Market Segmentation, Targeting and Positioning

How do you choose which customers to serve?

• Market segmentation (Parts of a market)

• Targeting (Segments to enter)

How do you decide how to serve your chosen customers?

• Product differentiation (What makes it different from the competition)

• Market positioning (How customers perceive the product)

What is market segmentation?

It involves dividing a market into parts that reflect different customer needs and wants

What are the main categories of market segments?

• Demographic Segments

• Geographic Segments

• Income segments

• Behavioural Segments

What are the benefits of effective market segmentation?

• Focuses resources on parts of a market where the business can succeed

• Allows a business to grow shares in markets or to ‘ride the wave’ of fast-growing segments

• Helps with new product development- focused on the needs of customers in the segment

• Helps make the marketing mix more effective- e.g. better targeting of promotion

What are the potential drawbacks of market segmentation?

• Segmentation is an imprecise science- data not always available, up-to-date or reliable

• Just because you can identify a segment doesn’t mean you can reach the customers in it

• Markets are increasingly dynamic and fast-changing; so too are the segments

What is a target market?

It is the set of customers sharing common needs and wants that a business decides to target

What are the 3 main strategies for targeting a market?

• Mass Marketing (undifferentiated):

  • Business targets the whole market, ignoring segments

  • Products focus on what customers need and want in common, not how they differ

• Segmented (differentiation):

  • Business targets several market segments within the same market

  • Products are designed and targeted at each segment

  • Requires separate marketing plans and often different business units and product portfolios

• Concentrated (niche)

  • Business focuses narrowly on smaller segments or niches

  • The aim is to achieve a strong market position (share) within those niches

What is marketing postitioning?

• Having chosen which segments to target- businesses need to decide how to compete in those segments

• Marketing people call this the value proposition

• Market position is defined by customers- the place a product occupies in customers’ minds relative to competing products

What is the marketing map?

A market (or positioning) map illustrates the range of ‘positions’ that a product can take in a market based on two dimensions that are important to customers

What is positioning and competitive advantage?

• Customers choose products based on the value proposition

• Providing superior value than the competition is a source of competitive advantage (if it can be sustained)

• These are various possible value differences which can deliver a competitive advantage

What are possible positioning strategies?

• Offer more for less:

  • Aldi: Good quality at low prices

• Offer more for more:

  • High-priced luxury products with prestige value

• Offer more for the same:

  • Introduce new features and better performance for the same price

• Offer less for much less:

  • No-frills low-cost flying and hotels; good quality, back-to-basics and low price