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Segmentation,

Targeting,

Differentiation &

Positioning

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What Are Markets?

Requirements of a Market

Must need or desire a particular product

Must have the ability to purchase the product

Must be willing to use their

buying power

Must have the authority to

buy specific products

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What Are Markets? (cont’d)

Types of Markets Consumer markets

Purchasers and individuals in households

Purchases are for personal consumption, not profit

Business markets

Individuals and groups that purchase products for resale, direct use to produce other products, or use in daily business operations

Purchasers classed as producers, resellers, government, and institutional markets

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The right relationship with the right

customer

To build a marketing strategy we need the next

steps to be done :

Segmentation

Targeting

Differentiation

Positioning

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Why Segmentation, targeting,

differentiation and positioning?

Companies today recognize that they cannot appeal to

all buyers in the same way because Buyers are too

numerous and too varied in their needs

Moreover, the companies themselves vary widely in their

abilities to serve different segments of the market.

Rather than trying to compete in an entire market each

company must identify the parts (segments) of the

market that it can serve best and most profitably.

Steps in Market STP

Market Segmentation

Identify bases (variables) for segmenting the market

Develop segment profiles

Target Marketing Develop measure of segment attractiveness

Select target segments

Market Positioning

Develop positioning for target segments

Develop a marketing mix for each segment

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Has also identified different niches within certain segments (ex. Pampers extra size

for obese babies)

Product modifications are useful Tide offers seven different

product formulations to serve different niches’ needs

Case Study

Procter & Gamble

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MARKET SEGMENTATION

Step.1

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Step.1 What is Market Segmentation?

Subdividing the large

market into smaller

groups (Segments) of

customers.

Each group (segment)

has similar needs and

wants & can be reached

with a different

marketing mix

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Which Segmentation Variables

to Use?

Segmentation Variables

Characteristics of individuals, groups, or

organizations used to divide a market into

segments

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Segmentation Variables for

Consumer Markets

FIGURE 8.3

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1) Demographic

dividing the market into groups based on variables such as

age, gender, family size, family life cycle, income, occupation,

education, religion, race, generation.

2) Geographic

dividing a market into different geographical units such as

nations, states, regions, countries, cities.

Sometimes, Marketers mix 2 variables with each

other…ex ( Geodemographic segmentation)

Variables of Market Segmentation

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Family Life Cycle Stages as a

Percentage of All Households

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3) Psychographic

dividing a market into different groups based on social class,

lifestyle, or personalities, norms, values

4) Behavioral

dividing a market into different groups based on

Consumption rate

Occasion

Benefits

User status (1st time user , ex-user, regular user …etc)

Brand loyalty

Variables of Market Segmentation

Principles of Marketing A.U.C - Amira EL-Deeb

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Behavioral Segmentation

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Which Segmentation Variables

to Use?

Variables for Segmenting Business Markets

Geographic location

Location affects the level of product demand.

Type of organization

Variations in firms’ characteristics leads to segmentation by

type.

Customer size

Larger customers strongly influence how they are treated in

the marketplace.

Product use

Firms use basic inputs in ways different from one another.

•Steps of segmentation

4)Evaluate

Segments

3) Describe each segment

2) Grouping customers with similar needs

1) Identifying all product-related needs

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Levels of Market Segmentation

Mass marketing (undifferentiated) :

The seller engages in the mass production,

distribution & promotion of one product for all

buyers.

It focuses on what is common in the needs of

consumers rather than what is different.

Because it’s one offer it keeps down production,

inventory, transportation & advertising costs.

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Levels of Market Segmentation

Segmented marketing (Differentiated) :

A market segment consists of a group of

customers who share similar needs.

The marketer’s task is to identify the

segments & decide which ones to target.

By offering different products to different

segments, companies hope for higher sales

and a strong position within each market

segment more than mass marketing

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Niche marketing (concentrated) :

A niche is a more narrowly defined customers group seeking

a distinctive mix of benefits.

Marketers usually identify niches by dividing a segment into

sub-segments with distinctive set of traits who may seek a

special combination of benefits.

This strategy is used when company resources are limited.

Levels of Market Segmentation

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Mass customization

(micromarketing /individual):

The ultimate level of

segmentation leads to:

“segments of one”

“customized marketing,”

or “one-to-one marketing.”

Levels of Market Segmentation

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Effective Segmentation Criteria Each segment must be…

Measurable Size, purchasing power, and profile of segment

Accessible Can be reached and served

Substantial Large and profitable enough to serve

Differentiable Respond differently

Actionable Effective programs can be developed

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The more you define your customers, the more satisfied

they will be, the more profit you will get.

A firm can allocate limited resources more efficiently to selected

customers.

A firm can seek growth by reaching new segments

A firm can gain a strong positions in different market segments as

No company can win if its products and offerings resemble every

other product by offering a distinctive big idea in the mind of the

target market = creating the product’s competitive advantage

Importance of Market Segmentation

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MARKET TARGETING

Step.2

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Step.2 Targeting

Once the firm has identified its market-

segment opportunities, it decides:

How many segments to target?

Which Segments to target ?

Marketers are increasingly combining

several variables in an effort to identify

smaller, better-defined target groups.

Like aiming at a dart board…

Aiming the product or service at a specific segment is 'targeting'.

