MARKETING SEGMENTATION, TARGETING AND POSITIONING

MARKET SEGMENTATION
INTRODUCTION
Markets consist of buyers and buyers differ in one or more respects.
They may differ in their:-
- Wants,
- Resources,
- Geographical locations,
- Attitudes and
- Buying practices.
It is therefore necessary for a marketer to segment his/her market.
MEANING OF MARKET SEGMENTATION
Marketing segmentation is
“The act of dividing a market into distinct groups of buyers who might require
separate products and/or marketing mixes. Or it is the sub-division of a market
into smaller homogenous sub-markets which the organization might
successfully satisfy.”
BENEFITS OF MARKET SEGMENTATION
The following benefits may be derived by a company from market segmentation.
 It may enable a company to select a potentially most profitable segment.
 It enables a company to concentrate resources on the chosen segments.
 The analysis gives a company the opportunity to review developments and anticipate
changes in its chosen segment from competitive activity, legal/political changes,
e.t.c.
 Sales opportunities are more likely to be effectively and fully exploited by staff
when target audience is properly defined.
 Better services tailored to the needs of particular market segments are offered.
 Prices are tailored to customer situations and circumstances.
 It may lead to improved level of services both in terms of sophistication and general
standards.
 Assists in identifying gaps. Market segmentation involves marketing research.
During this process, the marketer can also engage in „Gap Analysis”. Gap Analysis
is:
- A process which aims to seek out differences between what the market needs and
wants and what is actually being supplied – the gap.
Hence gap analysis will uncover:-
o Market needs for existing services not fulfilled.
o Other needs where no services currently exist

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THE PROCESS OF MARKET SEGMENTATION
In identifying market segments, three stages are involved:-
1. Survey,
2. Analysis and
3. Profiling.
Survey Stage
1. The researchers initially conduct informal interviews with groups of consumers to
find out about their;
- Motivation,
- Attitudes and
- Behavior.
2. Based on the preliminary work, the researchers conduct more formal research by use
of a structured questionnaire using a representative sample of consumers.

Information sought include;

 The importance and ratings consumers give to certain attributes of products.
 The extent to which people are aware of the existence of different brands of the
product.
 If brand awareness exists, how people rate different brands
 How, when, where and by whom the product is used.
 Attitudes towards the product category.
 Demographic, psychographic, behavioral and geographic profiles of consumers of
the product.
Analysis Stage
The researcher can then use an appropriate statistical method to analyse data in order to
categorize the segments based on the identified characteristics.
Profiling Stage
 Each segment is profiled with respect to its distinguishing attitudes, behavior,
demographics, psychographics and geographic habits.
 Segment characteristics and make-up vary over time, so the procedures have to be
periodically carried out.
VARIABLES FOR SEGMENTING CONSUMER MARKETS
The following variables are commonly used to segment consumer markets.
 Geographic,
 Demographic,
 Psychographic and
 Behavioral variables.
1) Geographic segmentation
This calls for dividing the market into different geographical units such as.
- Nations,

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 - States,
- Regions – West, North, Central, South, e.t.c.
- Countries,
- Cities or
- Neighborhoods
Attention should be paid to variations in geographical needs and preferences.
Geographical segmentation assists the seller to position retail outlets in most
appropriate locations as well as simply identifying the needs on the basis of the
consumers own location.
2) Demographic segmentation
This consists of dividing the market into groups on the basis of demographic
variables such as:- Age, sex, family size, family life cycle, income, education,
occupation, religion, race and nationality.
These variables are the most popular for distinguishing customer groups
because,
- Consumers‟ wants and preferences are closely related to them.
- They are easier to measure than most other types of variables.
a) Age: Consumer needs and wants change with age. Hence the market should
be segmented as young, old, e.t.c.
b) Sex: This can be employed to segment such markets for clothes deodorants,
lotions, magazines, e.t.c. Thus the markets can be for either men or women,
male or female
c) Family life cycle (FLC): The product needs for a household vary according
to marital status and the present ages of children. Thus family life cycle can
be divided into:-
- Single,
- Young, married with no children,
- Young, married with young children,
- Older married with children, e.t.c.
d) Income: Marketers can segment the market according to the distribution of
income e.g. under 1000 shillings per month, 2000/=, 4000/= per month,
e.t.c.
e) Occupation: Variables include; bankers, teachers, farmers, clerks, students,
housewives, secretaries, e.t.c. A marketer can choose to specialize in the
needs of one occupation group.
f) Education: E.g.
- Same primary education
- Same high school education
- College education
- University education e.t.c.

