Segmentation, Targeting and Positioning (Module 4) 153

Unit 14
Module

Segmentation, Targeting and Positioning

Learning Objectives
This module gives an overview to consumer buying behaviour. After studying this
module one would be able to:
Comprehend the concept of STP approach.
Explain the concept and bases of market segmentation.
Understand the basic concepts of target market and its evaluation.
Describe the positioning strategies.
Understand the concept of USP and value proposition.

4.1. TARGET MARKETING: STP APPROACH

4.1.1. Introduction
The awareness about the product amongst the consumers is the basic requirement of marketing. It is the
responsibility of the marketer to effectively communicate with customers in order to inform them about the products
and services being offered by the company. Since, requirements and demands vary from individual to individual;
marketing planning cannot afford to be a clean sweep. The marketing planning has to have such campaigns made so
that USPs (Unique Selling Prepositions) are logically and clearly communicated to the customers.
A single product cannot satisfy all customers. Therefore, due to the varying needs and requirements, it is
essential to make different segments of consumers and plan for each segment separately. This process in
marketing is called ‘Target Marketing’ which is also termed as STP (Segmentation, Targeting and
Positioning).

4.1.2. Steps in Target Marketing

After segmenting the market, the marketers have to select the segments to create their target market. This is
known as targeting a target market. This makes the consumer aware of the product. The products are placed into
the minds of the customer, which is called positioning of the product. The entire process of segmenting,
targeting and positioning is referred as market selection. These three activities in the target marketing of market
selection are as follows:
Identifying Market Segments (Market Segmentation): The first and foremost action in target
marketing is to locate the target markets which have not been served yet. The unsatisfied needs of such
markets become the basis of segmentation. Following three phases are involved in segmentation:
Analysing the pattern of demand,
Determining the segmentation bases, and
Identifying the available market segments.
Selecting Target Market (Market Targeting): After dividing the market into homogenous segments,
the marketers aim at identifying those segments for which they could develop their products. This
involves:
Analysing the segments to determine their attractiveness, and
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Selecting the potential segment(s).

1
Determining demand pattern
Identifying
Establish possible bases of segmentation 2 Market Segmentation

3
Identify potential market segments

Develop measures to gauge segment attractiveness 4 Selecting

Target Market
5 (Market Targeting)
Select the target segment

Develop positioning for each target segment (position the 6

company’s offering in relation to competitors) Developing
Market Positions
7
Developing marketing mix for each target segment

Figure 4.1: Steps in Target Marketing Strategy

Developing Market Positions (Market Positioning): Each selected segment differs from the other one
on the basis of different types of customers and their expectations about the product. Thus, positioning
includes:
Identifying possible positioning concepts for each target segment, and
Developing marketing mix for each target segment.

4.2. MARKET SEGMENTATION

4.2.1. Concept of Market Segmentation
The market contains variety of products and they differ from each other in their specifications, quality,
durability as well as prices. The customers also differ from each other in their habits, preferences, hobbies,
income, culture, purchase decisions, etc. In order to streamline the marketing process, the consumers of similar
characteristics are grouped together in segments. This is termed as ‘market segmentation’.

Market segmentation means division of market into smaller groups having similar needs and qualities. This
helps the company to modify the products or services to suit the different groups more effectively. Even, the
advertisement messages and promotional methods are needed to be modified so that they are well-understood
by the group.

For example, a product being sold in the State of Tamil Nadu is required to be advertised in Tamil language.
Here, getting the endorsement of local popular film star will be an added advantage.

According to Philip Kotler, “Market segmentation is sub-dividing a market into distinct and homogeneous
subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct
marketing mix”.

According to Philip Kotler, “The purpose of market segmentation is to determine difference among them or
marketing to them”.

The quality of precision in market segmentation is helpful in accurately defining the customer needs. The actual
objective of segmentation is to develop separate marketing plan for each segment so that consumers can be
better served and their expectations are met effectively. In marketing planning, the market segmentation is
perceived as the first step towards betterment. After identification of a particular consumer group and
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application of four Ps, i.e. product, price, place, and promotion, in proper manner, the marketers are able to
design products and services according to the target market.

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4.2.2. Need for Market Segmentation

Market segmentation is essential for marketers because of the following reasons:
Need for Market Segmentation

Meeting the Needs and Demands of

Increasing Profits for Organisations
Customers

Greater Chances for Growth

Retain Customer Base

Target Marketing Communications

Gain Share of Market Segment

Meeting the Needs and Demands of Customers: Different customers have different types of needs
and demands. By segmenting a large market, customers of different segments can be offered products
or services which provide them higher level of satisfaction.
Increasing Profits for Organisations: The price sensitivity of customers varies in accordance with
their disposable incomes. By segmenting the markets, organisations can increase their average price of
the products and services, thereby improving their profits.
Greater Chances for Growth: Segmentation of a market can lead to high volume of sales. For
example, a customer can be lured or motivated to purchase a product in future when a firm offers first
sample of the product at an introductory price which is very low.
Retain Customer Base: Customers go through various types of transition phases such as they become
adults, start working, get married, have children, get promotion, and hence keep on changing their
purchasing pattern. Any business organisation can continue to retain its customer base by offering them
the products and services which they may need at different phases of their life cycle; otherwise, these
customers may get diverted to other brands or products.
Target Marketing Communications: All the business organisations should communicate with their
target customers. Organisations may face the following challenges if the target audience is too large:
The important customers may be left unnoticed.
The cost of communicating with the customers may be very high, making the marketing
communication unprofitable.
Hence, through market segmentation, target customers can be approached frequently and offered products
at lower prices.
Gain Share of Market Segment: The profitability of any organisation cannot be increased until it has
a substantial or major market share. Brands that are less popular in the market may face problems such
as diseconomies of scale in manufacturing and marketing processes, lesser shelf space in outlets,
continuous pressure from distributors, etc.

4.2.3. Bases for Market Segmentation

When a market is huge and diverse, it becomes difficult for the companies to reach every customer individually. But,
such markets can be divided into segments or groups of customers having different demands and requirements. This
helps the company to identify which segment of customers can be served efficiently. For this purpose, a proper
marketing strategy and understanding of consumer behaviour is required. A manager should identify the uniqueness
and distinctiveness of each customer segment before developing an effective marketing plan.

Both the individual consumers as well as the industrial consumers can be a part of the market segments; the
only thing which is different among the two types of consumers is the basis of segmenting them.

Individual consumers generally need those products which lie in middle of the ‘marketing strategy continuum’,
i.e., between the mass marketing and the one-to-one marketing. Mass marketing refers to the concept where all

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the customers in a market are offered a single standardised product, whereas in one-to-one marketing all the
customers are offered a unique product as per their needs.

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On the other hand, the industrial consumers can be less in number but they mostly purchase in large quantities.
Industrial consumers assess the product very thoroughly before actually purchasing it and the purchase decision
of such buyers is not taken only by a single person. Manufacturers, resellers, service providers, government
organisations, etc., are some of the examples of the industrial consumers.

The bases of market segmentation for the individual consumers are as follows:
Geography, i.e., location, population growth, population density, etc.
Demographics, i.e., age, income level, education level, gender, etc.
Psychographic variables, i.e., lifestyle, value, attitude, perception, etc.
Client behaviour, i.e., price sensitivity, brand loyalty, etc.

However, the bases of segmenting the industrial consumers are as follows:

Geography, i.e., location, growth of that area, clients’ density, etc.
Client type, i.e., size of company, industry in which company is operating, etc.
Client’s behaviour, i.e., size of their orders, loyalty towards suppliers, etc.

Market segmentation helps in dividing a large customer base into different segments, which in turn makes it
easier for the marketers to recognise their competitors in different segments. Segmentation is an important tool
for planning because it helps in targeting different customers on the basis of the product they need and the
marketing strategies required to satisfy them.

The bases of segmenting the consumer and industrial market are categorised as follows:
Segmenting consumer markets, and
Segmenting industrial markets.

4.2.3.1. Bases for Segmenting Consumer Markets

There are different factors based on which consumer market can be segmented. The bases for segmentation are
as follows:
Bases for Segmenting Consumer Markets

Geographic Segmentation
Demographic Segmentation
Psychographic Segmentation
Behavioural Segmentation

Geographic Segmentation: This includes the segmentation of market based on location, size,
population density, climate, etc. This type of segmentation enables the planning for better marketing.
Rural and urban markets can be easily segmented by such segmentation. The geographic location is
very helpful for marketers to design the marketing plan. For example, there are different regions in
India like Assam, Bengal, Punjab, Gujarat and Tamil Nadu which prefer clothes and food-items based
on their regional culture and food habits. Marketers must be very much conversant with regional
languages. Also, places known for extreme climate conditions affect the need as well as the buying
behaviour. For example, in cold climate, there is permanent need for woollen garments and heating
systems whereas for hot climate, air-conditioners are needed.

