Market

segmentation,
targeting and
positioning
Chapter 5
Introduction
• One company cannot hope to meet the needs and wants of all customers.

• At best, companies are able to meet the needs of some clients in some
respects. Therefore, they must reflect on the markets they are currently in or
intend servicing, and segment them accordingly.

• Companies must make a profit.

• They must focus on satisfying a specific market's needs, concentrating on

what they do best to remain competitive in an increasingly competitive
marketplace.
Segmentation, targeting and
positioning defined

• By dividing a market into smaller homogenous

groups, companies are able to create more
personalised messaging, create more
awareness and enhance and improve
customer satisfaction, which will ultimately
culminate in an increase in sales and revenue.
• It is the marketer’s responsibility to divide the
consumer market into various groups with
similar needs.
• This is the process of market segmentation.
 Defining Marketing segmentation
The process of dividing the market, which is very diverse, into sub-groups of
consumers with similar needs, wants or demands, to achieve maximum
customer satisfaction by successfully addressing the specific needs, wants or
demands of the target group.

It is a marketing term that refers to aggregating prospective buyers into groups or

segments with common needs that respond similarly to a marketing action.
Market segmentation enables companies to target different categories of
consumers who perceive the full value of certain products and services
differently from one another.
• Market segmentation has as its aim to identify groups of consumers who are similar in some respects
and to tailor products and branding that will be acceptable to the group.
• The basis on which the markets can be segmented is not limited but can be a combination of factors
such as demographics, geographic location, psychographic aspects and behavioural aspects.
• Risk of failure of products offered are reduced as companies will be focusing on those products that
have the potential to penetrate the market and gain a share of the sales and how best to inform the
market of these products.
• By focusing on the target audience and their needs, the company can better allocate its available
resources on those actions that are likely to be the most profitable.
• Market segmentation can have an impact on the reach of a company’s demographic profile as it can
lead the company to maybe discover products or services they had not previously considered.
• The business must now decide which market segment's needs it can satisfy
best, a process known as target marketing

Target marketing is the process of deciding which segment(s) to pursue.

Targeting means that the marketer develops a specific marketing mix to meet the
needs of a specific group of customers.

• After selecting the market segment, the business should decide how to
compete effectively in this target market. A decision has to be made regarding
the competitive advantage to be achieved.
 Product positioning
• Through product positioning, marketers attempt to create a specific image or identity in the minds of
their target market for their product, brand or organisation and to ensure that this image is as positive
as possible.

• For new products, positioning relates to how the organisation wants to compare the new item in terms
of its predecessors.

• The marketer will attempt to establish a favourable position for their product by means of marketing
communication such as advertising.

Product positioning is the process of deciding and communicating how you want your market to think and
feel about your product. Successful product positioning requires your team to articulate:

1. How your product can solve your customer's problem

2. Why it is a better solution than its competitors'.

8 Stages in segmentation, targeting and positioning process
Stage 1: Situation analysis.
Establish the current state of the organisation. What are the strengths and weaknesses? ls the business meeting its
objectives? What resources are available?
Stage 2: Market segmentation.
What is the basis on which the business will segment its market?
Stage 3: Profiling.
Each segment the company wants to target must be profiled to get a clear picture of that segment.
Stage 4: Market targeting.
Determine the attractiveness of each segment.
Stage 5: Selection.
Select the most attractive target market(s).
Stage 6: Product positioning.
Decide on how and where to position the product for each selected segment.
Stage 7: Positioning strategy.
Decide on the best and most suitable positioning strategy for the selected segments.
Stage 8: Marketing mix.
Decide on the most appropriate marketing mix strategy that will be used for each segment
 Segmenting the market
• Segmenting the market is not something that can be neglected or done carelessly.

• The future of the company may depend on the way the market is segmented, and therefore regarded as
a key task that requires the correct identification of the market to serve and the correct basis on which
to segment it.

Market targeting is the process of deciding which market segment(s) to pursue by concentrating marketing
efforts on the specific segment(s).

• Marketers targeting is when marketers target specific segments of the market to focus specifically on
these smaller segments.
Advantages of Market segmentation:
• It forces marketers to focus more on customer needs. In a
segmented market, the marketer can fully appreciate the
differences in customer needs and respond accordingly. A
greater degree of customer satisfaction can be achieved.

