5.

MARKETING SEGMENTATION, TARGETING AND POSITIONING

DESIGNING A CUSTOMER VALUE–DRIVEN STRATEGY

Marketing Strategy
There are four major steps in designing a customer value–driven marketing strategy. In the
first two steps, the company selects the customers that it will serve.

 Market segmentation: Dividing a market into distinct groups of buyers who have
different needs, characteristics, or behaviors and who might require separate
marketing strategies or mixes.
 Market targeting: Evaluating each market segment’s attractiveness and selecting
one or more segments to serve.

In the final two steps, the company decides on a value proposition—how it will create value
for target customers.

 Differentiation: Actually differentiating the market offering to create superior

customer value.
 Positioning: Arranging for a market offering to occupy a clear, distinctive, and
desirable place relative to competing products in the minds of target consumers

IDENTIFYING MARKETING SEGMENTS AND SELECTING TARGET MARKETS

Identifying marketing segments and selecting target markets is a crucial process in

developing an effective marketing strategy. It involves breaking down a larger market into
smaller, more manageable segments and then choosing one or more of these segments to
focus your marketing efforts on. Here's a step-by-step guide on how to do it:

1. Market Segmentation:
a. Define Your Market:
 Begin by clearly defining the overall market or industry that your product or service
operates in. This provides a starting point for segmentation.

b. Gather Data:
 Collect data on potential customers, including demographics (age, gender, income,
education, etc.), psychographics (lifestyle, values, attitudes), and behavioral factors
(buying habits, usage patterns, loyalty).

c. Segment the Market:

 Divide the market into smaller, homogeneous segments based on similarities in the
data you've collected. Segmentation can be done using various criteria, such as
geographic (location), demographic, psychographic, and behavioral factors.

d. Evaluate Segment Viability:

 Assess the size, profitability, and growth potential of each segment. Not all segments
may be worth pursuing, so focus on those that align with your business goals.

2. Target Market Selection:

a. Analyze Segments:
  Evaluate each segment's attractiveness by considering factors like market size, growth
potential, competition, and profitability.

b. Set Clear Objectives:

 Define your marketing objectives for each potential target segment. What do you
want to achieve by targeting this group? For example, increased sales, brand
awareness, or market share.

c. Consider Your Resources:

 Assess your company's resources, capabilities, and limitations. Can you effectively
reach and serve the chosen target market?

d. Choose Target Segments:

 Select one or more segments that align with your objectives and resources. You may
choose to focus on a single primary target market or multiple segments if your
resources allow.

e. Develop a Marketing Mix:

 Tailor your marketing mix (product, price, place, promotion) to meet the specific
needs and preferences of your chosen target market(s). This may involve product
customization, pricing strategies, distribution channels, and targeted marketing
campaigns.

Remember that market segmentation and target market selection are not static processes.
Markets change over time, and consumer preferences evolve. Regularly review and update
your segmentation and targeting strategies to stay competitive and relevant in your industry.

Segmenting Consumer Markets

There is no single way to segment a market. A marketer has to try different segmentation
variables, alone and in combination, to find the best way to view market structure.

1. Geographic segmentation: Dividing a market into different geographical units, such

as nations, states, regions, counties, cities, or even neighborhoods.

2. Demographic segmentation: Dividing the market into segments based on variables

such as age, life-cycle stage, gender, income, occupation, education, religion,
ethnicity, and generation.

3. Psychographic segmentation: Dividing a market into different segments based on

lifestyle or personality characteristics

4. Behavioral segmentation: Dividing a market into segments based on consumer

knowledge, attitudes, uses of a product, or responses to a product.

 Occasion segmentation: Dividing the market into segments according to

occasions when buyers get the idea to buy, actually make their purchase, or
use the purchased item.
 Benefit segmentation: Dividing the market into segments according to the
different benefits that consumers seek from the product.
 User Status: Markets can be segmented into nonusers, ex-users, potential
users, first-time users, and regular users of a product. Marketers want to
 reinforce and retain regular users, attract targeted nonusers, and reinvigorate
relationships with ex-users.
 Usage Rate: Markets can also be segmented into light, medium, and heavy
product users.
 Loyalty Status: A market can also be segmented by consumer loyalty. Buyers
can be divided into groups according to their degree of loyalty. Some
consumers are completely loyal—they buy one brand all the time and can’t
wait to tell others about it. Other consumers are somewhat loyal—they are
loyal to two or three brands of a given product or favor one brand while
sometimes buying others. Still other buyers show no loyalty to any brand—
they either want something different each time they buy, or they buy
whatever’s on sale

Selecting Target Market Segments

After evaluating different segments, the company must decide which and how many
segments it will target. A target market consists of a set of buyers who share common needs
or characteristics that a company decides to serve. Market targeting can be carried out at
several different levels. Companies can target very broadly (undifferentiated marketing), very
narrowly (micromarketing), or somewhere in between (differentiated or concentrated
marketing).