Demographic Segmentation: Another important basis commonly used for market segmentation is the
demography, i.e. age, gender, income, education, religion, family size, social class, nationality, etc.
This type of division of market is admired by most marketers. These are discussed below:
Age and Life Cycle Stage: Under this segmentation, the requirements of consumers are related to age
group and this can be divided into four categories, i.e. children, young, adult and old. For example,
Dabur produces oils especially for children.
Gender and Sexual Orientation: Males and females have different requirements and it is inherent in
their nature. For example, females generally prefer to spend on expensive clothes, cosmetics, jewellery
whereas males prefer to purchase cars, hot drinks, going to clubs, etc.
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Marital Status: Lifestyle of married and unmarried individuals is totally different. A bachelor
normally spends his earning on entertainment, hotels, whereas, a married person will generally spend
on home furnishing, children education or purchase of house, etc.
Income: Buying behaviour of consumers is derived from their income. In our country, it varies from
few thousands rupees to even millions. Therefore, individuals have different buying behaviour.
Social Class: As per the social status of a person, the buying patterns change. A business tycoon will
prefer Mercedes, Audi, BMW cars, expensive cell phones, spacious and luxurious apartments or
bungalow. A commoner will go for economy cars, common cell phones and a suitable accommodation
for family.
Family Size: The purchase requirements vary with family size. The consumption-level are different for
joint family and nuclear family.
Occupation: Occupation of an individual affects the buying behaviour to a great extent. For example,
people related to glamorous film world have totally different orientation in buying behaviour in
comparison to researchers and academicians.
Educational Level: People with same educational background and income have different preferences
for certain products but it cannot be taken as a thumb rule.
Religion: Certain rituals, festivals, eatables, clothes, colours, etc. are related to religion. The market can
also be segmented on such considerations.
Psychographic Segmentation: Psychographic segmentation of the market is not absolutely correct and
it is generally found that persons of same age, financial status, educational background and occupation,
adopt different procedures in purchasing the products, selecting a new product or choosing a shop. This
is due to some psychographic factors which include personality, values, lifestyles, beliefs, etc. These
are described below:
Lifestyles: Lifestyle of a person greatly affects his/her buying behaviour. The lifestyle is associated
with the standard of living and the way in which money and time is spent by a person. This is also a
result of social background, culture, religion, psychology and demography. It is an important factor in
dividing the market and should not be ignored. For example, corporate icons prefer to buy costly suits
and luxurious cars, whereas an executive goes for normal clothes and shoes.
Personality: Another variable in psychographic segmentation is personality. Different individuals have
different personality which determines their buying behaviour. Marketers utilise this phenomenon to
design products having brand personality. Thus they segment the market according to the personality of
individuals. For example, Levi’s Jeans, Vimal Suiting’s, Tanishq Jewellery, Sabyasachi and Gaurang
Shah for Sarees, Paris perfumes, etc., have personality statement which automatically attracts a
particular segment of the society.
Values: Values are the belief systems of individuals, which affect their buying behaviour. These are
also utilised for segmenting consumer market. This is the most appealing strategy to attract the
customers because it touches their inner-self due to which selection of the product becomes easy.
Beliefs: Marketers know the fact that belief plays an important role in buying and hence they
accordingly divide the market. People adopt certain characteristics from childhood which gradually
becomes their firm conviction or belief that govern their buying behaviour. For example, it is a
common observation that people exhibit buying behaviour and lifestyle as per their religion,
irrespective of festivals or normal days.
The psychographic segmentation reveals that consumers’ attitudes, values, motivation, life style are
responsible for their buying behaviour for a particular product. Many marketing research companies are
engaged in studying the individual clients for psychographic effect.
Behavioural Segmentation: It involves segmenting the market on the basis of understanding how
customers use a particular product, how they respond towards a particular product, what they know
about product or what their attitude towards a product is. The market segmentation is based upon the
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analysis of behavioural variables like occasions, benefits, user status, usage rate, loyalty and attitude of
the consumers.

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The analysis of these variables helps in developing the market segments. These derivatives are described
below:
Occasions: The marketers do recognise the occasions that are helpful in developing needs. The
household items are regularly purchased by the salaried people on every first working day of the month.
Festivals, family functions or celebrations for specific events develop needs for purchase. The
companies can plan to enhance the supply of products based on these occasions. Two types of
occasions are common:
Regular: These include occasions like Republic Day, Holi, Diwali, Dushehra, Eid, Christmas,
Independence Day, etc.
Special: These include marriage, anniversary or any happy occasion like winning an award, promotion,
etc.
Benefits: The market is also segmented on the basis of benefits derived by the consumer. A consumer
may purchase a watch as an essential need to know the exact time or to gift someone or use it as a status
symbol, wear it to match with the dress or even wear it as a jewellery item. The marketers do recognise
this fact and provide different brands of the product to take care of each segment separately.
User Status: The market can also be segmented on the basis of user status. For example, the users for
deodorant can be categorised as:
Non-user: This category is not interested in using the given product. For example, children and aged
people generally do not use deodorants.
Potential User: This category heavily relies on given product consumption. For example, deodorants
are frequently used by fashionable teenagers and corporate executives.
First Time User: There are consumers who use a new product for the change. For example,
deodorants used by college going students.
Regular User: There is a section in the society who leads a lifestyle which requires regular use of
deodorants or other cosmetics like film stars, models, corporate big-wig and fashion conscious ladies.
Ex-user: Some people give up using a particular product (like deodorants) because of allergy or
medical advice.
Quantity Consumed/Usage Rate: The quantity consumed or the rate of consumption of a product is
also an established basis for segmentation of market. This segmentation is commonly used in tea,
coffee and soft drink markets. There are three categories:
Light: The frequency of consumption of the consumer is not constant but occasional. For example, use
of cosmetics by a housewife who is not so fashionable.
Medium: The frequency of consumption of product is frequent. It is observed that teenagers frequently
use cosmetics.
Heavy: The consumption of product is regularly made in large quantity. For example, the celebrities
working in the film industry, models, etc., use cosmetics regularly since it is a part of their profession.
Buyer Readiness Stage: There are different readiness stages of consumers regarding a product
purchase. Some consumers may be unaware, others may not be interested, and some might be interested
while some might be ready to buy the product definitely. The market is segmented as per the readiness
of the consumers.
Loyalty Status: There are different levels of loyalty of consumers for specific brands as described below:
Hard Core Loyals: Such consumers always buy the same brand of product, like newspaper, coffee,
certain brand in clothes and sarees. They get hooked to these products due to their long experience and
develop a sort of addiction and do not switch to other brands.
Soft Core Loyals: Such consumers limit themselves to two or three type of brands of the product. For
example, a consumer using Sony, LG, Voltas products is a soft core loyal consumer. Such consumers
need to be motivated by marketers to stick to one brand so that they could be turned into hard core
loyalist.

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Split Loyals: Such consumers shift their loyalty for a change. For example, majority of customers
prefer Colgate tooth paste but some also use Pepsodent or Close Up.
Switchers: Such consumers never stick to a brand rather they enjoy switching to new brands for
experience and thrill.
Attitude: Attitude is the principal driver behind a product purchase. Some people lose interest in life
due to some sad events, while some lead a very simple life as directed in scriptures. Such people do not
indulge in fun or luxuries of life and behave differently. However, normal persons want to enjoy their
life to the fullest and have fun. Keeping these things in mind, the customers are categorised as
enthusiastic, positive, indifferent, negative and hostile.

4.2.3.2. Bases for Segmenting Industrial Markets

The business market is also known as organisational/ industrial/ business to business (B2B) market/ manufacturer/
producer, etc. It is an association of different organisations and individuals who buy products or services which
are to be used in the production of other products or services that are rented, supplied, or sold to others. In simple
terms, industrial market is a place where industrial buyers directly interact with the industrial sellers.
In contrast to consumer market, the industrial buyers are spread over different geographical locations, have a
derived demand and a homogenous marketing mix and are more trivial to deal because the sellers have to deal
with several decision-makers in trading such goods. Almost same bases can be used for segmenting an
industrial market which is employed for segmenting the consumer market. However, some other bases can also
be used to segment the industrial markets. These are as follows:
Bases for Segmenting Industrial Markets

Size of the Customer

Geographical Location
End Use
Buying Criteria or
Benefits Seeking Behaviour/Motivation of Buyer

Nature of Customer
Frequency of Use
Buying Process

Situational Factors

Size of the Customer: The size of a firm determines the quantity to be purchased. Big retail chains,
manufacturers, and engineering firms purchase products in large quantities and are known as big customers. On
the other hand, small quantities of product are purchased by small manufacturing organisations and retail
outlets, and hence they are known as small customers. The industrial buyers who buy goods in huge quantities
have different parameters for sales approach than small industrial buyers. It is termed as ‘key account selling’ in
which the sales managers deal with major accounts firstly since they are vital customers for the organisation.
This can be considered as a conventional method of industrial market segmentation. Depending on their
purchase and size, industrial buyers can be segmented into following three categories:
Category customers (heavy purchase) – these buyers purchase in huge quantity.
Category customers (medium purchase) – these buyers purchase lesser quantity than that of category customers
but more than that of small buyers.
Small buyers – These buyers purchase in small quantity.
Geographical Location: The market of industrial products can also be segmented on the basis of geographical
location of industrial customers. The industrial customers who are located in different locations within a
country can be divided according to sales persons’ territories or regions. At an international level, different
market segments are created on the basis of different parts of the world, as globalisation has broadened the
scope of regional territories. This segmentation proves to be beneficial for the management as it can divide a
huge market into small groups which can be managed easily. Decision-making is also decentralised so as to

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make precise and speedy decisions. For example, Airtel office situated in Delhi targets North India, whereas
the office in Mumbai targets the market of West India.