• Segmentation leads to the identification of new marketing

opportunities if research reveals an unexplored segment.

• Segmentation provides guidelines for the development of

separate market offerings and strategies for the different market
segments.

• Segmentation can help to guide the proper allocation of

marketing resources. A large, growing market segment may be
allocated a greater proportion of the marketing budget, while a
shrinking one may be scaled down or eventually abandoned if it
becomes unattractive.
 Disadvantages of market segmentation
• The development and marketing of separate models and market offerings is very
expensive.

• Only limited market coverage is achieved since marketing strategies are directed at
specific market segments only.

• Excessive differentiation of the basic product may eventually lead to a proliferation of

models and variations, and finally cannibalisation. Cannibalisation occurs when one
product takes away market share from another developed by the same enterprise.
 Prerequisites for market segmentation
1. Measurable
• In order to be effective it is crucial that the size and purchasing power of the company's market should
be measurable. That implies that it must be able to quantify the data available about it.
2. Accessible
• It is one thing to know there is a market, but the question is whether the customers and consumers can
be easily reached and at a cost that is affordable.
3. Substantial
• The market that a brand decides to target should be large enough to warrant time and cost it will take to
penetrate it.
4. Differentiable
• When segmenting the market, the company should make sure that different target markets respond
differently to different marketing strategies.
5. Actionable
• Your market segments need to be actionable, meaning that they have practical value. A market segment
should be able to respond to a certain marketing strategy or programme and have outcomes that are
easily quantifiable.
 The marketing manager can use different variables to
segment a market.

Bases for
segmenting These variables can generally be classified according to:

consumer psychographic, geographic, demographic behavioural

markets

Table 5.1 - summary

 • In segmenting a market geographically,
the marketer divides the total market into
different geographic areas, such as
countries or regions.
Geographic • The enterprise can then decide to target
only one or a limited number of
segmentation geographic areas.
• The assumption is that people with similar
characteristics tend to live in the same
area and, therefore, have similar buying
patterns.
 • Demographic segmentation is probably the most common
base for segmenting consumer markets because it is
clearly identifiable. This is due to two main reasons:
• 1. Consumer needs or product use is often related to one or
more demographic variables.
• 2. Most demographic factors are measurable, accessible
• This may be because of the relative ease with which the
Demographic approach can be applied or because consumer needs are
often strongly associated with these variables.
segmentation

• Demographic segmentation involves dividing markets

according to age, gender,
• income, family life stage, ethnicity or any combination of
these factors.
 Psychographics and lifestyle
• Psychographics is the study of individuals based on
characteristics that describe them. It uses demographics
to study consumer attitudes, behaviours, opinions and
lifestyles.
• The term 'psychographics' is often used interchangeably
Psychographic with 'lifestyle’ to denote the separation of customers into
categories based on differences in choices of consumption
segmentation activities and product usage.
• Many psychographic variables may be used to segment
customers, but they all share the underlying principle of
going beyond surface characteristics to understand
customers' motivations for buying and using products.
• Demographics allows us to describe who buys, while
psychographics allows us to understand why they buy. This
is largely based on the values of the customer concerned.
 Values determine lifestyle
• Lifestyle' refers to how consumers behave
and act, their values and norms, their
attitudes, their actions and reactions.
• Values are the goals that we live by and the
Psychographic core beliefs that motivate us.
segmentation • Customers are motivated to purchase
products to satisfy their needs and wants,
which are based on their values, and
therefore their personal values determine
product choice.
• Customers buy products that they perceive
will achieve a value-related goal.
 The uses of psychographics
• Psychographics is used extensively in market segmentation.
• Psychographics allows marketers to go beyond the simple
demographic or product usage descriptions.

• Psychographic information can allow marketers to emphasise

features of the product that fit in with a person's lifestyle.

Psychographic • Products targeted at people whose lifestyle profiles show a high

need to be around other people might focus on the product's

segmentation
ability to help meet this social need.
• Psychographic information can offer useful input in advertising,
or in communicating something about the product.

