Unit 4 Marketing Management

1. Unit 4
Segmentation, Targeting and Positioning
By- Prachi Agarwal

2.  Segmentation comprises identifying the market to be segmented;
identification, selection, and application of bases to be used in that
segmentation; and development of profiles.
 Targeting is the process of identifying the most attractive segments from the
segmentation stage, usually the ones most profitable for the business.
 Positioning is the final process, and is the more business-orientated stage,
where the business must assess its competitive advantage and position itself
in the consumer's minds to be the more attractive option in these categories.

3. Concept of Market Segmentation
 A market consists of all such people who have the willingness to buy and the
capacity to buy a product or service. The market for a product or service is
generally heterogeneous rather than the homogeneous mass of customers.
 Each potential buyer has individual needs and desires, and specific
circumstances that influence his/her purchasing and consumption behaviour.
Its firm attempts to cater to the local market, its limited resources might be
frittered away. At the same time it would be highly inefficient to tailor the
marketing programme to each specific customer. The firm can develop a
marketing programme for each relatively homogeneous and meaningful
segment of the total market

4.  Market segmentation is based on the fact that a market is composed of different
buyers who respond differently to the same marketing programme. Therefore, all
the potential customers are grouped into sub-groups so that each sub-group is
different from others but all customers in a particular sub-group have by and large
similar characteristics.
 Market segmentation is customer-oriented philosophy. It is a technique of
recognising effectively the differences among customers. It is well-tested system
for guiding marketing strategy. It enables a bank (or any other organisation) to
offer specialised services and need-based (user- oriented) schemes for optimum
deployment of funds.
 The basic aim of market segmentation is to identify the varying and specific needs
of different types of customers so that appropriate mix of products/services may
be designed and offered to satisfy different types of customers. In this age of
intense competition for the mass market, individual sellers can prosper by serving
specific market segments in a creative manner.

5. Benefits of Market Segmentation
 Determining market opportunities:Market segmentation enables to identify
market opportunities. The marketer can study the needs of each segment in
the light of current offerings by the competitors. From such study, the
marketer can find out the current satisfaction of customers.
 Adjustments in marketing appeals:Sellers can make best possible
adjustments of their product and marketing appeals. Instead of one
marketing programme aimed to draw in all potential buyers, sellers can
create separate marketing programmes designed to satisfy the needs of
different customers. Proper advertising and sales promotional appeals can be
made depending on the target audience.

6.  Developing marketing programmes:Companies can develop marketing
programmes and budgets based on a clearer idea of the response
characteristics of specific market segments. They can budget funds to
different segments depending on their buying response.
 Designing a product:Market segmentation helps in designing products that
really match the demands of the target audience. Products with high market
potential can be designed and directed to meet the satisfaction of the target
market.

7.  Media selection:It helps in selection of advertising media more intelligently
and in allocating funds to various media. The funds are allocated to various
media depending on the target audience, impact of the media, competitor
advertising, and so on.
 Timing of marketing efforts:It helps in setting the timings of the promotional
efforts so that more emphasis is placed during those periods when response is
likely to be at its peak. For instance, consumer goods can be heavily
advertised to Christians during Christmas season and to Hindus during Diwali
time.

8. Requirements for Effective Segmentation
Measurable
 The size, purchasing power, and profiles of the segments can be measured. Certain segmentation variables
are difficult to

 measure. For example, there are approximately 30.5 million lefthanded people in the United States, which
is nearly the entire population of Canada. Yet few products are targeted toward this left-handed segment.

 The major problem may be that the segment is hard to identify and measure. There are no data on the
demographics of lefties, and the U.S. Census Bureau does not keep track of left handedness in its surveys.
Private data companies keep reams of statistics on other demographic segments but not on left-handers.


