UNIT 2

Market Segmentation
Market consists of buyers and buyers differ in on or more respects. They may differ in
the wants, resources, geographical, location, buying attitudes and buying practices.
Any of these variable can be used to segment a market. Each buyer is potentially a
separate market because of unique needs and wants. Ideally a seller management
design a separate product and or marketing program for each buyer. Most sellers will
not find it worth wile to “customize”. Their product to satisfy each specific buyer.
Instead the saver identifiers broad classes of buyers who differ in their product
requirement and or marketing responses.
As a market is segmented using more characteristics such as age, income, etc., the
seller achieves finer precision but at the price of multiplying the no. of segments and
thinking gout the population of the segments.

Types of market segmentation/ Market Preference Patterns

[Link] preferences: A market where all consumers have roughly the
same preference. We would predict the existing brands would be similar and
located in the center of the preferences as shown in the below.
2. Clustered preference: The market might reveal district preference cluster, called
natural market segments. The first firm in this market has three options. It might
position is self in the center hoping to appeal to all the groups (undifferentiated
marketing). It might position itself in the largest market segment (consummated
marketing). It might marketing several brands, each positioned in a different segment
(differentiated marketing) clearly if it is developed only one brand, competition
would enter and introduce brands in other segments.

3. Diffused preferences: As the other extreme consumer preferences can the

scattered throughout the space showing that consumer differ in what they want
from the product. If one brand exists the market, it is likely to be positioned in the
center minimizes sum of total consumer dissatisfaction. A new competitor could
take step to the first brand and fight for market share of the competition could
locater in a center to win over a customer group that not satisfied with the center
brand. If several brands are in the market, they are likely to be positioned
throughout the space show real differences to march consumer preference
difference.

Levels of Market Segmentation

Marketers subdivide markets into segments, so they can do focus on marketing plans. Each
Level of market segmentation determines the strategy a company will follow to
promote, distribute and position its product in the market and respectively target
 audience or its customers. Before developing a marketing plan, one must know the what
are the levels of market segmentation.
Mass Marketing
In Segmentation, Mass marketing refers
to the strategy of targeting the entire
potential customer market by means of a
single marketing message. The
marketing strategy used in this
segmentation does not target the specific
requirements or needs of customers.
Mass marketing strategy, instead of
focusing on a subset of customers,
focuses on the entire market segment
that can be a probable customer of a product.

An example of mass marketing strategy is of Baygon cockroach spray or Mortein

mosquito repellent coils that target all its potential customers through a single
marketing message.

Segment Marketing
Segment marketing refers to a strategy where the company divides its target audience
into different segments based on their unique needs and requirements. This way the
company targets different messages to different segments, appealing them towards the
unique features the product offers. This strategy creates product differentiation for
customers with similar needs and preferences, based on their gender, age, income and
location.
The example of segment marketing within clothing industry may be men, women,
casual, fashionable and business clothing segments.

Niche Marketing
This strategy of marketing focuses on a narrower customer segmentation. Customers
may want or desire a product that is not met completely by the products offered in a
market. When companies move forward and develop highly specialized products to
offer these customers their specific needs, they offer distinct products in a market that
caters to specific customer segments only.

Mountain bikes are an example of a niche marketing segment. where the market
segmentation will be individuals interested in mountain biking only. Since not every
bike manufacturing company caters to mountain bikers, it is a niche segment.
Companies that produce mountain bikes target the niche segment of mountain bikers
and cater to their specific needs, preferences and requirements.

Micro Marketing
 Micro marketing follows an even narrower segmentation marketing strategy, catering to
the attribute of a much-defined subset of potential customers such as catering to
individuals of a specific geographical location or a very specific lifestyle.

An example of niche marketing is luxury cars that are very high priced and offer
exceptional features such as high speed, customized look, etc. Since these cars are very
expensive and limited in number, the niche market for these vehicles target rich, car
lovers that are interested in the unique features and has the financial capability to buy
them.

Bases for segmenting consumer Market

Geographic segmentation
Demographic segmentation
Psychographics segmentation
Behavioral segmentation

1. Geographic segmentation: - Geographical

segmentation for dividing the market into
different geographical units such as
nations, states, regions, countries, citizen
of neighbor hoods. The company can decide
to operate in one or a few demographic
areas of operate in all but pay attention to
variations in geographic needs and
preferences.

For example, national newspapers are published and distributed to different cities in
different languages to cater to the needs of the consumers.

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

Claritas Inc has developed a geoclustering approach called PRIZM (Potential Rating
Index by ZIP Markets ) that classifies over half a million people into 14 distinct groups.

Marketers use PRIZM to answer questions like :

 Which geographic areas contain most valuable customers ?
 How deeply have we penetrated the markets?
 Which distribution and promotional media will work best ?
 Ex: General foods Maxwell house ground coffee is sold nationally but is flavored
regionally. Its coffee is flavored stronger in the west than the east
ADVANTAGES LIMITATIONS

1. Valuable approach for a large company that

operates across many countries, as geographic 1. This segmentation base is quite limited
segmentation would allow them to consider cultural as it assumes that all consumers in a
differences. geographic area are similar in needs.