• Understanding how a product fits or does not fit into customers'

lifestyles enables marketers to identify new product
opportunities, design media strategies, and create environments
that are most consistent and harmonious with these
consumption patterns.
 • The market can also be segmented according to an
individual's buying behaviour.

• This form of segmentation is based on the following criteria:

o Purchase occasions – bread vs cake.

Behavioural o Benefits sought – Specific benefits sought in a product.

o User status – Focus on regular and potential users.
segmentation o Usage rate – Heavy users should receive special attention.
o Loyalty status – 80% of profit is made from 20% loyal
customers
o Buyer readiness stage – create awareness of new product
o Attitude towards the product – focus on indifferent
consumers
 Developing segment profiles
• Every segment considered by the enterprise must be described
fully with respect to its
• size,
• demographic and
• psychographic details,
• lifestyle,
• behaviour patterns and
• product usage.

• Such a profile enables marketing management to develop

products that will provide the need satisfaction utilities desired
by customers, and to design marketing communication
messages that will appeal to them.
 Market targeting

• Page 317

• After developing a comprehensive

profile of the market segments based on
the criteria indicated, the next step is to
decide to target only one segment or a
few, or even the whole market.

• This is referred to as market targeting.

 Criteria for selecting
potential target markets

• Before a specific market segment is selected as a

target market, it must first be evaluated according to
five important evaluation criteria:
1. Segment size and growth possibilities
2. Attractiveness and potential profitability
3. Resources and skills of the enterprise
4. Compatibility with the Enterprise’s objectives
5. Cost of reaching the target market
Segment size and growth possibilities

• The size of a target market is not relative to its profitability.

• A small segment may be more profitable than one in which a large sales volume can be realised.

• Marketing management should be convinced that there are further growth possibilities that make
the segment sustainable.

• The market for TAG Heuer watches or Rolls Royce cars may be small, but the profit potential is
huge.

• This makes the target market a very attractive segment.

Attractiveness and potential profitability
• The attractiveness of a target market depends not only on
its size and growth potential, but also on its promise of
long-term profitability.
• Attractive segments can draw intense competition, which
may have a negative effect on future profits.
• A target market is generally attractive if it has some
degree of interrelationship with other segments.
• Instead of a company serving a number of small
segments, it is much better to combine interrelated
segments.
• Interrelationships exist between segments that use the
same raw materials, similar production methods or joint
distribution channels
Resources and skills of enterprise

• Even if a segment has great potential, it cannot be

used if it does not fit in with management's long-term
objectives.
• The same applies if the resources and skills are not
available to take full advantage of the opportunity.
• A segment can be chosen as a target market only if
marketing management is fully committed to serving it
better than any other competitor does.
• This implies that the market offering must have an
undoubted differential advantage for target market
members.
• If not, it is advisable to commit the costs and energy
to an alternative option
Compatibility with the
enterprise's objectives

• Besides the resources and skills of the

enterprise, the target market's compatibility
with the enterprise's objectives must be
considered.

• If the enterprise's objectives cannot be

enhanced, the market segment in question
should be disregarded.
Costs of reaching the
target market

• A potential target market should not

be considered if it is inaccessible to an
enterprise's marketing strategies, or if
the costs of reaching the market are
too high.
 • To assess the potential of each of the market
segments identified during the segmentation
process, there are five steps, as shown in Figure
5.3 (p137).
• Evaluating potential market segments starts with

Steps in
selecting a set of criteria that can be used to
assess:

evaluating a • the attractiveness of the particular target market

and,
potential market • the competitive position of the enterprise with
regard to a specific market segment.

• Because not all evaluation criteria are of equal

importance, these factors are then weighed to
reflect the relative importance of each.
 Product positioning (p141)
• The ultimate aim of the marketing actions of marketers is to position their products or services
in the minds of their customers in the way that they want the customers to perceive them.

• Product positioning - refers to the way in which customers perceive a product in terms of its

• characteristics and advantages, and its competitive positioning.

Positioning is the way customers perceive a product in terms of its characteristics and
advantages, and its competitive positioning relative to the products of competing organisations.

