Week 5 - Strategic Segmentation, Targeting & Positioning.

Consumers, Markets and

Trends

Learning Outcomes
Upon the completion of this week of study you will be able to:
LO.1 Apply critical understanding of operational trends, theories and frameworks associated
with financial management, marketing, and operations management used to translate strategy
into operational practice
LO.2 Gain an understanding of key relationships and engagement challenges and enablers
to create optimum conditions for operationalising strategy
LO.3 Critically consider the methods, tools, skills and competencies required to
operationalise strategy through projects
LO.4 Evaluate key aspects of practical and achievable operational goals and objectives in order to
deliver the desired strategy outcomes

Contents
1.1 Introduction ............................................................................................................................... 2
1.2 Strategic Segmentation ............................................................................................................. 2
[Link] or Target Marketing.................................................................................................. 5
1.4 Positioning ................................................................................................................................ 7
1.5 Competitors & Markets Analysis.............................................................................................. 7
References ..................................................................................................................................... 10

LJMU-7503-UNIMBA Operationalising the strategy 1|Page

1.1 Introduction
Segmentation, targeting, and positioning are marketing concepts that redefines to whom and how
products are marketed. It focuses, makes relevant, and personalizes your marketing
communications for your customers. The concept is useful because it enables you to identify
your most valuable customer types and then create products and marketing messages that are
specifically designed for them. This enables you to communicate with your target audience more
effectively, customize your messaging, and eventually increase your sales.

1.2 Strategic Segmentation

The technique of dividing customers or potential customers in a market into different groups or
segments, in which customers share a comparable level of interest in the same or comparable set
of needs that are addressed by a distinct marketing proposal is known as
segmentation (McDonald, 2008). The world is populated by a diverse range of consumers, each
of whom has their own specific requirements and patterns of behavior. The goal of market
segmentation is to provide customers with items that cater to their unique requirements and
preferences in terms of how they behave. As a consequence of this, we refer to this as a
"segmenting." Imagine a market as a connected series of separate but related submarkets, each of
which has its own distinct profile. Researching the order of importance of various qualities from
the perspective of customers prior to making a purchase can lead to the discovery of new market
niches by businesses (Kotler, 2001). A vast variety of characteristics that can be found in
customers can be used to develop several kinds of marketing segmentation methods. It's possible
to identify one sector of the market based on the gender of its participants, while another sector
might be distinguished by the age range of its buyers. Along with one's level of cultural
sophistication and one's level of financial success, locality is another general factor used in
market segmentation (Martin, 2011). There is not one single approach that may be taken to
segment a market. It is necessary for a marketer to test various segmentation characteristics, both
on their own and in combination (Kotler & Armstrong, 1996).
Organizations will need to think creatively, be willing to change, and swiftly adapt to the new
ways of conducting business that have emerged in the twenty-first century in order to be
successful in today's global market. Despite this, a significant amount of business must now
contend with a growing proportion of low-volume customers who do not believe that

LJMU-7503-UNIMBA Operationalising the strategy 2|Page

segmentation is worthwhile. Nevertheless, these vendors have to search for diverse groups of
customers who are flexible in the items or services they require and the purchasing patterns they
follow (Kotler & Armstrong, 2008). Previous research has demonstrated that mass marketing
generates the most potential market at the lowest possible cost. This, in turn, can result in
cheaper prices and larger profit margins.

1.2.1 Steps of the Market Segmentation process

Consumer market segmentation includes:

• Geographical
• Demographical
• Behavior
• Psychographic

Geographical Segmentation
For Consumers The geographic segmentation signifies a market divided by location. Geographic
segmentation is based on the belief that consumers who live in the same region share some
related wants and needs and those wants and needs could be very different from the consumers
who are living in other regions of the world. For example, some products and services have high
demand in one region but not demanded in other regions. Despite its meaning, geographic
segmentation may differ from area to area. Geographic biases may depend on the different

LJMU-7503-UNIMBA Operationalising the strategy 3|Page

brands available. In a number of areas, one brand may be very well liked and accepted but it may
not be known by a majority of the consumers (Martin, 2011).