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 g) Religion - e.g. Muslims, Christians e.t.c.
h) Race - e.g. white, black e.t.c.
i) Nationality – e.g. Asians, Africans e.t.c.
j) Ethnicity groups
k) Generation
Each consumer is profoundly influenced by the generation in which it grows
up. This influences one‟s inclination to Music, politics, e.t.c.
3) Psychographic segmentation
Psychographics are psychological profiles of different consumers developed from
research, sometimes referred to as A.I.O. (Attitudes, interests and opinion profiles)
In psychographic segmentation, buyers are divided into different groups on the basis of
their:-
- Social class,
- Lifestyle and/or
- Personality characteristics.
People within the same demographic group can exhibit very different psychographic
profiles.
Consumers can thus be sub-divided on the basis of the following psychographic
variables.
i) Social class
Social class has a strong influence on people‟s preferences,
Marketers designing products and/or services for specific social classes build in those
features that appeal to the target social class.

ii) Lifestyle
Consumers‟ lifestyles are derived from their activities, interests and opinions. Each life
style group is influenced by different marketing mixes.
iii) Personality
Type of personality groups may include;
- Comparative authoritarian
- Ambitious
- Alert to change
- Self-confidence
- Prestige conscious
- Self image
- Self concept
4) Behavioral segmentation
Buyers are divided into groups in the basis of their,
- Knowledge,
- Attitude,

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 - Behavior,
- Use or
- Response to a product.
In this respect, behavioral variables that are used to segment consumer markets
include:-
- Occasions benefits,
- Benefits,
- User status,
- Usage rate,
- Loyalty status,
- Buyer readiness stage,
- Attitude,
- Individual segmentation
i. Occasions benefits
Buyers can be distinguished according to occasions when they
- Have a need,
- Purchase a product or
- Use a product
E.g. Occasions when public transport is used mostly
ii. Benefits
Buyers are classified according to different benefits they seek from the product. Variables
here include:-
- Economy (Low price)
- Medical (Decay prevention)
- Bright teeth
- Good taste, e.t.c. for toothpaste.
Benefit segmentation requires determination of:-
- The major benefits that people seek from the product
- The kind of people who look for such benefit
- The major brands that deliver each benefit.
ii. User status
Many markets can be segmented into
- Non-users.
- Ex-users,
- Potential users,
- First time users and
- Regular users of a product
All these people require different marketing approaches.
iii. Usage rate
Markets can be segmented into

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 - Light,
- Medium and
- Heavy user group of products.
iv. Loyalty status
A market can be segmented by customer loyalty patterns.
According to the loyalty status, the buyers can be divided into:-
- Hard core loyals – Consumers who buy one brand all the time
- Soft core loyals – Consumers who are loyal to two or three brands
- Shifting loyals – Consumers who shift from favoring one brand to
another.
- Switchers – Consumers who show no loyalty to any brand
A company should
- Study the characteristics of its hard-core customers e.g. whether
middle class, larger families, e.t.c.
- By studying soft-core loyals, the company can pinpoint which
brands are most competitive with its own.
- By looking at customers who are shifting away from its brands, a
company can learn about its marketing weaknesses.
- The company should be aware that what appears to be brand loyalty
purchase may reflect.
 Habits,
 Indifference,
 A low price or
 Non-availability of other brands.
vi. Buyer readiness stage
At any given time, people are in different stages of readiness to buy a
product;
- Some people are aware,
- Some are informed,
- Some are interested,
- Some are desirous of buying,
- Some intend to buy.
All these make a big difference in designing the marketing programme.
MARKET TARGETING
 Market segmentation reveals the market segment opportunities facing the firm.
 The firm therefore has to evaluate the various segments and
 Decide on how many and which one to serve.
EVALUATING THE MARKET SEGMENTS
In evaluating different market segments, the firm must look at the following factors
1) Segment size and growth

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  Marketing segment has to be „right size‟. Size can be measured in terms of
sales volume.
 Companies should not only concentrate on sales volume but also on the
growth potential of the segment.
2) Segments structural attractiveness
A segment might have desirable size and growth characteristics and still not
profitable.
- It should evaluate the long-run profitability of the market segment.
- It has to appraise its impact on profitability. Michael Porter has identified
five forces that determine the intensive long-run attractiveness of the whole
market or any other segment within it.
 Industry competitors,
 Potential entrants,
 Existence of substitute products,
 Bargaining power of buyers and
 Bargaining power of suppliers.
The five threats they pose are:-
 Threat of intense segment rivalry
A segment is unattractive if it already contains strong or aggressive
competitors.
 Threat of new entrants
A segment is unattractive if it is likely to attract new competitors
who will bring in new capacity, substantial resources and a drive
for market share growth.
 Threats of substitute products
A segment is unattractive if there exists actual or potential
substitutes for the product.
 Threats of growing bargaining powers of buyers
A segment is unattractive if the buyers posses strong or increasing
bargaining power. Interested in low prices but high quality.
 Threat of growing bargaining power of suppliers
A segment is unattractive if the suppliers posses a strong or
increasing bargaining power. They can raise prices or reduce the
quality and quantity of products and services offered.
3) Company objectives and resources
- Even if the segment has positive size and growth and it is attractive, the
company has to consider its own objectives and resources.
- The segment can be dismissed because it does not fit in the company‟s
long-run objectives.

