Module 2: Marketing Segmentation and Positioning

Marketing segmentation and positioning are two important ideas in marketing that
help a company sell its products better.

Marketing segmentation means dividing a big market into smaller groups of

customers. These groups are formed based on similar needs, preferences, age, income,
lifestyle, or buying behaviour. Since all customers are not the same, a company
cannot satisfy everyone in the same way. By segmenting the market, a company can
understand different types of customers clearly and design products and marketing
messages that suit each group.

Positioning means creating a clear image of a product in the minds of customers.

After selecting a particular market segment, the company decides how it wants
customers to see its product compared to competitors. Positioning focuses on
highlighting special features, benefits, price, quality, or usage of the product so that
customers remember it in a specific way.

Example:
A mobile phone company divides the market into different segments such as students,
working professionals, and senior citizens. This is market segmentation. The company
then launches a budget smartphone with good battery life and internet features
especially for students and promotes it as “the best affordable phone for online classes
and entertainment.” This is product positioning.

Example:

A publisher wants to sell books related to marketing. It divides the market into
different groups such as general marketing students, digital marketing students, MBA
students, and working professionals. This division of the market into smaller groups
based on their field of study and needs is called market segmentation.

After this, the publisher focuses only on digital marketing students. It designs a book
that covers SEO, social media marketing, content marketing, and online advertising in
a simple and practical way. The book is positioned as “an easy-to-understand,
practical guide specially made for digital marketing students with real-life examples.”
This clear image created in the minds of students is called positioning.

Importance of market segmentation

1. Helps to understand customers better: Market segmentation helps a business

know who its customers are and what they really want. When customers are
divided into small groups, it becomes easy to understand their needs, likes, and
buying habits.
2. Makes marketing simple and effective: When a company knows its target
customers, it can advertise only to them. This saves money and effort, and the
message reaches the right people at the right time.
3. Helps in making the right product and fixing the right price: Different
customers want different products and can pay different prices. Market
segmentation helps companies design suitable products and decide prices
according to the customers’ ability to pay.
4. Helps to face competition and build loyal customers: By serving a particular
group of customers better than others, a company can stand out from competitors.
Satisfied customers are more likely to buy again and stay loyal to the brand.
5. Saves resources and increases profit: Instead of trying to sell to everyone,
companies focus only on selected customer groups. This reduces wastage of
money and effort, improves sales, and increases profit.

Requirements for effective market segmentation

1) Measurable
The size, purchasing power, and characteristics of the market segment should be
capable of measurement. The marketer should be able to estimate the number of
buyers and their buying capacity in order to plan marketing strategies effectively.
2) Substantial
The market segment should be sufficiently large and profitable to be served. It
should justify the cost and effort involved in developing separate marketing
programmes for the segment.
3) Accessible
The market segment should be effectively reached and served through
 appropriate distribution channels and promotional media. If a segment cannot be
reached, it cannot be targeted successfully.
4) Differentiable
The market segments should be clearly distinguishable and should respond
differently to different marketing mix elements and programmes. If segments do
not show distinct responses, segmentation loses its significance.
5) Actionable
Effective programmes should be designed for attracting and serving the selected
market segments. The firm must be able to develop suitable marketing strategies
for each segment.
6) Feasible
The segment should be practicable to serve in terms of the firm’s financial,
managerial, and technological resources. The organisation should possess the
capability to meet the requirements of the selected segment.
7) General considerations
The segments should be identifiable, stable, and consistent over time, and they
should be in line with the firm’s objectives and market conditions to ensure long-
term effectiveness of segmentation.

Bases

Market segmentation refers to the process of dividing a broad and heterogeneous

market into smaller and more homogeneous groups of consumers who have similar
needs, preferences, and buying behaviour. Since customers differ in many ways, it is
difficult for a marketer to satisfy all of them with a single product or marketing
strategy. Therefore, segmentation helps firms to identify specific groups of customers
and design suitable products and marketing programmes for them.

The main bases for market segmentation are explained below with suitable examples:

Geographic segmentation
Geographic segmentation means dividing the market on the basis of geographical
factors such as country, region, state, city, climate, and population density (urban or
rural). Consumers living in different locations often have different tastes, habits, and
needs due to climate, culture, and lifestyle. Marketers use this base to customize their
products and marketing efforts according to the location of the target market.
For example, woollen clothes are marketed more in cold regions like Himachal
Pradesh and Kashmir, while light cotton clothes are preferred in hot regions like West
Bengal and Rajasthan. Similarly, food companies sell spicy food in South India and
less spicy food in North India based on regional taste preferences.