2. Geographic segmentation typically

2. It is also quite an effective approach for small needs to be used in conjunction with
firms, with limited resources that often need to another segmentation base .
operate in a defined geographic area for efficiency
purposes.

2. Demographic segmentation: -Demographic segmentation consists of dividing

the market into groups on the basis of demographic variables such as age, sex,
family size, family life cycle, income, occupation, education, religion,
race and nationality. Demographic variables are the most popular bases for
distinguishing customer groups.
1. 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.

2. Gender:
Gender segmentation is used in clothing, cosmetics and magazines.

EXAMPLE-
Lakme sells beauty care products to women .

3. 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.
4. 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.

DEMOGRAPHIC SEGMENTATION

ADVANTAGES :

1. The demographic information that will help business segment the market is easily
accessible through census data.

[Link] demographic segmentation also leads to customer retention and loyalty.

 3. It will save the time and money in the long run, because efforts to expand business will
be carefully calculated and to the point

LIMITATIONS :

1. If company don’t have a clear idea from the very beginning about what their goals are,
there is waste of time and efforts chasing after the wrong market segment.

2. While trying to move certain products, marketers may overlook a particular group of
potential customers.

3. Psychographic segmentation: -In psychographics segmentation, buyers are

divided into different groups on the basis of their social class life style
and or personality characteristics. People with in the same demographic
groups can exhibit very different Psychological profiles

One of the most popular commercially available systems based on psychographic measurement is
SRI consulting Business Intelligence's Framework. (SRIC-BI) VALS

VALS signify values , attitudes and lifestyle .

Primary Motivation: Ideals, Achievement, and Self-Expression

The concept of primary motivation explains consumer attitudes and anticipates behavior. VALS
includes three primary motivations that matter for understanding consumer behavior: ideals,
achievement, and self-expression.

1. Consumers who are primarily motivated by ideals are guided by knowledge and
principles.
2. Consumers who are primarily motivated by achievement look for products and
services that demonstrate success to their peers.
3. Consumers who are primarily motivated by self-expression desire social or
physical activity, variety, and risk.
These motivations provide the necessary basis for communication with the VALS types and for a
variety of strategic applications.

Resources

A person's tendency to consume goods and services extends beyond age, income, and education.

Energy, self-confidence, intellectualism, novelty seeking, innovativeness, impulsiveness,

leadership, and vanity play a critical role.

These psychological traits in conjunction with key demographics determine an individual's

resources. Various levels of resources enhance or constrain a person's expression of his or her
primary motivation.

THE 4 GROUPS WITH HIGH RESOURCES:

1. Innovators.

These consumers :
 The leading edge of change Have the highest incomes
 High self-esteem Successful , Sophisticated.
 Image is important to them as an expression of taste, independence, and character. Their
consumer choices are directed toward the "finer things in life."

2. Thinkers.

These consumers are :

 The high-resource group of those who are motivated by ideals. They are mature,
responsible, well-educated professionals.
 Their leisure activities center on their homes, but they are well informed about what goes
on in the world and are open to new ideas and social change.
 They have high incomes but are practical consumers and rational decision makers.
3. Achievers.
 These consumers are the high-resource group of those who are motivated by achievement.
 They are successful work-oriented people who get their satisfaction from their jobs and
families.
 They are politically conservative and respect authority and the status quo.
 They favor established products and services that show off their success to their peers.

4. Experiencers.
 These consumers are the high-resource group of those who are motivated by self-
expression.
 They are the youngest of all the segments, with a median age of 25.
 They have a lot of energy, which they pour into physical exercise and social activities.
 They are avid consumers, spending heavily on clothing, fast-foods, music, and other
youthful favorites, with particular emphasis on new products and services.
THE 4 GROUPS WITH LOWER RESOURCES:

1. Believers.
 These consumers are the low-resource group of those who are motivated by ideals.
 They are conservative and predictable consumers who favor local products and established
brands.
 Their lives are centered on family, community, and the nation. They have modest incomes.

2. Strivers.
 These consumers are the low-resource group of those who are motivated by
achievements.
 They have values very similar to achievers but have fewer economic, social, and
psychological resources.
 Style is extremely important to them as they strive to emulate people they admire.

3. Makers.
 These consumers are the low-resource group of those who are motivated by self-
expression.
 They are practical people who value self-sufficiency.
 They are focused on the familiar-family, work, and physical recreation-and have little
interest in the broader world.
 As consumers, they appreciate practical and functional products.

