Market Segmentation, Targeting and Positioning
Choose which customers to serve
Market segmentation (Parts of a market)
Targeting (Segments to enter)
Decide how to serve those customers
Product differentiation (What makes it different from the competition)
Market positioning (How customers perceive the product)
What is Market Segmentation?
Market segmentation involves dividing a market into parts that reflect different customer needs and wants
Main Categories of Market Segment:
Demographic Segments
Geographic Segments
Income segments
Behavioural Segments
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
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?
A target market is the set of customers sharing common needs and wants that a business decides to target
Three 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
Market Positioning:
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
The Marketing (Positioning) 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
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
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