Chapter 3: Market Segmentation
and Positioning
Consumer Behaviour
Sangeeta Sahney
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Learning outcomes
After going through this chapter, the reader will be able to
understand:
➢ the two approaches to marketing—aggregate marketing and
market segmentation
➢ the changing trends in target marketing
➢ the various types of market segmentation
➢ the process of targeting market segments
➢ the issues and strategies related to the positioning of a
product
Introduction
The traditional way of doing business was through mass
marketing.
However, marketers gradually realized that customers are
varied and unique, with different needs, wants, and
preferences.
This led to a shift from mass marketing to a more customer-
centric target marketing or STP, that is, segmentation,
targeting, and positioning.
STP involves dividing the potential market into distinct sets and
subsets of consumers (called segments), and then focusing on
one or more segments that can be reached with a marketing mix.
In target marketing, the marketers first identify like-minded
clusters of groups that are homogenous within and
heterogeneous with other groups (called ‘segmentation’), then
evaluate the segments and select the most viable segment(s)
(called ‘targeting’), and finally, create a distinctive image of the
goods/service offering in the mind of the consumer (called
‘positioning’), such that the latter relates himself and his
need/want to the product and/or brand.
Aggregate marketing and
market segmentation
Aggregate marketing wherein he would treat the entire
population as a single segment.
Market segmentation where he would identify groups of
like-minded customers who were similar on one or more
base(s) and then cater to one or more of such segment(s).
Aggregate Marketing
In aggregate marketing, marketers adopted a ‘one size fits
all’ approach and offered one product to the entire market.
A standardized product was produced and further distributed
with a single marketing programme or the same marketing
mix.
Market Segmentation
Market segmentation is the process of classifying clusters of
individuals into groups, such that they are similar on demographic,
geographic, psychographic, or behavioural characteristics, with the
assumption that they would react similarly to a marketing
programme.
Target marketing
Target marketing involves identifying like-minded clusters of
individuals and designing focused marketing mixes keeping in
mind the needs, wants, and preferences of the segment(s).
Then, the marketer targets a segment or a few segments,
designs the marketing mix accordingly, and attempts to serve
the segment(s) more efficiently and effectively.
Market segmentation
A certain degree of homogeneity within groups and/or sub-groups
of customers on certain bases and dimensions.
A ‘market segment’ may be defined as a group of customers who
are similar to one another on certain bases.
Market segmentation is the process of identifying distinct groups
and/or sub-groups of customers in the market who have distinct
needs, preferences, characteristics, and/or behaviours, and
require separate goods and service offerings and corresponding
marketing programmes and strategies.
Segmentation could take place for both consumers and business
markets.
Alternative Levels for
Segmentation
Segmentation can be classified as
a) single segmentation
b) differentiated segment marketing
c) concentrated marketing
d) micro-marketing
➢ Single segmentation: As the name suggests, single segmentation
comprises one segment only. The marketer ignores segment
differences and caters to the entire market (as one target
market) with a single offering and the same marketing mix.
➢ Differentiated segment: In differentiated segment marketing,
the marketer takes into account the differences amongst
customer needs and wants, identifies segments, and caters to
few of them, marketing mixes and programmes, specially
designed for the segment(s).
➢ Concentrated marketing: In concentrated marketing, the
marketer caters to just one segment although the product
could appeal to others. The small segment is generally a sub-
group within the whole segment.
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➢ Micro-marketing: Micro-marketing is of two types,
namely local marketing and individual marketing.
• In local marketing, the marketer caters to local
customer groups.
• In individual marketing, the marketer caters to the
customer as an individual and personalizes the
marketing mix.
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Basis for Segmentation
Segmentation of consumer markets
Segmentation variables may be divided into two broad
categories: descriptive variables and behavioural variables.
➢ Descriptive variables comprise demographics, geography, and
psychographics.
➢ Behavioural variables comprise day-to-day consumption
patterns and behavioural dimensions within consumers vis-à-
vis the goods and service offerings such as consumer
awareness and knowledge, feelings and disposition, and
purchase and usage.
Culture and Age
Sub-culture
Gender
Nationality
Demographic Basis for Education,
Religion Occupation and
Segmentation
Income
Social class Family size
Generation Family Life
Cycle
Demographic basis for segmentation
Geographic basis for
segmentation
Location/Country Region
Geographic Climate
State
Basis for
Segmentation
City/Metro/ Terrain
Density of
population
Geographic Basis of Segmentation
Psychographic basis for
segmentation
Need/ Motivation Attitude
Psychographic Involvement
Perception
Basis for
Segmentation
Personality Lifestyle
Psychographic Basis of Segmentation
Behavioural variables of
segmentation
Consumer Buying readiness
awareness stage
Benefits sought
or use
Psychographic Loyalty status
Basis for
Buying occasions/ Segmentation
purchase
situations
Shopping
orientation
Usage rate buying/
usage frequency
Behavioral Variables of Segmentation
Segmentation of
business markets
Business markets could be segmented on the basis of
demography, geography, purchase approach and orientation,
purchasing orientation, and personal variables.
Demographic Purchasing
variables methods
Segmentation
Geographic
of business
variables
markets
Purchasing Personal
approach and variables
orientation
Segmentation of Business Markets
Viability of the Segment
A segment is regarded as viable if it is measurable, substantial,
accessible, differentiable, actionable, and stable.