4. Survivors.
 These consumers have the lowest incomes.
 They have too few resources to be included in any consumer self-orientation and
are thus located below the rectangle.
 They are the oldest of all the segments, with a median age of 61.
 Within their limited means, they tend to be brand-loyal consumers.
ADVANTAGES LIMITATIONS

[Link] requires the organization to have detailed

1. Psychographic segmentation gives a much
data/research on the consumer. Hence it is far more
better insight into the consumer as a person,
suitable for a larger organization and is probably
which gives better identification of the
beyond the scope of a small business
underlying needs and motives.
2. There are also some concerns regarding data and
2. It delivers a much better understanding of
interpretation, and perhaps the creation of segments
the consumer, which in turn create more valid
that cannot be easily accessed or practical in real
and responsive segments and subsequent
life.
marketing programs.
4. Behavioral segmentation: - In behavioral segmentations buyers are divide into
groups on the basis of their knowledge attitude use and response to a products many
marketers believe that behavioral are best starting point for constructing
market segments. A). Occasions: - B). Benefits: - C). User status: - D). Usage rate:
- E). Loyalty status: - F). Buyer readiness stage
1. 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.

Example :

[Link]’s advertising to promote the product during wedding season is an example of occasion
segmentation.

2. The Indian festivals like Diwali , Rakshabandhan sweets are sold at high prices .
2. User status:
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.
3. 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.

EXAMPLE-

FMCG and electronics works on the basis of a channel with dealers and distributors. In these
segments, the maximum discount goes to the one who buys the maximum whereas others get
lesser profits as they also get lesser discounts.
4. Loyalty status:
1. Buyers can be divided on the basis of their loyalty status :
2. Hardcore loyal (consumer who buy one brand all the time)
3. Split loyal (consumers who are loyal to two or three brands) Shifting loyal
(consumers who shift from one brand to another) Switchers (consumers who show no
loyalty to any brand).
5. 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.

BEHAVIOURAL SEGMENTATION :-
ADVANTAGES LIMITATIONS
1. This approach does not really consider why
consumers buy the product, their needs or
their lifestyles – so the level of market
1. This style of segmentation is often used in mature understanding may not be as high.
markets, where the firm is looking to understand:
how to activate a non-user, target switchers, convert 2. It also heavily relies upon obtaining
detailed market intelligence, and probably the
a medium user to a heavy user and so on.
use of a marketing models and databases for
market testing and experimentation.

Business market can be segmented on the bases consumer market variables but because of many
inherent differences like

Businesses are few but purchase in bulk

 Evaluate in depth
Joint decisions are made
Business market might be segmented on the bases of following variables:

 Company Size: what company sizes should we serve?

 Industry: Which industry to serve?
 Purchasing approaches: Purchasing-function organization, Nature of existing
relationships, purchase policies and criteria.
 Product usage
 Situational factors: seasonal trend, urgency: should serve companies needing quick order
deliver, Order: focus on large orders or small.
 Geographic: Regional industrial growth rate, Customer concentration, and international
macroeconomic factors.

Main Category Segmentation Base Questions to help define

segment groups
Geographic location/s Country/continent In which countries do
they operate?
Region/area of the country In which regions do they
operate?
Number of outlets Does the firm have one
office only, or potentially
1,000s of outlets?
Geographic spread Does the firm operate in
one geographic area, or
spread over a wide area?
Business description Industry What industry do they
operate in?
Size (by staff or outlets) How many staff do they
have, or how many
outlets do they have?
Size (revenues/profits) What is their financial
position?
Products sold What is their product
mix?
Equipment/technology What is the main forms
of manufacturing and/or
IT equipment do they
use?
 Company ownership Are they a public or
private company? Are
they a subsidiary?
Behavioral/operating practices Do they have a
centralized purchase
decision-making process?
Are they generally loyal
to suppliers or do they
frequently switch?
Are they fast or slow
decision makers?
Do they use franchising?
Culture/personality Are they a lead user (an
early adopter) or more of
a market follower?
Do they make highly
analytical decisions or are
they more intuitive?
How socially and
environmentally
conscious are they?
Organizational goals Do they have aggressive
growth goals?

Criteria for selecting Market Segments

Measurable
A segment should be measurable. It means you should be able to tell how many potential
customers and how many businesses are out there in the segment.
Accessible
A segment should be accessible through channels of communication and distribution like:
sales force, transportation, distributors, telecom, or internet.
Durable
Segment should not have frequent changes attribute in it.
Substantial
Make sure that size of your segment is large enough to warrant as a segment and large
enough to be profitable
Unique Needs
Segments should be different in their response to different marketing efforts (Marketing
Mix).
Consumer and business markets cannot be segmented on the bases of same variables
because of their inherent differences.
Target Market
Target marketing involves breaking a market into segments and then concentrating your
marketing efforts on one or a few key segments consisting of the customers whose needs and
desires most closely match your product or service offerings. It can be the key to attracting new
business, increasing sales, and making your business a success.
To select a target market, it is essential for the organizations to study the following factors:

 Understand the lifestyle of the consumers

 Age group of the individuals
 Income of the consumers
 Spending capacity of the consumers
 Education and Profession of the people
 Gender
 Mentality and thought process of the consumers
 Social Status
 Kind of environment individuals are exposed to