9.  Accessible-The market segments must be effectively
reached and served. Suppose a fragrance company finds
that heavy users of its brand are single men and women
who stay out late and socialize a lot. Unless this group
lives or shops at certain places and is exposed to certain
media, its members will be difficult to reach.
 Substantial -The market segments are large or profitable
enough to serve. A segment should be the largest possible
homogeneous group worth pursuing with a tailored
marketing program. It would not pay, for example, for an
automobile manufacturer to develop cars especially for

10.  Differentiable-The segments are conceptually distinguishable and respond
differently to different marketing mix elements and programs.If men and
women respond similarly to marketing efforts for soft drinks, they do not
constitute separate segments.
 Actionable- Effective programs can be designed for attracting and serving the
segments. For example, although one small airline identified seven market
segments, its staff was too small to develop separate marketing programs for
each segment.

11. The 7 steps of Market Segmentation
1) Determine the need of the segment-What are the needs of the customers
and how can you group customers based on their needs? You have to think of this
in terms of consumption by customers or what would each of your customer like
to have.
 For example – In a region, there are many normal restaurants but there is no
Italian restaurant or there is no fast food chain. So, you came to know the
NEED of consumers in that specific region.

12.  2) Identifying the segment-Once you know the need of the customers, you
need to identify that “who” will be the customers to choose
your product over other offerings. Quite simply, you have to decide which
type of segmentation you are going to use in this case. Is it going to
be geographic, demographic, psychographic or what? The 1st step gives you a
mass of crowd, and in the 2nd step, you have to differentiate the people from
within that crowd.

13.  3) Which segment is most attractive?-Now, we approach the targeting phase
in the steps of market segmentation. Out of the various segments you have
identified via demography, geography or psychography, you have to choose
which is the most attractive segment for you. This is a tough question to
answer because one of them will be left out. Attractiveness of the firm also
depends on the competition available in the segment. If the competition is
too much in a given segment, then it does not make sense to take that
segment into consideration. In fact, that segment is not attractive at all.

14. 4) Is the segment giving profit-So, now you have different types of
segmentation being analysed for their attractiveness. Which segment do you
think will give you the maximum crowd has been decided in the 3rd step. But
which of those segments is most profitable is a decision to be taken in the 4th
step. This is also one more targeting step in the process of segmentation.

15.  5) Positioning for the segment-Once you have identified the most profitable
segments via the steps of market segmentation, then you need to position
your product in the mind of the consumers. I would not dive deep
into positioning here as you can read this quick guide to positioning. The basic
concept is that the firm needs to place a value on its products.
 If the firm wants a customer to buy their product, what is the value being
provided to the customer, and in his mindset, where does the customer place
the brand after purchasing the product? What was the value of the product to
the customer and how valuable does he think the brand is – that is the work
of positioning. And to complete the process of segmentation, you need to
position your product in the mind of your segments.

16.  6) Expanding the segment-All segments need to be scalable. So, if you have
found a segment, that segment should be such that the business is able to
expand with the type of segmentation chosen. If the segment is very niche,
then the business will run out of its course in due time. Hence
the expansion of the segment is the second last step of market segmentation.

17.  7) Incorporating the segmentation into your marketing strategy-Once you
have found a segment which is profitable and expandable, you need to
incorporate that segment in your marketing strategy. How do you
think McDonalds or KFC became such big chains of fast food? They had a very
clear process of segmentation because of which it became easier to find
regions to target.
 With the steps of market segmentation, your segments become clear and then
you can adapt other variables of marketing strategy as per the segment being
targeted. You can modify the products, keep the optimum price, enhance the
distribution and the place and finally promote clearly and crisply to your
target audience. Business becomes simpler due to the process of market
segmentation.

18. What Is Targeting in Marketing?
 Targeting in marketing is a strategy that breaks a large market into smaller
segments to concentrate on a specific group of customers within that
audience. It defines a segment of customers based on their unique
characteristics and focuses solely on serving them.
 Instead of trying to reach an entire market, a brand uses target marketing to
put their energy into connecting with a specific, defined group within that
market.
 The types of target markets are often segmented by characteristics such as:
 Demographics: age, gender, education, marital status, race, religion, etc.
 Psychographics: values, beliefs, interests, personality, lifestyle, etc.
 Business Industry: business industry or vertical
 Geographic Areas: neighborhood, area code, city, region, country, etc.

