LECTURE FIFTEEN

MARKETING SEGMENTATION, TARGETING AND POSITIONING

At the end of this lecture, students must be able:

To describe the meaning of segmentation, targeting and positioning.
To review various methods of segmenting, targeting and positioning
both consumer and business market.
To identify various factors which influencing market segmentation,
targeting and positioning.

Background Information
A success of an organization in modern business practices is not
guaranteed by an ability of serving a large market. In this era of a stiff
competition marketers must develop sustainable strategies which give
assurance for a firm to compete. Nowadays, a firm cannot be glorified
because it has a large number of customers or because it acquires a large
market geographically. This is because; despite of these achievements in
term of the size of customers and market coverage, customers might have a
lot of complaints and dissatisfactions with regards to a firm products and
services. The idea here is that, it is very difficult for a firm to serve a large
market or different customers effectively by using only one strategy or
product/ service. Again, it is a challengeable task to serve a large market
without having suitable strategies which are close to the needs and
requirements of a given market or society. These difficulties are the ones
which give birth for the idea of market segmentation, targeting and
positioning. That means, a firm needs to divide a large market into small
portions (Segments) with homogenous needs and requirements. Then, the
organization should select a market segment or segments which can serve
them effectively with the available resources (Targeting) and thereafter, the
firm should select which positioning strategy is appropriate by looking types
of targeted markets. Probably, this can be a reason why most of the firms
nowadays, for them to possess a large market is not a first priority. Their
focus is to have a small market (Segment) or reasonable number of markets
which they can serve them fully.

Concept of Market Segmentation

Market Segmentation is a very popular component in managing
complex markets. The complexities of customers in term of needs and
requirements diversification etc provide a reason of having market
segmentation. The ideally is that, different characteristics and unique
features of each large market must be reviewed and thereafter, those
characteristics or features can be used as potential criteria to segment each
market. The rationale of dividing markets by focusing on its unique
characteristics and features is that, the firm will offer products and services
which are directly meeting the specifications of the market.

What Is Market Segmentation?

Market Segmentation can be viewed or described in different
perceptions; one can view market segmentation as a process of dividing a
large market into small markets (segments). For instance, According to
Stanton (1981), market segmentation is the process of dividing the total,
heterogeneous market for a product into several sub-markets or segments,
each of which tends to be homogeneous in all significant aspects. On the
other hand, Akanbi (2002) defines market segmentation as a process of
dividing the consumers in a given economy into target markets. The aim of
market segmentation is to ensure the organization establish a substantial
and measurable market target and with effective positioning strategies.

Steps in Market Segmentation, Targeting and Positioning

Fig: Steps in Market Segmentation, Targeting and Positioning

Rationale of Segmenting a Market

Basically, market segmentation has a number of significances which
have a great implication to the organization operations. The following are
some of the significances of market segmentation:

Market segmentation is an important approach which help an

organization to serve a given market effectively by selecting a suitable
market or market niche which it can serve them effectively given the
resources which the organization own currently.

Through market segmentation, the organization is in a position to offer

various offerings in accordance to customers’ needs and requirements.
This is attainable due to the fact that, the organization is serving a
small market which its needs are very clear and easy to be fulfilled.

Through market segmentation marketers are in a position to formulate

and to implement relevant strategies which are directly targeted to a
specific market segments rather than communicating to a large market
which sometimes is not successful and not effective.
 Market segmentation is very helpful to marketers when they think on
which type of a distribution channel to adopt or to design.

Market segmentation creates a cornerstone in which the organization

can build a strong brand image and the organization image which in
turn gives birth to customers who are loyal to the organization brands.
This happens because; through market segmentation the organization
establishes strong services delivery by saving small markets very
effective.

Conditions for Effective Market Segmentation

Not all decisions to segment a market can be successfully. It depends
on how the organization has been preparing preliminary actions which offers
conducive environments for doing market segmentation. Some of issues
which made up effective market segmentation are:

Consumers’ needs must be heterogeneous; effective market

segmentation is possible when the customers’ needs are diverse. Thus,
in case if the needs of consumers are similar segmentation cannot be
effectively and basically the need for segmentation is void.

The chosen market segments must be accessible; the segmented

market must be easily to be reached and served. This is because the
aim of market segmentation is to ensure market is served effectively
through accessibility.