Basis for market targeting

Factor to be considered while identifying and evaluating a target market segment include

 segment size and growth potential

 company’s objectives and resources

 resource capability of the firm

 cost advantage

 technological edge

 managerial capabilities

 Market attractiveness

 Entry & exit barriers

 Nature of competition

 Social and political environment

 Environment and legal factors

Market targeting strategies

Market targeting strategies can be divided into two types

Limited coverage market targeting

Fukl coverage market targeting

 Limited coverage market targeting: When only one or few segments are selected as target
market. This strategy is useful for small firms with limited resources or firms introducing a new product. It
can take the following forms:

Single-segment Concentration

M1 M2 M3
P1
P– Product
P2
P3 M - Market

The company may select a single segment. Volkswagen concentrates on the small-car
market and Porsche on the sports car market. Through concentrated marketing the
firm gains a strong knowledge of the segment’s needs and achieves a strong market
presence. Furthermore, the firm enjoys operating economies through specializing
its production, distribution, and promotion. If it captures segment leadership, the
firm can earn a high return on its investment.
Selective specialization :
M1 M2 M3
P1
P– Product
P2
P3 M - Market

Here the firm selects a number of segments each objectively attractive

and appropriate. There may be little or no synergy among the segments, but each
segment promises to be a money market. This multi segment coverage
strategy has the advantage of diversifying the firm’s risk.
Product specialization :
M1 M2 M3
P1
P– Product
P2
P3 M - Market

Here the firm specializes in making a certain product it

sells to several segments. An example would be a microscope manufacturer that
sells microscope to university laboratories, government laboratories, and
commercial laboratories. The firm makes different microscopes for different
customers groups but
does not manufacturer other instruments that laboratories might use. Through a
product specialization strategy, the firm builds a strong reputation in the specific
product area. The downside risk is that the product may be supplanted by an entirely
new technology.
Market specialization
 M1 M2 M3
P1
P– Product
P2
P3 M - Market
Here the firm concentrates on serving many needs of a particular
customer group. An example would be a firm that sells an assortment of products
only to university laboratories, including microscopes, oscilloscopes, Bunsen
burners, and chemical flasks. The firm gains a strong reputation in serving this
customer group and becomes a channel for further products that the customer
group could use. The downside risk is that the customer group may have its
budgets cut.
Full coverage market targeting:

M1 M2 M3
P1
P– Product
P2
P3 M - Market

Here a firm attempts to serve all customer groups with all the products they might need. Only
very large firms can undertake a full market coverage strategy. Examples include I B M,
General Motors, and Coca-Cola. Large firms can cover a whole market in three broad
ways: through undifferentiated marketing or differentiated marketing or concentrated
marketing
1) Undifferentiated marketing-There may be no strong differences in customer characteristics.
Alternatively, the cost of developing a separate marketing mix for separate segments may
outweigh the potential gains of meeting customer needs more exactly. Under these circumstances
a company will decide to develop a single marketing mix for the whole market. There is absence
of segmentation.

 This strategy can occur by default. Companies which lack a marketing orientation may practice
this strategy because of lack of customer knowledge. It is convenient since a single product has to
be developed.

 Companies following undifferentiated targeting strategies save on production and marketing

costs. Since only one product is produced, the company achieves economies of mass production.
Marketing costs are also lower as only one product has to be promoted and there is a single
channel of distribution.

 But undifferentiated targeting strategy is hardly ever a well considered strategy. Companies
adopting this strategy have either been blissfully ignorant about differences among customers or
have been arrogant enough to believe that their product will live up to the expectations of all
customers, till focused competitors invade the market with more appropriate products for different
segments

2) Differentiated marketing or multi-segment targeting:

 When market segmentation reveals several potential target segments that the company can
serve profitably, specific marketing mixes can be developed to appeal to all or some of the
segments. A differentiated marketing strategy exploits the differences between marketing egments
by designing a specific marketing mix for each segment.

 A company following multi-segment targeting strategy serves two or more well- defined
segments and develops a distinct marketing mix for each one of them. Separate brands are
developed to serve each of the segments.

3) Focus or concentrated targeting:-Several segments may be identified but a company may not
serve all of them. Some may be unattractive or out of line with the company’s business strengths.
A company may target just one segment with a single marketing mix. It understands the needs,
and motives of the segment’s customers and designs a specialized marketing mix.

 The strategy is suited for companies with limited resources as these resources may be too
stretched if it competes in many segments. Focused marketing allows R&D expenditure to be
concentrated on meeting needs of one set of customers and managerial activities are devoted to
understanding and catering to their needs.

4) Customized marketing: In some markets, the requirements of individual customers are unique
and their purchasing power is sufficient to make designing a separate marketing mix for each
customer a viable option. Many service providers such as advertising, marketing research firms,
architects and solicitors vary their offerings on a customer to customer basis.

 They will discuss face to face with each customer their requirements and tailor their services
accordingly. Customized marketing is also found within organizational markets because of high
value of orders and special needs of customers.

 Customized marketing is associated with close relationships between the supplier and customer
because the high value of an order justifies large marketing and sales efforts being focused on
each buyer.

Positioning
Positioning in marketing refers to the deliberate, strategic effort to create a unique
identity for a brand, product, or service within the consumer’s mind. More than just
the product features, positioning is about the emotions, associations, and
experiences that a brand conjures up. Essentially, it’s the brand’s promise and the
mental space it occupies when you think about a particular product or service.