Demographic segmentation
Demographic segmentation divides the market on the basis of demographic variables
such as age, gender, income, occupation, education, family size, religion, and social
class. This is one of the most popular and widely used bases because demographic
characteristics strongly influence consumer needs and buying behaviour, and the data
is easy to collect and measure.
For example, baby products like diapers and baby food are targeted at parents with
infants. Cosmetics and personal care products are often designed separately for men
and women. Luxury cars and premium smartphones are targeted at high-income
groups, while budget products are designed for middle- and lower-income groups.

Psychographic segmentation
Psychographic segmentation is based on psychological and lifestyle-related factors
such as lifestyle, personality traits, values, attitudes, interests, and opinions. Even
consumers with similar demographic characteristics may show different buying
behaviour because of differences in lifestyle and personality. This base helps
marketers understand the deeper reasons behind consumer choices.
For example, fitness-conscious consumers prefer gym memberships, health drinks,
and organic food products. Adventure-loving consumers are attracted to products
related to trekking, biking, and travel. Similarly, premium brands target consumers
who have a status-conscious and luxury-oriented lifestyle.

Behavioral segmentation
Behavioral segmentation divides the market on the basis of consumer behaviour
towards a product, such as usage rate, buying occasions, benefits sought, brand
loyalty, and readiness to purchase. It focuses on how consumers actually use the
product and what benefits they expect from it. This base is very useful for developing
effective promotional strategies.
For example, a toothpaste company may segment the market based on benefits
sought, such as protection from cavities, whitening of teeth, or fresh breath. Airlines
offer special discounts and loyalty programmes for frequent flyers. Festive offers
during Diwali or Eid target customers based on buying occasions.

Determining How Many Segments to Enter

After dividing the market into different segments, a company must decide how many
segments it should target. This decision is called target market selection. A company
usually cannot serve every segment because of limited resources, time, and marketing
capability. Therefore, marketers choose a suitable strategy to enter one or more
market segments. The main approaches are explained below.

1. Undifferentiated Marketing
In undifferentiated marketing, a company ignores the differences among various
market segments and targets the whole market with one product and one marketing
program. The company assumes that most customers have similar needs and
preferences. Therefore, it offers the same product to everyone and uses a single
marketing strategy. This approach helps the company reduce production, advertising,
and distribution costs because only one product and one promotional plan are used.
However, it may not satisfy the specific needs of different groups of customers. For
example, Tata Consumer Products – Tata Salt- Tata Salt is marketed as “Desh ka
Namak.” The product is positioned for all households across India rather than a
particular segment. The company uses a single marketing message that appeals to the
general population.
2. Differentiated Marketing
In differentiated marketing, a company targets two or more market segments and
designs separate products or marketing programs for each segment. Each segment is
served according to its specific needs, preferences, and purchasing power. This
strategy allows the company to attract a larger number of customers and increase its
total sales. However, it also increases the cost of production, marketing, and
administration because different products and promotional strategies are required. A
good example is Toyota, which produces different models such as small cars, SUVs,
and luxury vehicles to serve different customer groups.
3. Concentrated Marketing
Concentrated marketing, also known as niche marketing, occurs when a company
focuses on only one specific market segment instead of targeting the entire market.
The company concentrates its resources and marketing efforts on that particular
segment. This strategy is commonly adopted by small or new companies that have
limited financial and managerial resources. By focusing on one segment, the company
can understand customer needs better and develop specialized products. However, the
risk is higher because the company depends on a single segment. For example, Rolex
focuses mainly on the luxury watch segment and targets customers who prefer
premium and high-status products.
4. Micromarketing
Micromarketing means designing products and marketing programs according to the
needs of very small groups of customers or even individual customers. Instead of
targeting a large segment, companies focus on a specific location, community, or
individual buyer. Micromarketing includes local marketing and individual marketing.
Local marketing focuses on customers in a particular geographic area, while
individual marketing customizes products for individual customers. For example,
Nike allows customers to design their own shoes through personalized options, which
is an example of individual marketing.

Therefore, while determining how many market segments to enter, a company must
consider its resources, marketing objectives, product characteristics, and market
opportunities. Based on these factors, the company may choose to target the whole
market, several segments, a single segment, or even individual customers.