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End Use: The market can also be segmented on the basis of their end-users who use a particular company’s
product or service. For example, the industrial market of a tyre manufacturer can be segmented into the
markets of cars, bikes, trucks, etc. Separate marketing strategies are required for each segment as they have
distinct characteristics.
This type of segmentation is also known as technology/product segmentation. For example, air-
conditioners can be used by both industrial as well as domestic buyers. The industrial buyers focus on the
specific requirements such as, cooling capacity, etc., whereas the domestic buyers may also focus on model,
colour, and electricity consumption.
Buying Criteria or Behaviour/Motivation of Buyer: The market segmented on the basis of end-use can be re-
segmented on the basis of purchase criteria. For example, a market can be sub divided into sensitive,
moderately-sensitive, and highly sensitive segments, taking the price of product under consideration.
Benefits Seeking: Alike consumer market, an industrial market can also be segmented on the basis of benefit
seeking criteria which is one of the most significant factors for segmentation. In simple words, the different
business organisations can be divided into small groups which are seeking the similar type of benefits from the
products or services.
Nature of Customer: The nature of industrial customers can be totally different from that of the consumer market
customers. These types of customers can either be a small retail outlet or a heavy equipment manufacturer. The
customer can also be an individual who uses the products and services for further processing in order to manufacture
a new product or an individual who buys the product for his/her own end-use.
Frequency of Use: The industrial customers can order different quantities of the products depending upon their
requirements. These customers can be segmented as infrequent or light buyers and frequent or heavy buyers.
Buying Process: The business organisations can divide their industrial customers on the basis of buying process
which can be centralised or decentralised. The purchasing decisions are mainly held by closed bidding, tenders, open
negotiation or by the amount by which customers allow any variation in product specification.
Situational Factors: Some buying situations may require specific personal approach, while others may require
a business-like formal approach. Therefore, such situations also affect the market segment process.

4.2.4. Types/Levels of Market Segmentation

The market is broken into several smaller segments to pay more attention to marketing plans for each segment.
For each segment, the type of information needed as well as the method of handling it is different. The marketer
must know the type of segments and the ways to tackle them and in-turn develop a suitable strategy to operate
in these segments in harmony. Four levels of market segmentation are described below:

Types/ Levels of Market Segmentation

Segment Marketing
Niche Marketing
Local Marketing
Individual Marketing

Segment Marketing: It is based on similar needs, financial status, location, buying attitudes and habits
of individuals belonging to a market segment. The companies which follow segment marketing
understand the varying needs of different types of customers. Different customers may have different
habits, expectations, needs, income levels, geographical locations, etc. In case of a transport company,
business organisations and domestic customers can be seen as two segments of the market. A domestic
customer may require transportation services for travelling or shifting of luggage from one place to
another; whereas, a business organisation can use these services for the distribution of goods or
services. A company does not customise its market offerings for each customer individually; rather, it
creates a separate market segment for customers of similar needs. For example, a car manufacturing

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company may identify four segments seeking different features in a car like simple transportation,
safety, luxury or high performance.

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Segment marketing is not as accurate as individual marketing. It comes somewhere between the individual
marketing and mass marketing. For a transportation company, some industrial customers may require
containers with refrigerating facilities for storing vegetables, milk, and meat products. The marketers try to
create a balance between individual marketing and mass marketing while segmenting a market. With the
help of segment marketing, a marketer becomes capable of providing more sophisticated and superior
products or services to the customers and that too within the price range best suited to the targeted segment.
It also simplifies the procedure for making promotion and distribution decisions.
Niche Marketing: These are the areas which have been overlooked by the other marketers due to
certain reasons. They have a limited area and a small turn-over but attract new comers for possibility of
limited profit. A niche refers to a group of customers who are combined together because they have
similar tastes and preferences. For example, a bike manufacturer can consider the entire nation as a
target market but among all the target customer groups, there can be a certain class of customers who
give preference to mileage, colour, design, features, and so on. The group of customers having same
preferences can be treated as a niche market by the bike company.

Niche market has only one or a few competitors, whereas there can be several competitors in a broad
market segment. The customers of niche market are ready to pay high prices for the products and services
as the marketer understands the specific needs of the niches. For example, Hotel Taj of Mumbai charges a
premium price from its customers and customers even pay it willingly because they know that no other
hotel can provide such high-end services. The main features of an attractive niche are as follows:
The needs of the customers are quite unique and difficult to satisfy.
Customers are ready to pay high prices to those marketers who can serve them best.
The niche marketers should have expertise in their products and services in order to stand above all the
competitors.
The position of a niche leader is very firm in the market and cannot be taken up easily by other competitors.
Vigilant business organisations are now focussing on niche marketing. Reebok makes different athletic
shoes for different activities such as walking, running, football, cricket, etc. Various banks are offering
customer centric accounts such as saving accounts for students, ladies, farmers, small businessmen, etc.

Local Marketing: A marketer tries to go deeper into the levels of segmentation in order to know the
location of their niche market. With the help of localised market segments, a marketer can know the
specific marketing activities which are to be performed and the location which has the maximum
requirements for a particular product. For example, if a marketer of sports shoes finds that the
maximum customers in South Delhi are looking for tennis sports shoes, then the marketer will use
maximum numbers of displays, hoarding, and other modes of advertising in South Delhi and will also
stock large amount of inventory at that location.
In such marketing, the marketing tactics are tailored to suit the local consumers. This may include inviting
the consumers by sending them coupons, offering freebies for first few consumers, organising special
events and offering scratch cards individually to customers, developing an emotional cord by addressing
them by name, sending greetings on birthday or marriage anniversary, etc. Even some banks have
recognised the essence of local marketing and modified their working to suit the local population.

In view of those marketers who emphasise on focussing the organisation’s marketing efforts on the
demographic variations of different communities such as age, gender, income, etc., national marketing of
products and services is nothing but a wastage of resources as these activities fail to address the local target
customer groups.

On the contrary, the critics of local marketing believe that it increases the manufacturing and marketing
costs by decreasing the economies of scale. Moreover, the issues related to inventory and logistics arise
when a company attempts to fulfil the requirements of regional and local markets. Along with this, the
image of a brand also gets hampered when the product and message vary in accordance with different
regions.
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Individual Marketing: This is the ultimate level of marketing where the individual needs of the
consumers are considered and products are modified accordingly. Earlier, the market provided the
individuals with customised food and clothes matching their tastes and comfort. Now, the consumers
generally visit a particular food joint, tailor or cobbler who provides them satisfaction. This practice is
being revived by big business houses to captivate their customers. For example, DELL, a computer
company, seeks consumer’s specific requirements and incorporates them into its computer system
before delivery.

This level of market segmentation includes collection of data from various customers in order to create a
niche which can be used for the better understanding of the overall formation of global market segment. A
high level of brand loyalty and the practice of re-purchasing can be induced among the customers with the
help of sales force and customer service representatives who remain in direct contact with individual
customers. For example, a boutique making a wedding dress for the bride and a jeweller making the
jewellery with the names of customers engraved on it. Individual marketing is a common practice in
industrial buying where a certain buyer has specific requirements for product specification, payment
conditions, distribution, and so on.

