M-104
Unit III
Segmentation, Targeting
and Positioning
By: Kaneenika Jain
Contents
• The STP process,
• Concept of Market Segmentation,
• Benefits of Market Segmentation,
• Requisites of Effective Market
Segmentation,
• Process of Market Segmentation,
• Bases for Segmenting Consumer Markets,
• Targeting strategies,
• Positioning concept and strategies.
Concept
• STP, which stands for
segmentation, targeting, and
positioning, is a fundamental
concept in marketing management.
• It is usually the first step in
developing a marketing plan.
• The three parts of the concept
maximize exposure and market
saturation by looking at the most
important factors that impact how a
good or service will be received.
Market Segmentation
• Market segmentation is the process of dividing a market of
potential customers into groups, or segments, based on
different characteristics.
• The segments created are composed of consumers who
will respond similarly to marketing strategies and who
share traits such as similar interests, needs, or locations.
• Market segments are large, identifiable groups within a
market.
• In each market segment, there are typically three things
that are common to all segments - homogeneity,
distinctiveness and reaction.
Definition
• According to Philip Kotler, “ market
segmentation is the sub-dividing
of market into homogeneous sub-sections of
customers. Where any sub-section may
conceivably be selected as a target market to
be reached with a distinct marketing mix.”
• Market segmentation consists of taking the
total, heterogeneous market for a product and
dividing it into several sub markets or
segments each of which tends to be
homogeneous in all significant aspects. – W.
J. Stanton.
Requisites for effective segmentation
Importance of segmentation
• Advantage over competitors
• Opportunity to expand market
• Discovery of marketing opportunity
• Awareness of consumer needs
• Adjustments in products
• Effective advertising
Bases for segmentation (Consumer Markets)
Geographic segmentation
• It organizes customers into groups on
the basis of where they live.
• A market can be grouped by country,
region (northeast, southeast) or areas
within a region (state, city,
neighborhoods, zip codes).
• It is very useful for companies whose
products satisfy needs that vary by
region.
Demographic segmentation
• It groups consumers according to
easily measured objective
characteristics such as age, gender,
income, education, social class, life
cycle stage/generation, occupation
etc.
Behavioral segmentation
• In behavioral segmentation,
marketers divide buyers into groups
on the basis of their knowledge of,
attitude towards, use of or response
to a product.
Bases for behavioral segmentation
• Needs and benefits –Price, utility,
convenience, prestige etc.
• Decision roles – 5 roles, initiator,
influencer, decider, buyer and user
• User and usage variables – occasion,
user status, usage rate, buyer-
readiness stage, loyalty status and
attitude
User and usage related
• Occasions : time of day, week,
month, year or any other
• User status : non-users, ex-users,
potential users, first time users,
regular users
• Usage rate: light, medium and heavy
users
• Buyer-readiness stage : unaware,
aware, informed, interested, desire
the product, intended to buy.
• Loyalty status: hard-core loyal, split
loyal, shifting loyal, switchers.
• Attitude : enthusiastic, positive,
indifferent, negative, hostile
Example Segmentation for
restaurant
Process of segmentation
Bases for segmenting Business
Markets
• Demographic
• Operating variables
• Purchasing approaches
• Situational factors
• Personal characteristics
Market Targeting
• Once the consumer market has been
divided into segments, the marketer
proceeds to the second step of picking
exactly who he should target.
• The targeting stage involved matching the
abilities of the marketing plan with the
needs of the consumers.
• Market targeting is the process of
formulating market coverage policies.
• The targeting process involves two
steps:
Evaluating Selecting
Market Target
segments market
• The purpose of evaluating market
segments is to choose one or more
segments to enter.
• Target market selection is the choice of
which and how many market segments
the company will compete in.
• The term ‘Target Market’ means a
group of customers at whom the
organization specially intends to aim its
market effort.
• In evaluating market segments, the
firm must examine these two factors :
(A) Relative attractiveness of the
market segments
(B) Company’s capability to serve
and compete in various segments.
Segment attractiveness
Identifiable/
Measurable
Profitable Substantial
Segment
attractiveness
Reachable /
Differentiable
Accessible
Segment profitability
• Segment profitability = (Segment size
x segment adoption% x Purchase
behavior x Profit Margin%) -- Fixed
Costs
Company’s capability to serve and
compete in Market
Selecting the market
segments
• Full market coverage
• Multiple segment specialization
(product specialization, market
specialization)
• Single segment concentration
• Individual marketing
(Customerization)
Positioning
• The final stage in the STP strategy is positioning
the product in the market.
• Positioning is the act of designing a company’s
offering and image to occupy a distinctive place in
the minds of the target market.
• The goal is to locate the brand in the minds of
consumers to maximize the potential benefits to
the firm.
• The real trick in positioning is to strike just the
right balance between what the brand is and what
it could be.
• Market 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.
For example:
• A handbag maker may position itself as a luxury status
symbol
• A TV maker may position its TV as the most innovative
and cutting-edge
• A fast-food restaurant chain may position itself as the
provider of cheap meals
Examples
Some examples of marketing positioning:
• Tesla and Audi position themselves as a luxury
status symbol
• Starbucks positions itself as a trusted source of
upscale quality coffee and beverage
• McDonald’s positions itself as a place to get quick
and cheap meals
• Microsoft and Apple position themselves as a tech
company that offers innovative and user-friendly
products.
Perceptual map in
Positioning
• A perceptual map is used to show
consumer perception of certain brands.
The map allows you to identify how
competitors are positioned relative to you
and to identify opportunities in
the marketplace.
• An example of consumers perception of
price and quality of brands in the
automobile industry are mapped below:
• Positioning requires that marketers define
and communicate similarities and
differences between their brand and its
competitors.
• Positioning requires :
a) Determining a competitive frame of
reference
b) Identifying optimal PoPs and PoDs
c) Creating a brand mantra
Brand Mantra
• Brand essence, also known as a brand
mantra, is a short statement that
expresses the core of what that brand
represents or the image it seeks to project.
• A brand essence statement is often just
two to three words.
• For example, BMW is the "ultimate driving
machine", or Disney, "fun, family
entertainment"
USP
• Effectively positioning a product or service
gives it a USP (Unique selling proposition).
• A USP is an attractive feature or
characteristic of a brand that differentiates
it from similar alternatives.
• Brands must communicate this USP with
their target audience. This is where
positioning comes in.
Full STP Process
Differentiation
• It is the act of designing a set of
meaningful differences to distinguish
the company’s offering from
competitors’ offerings.
Differentiation variables
• Form
• Features
• Performance quality
• Conformance quality
• Durability
• Reliability
• Repairability
• Style
• Design
Means of differentiation
• Employee
• Channel
• Image
• Services