19. Target market strategies
1) Undifferentiated marketing-There may be no strong differences in customer
characteristics. Alternatively, the cost of developing a separate marketing mix
for separate segments may outweigh the potential gains of meeting customer
needs more exactly. Under these circumstances a company will decide to develop
a single marketing mix for the whole market. There is absence of segmentation.
 This strategy can occur by default. Companies which lack a marketing
orientation may practice this strategy because of lack of customer
knowledge. It is convenient since a single product has to be developed.

20.  Companies following undifferentiated targeting strategies save on production
and marketing costs. Since only one product is produced, the company
achieves economies of mass production. Marketing costs are also lower as only
one product has to be promoted and there is a single channel of distribution.
 But undifferentiated targeting strategy is hardly ever a well considered
strategy. Companies adopting this strategy have either been blissfully ignorant
about differences among customers or have been arrogant enough to believe
that their product will live up to the expectations of all customers, till
focused competitors invade the market with more appropriate products for
different segments.

21. 2. Differentiated marketing or multi-segment targeting:
 When market segmentation reveals several potential target segments that the
company can serve profitably, specific marketing mixes can be developed to
appeal to all or some of the segments. A differentiated marketing strategy
exploits the differences between marketing segments by designing a specific
marketing mix for each segment.
 A company following multi-segment targeting strategy serves two or more
well- defined segments and develops a distinct marketing mix for each one of
them. Separate brands are developed to serve each of the segments.

22.  It is the most sought after target market strategy because it has the potential
to generate sales volume, higher profits, larger market share and economies
of scale in manufacturing and marketing. But the strategy involves greater
product design, production, promotion, inventory, marketing research and
management costs.
 The car market is most clearly segmented. There are segments for small cars,
luxury cars, sports utility vehicles, etc. Most car makers like General Motors,
Ford, Toyota, Honda and others offer cars for all the segments. Though Toyota
entered the US market with small cars, it eventually chose to operate in most
of the segments.

23.  3) Focus or concentrated targeting:-Several segments may be identified but
a company may not serve all of them. Some may be unattractive or out of line
with the company’s business strengths. A company may target just one
segment with a single marketing mix. It understands the needs, and motives
of the segment’s customers and designs a specialized marketing mix.
 The strategy is suited for companies with limited resources as these resources
may be too stretched if it competes in many segments. Focused marketing
allows R&D expenditure to be concentrated on meeting needs of one set of
customers and managerial activities are devoted to understanding and
catering to their needs.

24.  4) Customized marketing:In some markets, the requirements of individual
customers are unique and their purchasing power is sufficient to make
designing a separate marketing mix for each customer a viable option. Many
service providers such as advertising, marketing research firms, architects
and solicitors vary their offerings on a customer to customer basis.
 They will discuss face to face with each customer their requirements and
tailor their services accordingly. Customized marketing is also found within
organizational markets because of high value of orders and special needs of
customers.
 Customized marketing is associated with close relationships between the
supplier and customer because the high value of an order justifies large
marketing and sales efforts being focused on each buyer.

25. Market Positioning- Meaning, Positioning
Strategies
 Definition: Positioning defines where your product (item or service) stands in
relation to others offering similar products and services in the marketplace as
well as the mind of the consumer.
Description: A good positioning makes a product unique and makes the users
consider using it as a distinct benefit to them. A good position gives the
product a USP (Unique selling proposition). In a market place cluttered with
lots of products and brands offering similar benefits, a good positioning makes
a brand or product stand out from the rest, confers it the ability to charge a
higher price and stave off competition from the others. A good position in the
market also allows a product and its company to ride out bad times more
easily. A good position is also one which allows flexibility to the brand or
product in extensions, changes, distribution and advertising.