4.2.5. Identification of Market Segments: The Process of Market Segmentation

As per the universally accepted view, market segmentation process primarily includes three stages, which are as
follows:
Determining Demand Pattern/Survey Stage: It is crucial to ascertain the demand patterns related to
products and services as they signify the changing needs of customers as well as their consistent or non-
varying tastes and preferences for a definite class of products and services. There are following three
demand patterns which are usually encountered by a company:
Homogeneous Preferences:  Homogeneous preferences
can be understood as a marketplace where majority of the Determining Demand Pattern/Survey Stage
customers have similar tastes and preferences. There is no
indication of any natural segments in such a marketplace. Establishing Possible Bases of Segmentation/
It is quite easily envisioned that the present brands would Analysis Stage
be identical and concentrated around the middle of the
scale both in terms of positive and negative effects.
Identifying Potential Market
Diffused Preferences: In contrast with homogenous Segments/Profiling Stage
preferences, consumer preferences may vary greatly from Figure 4.2: Process of Market
each other. Such type of preference is known as diffused Segmentation
preference. It symbolises that consumers have a wide
range of preferences which are altogether different from each other. The first firm to enter the market
will hold the central position in the market and can have the potential to attract most of the consumers.
Clustered Preferences: A particular market can be divided into different preference clusters. Such
preference clusters can be termed as market segments. The first company or brand to enter the market
has three alternatives, viz. to position itself in the centre position so as to engage most of the customers,
to come up with different brands and position them at different market segments or to position itself in
the largest market, i.e., concentrated marketing.
In case the first company entering the market is engaged in developing a single brand in a particular
segment, then the other entrants (competitors) would try to develop and launch their brands in the other
market segments.

Furthermore, the survey stage is categorised into following segments:

In-depth interviews and focus group discussions with an intention to know or understand consumer
behaviour, attitude, preferences and motivation.
On the basis of the information gathered from the above mentioned activities, a questionnaire is
developed which is dispensed or issued to a sample group of customers. The main purpose of this
questionnaire is to gather data related to:
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Patterns in which customers make use of a product. *
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Attitude of customers towards a general product or the entire class of product.

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Segmentation, Targeting and Positioning (Module 4) 169

The priority ratings of customers associated with different products and to know on what basis they
prioritise a particular product.
Prevailing habits of customers, namely, their psychographic, demographic and media habits.
Brand awareness among customers and ratings given by them to different brands.
Establishing Possible Bases of Segmentation/ Analysis Stage: According to marketing school of
thought, segmentation is extensively considered as an art and not as science. The most significant
activity is to locate the variable(s) that are responsible for dividing the market into prospective
segments. Generally, there are two kinds of segmentation variables, which are as follows:
Needs
Profilers
Customer needs are the fundamental basis for any market segmentation. Market research is essentially
required to discover the needs and wants of consumers in a market. Illustrative and computable consumer
attributes like age, location, gender, income, nationality, etc., are known as profilers, which are useful in
informing a segmentation exercise.
For the purpose of identifying factors that can distinguish different customer groups, factor analysis is used.
That is, once the data collection process is complete, it is reviewed with the help of factor analysis.
However, for clustering customers into different groups, cluster analysis is used.
Identifying Potential Market Segments/ Profiling Stage: This stage involves profiling each cluster of
customers on the basis of their behaviour, attitude, consumption pattern, alongwith their
psychographics, demographics and media habits. Every segment can be named by the marketer either
on the basis of dominants or unique characteristics.

Customer segmentation helps the marketer to understand the potential customers of the firm from a
demographic viewpoint. In order to understand the penetration rates and the market potential for different
products and services, a perfect and explicit profile of consumers is required. It helps in analysing a particular
market as well as gives an idea about the closely related markets. Such analysis enables the marketer to
explore the market opportunities and implement the market penetration strategies. Highest market penetration
can be achieved by identifying and understanding the customers in clusters which helps in target marketing. It
also helps in planning business activities for the prospective buyers. Moreover, the ROI and response rates can
be increased by specifically marketing to the potential customers with attractive offers.

Profiling the customers becomes a necessity in the process of evaluating the entire market opportunities and
the profits that can be generated from such markets.

Further, it also helps in identifying the potential customers present in the selected market. It is possible only
for few companies to make effective site selection decisions in the absence of appropriate information of
customer profiles.

4.2.6. Factors Influencing Market Segmentation

Segmentation gets influenced by the following factors:
Size, Resources, and Objectives of the Company: Market segmentation of a company is greatly
influenced by its size, the objectives according to which it works, and the resources available with it.
For example, a global automobile company considers many countries as its market and segments
accordingly, whereas a local boutique caters to a city and does its segmentation on a local level.
Type of Product and Market: Product portfolio of a company also influences its process of segmentation.
For example, a company of bakery products, cleaning materials, etc., can do the segmentation easily;
however, the process of segmentation will be complicated for the companies of apparels, financial services,
etc.
Competitive Structure of the Industry: Process of segmentation for a company also depends on the
competitive structure of the industry in which it is operating. Companies attempt to differentiate their
products from that of competitors, if the competition in the industry is very high. This in turn creates
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the need for tight segmentation because in such competitive industries where numerous options are
available, customers demand more and more features in a product.

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Nature of Market: Decisions related to market segmentation depend on the nature of the market also.
For example, company operating in a high competitive environment will have a different segmentation
approach than one operating in a less competitive environment.
Life Cycle Stage: Product life cycle also influences the segmentation decision of a company. For
example, the segmentation approach of a company would be different when its product is in growth
stage.
Competitive Strategy of Firm: Segmentation decision of a company also depends on its competitive
strategy. And the companies which strategically target their markets and segment its consumers are
more likely to achieve success in a highly competitive industry.

4.2.7. Requisites of Effective Market Segmentation

Market segmentation is a complex decision and requires due care while selecting the criteria on which decisions
are to be taken. It is very essential for products and services to be planned for a particular market. The product
being launched should attract the market segment. It should have substantial size and growth potential
alongwith the capacity to provide remarkable returns. The market segmentation criteria are discussed below:

Requisites of Effective Market Segmentation

Measurable
Substantial
Accessible
Differentiable

Actionable

Measurable: While establishing a market segment, the consumers of the product are counted along
with their financial status and characteristics. The number of such consumers should be enough to be
measured with ease. These calculations are obtained only after the marketing analysis and research
work is done.
Substantial: The market segment must have customers of similar characteristics like age group,
financial status, culture and should be aware about the different brands of the product. The size of the
segment should be substantial so that suitable marketing strategy can be adapted which is convenient to
all. The products should be supplied as per consumer preferences like quantity-wise, i.e., in small or big
packs.
Accessible: The product and market segment should be compatible in price and financial status of the
population. The location of the segment should have easy transportation facility for smooth flow of the
product. The marketing strategy adopted for one consumer group is always different from other
consumer group due to differences in their needs. For example, the fashion needs may vary on the
basis of age groups therefore each group requires different products respectively. The effectiveness of
marketing lies in catering to real needs of the customers belonging to different segments.
Differentiable: The marketing managers should clearly differentiate between the different segments
since each segment requires different strategy for marketing. The consumers react differently to
different products, and the advertisements are also designed in accordance with the consumers of
different locations. Various marketing tools are used to take due care of nuances of local area to attract
the customers.
Actionable: A well-defined market segmentation is always actionable on the part of the consumers,
who are captivated by the products, services, advertisements and marketing strategies and as a result
indulge in purchasing activity. The product placed at reasonable price coupled with marketing efforts is
bound to bring favourable returns.

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4.2.8. Benefits of Market Segmentation

The benefits of market segmentation are as follows:
Adjustment of Product and Market Appeals: Marketing is a complex activity but segmentation has
slightly simplified it. This gives an opportunity to analyse each segment separately and make
adjustments to attract maximum number of customers by suitable advertisements or other attractions.

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Segmentation, Targeting and Positioning (Module 4) 173