• The ultimate aim of the marketing actions of marketers is to position their products or services
in the minds of their customers in a way that they want the customers to perceive them.
 The positioning process
• A seven-step approach can be adopted when
positioning brands.
• (The term 'Brands' is preferred here since we
are referring to individual producers' brands
and not products that compete with one
another in a market. Positioning maps
• can, however, also be developed for product
categories.)
• These steps are shown in Figure 5.6. (p143)
 • The positioning process starts with identifying a
relevant set of competitive brands with which a
Step 1: Identify particular producer's brand will be compared.
• All relevant competing brands must be identified
all major to make the positioning effort worthwhile.

competing • This enables marketers to identify the strengths

and weaknesses of their own 'brand against a
brands competing one.
• It also helps them to decide whether to reposition
the brand to strengthen its position in the market.
 • Product positioning has to do with competitive
Step 2: Identify differentiation and the effective communication of
this to customers.
which variables • An enterprise or market offering can be
are most differentiated along four dimensions:
1. product,
relevant to 2. services,
consumer 3. personnel and

needs and 4. image.

• Marketers must select those variables that play a
wants major role in helping customers to differentiate
between alternative brands in the market.
Step 3:
Determine • The marketer must establish how consumers
consumers' perceive the various brands in terms of the
determinant variables selected in the previous
perceptions of step.
• This step involves the collection of primary data
your brand and from a sample of consumers.

of competing • Usually with a questionnaire.

brands
 • When a consumer is unaware of a brand, such a
brand clearly cannot occupy a position in the mind
of the consumer.
• In such instances, brand awareness must first be
Step 4: Analyse established.
• Competing directly with dominant brands is not
the strength of advisable.

major brands • Instead, the marketer must identify and target a

position within a market segment that is not
dominated by a leading brand.
• Alternatively, the marketer must concentrate on a
variable that is highly prized by a particular market
segment.
Step 5: Analyse • From the data collected from consumers about
their perceptions of the various brands in the
the brand's market, the marketer can establish how strongly a
particular brand is associated with a variety of
current position determinant variables.
 • To determine the variables and positions that
Step 6: Determine would appeal most to consumers, survey
respondents could be asked to think of the ideal
which variables product or brand in a particular product category.
• Respondents can be asked to rate their ideal
consumers prefer product and existing products on a number of
determinant variables.
 • Deciding where to position a new brand or where
to reposition an existing one, depends on the
market targeting analysis, as well as on

Step 7: Select • the market positioning analysis.

• The position chosen must reflect customer
positioning preferences and the positions of competitive
brands.
strategies • The decision must also reflect the expected future
attractiveness of the target market and the relative
strengths and weaknesses of competitors, as well
as the organisation's own capabilities.
 • Seven positioning methods can be
distinguished:
1. Attribute positioning
2. Benefit positioning
Positioning 3. Use application positioning
methods 4. User positioning
5. Competitor positioning
6. Product category positioning
7. Quality / price positioning
 • The enterprise positions itself in
terms of one or more outstanding
attributes.
1. Attribute • For example, Castle Lite has
chosen to position its beer as the
positioning leading premium light beer and
'cold'.
 • This positioning method
emphasises the unique benefits
that the enterprise or product
offering offers its customers.
2. Benefit • For example, Vanish promises
positioning effective stain removal.
 • An enterprise can position itself
or its products in terms of
product use or application
3. Use possibility.
application • Graca, for example, is positioned
as a wine to be enjoyed at all
positioning kinds of fun occasions.
 • The enterprise may position its
products with its users in mind.
• For example, marketers of
4. User skydiving can position their
market offering to appeal to thrill-
positioning seekers.
 • Some products can best be
positioned against competitive
offerings.
5. • For example, BMW finds it useful
Competitor to position its cars directly
against those of Mercedes-Benz,
positioning its closest rival in South Africa.
 • An enterprise can position itself in a
product category not traditionally
associated with it, thereby
6. Product expanding business opportunities.

category • For example, a museum or

planetarium, traditionally regarded
positioning as an educational institution, may
elect to position itself as a tourist
attraction.
 • The enterprise may claim its
product is of exceptional quality
or costs the least.
7. • For example, while Woolworths is
Quality/price known for high-quality garments,
Mr Price is known for unbeatable
positioning prices.