Product Positioning: An Introduction

Product positioning is one of the most important concepts in marketing. It refers to the
way a product is placed in the minds of customers so that it occupies a clear, distinct,
and desirable position compared to competing products. In simple terms, positioning
answers the question: “What does this product stand for in the customer’s mind?” It
is not just about creating a product, but about creating a perception. Even if two
products are physically similar, they can be positioned very differently through
branding, advertising, packaging, and communication.

Positioning focuses on identifying the unique value of a product and communicating

that value effectively to the target audience. It involves understanding customer
needs, preferences, and expectations, and then aligning the product in such a way that
it appears most suitable to them. For example, one brand of soap may position itself
as a beauty soap, while another may position itself as a medicated soap. The actual
difference may be small, but the perception created is very powerful.

A strong positioning helps customers easily recognize and remember the product. It
reduces confusion in the market and builds a clear identity. It also plays a major role
in influencing buying decisions, as customers tend to choose products that match their
expectations and self-image. Therefore, product positioning is not a one-time activity
but a continuous process that evolves with market changes, competition, and customer
preferences.

Positioning Strategy

Positioning strategy refers to the planned efforts and actions taken by a company to
establish a specific image of its product in the target market. It is a long-term
approach that guides how a product will be presented, promoted, and perceived by
customers. A well-designed positioning strategy ensures that all marketing activities
are aligned with the desired image of the product.

The first step in developing a positioning strategy is identifying the target market. A
company must clearly understand who its customers are, what they want, and what
influences their buying behavior. The second step is analyzing competitors to
understand how other brands are positioned in the market. This helps in identifying
gaps or opportunities where the company can differentiate its product.

The next step is determining the unique selling proposition (USP) or value proposition
of the product. This is the main idea or benefit that makes the product different and
attractive. It could be based on quality, price, innovation, convenience, or any other
factor that customers value. After this, the company develops a positioning statement
that clearly defines how the product should be perceived.

Once the strategy is decided, it must be consistently communicated through

advertising, branding, packaging, pricing, and distribution. Consistency is very
important because it helps in building trust and a strong brand image over time. For
example, if a brand positions itself as a premium product, all its activities—from
pricing to packaging—must reflect that premium image.

A good positioning strategy not only attracts customers but also creates long-term
loyalty. It helps the company stand out in a competitive market and maintain a strong
connection with its target audience.

Core Product Positioning Strategies

Price-Based Positioning
Price-based positioning focuses on attracting customers by offering products at a
lower price than competitors or by providing better value for the price paid. This
strategy is commonly used by companies that want to appeal to price-sensitive
customers who look for affordability. It does not always mean offering the cheapest
product; sometimes it means giving more features or benefits at a reasonable price,
which creates a perception of “value for money.” For example, retail chains like
Walmart position themselves as low-price leaders, making customers believe they can
save money by shopping there. However, this strategy requires efficient cost
management, as maintaining low prices while ensuring profitability can be
challenging.

Quality-Based Positioning
Quality-based positioning emphasizes superior quality, durability, reliability, or
luxury. Companies using this strategy focus on building a strong image of excellence
and premium value. Customers who prefer this type of positioning are usually less
price-sensitive and more concerned about performance, status, or long-term benefits.
For example, luxury brands like Rolex or Mercedes-Benz position themselves as
symbols of high quality and prestige. This strategy requires maintaining consistent
product standards, as any decline in quality can damage the brand’s reputation. It is
especially effective in markets where customers associate quality with trust and status.

Benefit/Feature Positioning
Benefit or feature-based positioning highlights specific attributes or advantages that
make the product unique or superior. Instead of focusing on price or quality alone,
this strategy emphasizes what the product can do and how it solves customer
problems. For example, Apple often positions its products based on user-friendly
design, innovation, and seamless experience. Customers are attracted because they
clearly understand the benefits they will receive. This approach is very effective in
competitive markets where products are similar, as it helps in creating differentiation
through unique features.

Application/Use Positioning
Application or use-based positioning focuses on how and when the product is used.
The product is associated with a particular situation, need, or occasion, making it
easier for customers to relate to it. For example, Gatorade is positioned as a drink for
athletes, especially during or after sports activities. This creates a strong connection
between the product and a specific use case. Such positioning helps customers quickly
recall the product when they are in a similar situation, increasing the chances of
purchase.