Better Position to Spot Marketing Opportunities: Depending upon the sales volume of the product
in different segments, the marketer can make alterations in distribution or advertisements. The inputs
from market research can further help in modifying marketing strategies.
Allocation of Marketing Budget: Different segments generate different sales volumes. This helps to
analyse and regulate the budget allocated to these segments. In case of markets with limited sales
budget, the allocation of budget can be curtailed or diverted to other progressing segments.
Understanding and Meeting the Needs of Consumers: Since, every smaller market segment is
concentrated, it gives marketer an opportunity to fully understand the needs, habits, tastes and
expectations of the customers. This enables to make better decisions related to customers, which further
improves the business opportunities.
Stronger Positioning: Positioning is all about establishing an image of the product in the minds of the
consumers for satisfying their needs and improving the situation in the best possible manner. The four
tools, i.e. price, place, product and promotion, when used in analytical way make the position of the
product stronger. In a market, varieties of similar products are available offering similar benefits. A
good positioning makes a product stand out from the rest. Thus, market segmentation gives the product
a stronger positioning.
Enhanced Efficiency: The purpose of market segmentation is to make marketing more effective. The
practice of locating customers in a segment and trying to attract them through advertisement (by
sending messages), will have little or no effect and it will be a mere waste of money. Accurate
segmenting enables the marketers to locate the most interested customers, and deliver them specific
marketing messages to improve their buying behaviour. In this way, segmentation enhances the
marketing efficiency.
Competitive Advantages: In the present competitive scenario, the company which can retain its
customers is a winner. After understanding the customer segments, a common opinion can be made on
what attracts a customer to a particular brand. An extensive market research is needed to study the
buying behaviour of the customers and suggest an appropriate brand which suits their requirements and
needs. The inputs from the market can be successfully used by the marketers for their competitive
advantages.
Targeted Media: Segmentation divides the market into small groups comprising selected people. This
enables the marketer to select suitable media for advertisement of a product. This can be done through
hoardings, SMS on mobile phones or advertisements on local television channels, etc.
Market Expansion: Segmentation also helps in market expansion. For example, if a business is set-up
in a particular region and it is a success, then it can be extended to a nearby region without much hassle.
Similarly, a demographic basis of segmentation may also be utilised for expanding one’s range of
products or adding new product lines. For example, Reebok provides t-shirts and other sportswear
along with shoes.
Better Communication: The effective communication is possible only after understanding the target
market. The customer is convinced up to the hilt about the product due to the identical products present
in the market. Thus, segmentation results in better communication between customers and sellers.
Increases Profitability: Various aspects of business like brand equity, customer retention, brand recall,
communications, competitiveness, etc., are influenced by effective segmentation strategies. The overall
impact of segmentation finally leads to profitability of the business. As a result, the product becomes a
USP for different businesses.
Identifies New Markets: Segmentation of market also brings in new market segments which have not
been tapped due to some reasons. This can even be a small segment that needs a different product,
which certainly opens a new business opportunity.
Reduces Costs: Market segment is a smaller portion of the market which can be operated
economically. This may lead to reduction in transportation costs, advertisement costs, manpower, paper
work and time.

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Reduces Credit Risks: It is generally found that some individuals or companies do not make payments
of the products purchased or even cause delay in making payments. Such customers should be avoided
or offered products only when they make on-the-spot payment in cash. On the other hand, the
customers with good payment records may be offered products on credit. These decisions are taken on
the basis of market segmentation since it helps to manage the market, business and the consumers.

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4.3. TARGET MARKET

4.3.1. Meaning and Concept of Target Market

Market segmentation helps the company to identify various opportunities. On the basis of these market
segments the marketer can determine the specific markets to be targeted.

Market targeting is a process of ascertaining groups of customers who are likely to purchase the products and
services of the company. This is done in ways where some companies can cater to the entire market while
others can focus on developing products and services for small niche markets which are profitable. Targeting is
undertaken by companies of all sizes in order to retain and maintain their customers.

Market targeting is not the same as target marketing. In market targeting, the product positioning is done
beforehand and only decisions related to choosing of suitable target market has to be made. In target marketing,
it is the other way around. The company already chooses a target market and then decides on what products and
services it has to offer.
Marketing is all about understanding the customers’ needs and wants, and developing the products that satisfy
them. Both market segmentation and targeting is practised by all organisations, ranging from the small corner
book store to large MNCs. A successful marketing plan can be developed by the company only when there is
complete synchronisation between what the customer wants and what can be provided by the company.

4.3.2. Process of Targeting the Market

The target market is a market segment (group of customers) selected by the company for directing its marketing
efforts and offerings (goods and services). It is the first component of the marketing strategy. The marketing
strategy comprises of target market and the four elements of the marketing mix – product, price, place and
promotion, which are most crucial for the success of a product in the market.
After deciding the group of customers, the company can develop a marketing mix strategy to satisfy its target
market. Thus, the market targeting process involves the following steps:
Evaluating the market segments to target, and
Selecting the target market.

4.3.3. Evaluating Market Segments to Target: Bases for Identifying Target

Customers
In the process of evaluating various market segments, the company must identify the potential of the segments
and also its own capability to target these segments. The marketer needs to make sure that while serving the
segments of market, the organisational objectives are achieved. While deciding on the market segments, the
firm must consider three factors, such as:
Segment Size and Growth: The potential of the segment can be assessed by using forecasting techniques.
Market segmentation analysis involves demand forecasting for each element of the product market other than
for the product market as a whole. The potential of the entire market can be identified by aggregating the
potentials of each market segment. This can be shown as follows:
n
MP   SPi
i 1

where,
MP = Market potential for the product market,
SPi = Segment potential in the ith segment,
n = Number of segments formed for the product market.
Segment Structural Attractiveness: The structural factors influencing the attractiveness of the segment must
be assessed along with its size and growth. For example, if the segment already has many powerful
competitors, then the market becomes less attractive. These competitors offer potential substitute products and
may also limit prices and profits that one can earn. Buyers with strong bargaining power also influence the
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attractiveness of market segment as they force the company to slash down their prices, demand for more
products and services, and try to raise disputes among competitors all at the expense of seller’s profitability.
Similarly, some strong and aggressive suppliers demand for lowering of prices or compromise on the quality of
the product. This again leads to destruction of structural attractiveness.
Company Objectives and Resources: If a company is satisfied with its market size, growth and structural
attractiveness, then it must not compromise with its objectives and resources. Some segments of the market can
be terminated if they are not appropriate for fulfilling long-term objectives of the company. Even if a segment
fits the company’s objectives, the skills and resources required for the company’s growth must be ensured.

4.3.4. Selecting Target Markets: Target Market Strategies

Once all the segments have been evaluated and analysed, the company has to decide the number of markets that
it wants to serve. A target market consists of a group of customers who have homogeneous needs which the
company chooses to fulfil. Alternative segments targeting strategies can be of two types:
Limited coverage market targeting, and
Full market coverage targeting.

4.3.4.1. Limited Market Coverage Targeting

When the company chooses to operate in one or a few market segments then it is called limited market
coverage targeting. This strategy involves limited or fewer resources. It is thus, appropriate for a small company
or new entrants who are trying to compete alongside large players in the industry.
M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3
P1 M3
P1 P1 P1

P2 P2 P2 P2

P3 P3 P3 P3

(a) Single Segment (b) Selective Specialisation (c) Product Specialisation (d) Market Specialisation

Figure 4.3: Limited Coverage Market

The different forms of limited market coverage targeting are:

Single-Segment Concentration: The company may choose to operate in a single segment. By adopting
concentrated marketing strategy, a company is able to identify the needs and wants of a particular segment,
which may help to attain large market share. The company can achieve economies of scale by focusing on its
production, distribution and promotion activities. A high return on investment can also be achieved by market
leadership.
Selective Specialisation: Under this type of targeting, firm operates in large number of segments, each of
which is profitable and attractive. There may or may not be interaction between the various segments but they
are all profit-making segments. Being operational in various segments helps the company to diversify their risk.
Product Specialisation: Here, the strategy of the company is product-based. The company decides to specialise
in a product and then sell it to various market segments. For example, a manufacturer of generators, who sells
the generators to hospitals, organisation, educational institutions, etc., provides generators of different size and
capacity, as per the needs of the customer. The company specialises in this product and does not sell any other
product to the customers.
Market Specialisation: In this strategy, the company focuses on a particular customer segment and tries to
supply as many products as possible to this segment. For example, company supplying laboratory equipment
like Bunsen burners, beakers, microscopes, etc., to universities and colleges labs may earn profit and reputation
by specialising in this particular area. The only drawback related to this type of targeting is that sometimes the
customer may cut-short its demand due to its limited budget.

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4.3.4.2. Full Market Coverage Targeting

In this strategy, the firm chooses to satisfy all types of customers by providing different products. This is
suitable for only large firms who can cover full market. For example, Mahindra and Mahindra in automobile
market, Pepsi and Coke in beverages market and Hindustan Unilever in FMCG industry are practising full
market coverage targeting. This can be done in three ways:
Undifferentiated Marketing: In this, the
firm does not consider different market
segments and offers homogenous products
to the entire market. The seller only focuses
on the fundamental needs of the customers
than the variations in customer choices.
The firm develops a product which (a) Undifferentiated (b) Differentiated (c) Concentrated
captures a large number of customers using Marketing Marketing Marketing
standard marketing mix strategies for
product, price, place and promotion. The Figure 4.4
best example of this is Coke and Pepsi who
use same pricing, advertising and packaging means throughout various consumer segments and
geographic areas. The major benefit of undifferentiated marketing is that it earns economies of scale
through mass production and marketing activities.
Undifferentiated marketing can also be termed as mass marketing. Here, the company assumes the entire
consumer market as a single market. It adopts a single marketing mix, i.e., a standardised product, uniform
pricing, same promotional schemes and the same distribution channels to reach out to its consumers.
Differentiated Marketing: In differentiated marketing, the firm produces and designs different product
value propositions for different market segments. It therefore, caters to the individual needs and wants
of customers belonging to a particular segment. For example, Maruti Suzuki serves various segments
of customers by offering them variety of cars like level cars (800, Alto), Sedans (Esteem, SX4),
Hatchbacks and Vans.