26. Positioning Strategy
1) Using Product characteristics or Customer Benefits as a positioning strategy
 This strategy basically focuses upon the characteristics of the product or customer
benefits. For example if I say Imported items it basically tell or illustrate a variety
of product characteristics such as durability, economy or reliability etc. Lets take
an example of motorbikes some are emphasizing on fuel economy, some on power,
looks and others stress on their durability. Hero Cycles Ltd. positions first,
emphasizing durability and style for its cycle.
 At time even you would have noticed that a product is positioned along two or
more product characteristics at the same time. You would have seen this in the
case of toothpaste market, most toothpaste insists on ‘freshness’ and ‘cavity
fighter’ as the product characteristics. It is always tempting to try to position
along several product characteristics, as it is frustrating to have some good
characteristics that are not communicated.


27.  2) Pricing as a positioning strategy
 Quality Approach or Positioning by Price-Quality – Lets take an example and
understand this approach just suppose you have to go and buy a pair ofjeans,
as soon as you enter in the shop you will find different price rage jeans in the
showroom say price ranging from 350 rupees to 2000 rupees. As soon as look
at the jeans of 350 Rupees you say that it is not good in quality.
 Why? Basically because of perception, as most of us perceive that if a product
is expensive will be a quality product where as product that is cheap is lower
in quality. If we look at this Price – quality approach it is important and is
largely used in product positioning. In many product categories, there are
brands that deliberately attempt to offer more in terms of service, features
or performance. They charge more, partly to cover higher costs and partly to
let the consumers believe that the product is, certainly of higher quality.

28.  3) Positioning strategy based on Use or Application
 Lets understand this with the help of an example like Nescafe Coffee for
many years positioned it self as a winter product and advertised mainly in
winter but the introduction of cold coffee has developed a positioning
strategy for the summer months also.
 Basically this type of positioning-by-use represents a second or third position
for the brand, such type of positioning is done deliberately to expand the
brand’s market. If you are introducing new uses of the product that will
automatically expand the brand’s market.

29.  4) Positioning strategy based on Product Process
 Another positioning approach is to associate the product with its users or a
class of users. Makes of casual clothing like jeans have introduced ‘designer
labels’ to develop a fashion image. In this case the expectation is that the
model or personality will influence the product’s image by reflecting the
characteristics and image of the model or personality communicated as a
product user.
 Lets not forget that Johnson and Johnson repositioned its shampoo from one
used for babies to one used by people who wash their hair frequently and
therefore need a mild people who wash their hair frequently and therefore
need a mild shampoo. This repositioning resulted in a market share.

30.  5) Positioning strategy based on Product Class
 In some product class we have to make sure critical positioning decisions For
example, freeze dried coffee needed to positions itself with respect to
regular and instant coffee and similarly in case of dried milk makers came out
with instant breakfast positioned as a breakfast substitute and virtually
identical product positioned as a dietary meal substitute.

31.  6) Positioning strategy based on Cultural Symbols
 In today’s world many advertisers are using deeply entrenched cultural
symbols to differentiate their brands from that of competitors. The essential
task is to identify something that is very meaningful to people that other
competitors are not using and associate this brand with that symbol.
 Air India uses maharaja as its logo, by this they are trying to show that we
welcome guest and give them royal treatment with lot of respect and it also
highlights Indian tradition. Using and popularizing trademarks generally follow
this type of positioning.

32.  6) Positioning strategy based on Cultural Symbols
 In today’s world many advertisers are using deeply entrenched cultural
symbols to differentiate their brands from that of competitors. The essential
task is to identify something that is very meaningful to people that other
competitors are not using and associate this brand with that symbol.
 Air India uses maharaja as its logo, by this they are trying to show that we
welcome guest and give them royal treatment with lot of respect and it also
highlights Indian tradition. Using and popularizing trademarks generally follow
this type of positioning.

33. Value Proposition
 What is a 'Value Proposition'
 Value proposition refers to a business or marketing statement that a company
uses to summarize why a consumer should buy a product or use a service. This
statement convinces a potential consumer that one particular product or
service will add more value or better solve a problem than other similar
offerings will. Companies use this statement to target customers who will
benefit most from using the company's products, and this helps maintain
an economic moat.