Each selected segment must offer possibility of harvesting profits;

taking into account that the aim of segmenting market is to enhance
profit, therefore each market segments must offer a possibility for
profit generation.
 Each market segment must offer an opportunity be measured and
evaluated; market segment is adopted in order to ensure there is a
proximity between the market and the organization. Therefore each
market must give a chance for being evaluated and measured and
sometimes different segments can be compared to see in which
segment the organization is doing well.

The segments must be identifiable and divisible; each segmented

market must possess special or unique characteristics. The needs of
customers in each segments must be relatively similar.

Criteria for Segmenting Consumer Markets

A market can be divided by using different bases. Apparently we can
say that, there is no single criterion which can be used to divide a market.
Therefore, a marketer needs to think on employing a combination of factors
or parameters which is helpful in this process. Furthermore, these variables
can vary from one market to another market, from one organization to
another organization etc. In this case the following are some of criteria which
can be used to segment consumer markets:

Geographical Segmentation; this criterion suggest that market can be

divided by considering parameters such as regions, states, cities,
Towns, nations etc. At the end the organization may decide to select
some of segmented markets to serve them effectively.

Demographic Segmentation; market can be divided based on age,

family size, gender, income, occupation, religion, race, rationality etc.
Basically, this is the most criterion which is used to divide consumer
markets. Through dividing a market by following demographic factors,
it is believed that, one can determine and measure efficiency of each
market segment easily. Likewise, consumer markets is much
associated with parameters such age, gender, nature of family etc,
which gives a great chance to divide effectively this market based on
demographical factors.

Age and Life Cycle Stage; it is often for sellers to use age or life cycle
stage to divide a market. This is because different age groups have
differences in term of purchase and needs. As a result, through
understanding age groups which exist within the market it becomes
easy for a company to produce appropriate goods and services or to
adopt appropriate strategies for each age group of buyers

Psychographic Segmentation; sometimes market can be divided by

considering variables such as social class, life style, personality etc.
People in the same demographic group can have very different
psychographic make-ups such as:

 Social Class; in recent years it is a normal thing for a company to

produce a product in order to serve the needs of a certain
specific social groups. When the organization thinks on doing so,
it produces types of goods and services which possess basic
features which favor the needs/specifications of these classes.

 Lifestyle; the organization can produce goods or services which

fits for lifestyle of a certain society as part of its market
segments. Consequently, if in case the organization decides to
divide a market based on consumers lifestyle, it should produce
goods and services which signifies such life style.

 Personality; it is true that Marketers also use personality

variables to segment markets, through this approach, marketers
 can produce goods and services which move along with
consumers’ personalities.

Behavioral Segmentation; it is often that marketers can decide to

divide a market by considering variables such as knowledge, attitudes,
uses, responses to a product, etc. In fact, most of marketers believe
that, behavioral segmentation is the best remarkable point to start
dividing a market.

 Benefits Sought; this is one of the most preferably method of

dividing a market. Thus, a seller may decide to divide buyers
based on kinds of benefits which each buyer is thought to obtain
in a particular product. In this case, this approach calls for
sellers’ ability to accumulate important information which says
about what kinds of benefits which can be obtained in his/her
produces.

 User Status; in some situation Markets can be segmented into

groups of nonusers, ex-users, potential users, first-time users,
and regular users of a product. Therefore, in each group a
marketer needs to develop unique strategies which will enable
him/her to manage these segments. For instance it is often that,
those potential and regular users may require different kinds of
marketing attention compared to other groups.

 Usage Rate; this form segmentation is very often used in

business Markets. Although, in consumer markets we can also
segment into light, medium, and heavy-user groups.

 Occasions; a market can be divided based on occasion when

they get the idea to buy, actually make their purchase, or use
 the purchased item. This type of segmentation criterion can help
firms build up product usage. For instance, an hotelier can use
this variable for his/her hotel rooms

 Attitude towards Product; marketers should know that,

sometimes customers can be enthusiastic, positive, indifferent,
negative or hostile about a product. Therefore, you can decide
to divide your market with regards to individuals’ perception or
reactions towards the products.

Criteria for Segmenting Business Market

The following basis can be used to segment business market;

Geographical Location; business market can be divided considerably

through the use of geographical profile. This geographical criterion is
also associated with other minor criteria like climate, final consumer
preferences etc.