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Target Marketing

Evaluating Market Segments

Company objectives and resources

Segment size and growth

Indicator for profitability

Large size segment with high growth rate is not suitable for

small companies

Sales estimate

Cost estimate

Segment attractiveness through assessing

porter’s five forces

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POTENTIAL

ENTRANTS

SUBSTITUTES

SUPPLIERS BUYERS COMPETITIVE

challenge

Porter’s five forces analysis

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Identify the Appropriate

Targeting Strategy

Undifferentiated Strategy

Defining an entire market for a particular product

as the target market (homogeneous market)

Designing a single marketing mix for and directing

it at the total market

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Targeting Strategies

FIGURE 8.2

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Identify the Appropriate Targeting

Strategy (cont’d)

Concentrated Strategy Through Market

Segmentation

Segmenting (dividing) the total market into groups

with similar product needs (heterogeneous

markets) to design marketing mixes that match

those needs

Concentrated targeting strategy focuses on a

single market segment using one marketing mix

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Targeting Strategies

FIGURE 8.2

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Identify the Appropriate Targeting

Strategy (cont’d)

Differentiated Strategy Through Market

Segmentation

Targeting two or more segments by developing a

marketing mix for each

Competitive advantage is that a firm may gain a

larger total market share by aiming multiple

marketing mixes at multiple segments

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Targeting Strategies

FIGURE 8.2

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Targeting strategies

Exercise

Select the right strategy in the following cases:

1. New company with limited resources

2. New company while the competitors are targeting

concentrated market

3. Well established company with full resources

4. Well established company offers new product

5. Well established company in a market with limited

customers’ needs

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- A company discovers different needs and groups

in the marketplace, = Segmentation

- Targets those needs and groups that it can satisfy

in a superior way, = Targeting

- Then, implanting the product’s unique benefits and

differentiation in customer’s minds

= Differentiation & Positioning Ex:-

Panadol …… Best Treatment for headache.

Vodafone … Best Coverage

DIFFERENTIATION

Step.3

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Step.3 Differentiation

Differentiation is the act

of designing a set of

meaningful differences

to distinguish the

company’s offering from

competitor’s offering =

“Creating the product’s

competitive advantage”

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Differentiation tools

Image Channel Personnel Services Product

Symbol Coverage Competence Ordering ease Form

Media Expertise Communication Delivery Features

Atmosphere Performance Credibility Installation Performance

Events Reliability Training Design

Responsiveness Consulting Durability

courtesy Maintenance Reliability

Style

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Personnel Differentiation

Companies can gain a strong competitive advantage through having better-trained people. McDonald’s people are courteous

IBM people are professional and knowledgeable

Disney people are friendly

Even the personnel outfits could be a symbol for differentiating the company

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Image Differentiation

Buyers respond differently to

company and brand images.

Identity and image need to be

distinguished,

Identity is the way a company aims to

identify or position itself or its product.

some companies become associated with

colors, such as Etisalat (Green), Kodak

(Red and Yellow).

Image is the way the public perceives

the company or its products.

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It takes three to tango!

Getting into the minds of customers

TARGET

POSITION

SEGMENT

POSITIONING

Step.4

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A.U.C - Amira EL-Deeb

The key to wining and keeping target customers is

to understand their needs better than competitors

do and to deliver more value.

Thus, after deciding which segment to be served ,

the company must position itself as providing

superior value, it gains competitive advantage,

which refers to the advantage over competitors

gained by offering consumers greater value, (ex. lower prices or providing more benefits that justify higher prices)

Step.4 Positioning

A product’s position is:

the way the product is defined by consumers on important

attributes or its unique competitive advantages .

It’s the place the product occupies in consumers’ minds

relative to competing products.

It’s implanting the brand’s unique benefits and differentiation

in customer’s minds.

A good brand positioning is clarifying the brand’s essence,

benefits and how it does so in a unique way ( customer-

focused POD).

Positioning

= Perception of differentiation

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For example, in automobile market: Toyota, Ford Focus and Suburu are positioned on

economy

Mercedes and Cadillac on luxury

Porch and BMW on performance

Volvo on safety

Positioning

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The easiest way of getting into someone's mind is to be first

The top three brands in a product category occupy market share in a ratio of 4:2:1

But if you can’t be, you should be the first to claim that position Head & Shoulders brand is not the first anti-dandruff shampoo but it

came out on top because P&G had an aggressive advertising campaigns to capture the public's attention and claim that position in the mind of the consumer.

Positioning

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Identifying possible

competitive advantages

Choosing the right

competitive advantage

Choosing a positioning

strategy

Differentiation can be based on

Products

Services

Channels

People

Image

Topics

Choosing a Positioning Strategy

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What is the competitive advantage ?

Which differences to promote? Criteria include:

Important

Distinctive

Superior

Communicable

Affordable

Profitable

Topics

Identifying possible competitive advantages

Choosing the right competitive advantage

Choosing a positioning strategy

Choosing a Positioning Strategy

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Brand’s Value propositions

represent the full positioning of

the brand = full mix of benefits

upon which the brand is

positioned.

It is the answer to the

customer’s question ‘why

should I buy your brand?’.

Volvo’s value proposition

concentrate on safety but also

includes reliability and styling

for a price that is higher than

average but seems fair for this

mix of benefits.

Topics

Identifying possible

competitive advantages

Choosing the right

competitive advantage

Choosing a positioning

strategy

Choosing a Positioning Strategy

Positioning statement

- The statement should follow the form: “To (target

segment and need) our (brand) is (concept) that

(point of difference)

For example: “To busy professionals who need to stay

organized, Palm is an electronic organizer that allows you to

backup files on your PC more easily than competitive

products.”

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Communicating the Positioning

Companies must deliver their unique value

propositions not only a product.

Positions must be monitored and adapted over time.

Designing the marketing mix ( product, price, place,

and promotion) should reflect that positioning strategy