Differentiated marketing is also called selective marketing or multi-segment marketing. Unlike

undifferentiated marketing, here, the firm markets different products to address different needs of customers
in different segments. With this, the firm is able to find out consumer groups who are loyal towards its
products. Then the firm mainly focuses on those customers and creates good relations with them. The
parameters like age, income, gender, economic status, and occupation are considered which are commonly
found in customer groups. For example, Indian railways have different product offerings for different
customers like general coach, sleeper coach, AC coach, etc. In this, the socio-economic status of customers
in each category is different. The price of each coach also varies accordingly.
Concentrated Marketing: This is the third market coverage strategy. This strategy is adopted by the
companies having limited resources. The firm targets a large share of one or more sub-markets instead
of a small share in a large market. An example of this strategy is recycled paper products, which is
used for making greeting cards.
This strategy is a combination of standardisation and differentiation and is also known as focus marketing.
Here, the core strategy used is alike for all segments but differences occur in relation with the diverse
requirements of the customers. This strategy also helps to recognise the customer groups who generate
revenue and enable the firm to earn profits. In other words, the focused marketing tries to find a profitable
niche of customers and develops products and services which are not being offered by their competitors.
However, focussed marketing as a strategy is losing out to its significance to other forms of marketing since
the companies want to cater as many customer segments as possible. A classic example is Mahindra’s
Scorpio which has five or six variants to cater to different categories of customer needs. The basic version
of the model has certain basic features but customers can opt for upgraded models having features like
power steering, airbags, GPS services, etc., by paying more. In this way, the company can achieve
economies of scale and large market share. All this depends on the type of strategy adopted by the marketer
so as to achieve high market penetration.
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4.3.5. Criteria for Selection of Target Market

Five criteria for selecting a target market are explained below:

Criteria for Selection of Target Market

Company’s Image and Experience

Responsiveness

Substantial
Competitive

Profitable

Company’s Image and Experience: The process of targeting a market segment should be in accordance with
the overall corporate image of the organisation. Usually, a business organisation tries to have a consistent and
integrated image for all of its business activities. Thus, a target market that does not have a consistent image is
removed from any kind of consideration.
Responsiveness: Responsiveness refers to the reactions of the target market towards the marketing mix of a
company, i.e., what the target market likes or ignores about the company. If various kinds of marketing stimuli
such as price discounts, product specifications, sales promotions, etc., are not able to affect the prospective
business customers, then these activities are a complete waste. Such non-responsiveness occurs when a
company’s manager is totally against the use of new alternatives and is strongly devoted towards implying
predefined methods. Similar situation can also take place when the prospective customer has a less scope to
analyse the offerings of a marketer because there are numerous guidelines and rules to be followed or because
of time and resource constraints.
Substantial: The size of a market segment needs to be considered not only in terms of the number of business
customers but also the amount of products and services purchased by them over a certain period of time. There
are segments that have long-term viability whereas some get saturated or matured quickly, which leads to
limited or no selling opportunity or a very slow rate of growth. The market segments get affected by the
changing buying behaviour of organisations and they may not remain attractive as before. Therefore,
substantiality is the most crucial factor in the industrial segmentation because technological advancements can
prove to be meaningless for a certain approach.
Competitive: Competitive advantage is one of the key elements of an effective segmentation. Though, a market
segment is in accordance with the corporate image of the organisation and it looks quite viable and substantial,
still a business organisation may not address the needs and wants of the customers of this segment. While
selecting a segment, a business organisation must ensure the strengths needed to maintain the competitive
advantage over other players for a longer period of time in that particular market segment.
Profitable: Most of the marketing decisions are taken after evaluating their profitability. While selecting the
target market, profitability and maintenance of profitability over time is considered as the most important
aspect. In some market segments, there can be numerous buyers and they may purchase a huge quantity of
products and services of the organisation but in order to acquire such customers, the organisation has to
compromise on its profit margins. Apart from this, in order to maintain the competitive advantage in such
segment, the company may have to incur huge cost on fulfilling the requirements of several activities such as,
product development, distribution, promotion, etc., which may make the segment less profitable because of
lower rate of return.

4.3.6. Benefits of Targeting

Targeting is not only significant, it is essential. The main advantages of targeting are explained below:
With the help of targeting, the marketer can predict and analyse the features of products and services which are
of utmost importance to the target customers. For example, a tailor can serve all those customers who want to
get their clothes stitched. But different people may like different benefits and features which depend on their
usages such as, clothes used for wedding dress, casuals, office wears, etc.
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A marketer can provide the right product to the targeted customers. A product manager who is targeting a
certain market segment has a clear idea about the customer’s price affordability, age range, tastes and
preferences, etc. On this basis, a manager can develop products that match the requirements of target customers
in best possible way. For example, the manufacturer of laptops can produce a laptop for the customers at a
price of ₹15,000. Because with the help of market feedback, a marketer may know that the students need
laptops at low prices for the purpose of their studies.
With the help of target market, a marketer can have a fair idea about the price which the targeted customers are
willing to pay for a particular offering. Experienced marketers generally have a clear picture about the average
income of their target customers as well as price sensitivity of their target market. For example, a high quality
apparel company will focus on businessmen or customers with high incomes.
A marketer can induce more sales on the amount spent on advertising activities with the help of target
marketing. In simple words, target marketing will enable a marketer for not spending the financial resources on
those advertising activities which are not directed towards their target customers. As a result, their advertising
becomes more efficient as they do not spend on those customers who are not interested in the products or
services of the firm. Target marketing helps the company to become more effective by approaching right
customers with a right message which is appealing to them. The company can choose the best media for
advertising to reach to the target customers. Most of the advertising firms provide vital demographic
information about the audience which they reach to. For example, a business magazine is more popular among
corporates and bureaucrats.
With the help of target marketing, the organisations can also have information about the target customers’
location which in turn helps them in identifying more potential customers from those localities. The market
segmentation maps can be used for viewing different income levels of customers residing in different areas.
Such information is very important for the marketers to position their outlets in relevant areas. Apart from this,
the changing tastes and preferences of customers also depend upon the geographical locations. With the help of
target marketing, the organisation can also address these varying preferences effectively.

4.3.7. Difference between Segmentation and Market Targeting

The difference between segmentation and market targeting is explained as follows:
Basis Segmentation Market Targeting
Definition Segmentation of market can be defined as a Market targeting is a process of identifying
process of dividing the market on the basis customer groups that are most probable to buy
of customers having homogenous needs and the products or services of a firm.
wants.
Types Geography, demographics, behaviour and There are two bases of market targeting,
psychographics of the customers are the namely, limited market coverage and full
major basis of market segmentation. market coverage.
Function Segmentation permits an organisation to Targeting allows the firm to effectively develop
customise the marketing communication for strategies for marketing communication for the
different segments of the market. target market.
Benefit It allows companies to concentrate on the It helps the marketers in concentrating on
needs and wants of the potential customers. particular segment of market for designing of a
well-planned and cost effective marketing
campaign.

4.4. POSTIONING AND DIFFERENTIATION

4.4.1. Meaning of Positioning and Differentiation

Positioning is a marketing approach which creates a distinct position for a brand or a product in the minds of
the customers. It aims to provide a different and new product to the customers in comparison to the other
competing brands or products. Here, the organisation decides the basis on which the product offers have to be
placed in front of the consumers. David Ogilvy explains the importance of product positioning that, ‘the results
of your campaign depends less on how we write your advertising than on how your product is positioned.’
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According to Kotler, “Positioning is the act of designing the company’s offering and image to occupy a
distinctive place in the target market’s mind”.

According to Ries and Trout, “Positioning starts with a product a piece of merchandise, a service, a company,
an institution, or even a person. But positioning is not what you do to a product. Positioning is what you do to
the mind of the prospect. That is, you position the product in the mind of the prospect”.

Whereas, product differentiation is a marketing approach which is used to gain an edge over the competitors’
product. It is done to stand out in the market against other identical products. In a marketplace, there are several
firms producing the same product, therefore, managers must try to develop a product which is unique and
exceptional.

In marketing strategy, positioning and differentiation of a product are considered as the main elements. These
strategies are important to face the stiff competition prevailing in the market. If a marketer is successful in
developing a unique product and has also discovered the right way, time and place to launch a product, then this
means that the marketer has designed a seamless positioning and differentiation strategy.