Types of organization; very often business market can be segmented

by looking types of the organizations which form a total market. How
to classify these organization one may look on types of products they
produce, distribution systems they used, price structures etc. Now,
based on these variations, the organization needs to select which
segment can serve effectively.

Customers size; customers’ size can be used as a basis of segmenting

a business market. In this case, if the organization opts to use this
method in segmenting a market, the organization can decide to offer a
low price for those buyers who buy extremely large quantities. Again,
the organization can decide to offer additional services to large buyers
 relatively to small buyers. The ideally here, the organization opts
different strategy to different customer groups.

Use of product; a single product can be used in numerous ways

between different users or buyers. For instance; one buyer is
purchasing a product just for only one use while another buyer is
purchasing the same product for using it in more than one uses. In this
case, the organization can divide a market by considering way in which
a product is going to be used. This is because, the use of a product
might affect types and amounts purchased as well the modality of
purchase.

Fundamental Segmentation Parameters for Consumers Markets

Geographic
Region Dodoma, Iringa, Mbeya, Mwanza,
Njoruma, Simiyu, Singida, Dar-es-
Salaam, Pwani, Mtwara, Lindi,
Arusha etc
Density Urban, Rural, sub-urban etc

Demographic
Age Below 5, 5-11, 12-19, 20-34, 35-49,
50-64, 65+ etc
Religion Christianity, Muslim, non-believers
etc
Marital Status Single, Widowed, Divorced,
separated, Married etc
Gender Male or Female
Income Level High, medium, Lower, etc
Education Level Uneducated, educated, etc
Nationality( Mostly for International Tanzanian, Kenyan, Asian etc
Marketing)
Social Class Working Class, medium Class, lower
Class etc
Race White, Black, Asian etc
Occupation Managers, Teachers, Farmers,
Students etc

Psychographic
Life Style Straight, swingers, longhairs, etc
Personality Compulsive, aggressive, ambitious,
competitive etc

Behavioral
Attitude Toward product Positive, negative, indifferent, etc
Benefits Quality, service, economy etc
Occasions Regular Occasion, special occasion,
etc
Loyalty status None, Strong, Medium, absolute
Buyer-readiness stage Unaware, aware, interested etc

Market Targeting
After the process of segmenting market is over, the organization is
required to select which market is going to serve. Remember, market
segmentation process give birth to different market segments each with its
own characteristics, features, needs etc. Therefore, the organization is
required to select which market(s) is able to serve it effectively given the
available resources, vision, objectives and mission of the organization. In this
case, the organization needs to conduct a thorough analysis and evaluation
of each market segments before the decision to select one or groups of
market is done. For example, first, a company needs to find if the segmented
markets possess characteristics or features which are attractive? This
includes features such as size, growth rate, risk rate, economies of scale,
possibility of making profits etc. second, the company to need to see if the
market segments are compatible to the company vision, mission, resources
objectives and goals. This signifies that, there are some segmented markets
which the organization will be forced to leave them provided that are not
compatible to the organization vision, mission, resources, objectives and
goals.

Selection of the Market Segments

There are five patterns of target market selection which is very
common; single-Segment Concentration, Selective Specialization, Product
Specialization, Market Specialization and Full Market Coverage.

Singe-Segment Concentration; this occurs when a firm selects a single

segment. This approach enables a firm to gain a wide and strong
knowledge on customer needs and market environments due to fact
that it concentrated on serving a single market in a repetitive way.

Key:
P- Product
M- Market

Selective Specialization; in this approach the organization selects a

number of segments which are compatible to the organization
resources, vision, mission and objectives. Through employing this form
of segmentation a firm is diversifying risks whereas if one market
segment fails to yield expected results, another segment will take
over.

Key:
P- Product
M- Market
Product Specialization; sometimes a company may decide to produce a
product which appeals to more than one segment. By adopting this
approach, a firm builds a strong image on producing a certain product
throughout the segments.

Key:
P- Product
M- Market

Market Specialization; this approach is appropriate when a firm is

thinking on producing and serving diverse needs of a single segment.
The benefit of this approach is that the firm gain positive reputation on
serving all the demands of the segmented markets.
Key:
P- Product
M- Market

Full Market Coverage; in this approach a firm decides to serve all the
needs of customers which prevail over time. It is not easy for small
firms to adopt this approach but large firm adopt this approach by
using the following ways; undifferentiated Marketing and Differentiated
Marketing.