A great example of this is Dove positioning itself as a brand that celebrates real
beauty rather than promoting traditional, unattainable beauty standards. This
positioning sets Dove apart from other beauty brands and creates an emotional
connection with consumers. Positioning goes beyond attributes—it’s about making a
memorable impression that differentiates the brand from competitors.

Why Positioning is Essential?

Today’s consumer landscape is crowded and competitive, making positioning more
crucial than ever. But why is it so important?

Differentiation: With countless products offering similar features, differentiation

through positioning helps a brand stand out, making it memorable and appealing to a
targeted audience.

Building Loyalty: Effective positioning encourages a sense of familiarity and trust.

When consumers feel aligned with a brand’s values and mission, they are more likely
to remain loyal customers.

Pricing Power: Positioning a brand as premium or high-quality can justify higher

price points, making consumers willing to pay more for perceived value.

Consistency in Brand Messaging: Positioning helps align all brand

communications, from advertising and social media to product packaging, ensuring
that all consumer touchpoints reinforce the desired brand image.
Better Market Penetration: Targeted positioning allows brands to connect more
effectively with specific market segments, enhancing product reach and market
share.

Types of Positioning in Marketing

Now, let’s dive into the different types of positioning strategies that brands can use to
make an impact.

1. Quality-Based Positioning
Quality-based positioning emphasizes a product or service’s superior quality. This
strategy works well for brands that invest heavily in materials, craftsmanship, or
processes that contribute to exceptional products.

Example: Lululemon focuses on high-quality, durable, and premium activewear. Its

quality-based positioning has helped it build a strong reputation in the athletic wear
industry, justifying higher price points and creating a sense of exclusivity.

2. Value-Based Positioning
Value-based positioning targets consumers who are seeking a balance between price
and benefits. This strategy doesn’t mean competing on price alone but offering more
value for the consumer’s dollar.
Example: IKEA focuses on value-based positioning by offering affordable yet stylish
and functional furniture. The brand has built a reputation for making modern design
accessible, positioning itself as the go-to choice for cost-effective, quality home
furnishings.

3. Benefit-Based Positioning
Benefit-based positioning emphasizes specific benefits or advantages a product
offers, solving distinct pain points for the target audience. Brands that choose this
approach highlight how their product or service uniquely meets consumer needs.

Example: Head & Shoulders positions itself as the ultimate solution for dandruff,
making it the go-to shampoo for consumers with scalp concerns.

4. Problem and Solution Positioning

This strategy highlights the brand’s ability to solve a specific problem, offering a clear
and direct benefit to the customer. By positioning themselves as problem-solvers,
brands align with customer pain points, presenting their product as the ultimate
solution.

Example: Grammarly is a prime example, as it helps users overcome the common

problem of grammar mistakes, enhancing communication and professionalism.

5. Lifestyle Positioning
Brands that adopt lifestyle positioning align their identity with a particular way of life,
culture, or personality. They don’t just sell a product; they sell an experience or
aspiration that consumers want to be a part of.

Example: Patagonia’s brand story revolves around adventure, environmental

sustainability, and social responsibility. Customers who value these traits are drawn
to Patagonia because it reflects their values and lifestyle.

Why It Works: Lifestyle positioning taps into customers’ emotions and self-identity,
creating a bond that goes beyond product functionality and builds strong brand
loyalty.

6. Price-Based Positioning
This positioning is primarily focused on being the most affordable or budget-friendly
option. However, price-based positioning can be a double-edged sword, as brands
need to avoid perceptions of inferior quality.
Example: Spirit Airlines positions itself as the most affordable airline, offering “bare
fare” pricing that gives consumers just the basics. While it may lack some luxuries, it
appeals to budget travelers looking to save on flights.

7. Celebrity or Influencer-Based Positioning

Leveraging the popularity of celebrities or influencers, this positioning strategy taps
into the public’s admiration for certain figures to boost brand appeal. However,
authenticity is key, as consumers are increasingly skeptical of forced endorsements.

Example: Fenty Beauty by Rihanna leveraged her influence to connect with diverse
beauty consumers worldwide. Her authenticity and commitment to inclusivity helped
the brand become a major player in the beauty industry almost overnight.

8. Competitor-Based Positioning
This approach involves positioning a brand directly against a competitor, either by
claiming superiority or by filling gaps where the competitor falls short. It can be a
powerful tactic, but it requires careful execution to avoid negative comparisons.

Example: Lyft positions itself as a friendly, community-centered alternative to Uber.

By emphasizing its driver-first approach and commitment to customer care, Lyft
appeals to consumers looking for an ethical and supportive ride-sharing service.

9. Niche Positioning
Niche positioning targets a small, specific segment of the market, focusing on unique
consumer needs that larger competitors may overlook. This strategy allows brands to
own a specialized space without competing with mass-market giants.