User-Focused Positioning
User-focused positioning targets a specific group of customers and designs the
product image accordingly. The brand communicates that the product is specially
made for a particular type of user, such as women, children, professionals, or fitness
enthusiasts. For example, Dove positions many of its skincare products for women,
focusing on real beauty and self-care. This strategy helps in building a strong
emotional connection with the target audience, as customers feel the product is
designed specifically for them.

Competitor-Based Positioning
Competitor-based positioning involves comparing the product directly or indirectly
with competitors to highlight its advantages. The company tries to show why its
product is better, more effective, or more valuable than others. For example, Pepsi has
often positioned itself in comparison to Coca-Cola by targeting a younger audience
and promoting a more modern image. This approach is useful in markets with strong
competition, as it clearly differentiates the product. However, it requires careful
communication to avoid negative perceptions.

Cultural Symbol Positioning

Cultural symbol positioning associates the brand with certain cultural values, beliefs,
or aspirations. It goes beyond functional benefits and creates a deeper emotional and
symbolic connection with customers. For example, Nike is strongly associated with
athleticism, determination, and the spirit of achievement. Customers do not just buy
the product; they buy what the brand represents. This strategy is powerful because it
builds long-term loyalty and a strong brand identity.

Steps to Develop a Positioning Strategy

Analyze Target Audience

The first step in developing a positioning strategy is understanding the target
audience. This involves studying customer needs, preferences, expectations, and
problems. Companies must identify what customers value most and what influences
their buying decisions. This can be done through market research, surveys, and data
analysis. A clear understanding of the target audience helps in designing a product
and message that directly appeals to them.

Conduct Competitive Analysis

The next step is analyzing competitors in the market. Companies need to understand
how competitors position their products, what their strengths and weaknesses are, and
what strategies they use. This helps in identifying gaps in the market where a new or
improved positioning can be created. Competitive analysis also helps in avoiding
direct imitation and encourages differentiation.

Identify Unique Selling Propositions (USPs)

After understanding customers and competitors, the company must identify its unique
selling proposition (USP). The USP is the key factor that makes the product different
and valuable. It could be based on price, quality, innovation, convenience, or any
other unique feature. A strong USP gives customers a clear reason to choose the
product over others.

Create a Positioning Statement

A positioning statement is a clear and concise description of how the company wants
its product to be perceived in the market. It usually includes the target audience, the
product category, the key benefit, and the point of differentiation. This statement acts
as a guideline for all marketing activities and ensures consistency in communication.
Develop Marketing Mix
The final step is aligning the marketing mix—product, price, promotion, and place—
with the chosen positioning. Every element of the marketing mix should support the
desired image of the product. For example, a premium product should have high-
quality packaging, higher pricing, and selective distribution. Consistency across all
elements helps in strengthening the positioning and building a strong brand image.

Positioning Approaches

Companies use different approaches to position their products depending on their

objectives and market conditions. Each approach focuses on a different aspect of the
product and customer perception.

Attribute-based positioning focuses on highlighting specific features or

characteristics of the product. These attributes could be quality, design, durability,
technology, or any measurable feature. This approach is commonly used in products
like electronics and automobiles where technical features matter a lot. For example, a
smartphone brand may highlight its camera quality or battery life to attract customers.

Benefit-based positioning emphasizes the benefits that customers will receive from
using the product. Instead of focusing on features, it focuses on outcomes or
advantages. For example, a health drink may be positioned as improving strength and
immunity. This approach is effective because customers are more interested in what
the product can do for them rather than how it works.

Use or application-based positioning is based on how or when the product is used.

The product is associated with a specific situation or purpose. For example, a
beverage may be positioned as a refreshing drink for summer, or a chocolate brand
may be associated with celebrations and gifting. This approach helps customers easily
relate the product to their daily lives.

User-based positioning targets a specific group of customers and designs the product
image accordingly. The product is positioned as suitable for a particular type of user,
such as children, women, professionals, or athletes. For example, a brand may
position its product as ideal for fitness-conscious individuals. This approach creates a
strong connection with the target audience.

Competitor-based positioning involves positioning the product in comparison to

competitors. The company highlights how its product is better or different from others
in the market. This can be done through direct or indirect comparison. For example, a
detergent brand may claim to clean better than other brands. This approach is useful
in highly competitive markets where differentiation is necessary.

Price-quality positioning focuses on the relationship between price and quality. A

product may be positioned as a premium product with high quality and high price, or
as an affordable product with reasonable quality. For example, luxury brands position
themselves as high-quality and expensive, while some brands focus on value for
money. This approach helps customers quickly understand where the product stands
in the market.