Measurable: The market segment should be measurable in
terms of the total size and purchasing power, and demographic,
geographic, and psychographic characteristics of the people
comprising the segment.
Substantial: The market segment should be of sufficient size so
as to generate revenues and profits for the marketer.
Accessible: The market segment should be reachable and easy to
enter and penetrate both effectively and efficiently.
Differentiable: One segment should be easily differentiated from
another.
Actionable: The marketer should be in a position to design a
marketing program directed towards that segment and serve it
effectively and efficiently.
Stable and growing: The segment must be stable in the sense that
the characteristics of the segment(s) and the consumers that comprise
it should be unwavering, and the segment should be able to maintain
its size for a considerable amount of time.
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Evaluation and Selection of
Target Markets
While evaluating and selecting market segments, the marketer
needs to address two issues: one, the overall attractiveness of
the segment, and two, the company’s objectives, available
resources, and constraints.
Patterns of Target
Market Selection
There can be five different patterns of target market
selection. These are single-segment concentration, selective
specialization or multi-segment, product specialization,
market specialization, and full market coverage.
Single-Segment Selective Product
Specialization Specialization Specialization
M1 M2 M3
M1 M2 M3 M1 M2 M3 M1 M2 M3
P1 P1 P1
P2 P2 P2
P3 P3 P3
Market Specialization Full Market
Specialization
M1 M2 M3 M1 M2 M3
P1 P1
M = Market P2 P2
P = Product P3 P3
P = Product
Patterns of target market selection. Abell (1980)
Positioning
POSITIONING
Positioning is the act of designing the goods and service
offering of a company in the minds of the customers such that
(i) the consumer can relate the good and service offering to a
need or want,(ii) the marketer can create a distinctive image
of himself, and (iii) the consumer can perceive a brand’s
characteristics relative to those of competitive offerings.
Issues to Address
While taking decisions on the appropriate positioning strategy,
it is important that the positioning parameters are of ‘value’
to the customers.
The major issues to address include decision-making with
respect to (a) choosing ‘what to position’, (b) ‘the optimum
number of criteria’ that should be used for positioning, and
(c) the ‘qualities of criteria’ for positioning.
Choosing what to
position
As a strategy, positioning can be based on:
(i) perceived benefits, characteristics, or image,
(ii) competition, and
(iii)a combination of both (i) and (ii).
S. No. Bases for Positioning Examples
1 Corporate brand/identity • Amul: The Taste of India
• State Bank of India: ‘The nation banks on us’
2 Product attributes • LG Golden Eye: Auto contrast and brightness control
• Hindustan Unilever’s No soak Surf Excel Matic: Vibrating
molecules are hard on germs
3 Benefits, problem solutions, • Pepsodent: Kills germs and prevents tooth decay
and needs
• Close-Up: Fresh breath confidence
4 Quality • Sony Bravia LED HDTV: Excellent picture quality and high-
quality audio
• Godrej Properties Ltd (GPL): First real estate developer in India
to have ISO certifications
5 Product user • Parker: Undisputed king: Amitabh Bachchan
• Reid and Taylor: Styling the world's elite: Executive/lifestyle
• Johnson & Johnson: Trusted by mothers: Babies
• Kellogg’s Special: Reduced calories: For the calorie-conscious
primarily women)
S. Bases for Positioning Examples
No.
6 Product usage and specific use • Burnol antiseptic: For burns and cuts (see Image 3.13)
• Crocin Cold and Flu: For cold and body aches
• Archies: Greeting cards for every occasion
7 Services • Maruti authorized service stations located all over India
• Desun Hospital, Kolkata: Low-cost best heart hospital: 24
hambulance, 24 hemergency admissions, 24 h doctors, 24 h
medicalfacility
8 Price • Big Bazaar: Wednesday bazaar: Hafte ka sabse sasta din
• Tata Nano: Low-cost car
9 Distribution • Dell (direct selling: Customization: Custom-made and
tailored products)
• Dominos: Delivery within 30 min, else free
10 Against other products • Savlon versus Dettol: Savlon jalta nahin
(competitors)
• Yippee noodles(ITC) (see Image 3.5) versus Maggie (Nestlé):
Can be explicit or implicit Yippee noodles are round, require no breaking, longer, and
slurpier
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Optimum number of
criteria for positioning
When he uses just one criterion on which he excels or is
impeccable, and possesses something which others do not,
he makes use of what is called a unique selling proposition.
Qualities of Criteria for
positioning
The criteria that a marketer chooses for positioning should be
important, distinctive, superior, communicable, pre-emptive,
affordable, and profitable.
Positioning Strategies
While positioning their products and/or brands, marketers have several
options. First, the marketer may position his company and/or brand to
maintain and strengthen the current image, Second, he may reposition
to create a new image for the company and/or brand; this would be
necessary in cases where he has to save himself from declining sales
and market share. Third, he may reposition the competitor; this would
happen in cases where he would want to enhance his own sales and
increase his own market share.
A marketer could choose among two kinds of positioning strategies. He
could either position his brand on (i) point of parity (POP) or (ii) point
of difference (POD).