Example: Oatly has carved out a niche in the dairy alternative market by promoting
its oat milk as a sustainable and delicious choice. Unlike other dairy alternatives,
Oatly targets environmentally conscious consumers and stands out with its unique
flavor and origin story.

Consistent Messaging: From advertising and social media posts to packaging,

brand messaging should consistently reflect the positioning strategy.

Adaptation Over Time: As markets evolve, so must positioning. Regularly reassess

to ensure it remains relevant and compelling.
Differentiation
Differentiation strategy is nothing but an approach that pushes
organizations to develop a unique product or service compared to
their competitors.
This strategy's primary goal is to gain a competitive edge and earn
greater reputation in the target market. The business must know its
strengths, weaknesses, and customer needs to accomplish this.
But is this easy to accomplish? Undoubtedly, no.
Several corporate giants would want to get ahead of you. Thus,
knowing the underlying needs of your target audience is the key to
developing a unique product or service.

Benefits of Differentiation
Strategy in the Workplace
Implementing a differentiation strategy for business growth comes
with many benefits. Let’s take a look at them in detail:

1. Reduction in Price Competition

Following a differentiation strategy helps companies to lower their
price commission in the industry. Suppose a firm provides a quality
product, their competitors will struggle to succeed even after
dropping their prices. When people receive quality products, they
don’t mind paying higher prices.

2. Product Uniqueness
As said, product differentiation is the most popular type of
differentiation strategy. When a company opts for this strategy, they
achieve tremendous success because their competitors cannot
deliver the same quality. That makes these companies one of a kind
in the industry.
 3. Increased Profit Margins
If a company aims for a competitive advantage in the industry
because of its high-quality product, it can set higher price points.
Thus, resulting in increased profit margin, and the company can earn
higher revenue with minimum sales.

4. Customer Loyalty
When you satisfy your customers with their desired product, you can
earn brand loyalty. Differentiation is a market strategy, and you must
remain empathetic towards your customer to create a product they
require.

5. Minimum or No Substitutes
Implementing a differentiation strategy helps in creating products
with no or minimum substitutes. For example, your company has
made a product with unique features. The customers will have to
choose your product unless a competitor delivers the same product
at a similar or lower price.

How to Differentiate Your

Business?
Suppose a company wants to try out a differentiation strategy for
business growth with a unique Idea.
What are the options available? In general, there are two ways to
select a differentiation strategy, they are:
 Broad differentiation strategy
 Focused differentiation strategy

What is a Broad Differentiation

Strategy?
When a company wants to target a wide range of customers, it will
adopt a broad differentiation strategy.
 This implies that the company intends to cover a large market with
similar needs and develop similar products. They would also upgrade
an existing product but with enhanced features.
For example, A cement industry will offer its product to a broad
market with a brand name. The company will target distributors,
whole-sellers, and retailers. They assure their cement can withstand
the earthquake or natural hazards. That makes it different from other
brands.

What is a Focused Differentiation

Strategy?
If the former strategy is not applicable for some companies, they can
opt for a focused differentiation strategy. A firm choosing this
strategy targets a specific/niche segment of the market. They can
target one or more market segments at the same time. But, they will
have to produce custom products for different markets.
Coca-Cola is a perfect example of this differentiation strategy. For
instance, they offer diet cola, canned, and bottled drinks. Thus,
serving three different markets at the same time.

Types of Differentiation
Strategy
Other than the two strategies mentioned, there are more specific
types of differentiation strategies you must know. They are as
follows:
 Product Differentiation
 Service Differentiation
 Distribution/Channel Differentiation
 Relationship Differentiation
 Image Differentiation
 Price Differentiation

Now, let’s get to know each of these strategies in detail:

 1. Product Differentiation
Product differentiation is the most evident and noticeable type of
differentiation strategy. Customers tend to differentiate a product by
its physical appearance.
Organizations use this strategy to make their product design unique.
A few common ways to differentiate a product are:
 Unique product features
 Product performance
 Product efficacy
 Consumer opinion

This strategy is popular in B2C markets. Companies target their

products to the end-users. But, it is also prominent in the B2B
market.
Let’s take Coca-Cola, for example. They have established a brand
name and have created a beverage with a unique taste. Despite
having so many other cola beverages in the market, one can easily
differentiate the taste of coca-cola.

2. Service Differentiation
In simple words, service differentiation means creating an unusual
way to serve customers.
Every company's motto is "serve the customer." So what makes this
one unusual? But customer service has evolved drastically. People
want you to present impeccable service with no wait time.
There are many factors involved in servicing your customers like
order processing, customer service method, etc.
McDonald’s is the perfect example of service differentiation. Setting
aside a few exceptions, they serve the same way in every outlet of
theirs. Their service differentiation is “consistent quality.” Whether
you are in New York or Bangalore, the taste and presentation of food
remain the same. For instance, their french fries will have the same
amount of salt, size and be served fresh everywhere.