34.  A successful value proposition has a bold headline that communicates the
delivered benefit to the consumer. The headline should be a single
memorable sentence, phrase or even a tagline. A sub-headline is often
displayed below the main headline, expanding on the explanation of
delivered value and providing a specific example of why the product or
service is superior to others the consumer may be considering. The sub-
heading can be a short paragraph between two and three sentences, with
bullet points below the sub-heading to list the key features or benefits of the
product. This allows consumers to scan the value proposition quickly and pick
up on the product features. Added visuals increase the ease of communication
between business and consumer.

35. Differentiation- Meaning, Strategies
 Definition: Differentiation strategy, as the name suggests, is the strategy that
aims to distinguish a product or service, from other similar products,
offered by the competitors in the market. It entails development of a
product or service, that is unique for the customers, in terms of product
design, features, brand image, quality, or customer service.

36. Basis of Differentiation
 Product: To have an edge over the competitors, a company can offer innovative
products to its customers that best fulfils their requirements. This may involve a
huge cost in research and development, production and marketing. Nevertheless,
the return on investment is more than the cost involved, as the firm becomes the
market leader in offering that product.
 Pricing: Market forces, i.e. supply and demand decides the price of the product,
so it tends to fluctuate and is greatly affected by product value to the customer.
To gain differentiation through pricing, either a firm can charge the lowest price
for its product or gain superiority by charging maximum prices.
 Organisation: Differentiation can also be based on organization, wherein a firm
earns success through the brand name, location advantage, goodwill and customer
loyalty etc.

37. Differentiation strategy
 Innovation / Invention –The best way to implement differentiation strategy is
to invent or innovate. By innovating or inventing, you become the market
leader because your product is the first entrant in the market. Inventions are
of course difficult and require regular R&D expenditure. But innovations are
more practical and are a Differentiation strategy used by technological
companies like Apple and Google.
 Product-level differentiation –Observed in many industries, Differentiation
strategy can be executed at product level too. Taking an example of the
tourism industry, tour packages of all companies are different and the tour
package might have its own differentiating factors. Some might be
giving international tours whereas others will be giving national and regional
tours only. Thus, by incorporating product differentiationstrategy at product
level, the brands can differentiate themselves from competitors in the eyes
of the customer.

38.  Price differentiation –The most used form of differentiation strategy is price
differentiation. In the above example of tour packages, some brands might
give the luxury package whereas other brands might give a cheap and
affordable pricing. Mobile handset companies like Samsung and
apple target the cream segment whereas companies like Micromax and Xolo
target the price sensitive segment. Price segmentation is the biggest
Differentiation weapon in the hands of marketers.
 Branding –Your promotion mix and the marketing communications of the
company play a crucial role in the differentiation strategy of your product.
Companies like Pepsi and Coke rely heavily on their branding efforts to
convert the customer to their products. Thus, youngsters will like pepsi,
young adults will like Thums up, families will like Fanta, and Coke can be an
all time favorite for everyone. Your promotion mix helps you target the
correct segment and hence plays a crucial role in differentiation.

39.  Packaging –If you go to any publications and ask them what are the critical
factors in selling a book, the publication agency will say that, after the
story of the book, the top cover of the book plays a critical role in the success
of the book. In fact, many a times, customers might buy a book based on the
top cover. Thus, packaging is important. The same can be seen when you
enter a mall and you have 100’s of shelves with different types of cereals,
soaps, shampoos, detergents etc. At such a time, the color, the packaging,
the taglines, the ease of handling can play an important role in converting the
customer to your brand. The tetrapack introduced by Frooti in the Indian
market was a wonderful example of Packaging playing a role in differentiation
strategy.

40.  Service pre sale and post sale –Word of mouth marketing is another product
differentiator and all brands targeting a niche audience know the importance
of word of mouth marketing. And how does word of mouth marketing happen?
Through very good pre and post sales service. Ever heard a friend say that not
only does the restaurant serve good food, but the service and the ambiance
are awesome as well? Thats the service i am talking of. If your service is
beyond customers expectation, than that can be a big boost to your
differentiation strategy.