications set your organization apart. What you communicate represents
your organization’s distinctive position in the minds of customers.

The first step is to have a clearly defined brand positioning strategy. Here are the
importance of the following:

• Market research to understand your customers’ needs and how they perceive you and your
team members;
• Understanding the essential benefits of your business and defining how you will provide
value to your chosen market;
• Developing a strong vision statement that states what you want your organization to achieve
over time – this clear strategic focus guides and inspires your team.

If you have undertaken the necessary preparation to define your brand positioning strategy,
you will have a strong foundation. From here, you can develop and deliver a focused
communications campaign.

Here are three key principles to guide your approach to ongoing brand
communications activities.

1. Use communications activities to reinforce your brand benefits.

Define what you will do to communicate with your audience. Your communications
activities may employ a select group of focused channels, or they may be far and wide-reaching.
Common activities include events, advertising, content marketing, newsletters, social media,
promotions, direct mail and media relations.

2. Communication materials should engage the attention of your core audience.

Consider your communication materials from your audience’s viewpoint. They should
serve to quickly attract attention, but also reflect your brand in a positive and professional light.
Your logo and headline must be prominent and designed to drive maximum interest – but not at
the expense of engaging design and a well-considered tone.

78
 Think about the overall look and feel you want to convey. Test your end result by seeking
feedback from people in your audience’s situation. Keep in mind: if you aim to position your
organization as trustworthy and credible, then your communication materials must reflect that.
Your target audiences will respond to materials that look professional and are based on fact.

Professional photography is a valuable tool in engaging with your target audience. To

create a unique image and demonstrate your authenticity, invest in your own photo-shoot. But
make sure you develop a clear brief so that the photographer can tell your story and demonstrate
who you are.

3. Consistently integrate the same key messages into your communications.

You can have the best creative in the world, but if you don’t understand who you are
communicating with and what their drivers are, then your efforts will not translate into the action
clients most commonly seek: sales uplift. Ensure you have a summary collection of key messages
that you use consistently to guide content development from content marketing to event topics.
Once you know what your message is, your communications campaigns will remind your audience
of your brand’s key benefits again and again.

Repositioning

Repositioning is an exciting opportunity to give a product or service a much-needed update.

Repositioning involves drastically altering your brand in order to change what customers think about your
products. Repositioning is usually done due to declining performance or major shifts in the
environment.

Repositioning campaigns can take several forms depending on the specific needs of the
product. Some repositioning efforts focus on improving a brand's customer relations. As social
media platforms have gained more influence, many brands have used repositioning to connect with
internet users by increasing the brand's presence online. Other brands find it necessary to reposition
due to public relations fiascos or negative press. Changing the public's perception of a product is
a critical part of overcoming a bad reputation or responding to complaints.

Repositioning often includes a shift in the brand's overall message. In recent years, many
companies have repositioned products to be more eco-friendly to show the company's commitment
to preserving the environment. Others have adapted messages of giving or societal responsibility
and have established charity foundations or service projects.

Repositioning can involve changing other aspects of a brand or product, including:

• Product price
• Marketing strategy
79
 • Target audience
• Customer engagement
• Color scheme
• Logo design
• Tagline

Positioning Strategy

A positioning strategy is the set of actions and processes to improve the image and visibility
of our brand, company or product. That is the place that our brand occupies in the mind of a
consumer, or what is the same, the perception that we have of a brand or product when compared
with those of the competition. The objective of positioning is to establish the image or identity of
a brand or product so that consumers perceive it in a certain way.

For example:

• A handbag maker may position itself as a luxury status symbol

• A TV maker may position its TV as the most innovative and cutting-edge
• A fast-food restaurant chain may position itself as the provider of cheap meals

How to Create an Effective Market Positioning Strategy

Create a positioning statement that will serve to identify your business and how you want
the brand to be perceived by consumers.

1. Determine company uniqueness by comparing to competitors

Compare and contrast differences between your company and competitors to identify
opportunities. Focus on your strengths and how they can exploit these opportunities.

2. Identify current market position

Identify your existing market position and how the new positioning will be beneficial in
setting you apart from competitors.

3. Competitor positioning analysis

Identify the conditions of the marketplace and the amount of influence each competitor can
have on each other.

4. Develop a positioning strategy

Through the preceding steps, you should achieve an understanding of what your company
is, how your company is different from competitors, the conditions of the marketplace,
opportunities in the marketplace, and how your company can position itself.

80
81