3. Distribution Differentiation
This is a strategy for companies to differentiate themselves from a
group of competitors.
Companies can create a personal distribution channel and
manufacture products to make them available to dealers,
distributors, and retailers using this strategy.
A company that focuses on distribution differentiation must
concentrate on the supply chain as well. This helps in maintaining
standardized distribution channels to create a competitive
advantage.
Let’s understand this strategy by taking Amazon as an example.
Amazon has evolved drastically, and it is because of its distribution
differentiation. They don’t have an offline store, so they provide 1-
day delivery with their own courier service. With this, Amazon has
become one of the valuable companies.

4. Relationship Differentiation
Companies creating excellent customer relationships is the best way
to differentiate themselves from their competitors. Using a
relationship differentiation strategy, companies can build a good
relationship with sales representatives, employees, and technical
representatives.
Vantage Circle is an employee benefits platform and work
towards employee rewards and recognition. This is a perfect example
of relationship differentiation because they work towards employee
engagement.

5. Image Differentiation
Image differentiation is a combination of multiple differentiation
strategies.
It simply means to innovate a reputed brand image. A company must
master all departments such as product quality, customer service,
and product performance to build a different and unique brand
image.
Example: Google, the world-famous search engine website, is the
perfect example of image differentiation. Its rebranding enhances the
user and advertiser experience as a whole.

6. Price Differentiation
Price differentiation strategy, a.k.a price discrimination, refers to
charging different prices for the same product. Companies use
this strategic planning skill to target broader markets. But, they
adjust their prices as per the customers’ price preference.
This is a great way to penetrate deeper into the market and boost
company revenues.
We can consider Amazon if we were to understand this strategy with
an example. The biggest online retail industry readjusts the product
prices according to their competitors and the buyers’ purchasing
ability. Amazon does not have a retail store; hence they win the price
war easily.

The Sales Forecast

A sales forecast is an estimate of probable sales for one company’s brand of the product during a
stated time period in a specific market segment and assuming the use of a predetermined
marketing plan.

• It is based on a specific marketing plan.

• It can be expressed in dollars or product units.

• It is best prepared after market potential and sales potential have been estimated.

• It typically covers a 1-year period.

• Marketing goals and broad strategies must be established before a sales forecast is
made.

• Once it is made, it becomes a key controlling factor in all operational planning

throughout the company

Basic Forecasting Approaches

Top Down:

• Develops a forecast of economic conditions and industry trends.

• Determines the market potential for a product.

• Determines the sales potential for the product.

• Measures the share of this market the firm is currently getting or plans to capture.

• Forecasts the firm’s sales of the product.

Bottom Up:

• Generates estimates of future demand from customers or the company’s

salespeople.

• Combines the estimates to get a total forecast.

• Adjusts the forecast based on managerial insights into the industry, competition,
and general economic trends.

Criteria of a good forecasting method

1. Accuracy – measured by (a) degree of deviations between forecasts and actuals, and
(b) the extent of success in forecasting directional changes.

2. Simplicity and ease of comprehension.

3. Economy.

4. Availability.

5. Maintenance of timeliness.

Forecasting Methods
 Qualitative methods are subjective in nature since they rely on human judgment and
opinion.

 Quantitative methods use mathematical or simulation models based on historical demand

or relationships between variables.

• Market-factor analysis: Demand for a product is assumed to be related to the factor--

housing starts and appliances.

• Direct Derivation: See what determines sales-- roofing firms look for 15-year-
old houses for business.
 • Correlation Analysis: Statistical analysis that shows two things are linked--
perhaps pets in an area and dog food sales.

• Survey of buyer intentions: A sample of current or potential customers are asked how
much of a particular product they would buy at a given price during a specified future time
period.

• Test marketing: A firm markets its product in a limited geographic area, measures sales,
and then projects the sales over a larger area.

• Past sales and trend analysis: A flat percentage increase is applied to the volume
achieved last year or to the average volume of the past few years. Trend analysis more
sophisticated, uses more statistical analysis.

• Salesforce composite: A bottom-up method consisting of collecting estimates of sales for

the future period from all salespeople.

• Executive judgement: Obtaining opinions regarding future sales volume from one or
more executives.

Qualitative Methods

 Jury of Executive Opinion (opinions of a small group of high-level managers is pooled).

 Sales Force Composite (aggregation of salespersons estimate of sales in their territory).

 Market Research Method (solicit input from customers or potential customers regarding
future purchasing plans).

 Delphi Method (a forecasting group uses a staff to prepare, distribute, collect, and
summarize a series of questionnaires and survey results from geographically dispersed
respondents, whose judgements are valued).

Quantitative Forecast Methods

 Time Series Methods use historical data extrapolated into the future. They are best suited for
stable environments. Moving averages, exponential smoothing methods, time series
decomposition, and Box-Jenkins Methods.

Moving averages/ exponential smoothing

o Moving averages is a method based upon a specified historical period to

forecast the value for a future period.

o When differential weights are desired, such as for recent years, exponential
smoothing can be used.

 Causal Methods assume demand is highly correlated with certain environmental factors
(indicators). Correlation methods, regression models, and econometric models.
  Simulation Methods imitate the consumer choices that give rise to demand to arrive at a
forecast.