Demographical Segmentation
Demographic segmentation consists of demographic factors such as age, ethnicity, nationality,
occupation, etc. Therefore, with these variables in mind, an organization can choose which
consumer they will accommodate. For example, an organization dealing with the younger
generation will have to target the consumers between the ages of 18 and 45 years, while an
organization dealing the older generation will have to concentrate on consumers between 46 and
up. Demographic segmentation aids an organization in understanding its consumers and
satisfying their wants and needs. In today’s global market, competition is driven by a strong
competition causing demographic marketing analysis to be a great advantage to any organization
(Martin, 2011).

Behavior Segmentation
A variety of strategies for segmentation is available. However, previous studies show
recommendations that behavior-based strategies work well for most organizations. Segmentation
based on consumer behavior variables normally included a sub-segment of consumer
segmentation. Organizations often collect this data to see the segment that best fits their
consumer behavior. Behavioral segmentation can be the answer for a great deal of organizations
on where to lavish their next marketing currency (Martin, 2011).

Psychographic Segmentation
Psychographic segmentation was developed by marketing researchers to correlate personality
with brands. Psychographics is classified as “the study of personality, values, attitudes, interests,
and lifestyles.” Organizations need to know their consumers‟ habits to effectively connect with
them and for the consumer to identify the organization’s products or services. Psychographic
segmentation acts on the psychology of the prospective consumer and helps the merchant decide
how he or she must manage their consumer that belongs to any specific segment (Martin, 2011).

LJMU-7503-UNIMBA Operationalising the strategy 4|Page

Requirements for effective segmentation (Jobber & Ellis Chadwick, 2016, p.222)
• Market factors & attractiveness
• Capability to compete
• Political, social and environmental factors

Market Attractiveness: It is important to determine whether it would

be profitable to enter a market segment because a company has to
expend huge amount of resources in developing a particular marketing
mix for the prospective target segment. Following factors should be
evaluated in finding out whether a particular market segment is worth
pursuing.
Nature of competition: Companies that are willing to innovate so that
they are able to serve their customers better, force their competitors to do
the same. Though competitors have to expend resources to maintain
competitive parity, they become more able organizations and their
ability to serve customers improves. But, when competitors just cut price
to become more attractive to customers, it is ruinous to the segment, and
competitors should not play the price game at all. They should instead
innovate aggressively to differentiate their offerings and provide more
value to customers. Therefore, ‘value’ competitors are always good for a
segment, and it is the ‘price’ competitors who should be kept away.
Depending on the nature of industry, quality of competitors would be
related to their size, financial strength, innovativeness, technical
capability, production facilities, brand equity, etc.
Political, social and environmental factors: The external environment
presents opportunities and threats for a firm. Changes in the regulatory
framework, economic policies, social values and lifestyles, etc., can alter
the attractiveness of market segments.