Key:
P- Product
M- Market

 Undifferentiated Marketing; here a firm does not concentrate on

market segment differences but more emphasize is on the wide
market and one market offer. That is consumers’ needs are
priority rather than differences among buyers. Basically,
 marketers develop products, services, and marketing strategies
which can be applied in a wide market.

 Differentiated; this approach is used when a firm serves several

market segments but the specific needs of each segment is
highly considered. Although this method is very useful in profit
generation, but it is more expensive because a firm needs to
produce varieties of products with regards to customers’ needs
etc.

Evaluating Markets and Sales Forecasting

The process of serving a market is not an easy task. It is very
expensive and it consumes a lot of resources in term of money, time,
personnel etc. With these facts, the selected market or targeted market
must offer a possibility for the organization to generate substantial profit
which is greater than expensive of serving particular markets. In this case, if
the targeted market does not offer a light for a firm to make a profit, such a
market is not promising. In the process of evaluating markets and sales
forecasting for a targeted market, the following parameters must be
determined effectively: Market and company sales potential and company
sales forecast.

Market Sales Potentials; according to Pride and Ferrell(1977), market

Sales Potentials refers to the amount of a product that would be
purchased by scientific customer groups within a specified period at a
specific level of industry- wide marketing activity. It is the limit
approached by market demand as industry marketing expenditures
approach infinity, for a given environments (Kotler, 1997).

Company Sales Potentials; company sales potential can be described

as the amount of a product that an organization could sell during a
 specified period. The company sales potential is determined by two
major forces. First, the size of market sales potential. Second, the level
and power of marketing efforts which also have an impact to the size
of market sales potentials. Third, the level of marketing activities
relative to the industry marketing activities, for instance, if in case the
organization implement strong and powerful marketing strategies
compared to its competitors, the possibility to raise sales potential will
be high.

Company sales forecast; according to Pride and Ferrel (1977), a

company sales forecast is the amount of a product that the company
actually expects to sell during a specific period at a specified level of
marketing activities.

Methods of estimating Future Demand

There are different methods of anticipating demands of the
organization products or services. Therefore, the organization has a choice to
select which method(s) to use by considering varieties of factors like
resources, types of results they want, nature of market, etc. As for this
course, we are going to review some of them. These are:
Executive Judgments; this is a method of sales forecast where by
executive people use their own experience to determine the future
trends of the market. This method is unscientific and might have some
weaknesses including the fact that, estimation is done based on past
experiences, that is current estimation is directly determined by past
market trends. This method is expedient when the demand of a
product is stable and someone who estimates sales has satisfactory
experience on market demand history. That is to say sometimes the
outcome can be very much optimistic or pessimistic depending on
current experience of a forecaster.
Surveys; this is another method of sales forecasting whereby
customers, sales people, and experts are asked to predict the trend of
sales in future.

 Customer Surveys; customers can be asked to say how much in

term of quantities are they read to buy in future or within a
specified time? Or what quantities are they able or intend to buy
in future. However, this approach is much expedient when the
market is small or number of customers are relatively small.

 Sales People; another option which can be used to estimate the

company sales is through asking each sales person to conduct a
formal research in his/her respective territories for a specified
period of time. These researches must anticipate sales of
different sales territories, and then at the end the organization
will obtain a total of market estimation through adding
estimations from various territories. This approach is good
because, sales people are the organization representatives in the
market. They work very close to customers and therefore it is
very easy for them to collect relevant information from
customers.

 Expert Survey; the organization can decide to employ

professional people outside the organization to collect data
which is useful in the process of making sales estimations. These
are statisticians with experiences in data analysis and making
estimations.

Time Series Analysis; this method used the organization’s historical

sales data to predict what might happen in future. It involves the study
of current sales patterns and trends and then assumption is made that
 these trends might remain in the same status in future or minor
changes might happen. In this case, the accuracy and usefulness of
this approach is predetermined by assumptions which have been put
forward before.

Correlation Methods; again this approach depends on the organization

historical sales data. Through this method a forecaster used past data
in order to establish relationship which exist between these data and
one of the selected variable such as population, per capital income etc.
In analyzing data this approach used regressions analysis to establish
relationship between past data and changes in a given variable.