4.4.2. Tasks Involved in Positioning: Process of Positioning

Positioning involves the fulfilment of many objectives. The marketer
can generate a successful positioning strategy only if the various Competitor’s Identification
required tasks for positioning a product are done properly. These tasks
are as follows:
Determining how Competitors are
Competitor’s Identification: The company has to be very careful in Perceived and Evaluated
the way in which it defines the competition. The definition of the
competitor has to be broad. It need not only be limited to companies
which are making the same type of products as the company. It Determining the Competitor’s Position
should actually include all companies which are the likely
competitors of the company. A company should analyse this keeping
the customers in mind and the way they use the products. Analysing Customer's Preferences

Determining how Competitors are Perceived and Evaluated: After

the definition of the competitor, the next task is to map the perception Making the Positioning Decision
of the customers with regard to these competitors and products. One
needs to understand the various features/ attributes that are considered
important by the customers. These have to be analysed through Monitoring the Position
marketing research techniques. The customers indicate their preference
Figure 4.5: Tasks Involved in
via focus groups and other survey method and this helps the company Positioning
to understand their perceptions.
Determining the Competitor’s Position: Once the various attributes and their importance to customers is
understood, the next step is to rate each competitor on these attributes. This helps us to understand how each
competitor is positioned with respect to the attribute. This also helps to understand the relative positioning of
the competitors, i.e., which competitors are similar and which are not so similar in terms of an attribute.
Analysing Customer’s Preferences: By the process of segmentation it is possible to classify the
customers into various segments based on age, income, psychographics, education, etc. These various
segments have different motivation to purchase and also have different ratings for the attributes that have
been identified.

Marketers generate the ideal preference for each segment, which is nothing but the ideal product or brand
that the customers seek among all available alternatives, including those that are not available. Once the
ideal product is recognised, it is very easy for the marketers to recognise the ideals for different segments. It
also helps to identify segments which are similar in terms of ideal points.

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Making the Positioning Decision: The next task involved in positioning is about making positioning decision.
It is not easy for the marketers to take clear and accurate positioning decision. Even market research is not so
helpful to determine the positioning. Therefore, some subjective decisions are taken by marketers by keeping in
mind the following questions:
Whether the segmentation is suitable or not?
Whether enough resources are available for communication or not?
What is the level of competition?
Whether the present positioning strategy is productive or not?
Monitoring the Position: Once the positioning strategy is generated, the company needs to check how
successful the strategy is in the marketplace. These are typically noted through tracking studies. These studies
check the change in the image of the company over a period of time. The perceptions of consumers are noted
without any lag time. The competitive impact of the positioning strategy is also noted.

4.4.3. Importance of Positioning

The importance of positioning is explained below:
Placing the Product in Customers’ Mind: Positioning and differentiation are the marketing activities
which help the marketers to place the product in the minds of the target customers. The product fails to
survive in market if the positioning decision goes wrong. And if the product is positioned wrongly then
enormous time and effort is needed to retrieve the product. Despite the fact, repositioning of a product
at a later stage is much easier than correcting a wrongly positioned product.
Connects Product Offerings with Target Market: The process of target market selection helps to
determine the actual target audience for whom the offering is proposed, and the marketing mix assists
in bringing the 4Ps in line with the intended target market. Therefore, market positioning acts as a
linkage between the product and the target market.
Product cannot be ‘Everything to Everyone’: A product cannot be ‘everything to everyone’ but a
little or more to some. This may define the need for differentiation and positioning of a product. For
this, some distinctive features of the product or some unusual requirements of the market, or some
visible gaps in the competitor’s products are identified and on the basis of these specifications the
product is positioned for a specific target market.
Creates a Locus in Customers’ Mind: The customer’s mind may be viewed as geometric perceptual
space which is occupied with diverse products and brands having specific positions. A new product can
take hold of the space by replacing the existing brands from their position. A brand position in the
customer’s mind can be achieved through several ways. Placing a brand against another existing brand
or against certain expectations raised by the consumers may seek a position in customer’s mind.
Providing Competitive Advantage: Positioning of a product is the finest method for providing a
competitive advantage to a product or service. This helps the marketer to determine the competitor’s
potential moves and responses so that appropriate steps can be taken, such as:
Providing the target markets the motive to buy the services and then plan the entire strategy.
Providing the guidelines to device the marketing mix, such that every element is aligned with the
positioning.
Better Serving and Covering the Market: Here, the marketer identifies that every consumer or group
of customers has different requirements and belongs to different market categories. In this approach, the
main aim of marketer is to recognise the potential market segments, monitor the market in those
segments and offer the customers’ with their desired needs and wants.

4.4.4. Positioning Strategies

The creation of brand differentiation considering the value frame of the customers is the key role of positioning
strategy. For this, positioning of a product can be done by using different strategies, such as:
Attribute Positioning: This strategy involves multiple product attributes or uses that the brand can
offer to its customers, other than the competitors. For example, a movie theatre publicising that it
offers the best movie experience is an attribute positioning. A fairness cream can be positioned by
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Price/Quality Positioning: This approach stresses the product’s place on the price/quality continuum
by positioning it in the minds of consumers. This can be executed at both ends of the continuum (e.g.,
at the high end with Mercedes cars and at the low end with Tata Nano cars).
Use or Application Positioning: In this strategy, a product is positioned on the basis of its usage or
applicability. For example, Kent RO purifier can be an example of application positioning. Here, the
purifier is positioned by affirming that it has an inbuilt seven stages of water purification.
Product User Positioning: This type of product is associated with the specific category of user. For
example, Lady Bird brand has positioned its bicycles as fashionable and sporty for young females only.
Usage and Use Time Positioning: This type of positioning is done on the basis of the product usage or
its usage time. For example, Livon hair serum is positioned to be used after shampoo to detangle hair.
Product Class Positioning: Product class positioning involves association with a particular group of
products, which are different from the conventional products. For example, positioning an exclusive
limited edition of Ferrari watches as race day watches. Olay a skin care brand has a new product line of
vitamins that are positioned as beauty supplements.
Category Positioning: In this type of strategy, the product is positioned other than its original category
to which it belongs. This is advisable when the existing product category is overcrowded and brand
differentiation becomes difficult. For example, an herbal tea brand may position itself as a health brand
instead of positioning itself in the beverage category.
Benefit Positioning: Usually, consumers’ purchase products for acquiring the benefits related to the
product. With the help of this strategy, marketers may select an exclusive and not-yet-offered benefit to
position the brand. For example, a tea brand (Red Label natural care) can help improve immunity of a
person if consumed regularly.
Price-Quality Positioning: A brand may also position itself on the basis of price-quality continuum. At
the bottom end, it means an ‘economy’ position (like wheel detergent, with both low quality, low price
positions) and at the top-end, it means premium position (Ariel Matic, with both high quality and high
price).
Competitive Positioning: Here, the positioning of a product is done in reference to the prevailing
competition in the market. This product is set as a favourable substitute against the established brand.
For example, the toothpaste brand Colgate Sensitive is launched as a competitor against the tooth paste
brand Sensodyne in the market.
Corporate Identity Positioning: A brand attempts to make a direct connection with the corporate identity
and tries to play on its key credentials. A corporate brand is used by products to label their offerings in the
market. The offerings by Nestle, Cadburys and Kellogg’s, all disclose their corporate identity on their
products.
Brand Endorsement Positioning: Unlike the previous method, here a successful brand acts as an
endorser of a new product. For example, Cadbury uses its successful brand, Dairy Milk, to promote its
other confectionaries.

4.4.5. Differentiation Strategies

An organisation may differentiate its market offerings in five dimensions, like:
Specific Ways to Differentiate

Service Personnel Channel Image

Product Differentiation
Differentiation Differentiation Differentiation Differentiation
Form Ordering Ease Competence Symbol
Coverage
Features Delivery Courtesy Media
Expertise
Performance Installation Credibility Atmosphere
Performance
Conformance Consumer training Reliability Events
Durability Customer Responsiveness
Reliability consulting Communication
Reparability Maintenance and
Style Repair
Design
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Differentiation based on *