[Link] or Target Marketing

The choice of which market segment(s)
Marketto serve with aIt tailored
Attractiveness: marketing
is important mixwhether
to determine (Jobberit & Ellis-
would be profitable to
enter a market segment because a company has to expend huge amount of resources
Chadwick, 2016, p.232). in developing a particular marketing mix for the prospective target segment. Following
factors should be evaluated in finding out whether a particular market segment is
worth pursuing.
Target marketing involves breaking a market
Nature into segments
of competition: and then that
Companies concentrating
are willingyour
to innovate so that
theysegments
marketing efforts on one or a few key are able to serve their
consisting of customers better,
the customers forceneeds
whose their and
competitors to do
the same. Though competitors have to expend resources to maintain
desires most closely match your product or service
competitive offerings.
parity, It canmore
they become be theable
keyorganizations
to attracting new
and their
business, increasing sales, and making your business a success. The beauty of target marketingjust
ability to serve customers improves. But, when competitors is cut price
to become more attractive to customers, it is ruinous to the segment, and
that aiming your marketing effortscompetitors
at specific groups
shouldofnotconsumers makes
play the price the at
game promotion,
all. They pricing,
should instead
innovate aggressively to differentiate their offerings and provide more
LJMU-7503-UNIMBA Operationalising value tothe strategy Therefore, ‘value’ competitors are
customers. 5 |always
P a g egood for a
segment, and it is the ‘price’ competitors who should be kept away.
Depending on the nature of industry, quality of competitors would be
related to their size, financial strength, innovativeness, technical
capability, production facilities, brand equity, etc.
and distribution of your products and/or services easier and more cost effective and provides a
focus to all of your marketing activities. Targeted marketing identifies an audience likely to buy
services or products and promotes those services or products to that audience. Once these key
groups are recognized, companies develop marketing campaigns and specific products for those
preferred market segments (Cahill, 1997).
Promotional messages and advertisements are sent to those primary groups instead of mass
marketing without regard to the specific characteristics of the audience. Companies that offer
specialized products or services typically benefit the most from using targeted marketing
strategies. Focusing marketing efforts on specific groups who are more likely to respond
increases the chances that the marketing efforts will be relevant to those groups. When marketing
is relevant, people are more likely to spend money on that service or product. In addition,
targeted marketing typically provides specific information and incentives to people, giving them
a reason to choose that company over competitors in the same industry (Cahill, 1997).

Four Key Targeted Marketing Strategies

• Geographic Strategies find audiences in a certain location, such as a certain state or
neighbourhood.
• Demographic Strategies find audiences with certain characteristics like race, age or
gender.
• Psychological Strategies look for desired personality attributes such as religion or
previous purchases of a certain product.
• Attractiveness and Relative Ability - Once these elements have been determined, the
focus of the marketing campaign is narrowed by determining if the identified audience
is likely to be interested in the specific product. This is evaluated in association with
the ability of the company to meet that audience’s needs and wants.

LJMU-7503-UNIMBA Operationalising the strategy 6|Page

1.4 Positioning
• Target Market- where we want to compete
• Differential advantage – how we wish to compete

Positioning refers to the ability to influence consumer perception regarding a brand or product
relative to competitors. The objective of market positioning is to establish the image or identity
of a brand or product so that consumers perceive it in a certain way.

Types of Positioning Strategies: There are several types of positioning strategies. A few
examples are positioning by:
• Product attributes and benefits: Associating your brand/product with certain
characteristics or with certain beneficial value
• Product price: Associating your brand/product with competitive pricing
• Product quality: Associating your brand/product with high quality
• Product use and application: Associating your brand/product with a specific use
• Competitors: Making consumers think that your brand/product is better than that of your
competitors

1.5 Competitors & Markets Analysis

Competitor identification is a key task for managers interested in scanning their competitive
terrain, shoring up their defences against likely competitive incursions, and planning
competitive attack and response strategies. It is a necessary precursor to the task of competitor
analysis, and the starting point for analysing the dynamics of competitive strategy
(Hatzijordanou, Bohn, & Terzidis, 2019). Before one can assess the relative strengths and
LJMU-7503-UNIMBA Operationalising the strategy 7|Page
 weaknesses of rivals, or track competitive moves and countermoves, one must first identify
the competitive set and develop an accurate sense of the domain in which strategic
interactions are likely to occur. Competitor identification serves as an important function in
several fields. In industrial organization economics, it is associated with the task of defining
markets, which is critical for antitrust and regulatory policy. In marketing, it supports the
analysis of pricing policies, product design, development and positioning, communications
strategy, and channels of distribution. In strategic management, it provides a foundation for
competitor analysis and the analysis of industry structure, conditions of rivalry, and
competitive advantage. One important objective of competitor identification is to increase
managerial awareness of competitive threats and opportunities.

To maximize awareness, it is essential to survey the competitive landscape broadly in the

initial stages of analysis. This can help managers avoid the dangers of a myopic approach to
competitive strategy and will minimize the chance of being blindsided. It can reduce a firm’s
vulnerability to competitive blind spots (Czepiel & Kerin, 2012), which are particularly
troublesome in settings in which industry boundaries are not well defined or are very fluid
and changeable. For example, in emerging industries, in turbulent, high velocity
environments, or in hypercompetitive contexts, there may be a temptation for managers to
pay attention only to competitors who display a product or technology overlap, because
these competitors are salient and because the task of broad scanning is difficult.