Market Tests; when a firm thinks on employing the market tests in

sales estimation, a firm is required to select a market segment in
which a test is going to be conducted. This test can be focused on the
responses of customers on prices, promotion, distribution etc. The
product is supposed to be introduced and customers’ response should
be observed. This method is useful when the need is to measure sales
estimation of a new product or existing product which is being
introducing in a new market.

Product Positioning Strategy

A Product positioning strategy concerns with building differences
between the firms. Thus, the aim of developing and adopting product
positioning is to make differences between one offerings and the other in the
mind of customers. For instance, the company can decide to position its
offerings in the minds of customers as high priced, high quality, affordable to
everyone etc. However, in the process of creating difference between the
company products or services against competitors’ products or services is
very important to notice that, not every products or services difference is a
differentiator. And also, every difference has its own costs and benefits to
the organization performance. This shows, how is very important for the
company to think on the best way to differentiate its offerings before the
sight of his/her customers. Now, the best difference holds the following
qualities;

Communicable; it must be easy to understand, visible, etc to

prospective buyers.

Affordable; customers must be able to pay for such the difference.

Profitable; it must offer a clarity of gaining profit from it. If in case the
difference does not offer possibility of raising profit from it, it is void.

Distinctive; must be unique.

Superior; the difference is superior to other ways of obtaining the same

benefits.

Preemptive; must be difficult to be copied by counterparts.

Important; it must offer valued benefits to a large number of buyers.

What Is Product Positioning?

According to Kotler (1997), Positioning is the act of designing the
company’s offering and image so that they occupy a meaningful and distinct
competitive position in the target customers’ minds. Product positioning
consists of a number of decisions which focus on creating and maintaining a
positive image of the company offerings relatively to competitors’ offerings.
It holds important parameters like, opinions, feelings, perceptions which
build customer altitude towards the organizations offerings. According to Al
Ries and Jack Trout “Positioning starts with a product. A piece of
merchandise, a service, a company, an institution, or even a person.
……….But positioning is not what you do to a product. Positioning is what
you do to the mind of the prospect. That is, you position the product in the
mind of the prospect”

It is very often the organizations are tempted to commit the following

errors in their process of creating and designing product positioning strategy.

Under-positioning; this occurs when customers do not feel anything

special from the organization offerings. That is to say, the positioning
strategy is vague.

Over-positioning; it is a situation which occurs in product positioning

strategy when buyers have a narrow perceptive about the products or
services.

Confused positioning; this occurs when the company introduce a large

number of differences to a product or service, or a company is making
changes in its positioning strategy frequently which in turn confused
the buyers.

Doubtful positioning; this occurs when buyers are not in trust with what
the product claims to offer in term of features, price, benefits etc.

Available Positioning Strategies

The following are some of positioning strategies which a company can
decide to opt:
 Attribute Positioning; this is used when a company thinks on
positioning itself as a company which offers offerings with high
attributes like size, experiences in businesses etc.

Benefits positioning; this strategy is appropriate when the target is to

use benefits of the organizations offerings as a strategic tool.

Use/application positioning; it is an appropriate strategy when the

need is to position the offerings as the ones which have varieties of
uses or applications.

User positioning; it is useful if the need is to positioning a product or

service that can be used by a certain group of users.

Competitor positioning; this strategy is useful if the organization thinks

to position itself as a competitive one relatively to its counterparts.

Product category positioning; here the product or service is being

positioned as the best in a certain category of product or service.

Quality/price positioning; in this strategy a product is positioned as the

one which offers the best value.

Product Re-positioning strategy

Sometimes the organization’s existing product positioning strategy
might fail to work substantially as per the organization and customer
expectations or is outdated. If these situations happen the organization is
forced to undertake product repositioning strategy as a strategic tool in
these particular environments. Specifically, product repositioning strategy
can appear inevitably in the following situations;
 When the current positioning strategy fails to meet the organizations
goals and objectives.

When the current positioning strategy does not offer satisfactions as

per the promise.

If the current positioning strategy is no longer competitive and unique,

etc.

Therefore; in the process of doing repositioning a marketer can decide

to take existing products and introducing them into a new market or
unoccupied market. But again, a marketer can decide to re-build the image
of the product through adopting minor changes to its product. However, this
process must be accompanied by intensive awareness campaign in term of
promotion, advertising etc.