Ingredients
Segmentation, Targeting and Positioning (Module 4) 183

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Product Differentiation: It is based on different features associated with the core products in order to
differentiate it:
Form: A product can be differentiated on the basis of its shape, form, size or physical structure. For
example, bath soap is an essential commodity which can be differentiated by fragrances, shape, size
and colour.
Features: There are many products that can be offered having diverse attributes that add an extra value
to the basic functions of a product. By introducing a new attribute to a product is the best way to
compete in the market. For example, Kissan and Nestle came up with a tetra pack for its tomato
ketchup products ‘Kissan Chotu’ and Nestle ‘Pichkoo’ in the India market. These pocket sized tetra
packs are introduced with a special feature of plastic nozzle. This feature has added up an extra value to
the product.
Performance Quality: Performance quality can be measured at four levels, i.e., low, average, high or
superior. Mostly the products are established at one of the four performance levels, i.e., low, average,
high or superior. For example, Sony has achieved reputation in many of its electronic product
offerings, by providing an excellent performance and quality delivered by the brand.
Conformance Quality: Here, the products manufactured by a firm are homogenous in nature with
assured specifications. Therefore, buyers anticipate products to have a high conformance quality.
Durability: Durability is the ability of a product to last longer without substantial deterioration. It is the
most vital feature of products like furniture, automobiles, home appliances, etc.
Reliability: Reliability is a degree of assurance that the buyer has over a particular product. If a buyer
is satisfied that the product will work efficiently without any fail, then he is even ready to pay a
premium price for that product.
Reparability: Products which are easy to repair are most preferred by the buyers. Reparability strategy
of a product helps the buyers to fix all the issues related to a product. For example, Maruti Suzuki
automobiles have a high reparability value. The parts of automobiles are easily replaceable and have
large number of service stations all around the country.
Style: The appearance and impression is defined as ‘style’ of a product. A buyer is ready to pay
premium price for the products which are highly attractive and stylish. This can be differentiated by the
product’s packaging, package design and convenience. For example, shampoos in pouches, Fevikwik
in a handy tube and Dhara cooking oil in a see-through-pack are all examples of differentiation through
packaging.
Design: Design is the most persuasive way to differentiate a company’s product or service. It is directly
proportional to the success of company and product. A well-designed product makes huge positive
difference to the buyer. It ensures product reliability and durability and also increases customer comfort.
For example, Woodland shoes used product design as their differentiation strategy. The conventional
formal shoes and regular sports shoes had become almost monotonous and standard products.
Therefore, Woodland introduced a semi-formal category of men’s shoes especially designed for
Weekends. They also reinvented the sport shoes category by offering exclusive designs for varied sport
activities.
Differentiation based on Ingredients: Ingredients used to prepare a product can also be used for
differentiation. For example, Real Fruit Juice made a distinction by claiming that it uses fresh fruit
pulp for making juices and it does not contains any other added preservatives in their products.
Services Differentiation: When a product fails to differentiate itself, then the other way to successfully
differentiate a product is by providing value-added services and offering quality products.
Under this differentiation strategy, many organisations have achieved services differentiation through fast,
suitable, or careful delivery. For example, Maruti Automobiles has positioned itself as “the most excellent
after-sales service provider”— their service station operates seven days a week, which includes evening
shifts. Easy availability of service thus may differentiate one organisation from another, like free repair

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Segmentation, Targeting and Positioning (Module 4) 185

services for a sold product. Thus, water purifier dealers who provide top-notch after-sale services are
largely preferred by the consumers.

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The following factors are the main service differentiators:

Ordering Ease: A company may provide an easy ordering facility to its customers. This may act as a
service differentiator in the market.
Delivery: Under service differentiation, a company may provide delivery services to its customers.
This includes speed, accuracy and proper handling of the entire delivery process.
Installation: It refers to assembling of various parts and connection of services related to a particular
product in order to make it operational at an intended location. When a buyer purchases a heavy
equipment, then he expects to receive a good installation service.
Customer Training: Customer training involves providing adequate training to the employees working
for the customer’s organisation, so that they use the purchased equipment correctly and efficiently.
For example, the manufacturers of expensive medical equipment provide a training session to the
buyer along with proper presentation and guidelines to be followed.
Customer Consulting: There are many customer consulting organisations which assist customers with
services like data search, information systems and advising services.
Maintenance and Repair: Maintenance and repair is all about the service program that helps
customers in keeping the purchased products in a working and manageable condition.
Personnel Differentiation: An organisation comprising of skilled and trained personnel has a strong
competitive advantage.
For example, La Meridian hotels have an admirable market reputation, primarily on account of their
efficient and hard-working service staff. The employees of Barista are courteous, the DELL employees are
professional and the Google employees are upbeat. The sales force of organisations such as Nestle, P&G
and HUL enjoy an exceptional market reputation. Personnel who are well-trained mainly exhibit six
personalities:
Competence: They own the necessary skill and knowledge;
Courtesy: They are polite, selfless and friendly;
Credibility: They are honest and dependable;
Reliability: They perform the service consistently and precisely;
Responsiveness: They are highly responsive towards the requirements and issues faced by the
customers; and
Communication: They try to understand the customer’s insight and communication effectively.

Channel Differentiation: Channels of distribution is another way of achieving competitive advantage.

This can be achieved by accurately deciding the coverage area, expertise and performance of the
company.
For example, ‘Eureka Forbes’ manages to distinguish itself by building and organising superior direct-
marketing channels using telephone and internet sales.
Image Differentiation: The consumers behave differently towards the different companies and brand
images. The identity and image of the company should be differentiated correctly. Identity is the
manner in which an organisation wants to portray or position itself or its product offerings. Image refers
to the way the public recognises the organisation or its products.
Image is affected by several factors:
Symbols: Image of a product can be improved by using strong symbols. The business can select a
symbol such as the Tree (Dabur), or Apple (Apple Computer).
Media: The selected image should be incorporated into advertisements and media that expresses a
story, a mood and a claim which can prove to be a distinct approach. It must also be included in
financial statements, reports, catalogues, the company stationery, brochures and business cards.
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Atmosphere: The location or the atmospherics of the organisation is also considered as one of the
influential image generators.

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Events: An organisation may construct its identity by the ways in which it selects its sponsored events.
For example, Hercules bicycles brand became renowned by laying down exercise tracks and
sponsoring health sports events.

4.4.6. Value Proposition and USP

The most eminent tools used to explain the reason to prospects for buying a product and using the terms
applicable to them are regarded as value proposition and the Unique Selling Proposition (USP). A
product must represent a unique selling proposition through its positioning statements and value
propositions. This differentiates the product from other players in the market. Therefore, value proposition
and the unique selling proposition acts a source with the help of which the marketer aims to attain
sustainable competitive advantage.

It specifies the ways through which a customer can gain value from the product and also determine the related
costs and benefits. If the value driver of a product is cost, then the low price or non-price cost of purchase
should be incorporated into a product’s position. This has to be further communicated in its value proposition.

Alternatively, a product positioning can also be done on hard and soft benefits or on several combinations of
benefits and costs. In either cases, the target customer must have a clear statement of value proposition, of how
will he/she derive an increased value by purchasing a product.

A value proposition is very clear about what the product does for the consumer (and sometimes, what it does
not) and also involves information related to pricing in comparison with the competitor’s products. Therefore,
value propositions should represent a Unique Selling Proposition (USP) of the product.

Alternatively, value proposition is used in place of product positioning. In its direct form, a value proposition
can be defined with the help of three elements:
Target market,
Benefits offered (and not offered), and
Price range (relative to competitors).

At the time of preparing a positioning statement or value proposition, it is essential to highlight the benefits of
the product to the customer rather than its attributes, quality or high-end services. These benefits are the
ultimate measurable consequences that the customer will experience while using the product, in contrast to the
other products.

A statement of differentiating a product or a service from that of the competitors is referred as a Unique Selling
Proposition (USP), or Unique Selling Position. To bring in uniqueness in a product is a challenging task. It is
rare to develop a product with unique features uninterruptedly.

Philip Kotler says that the level of difficulty faced by firms in creating functional uniqueness has made them
“focus on having a unique Emotional Selling Proposition (an ESP) instead of a USP”. He has explained this by
giving an example of the Ferrari car and the Rolex watch. Each of them not only has a different functional
uniqueness, but also has a unique Emotional Selling Proposition in the minds of the customers.

USP is the basis of any successful marketing plan. It is the unique position that the customers have in their
minds towards a particular organisation. It is an actual consideration of the customers’ experience with the
organisation and its products.

The first and foremost priority of a marketer is to create a unique selling proposition, as it is a difficult task for
the marketer to stand out in the market from the rest, to convince the customers’ for buying the product. It is
most essential for the organisation to highlight the distinct features of the product to the target audience. Hence,
this is referred as the USP of the product and the organisation. It influences the customers to know the
usefulness of the product and make purchases above all other available alternatives. Therefore, an organisation
should create a powerful and dynamic USP.
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4.5. EXERCISE

4.5.1. Short Answer Type Questions

What is target marketing?
State any four requisites of effective market segmentation.
What is niche marketing?
What is psychographic segmentation?
State the benefits of targeting.
What are the difference between segmentation and market targeting?
Give the meaning of market positioning.

4.5.2. Long Answer Type Questions

Discuss the concept of market segmentation. Also highlight the need for market segmentation.
Throw a light on the benefits of market segmentation.
What are the steps involved in the process of market segmentation? Explain.
Write a note on the bases for segmenting consumer markets.
Give the meaning of target market. Also describe the target market strategies in brief.
Discuss the process of targeting the market.
Discuss the various positioning strategies in detail.
What is differentiation? Discuss the differentiation strategies.
Write a note on value proposition and USP.

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