However, it is in these settings that competitive encroachments and incursions across

boundaries by indirect and potential competitors may prove to be the greatest threat. A
variety of approaches have been developed to address the task of competitor identification
that are congruent with market definition. Regardless of the analytical approach employed,
conceptually it is generally accepted that competitor identification requires the
simultaneous consideration of both demand side and supply side attributes of putative
competitors and their domain (Czepiel & Kerin, 2012). Demand side considerations ensure
that products are substitutable in the eyes of consumers. They include an analysis of the
degree to which products fulfil similar functions and address similar needs. Supply side

LJMU-7503-UNIMBA Operationalising the strategy 8|Page

 considerations address the degree to which firms are similar in term of technological and
production capabilities.
To identify and classify the competitive set, we draw from Peteraf and Bergen (2001) to
propose the framework presented in Figure 1.

Peteraf and Bergen (2001), for the original developments and a more detailed discussion of this
framework for competitor identification.
Withers, Ireland, Miller, Harrison, & Boss (2018), supports that market commonality and
resource similarity are used to serve different purposes. Specifically, under the category of
market commonality, competitors are sorted based on the degree to which they address similar
customer needs, while under the category of resource similarity, as well as competitors are
sorted based on the degree to which their resource endowment is similar in terms of type or
composition.
Chen (1996, p.106) defines market commonality as ‘the degree of presence that a competitor
manifests in the markets it overlaps with the focal firm’, a definition that serves as an indicator
of a firm’s ‘direct or primary competitors’ and their behavior (Chen, 1996 p.102). The
definition is broadened to take the perspective that firms compete with one another to the extent
that they satisfy the same customer needs. Accordingly, market commonalty as the degree to
which a given competitor overlaps with the focal firm in terms of customer needs served.
LJMU-7503-UNIMBA Operationalising the strategy 9|Page
References

Cahill, D. J. (1997). Target marketing and segmentation: valid and useful tools for
marketing. Management Decision.
Chen M.J. (1996). Competitor analysis and interfirm rivalry: toward a theoretical integration.
Academy of Management Review 21: 100–134.
Czepiel, J. A., & Kerin, R. A. (2012). Competitor analysis. In Handbook of marketing strategy.
Edward Elgar Publishing.
Hatzijordanou, N., Bohn, N., & Terzidis, O. (2019). A systematic literature review on competitor
analysis: status quo and start-up specifics. Management Review Quarterly, 69(4), 415-458.
Jobber, D., & Ellis-Chadwick, F. (2012). Principles and practice of marketing (No. 7th).
McGraw-Hill Higher Education.
Kotler, P., Armstrong, G., & Warren, R. (1996). Principles of Marketing, Third Canadian
Edition, Philip Kotler, Gary Armstrong, Margaret H. Cunningham, Robert Warren: Instructor's
Manual. Prentice Hall Canada.
Kotler, K. (2001). A framework of marketing management. Prentice Hall
McDonald, M. (2008). Market Segmentation as a Metaphor: Whoever Heard of Alexander the
Mediocre?. In Marketing Metaphors and Metamorphosis (pp. 62-87). Palgrave Macmillan,
London.
Martin, G. (2011). The importance of marketing segmentation. American Journal of Business
Education (AJBE), 4(6), 15-18.
Peteraf MA, Bergen M. (2001). Scanning Dynamic Competitive Landscapes: A customer and
resource based framework. Working paper, Carlson School of Management, University of
Minnesota.
Withers, M. C., Ireland, R. D., Miller, D., Harrison, J. S., & Boss, D. S. (2018). Competitive
landscape shifts: The influence of strategic entrepreneurship on shifts in market
commonality. Academy of Management Review, 43(3), 349-370.

LJMU-7503-UNIMBA Operationalising the strategy 10 | P a g e