ESTIMATING CURRENT DEMAND

Total Market Potential:

 Suspect pool

 Prospect pool

Area Market Potential

 Market-buildup method:

 Difficult to gather information

 Standard Industrial Classification (SIC)

 North American Industrial Classification (NAICS)

 Multiple factor index method:

 Buying Power Index:

o BPI=.5Y + .3 R + .2P Where:

o Y=income, R=retail sales, P=population

Industry Sales and market Share:

 A. C. Nielsen reports

Survey of Buying Intentions/Purchase Probability Scales

o SRC of the University of Michigan

Sales Force Composites/opinions

Expert Opinions

Past-Sales Analysis

o Time series analysis

o Exponential smoothing

o Statistical demand analysis

o Econometric analysis

Market Test Method

 o New product introduction

Customer Value
Customer Value is the customer's perception of the value of a
product or service, considering both the perks received and
the costs involved. This insight considers numerous elements
like product benefits, customer experience, quality, and net
value for money. Understanding customer value is vital for
attracting and retaining customers, along with customizing
offerings to meet their needs. It involves evaluating customer
benefits, including product quality and service, against costs
like time, price, and effort.

Create Customer Value?

1. Revisit your Brand's Value Proposition: Verify
that your brand's value proposition focuses on why
consumers should pick your brand and the perks
they can expect. Align your product benefits with
customer needs to develop a compelling value
proposition that resonates with potential customers.

2. Offer Exclusivity: Provide exclusive access to services,

products, or rewards to your most valued customers,
fostering a sense of exclusivity and distinction. Providing
special privileges and perks to loyal customers can elevate

their perceived value and boost their loyalty to your brand,

eventually driving repeat business and advocacy.

[Link] Customers through a Loyalty Program: Express

gratitude and retain loyal customers by instituting a loyalty
program that acknowledges their ongoing support. Loyalty
programs will serve as incentives for repeat purchases and
contribute to enhancing enduring relationships with your
customer base.

[Link] with Customers: Take proactive measures to

engage with your customers, actively seeking to understand
their needs and preferences. By listening to their feedback
and engaging in meaningful dialogue, you can customize
your offerings to better meet their expectations, thereby
creating value that aligns with their desires and enhances
their overall experience.

[Link] Consistent
Communication: Keep communication channels open with
your customers throughout their journey with your brand.
Consistent and transparent communication helps customers
recognize the value they derive from your products or
services, fostering trust and loyalty in the process.

[Link] Customer Experiences: Deliver personalized

experiences by tailoring your interactions based on individual
customer behaviors and preferences. By giving exclusive
offers and customized solutions, you can boost the value of
each consumer, leading to more meaningful relationships
over time.
[Link] and Report Progress: Continuously track and
evaluate the progress of your value creation efforts by
monitoring key metrics such as customer satisfaction,
loyalty, and engagement. Analyzing this data provides
insights into the effectiveness of your strategies, enabling
you to make informed decisions to enhance customer
value further
 Increase Customer Value
1. Personalize the Customer Experience: Tailor your
support interactions and services to meet the ideal demand of
individual customers. This personalized approach enhances
the value customers derive from your business by ensuring
that their specific requirements are addressed and catered to,
ultimately leading to greater satisfaction and loyalty.
2. Provide Multichannel Support Options: Offer a variety of
support channels to accommodate diverse customer
preferences and convenience. By offering numerous avenues
for communication, including email, chat, phone, and social
media, you can empower consumers to be involved with your
business in a way that suits their demands, thereby boosting
their perceived value and overall experience.
3. Create a Robust Onboarding Program: Develop a
comprehensive onboarding process to guide customers in
understanding your product or service effectively. A well-
designed onboarding program ensures that customers are
equipped with the necessary knowledge and resources to
maximize the perks of your offering, resulting in heightened
satisfaction and long-term value.
4. Prioritize Customer Success: Focus on helping
customers achieve their desired outcomes with your product
or service. By prioritizing customer success, you not only
increase the value customers derive from your business but
also foster stronger loyalty and advocacy, as satisfied
customers are more likely to remain honest and recommend
your brand to others.

5. Address Patterns in Support Issues: Proactively detect

and resolve recurring support issues to improve the overall
customer experience. By addressing common challenges
before they escalate, you demonstrate your commitment to
customer value and reinforce trust and confidence in your
brand.
6. Surprise and Delight Customers: Look for opportunities
to exceed customer expectations and provide unexpected
value. Whether through personalized gestures, exclusive
offers, or exceptional service, surprising and delighting
customers creates memorable experiences that foster loyalty
and positive word-of-mouth.
7. Acknowledge and Reward Customer
Loyalty: Recognize and reward loyal customers for their
support. Implement loyalty programs or offer special perks to
express appreciation for their dedication, ultimately
enhancing customer value and encouraging repeat business.
8. Create a Sense of Community: Build a community
around your brand where customers can connect and engage
with each other. By fostering a sense of belonging and
facilitating peer-to-peer interactions, you increase the overall
value customers derive from their relationship with your
brand, leading to greater satisfaction and loyalty.