 Undifferentiated Marketing: Using an undifferentiated marketing (or mass

marketing) strategy, a firm might decide to ignore market segment differences and
target the whole market with one offer. Such a strategy focuses on what is common in
the needs of consumers rather than on what is different. The company designs a
product and a marketing program that will appeal to the largest number of buyers.

 Differentiated Marketing: Using a differentiated marketing (or segmented

marketing) strategy, a firm decides to target several market segments and designs
separate offers for each. For example, P&G markets at least six different laundry
detergent brands in the United States (Tide, Gain, Cheer, Era, Dreft, and Bold), which
compete with each other on supermarket shelves.

 Concentrated Marketing: When using a concentrated marketing (or niche

marketing) strategy, instead of going after a small share of a large market, a firm goes
after a large share of one or a few smaller segments or niches.

 Micromarketing: Micromarketing is the practice of tailoring products and marketing

programs to suit the tastes of specific individuals and local customer segments. Rather
than seeing a customer in every individual, micromarketers see the individual in every
customer. Micromarketing includes local marketing and individual marketing.

 Local marketing: Tailoring brands and marketing to the needs and wants
of local customer segments—cities, neighborhoods, and even specific
stores.

 Individual marketing: Tailoring products and marketing programs to the

needs and preferences of individual customers.
 PRODUCT POSITIONING AND DIFFERENTIATION

Product positioning and differentiation are essential components of a successful marketing

strategy. They help businesses create a unique and compelling identity for their products or
services in the minds of consumers and stand out in a competitive marketplace.

1. Product Positioning:
Product positioning is the process of defining how your product or service is perceived by
consumers in relation to competing products. It's about crafting a clear and distinctive image
for your offering. Here's how to effectively position your product:

a. Identify Your Target Audience:

 Determine the specific segment of the market that your product is designed for.
Understand their needs, preferences, and pain points.

b. Understand Competitor Positioning:

 Analyze how your competitors are positioning their products. Identify gaps or
opportunities where your product can offer something unique.

c. Define Your Unique Value Proposition (UVP):

 Clearly articulate what makes your product special and why it's better or different
from others in the market. Your UVP should address a specific need or problem your
target audience has.

d. Choose a Positioning Strategy:

 Decide on the positioning strategy that aligns with your UVP. Common strategies
include:

 Quality or Premium Positioning: Emphasizing superior quality,

craftsmanship, or premium features.
 Price Positioning: Offering the lowest price in the market.
 Product Features or Innovation Positioning: Highlighting unique features
or technological advancements.
 Customer Service or Support Positioning: Focusing on exceptional
customer service.
 Niche Positioning: Targeting a specific, specialized segment of the market.

e. Craft a Clear and Consistent Message:

 Develop marketing messages and content that consistently convey your chosen
positioning strategy. Ensure that all aspects of your brand, including design and
messaging, reflect this positioning.

f. Test and Adjust:

 Continuously gather feedback from customers and monitor market trends. Be
prepared to adjust your product positioning strategy if necessary to stay relevant.

2. Differentiating the Marketing Offering:

Product differentiation is the process of highlighting and communicating the unique attributes
and benefits of your product that set it apart from competitors. Here's how to differentiate
your marketing offering effectively:
 a. Identify Key Points of Differentiation:
 Determine the specific features, benefits, or characteristics of your product that make
it stand out. These could include performance, design, quality, price, convenience, or
any other relevant factor.

b. Highlight Benefits, Not Just Features:

 Focus on how these unique attributes benefit the customer. Explain how they solve
problems or fulfill needs better than competing products.

c. Create Compelling Content:

 Develop marketing materials and content that showcase your differentiation points.
This can include product descriptions, videos, case studies, and testimonials.

d. Use Visual Branding:

 Incorporate unique visual elements, such as logos, packaging, and design, that
reinforce your differentiation and make your product easily recognizable.

e. Educate Your Audience:

 Help consumers understand why your product's differentiation matters. Provide
information that demonstrates the value it brings.

f. Consistently Deliver on Promises:

 Ensure that your product's performance and quality live up to the promises you make
in your marketing. Consistency builds trust with customers.

g. Monitor and Adjust:

 Continuously track customer feedback and market changes to refine your
differentiation strategy. Adapt as necessary to maintain your competitive edge.

Effective product positioning and differentiation can help your offering stand out in a
crowded marketplace and appeal to the specific needs and desires of your target audience.