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 - Even if segments fit the company‟s objectives, it must consider whether
it has the required skills and resources to succeed in that segment.
4) Segment interrelationships
Segments selected should be inter-related in terms of costs, performance and
technology for effectiveness.
SELECTING THE MARKET SEGMENTS
From the results of segment evaluation, the company may select one or a few segments
worth entering.
It must decide which ones and how many to serve.
Five possible market coverage patterns should be considered:-
1) Concentrated marketing/Single segment concentration
The company selects only a single segment to concentrate on. This is because;
- The company may have a natural match to the segment‟s success
requirements.
- The company may have very limited resources
- It might be a segment with no competitor
- Can be a segment that is a logical launching pad for further segment
expansion.
E.g. Volkswagen has concentrated on a small car market.
Advantages:-
- A firm achieves strong market position in the segment owing to its
greater knowledge of the segments needs and special reputation it builds.
- A firm enjoys many operative economies through product specialization,
distribution and promotion.
- It can earn high returns on interest.
Disadvantages:-
- Particular segment can turn sour.
- Competitor may decide to enter same market.
2) Selective specialization
(Multi-segment coverage)
- A firm selects a number of segments
- Each of which is objectively attractive and matches its objectives and
resources.
Advantages:-
- A firm‟s risks are diversified and even if the segment is unattractive, it
can still make profits in other segments
- It may result in synergistic effects.
- Promotion costs are lowered.
- More customers are captured.
Disadvantages:-

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 - Losses
- Expensive
- Needs more resources

3) Product specialization
A firm concentrates on making one product and selling it to a variety of customer
groups
This strategy works when;
- Demand is continuous
- There are homogenous goods
- Same resources are used
Disadvantages:-
- A lot of expenditure on advertisements
Advantage:-
- A firm avoids putting all eggs in one basket
4) Market specialization
A firm concentrates on serving many needs of a particular customer group.

5) Full market coverage

Here, the firm attempts to serve all customer groups with all the products that they
may need.
Large firms can cover a whole market in two broad ways, namely:-
- Undifferentiated marketing and
- Differentiated marketing
Undifferentiated marketing
(Market Aggregation)
The firm ignores market segment differences and goes after the whole market with
one product offer.

Focus
It focuses on what is common in the needs of buyers rather than what is different.
Design
It designs a product and a marketing programme that will appeal to the broadest
number of buyers.
Reliance
It relies on mass distribution and mass advertising.
The aim is to give a product a superior image in people‟s minds.
Advantages:-
- The narrow product line keeps down production, inventory and
transportation cost.

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 - The absence of segmentation lowers the cost of marketing research and
product management.
- The undifferentiated advertising programmes keep down advertising
costs.
Disadvantages:-
- Lack of personal touch.
- New entrants.
- There may be intense competition in the large market segments.
- It may be unprofitable operating in large segments.
Differentiated marketing
Here, the firm operates in most segments of the market but designs tailored
programmes for each significantly different segments.

Advantages:-
- Creates more total sales than undifferentiated marketing.
- Customer satisfaction
- Better defined marketing programmes
Disadvantages:-
It increases the cost of doing business E.g.
- Product modification ,
- Production,
- Administrative,
- Inventory,
- Promotion and
- Distribution costs.
MARKET POSITIONING
Meaning
This is the act of designing a company‟s offering and image to occupy a distinctive place
in the target market‟s mind.
I.e. The act of creating a difference between a company‟s offer from those of
competitors.

A difference is worth establishing to the extent that it satisfies the following criteria.
1) Important: - The difference delivers a highly valued benefit to a sufficient number of
buyers.
2) Distinctive:- The difference is delivered in a distinctive way
3) Superior: The difference is superior to other ways of obtaining the benefit.
4) Pre-emptive: The difference cannot be easily copied by competitors.
5) Affordable - The buyer can afford to pay for the difference.
6) Profitable - The company will find in profitable to introduce the difference.

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Positioning strategies:-
1) Attribute positioning
A company positions itself on an attribute e.g. size, number of years in existence.
2) Benefit positioning
The product is positioned as the leader in a certain benefit.
3) Use or application positioning
Positioning a product as the best for some use or application.
4) User positioning
Positioning a product the best for some user group e.g. Bic pen, food for
consumption.
5) Competitor positioning
The product claims to be better in some way then a named competitor.
6) Product category positioning
The product is positioned as the leader in a certain product category
7) Quality or price positioning.
The product is positioned as offering the best value
How many differences to promote
1) Single benefit positioning
E.g. best quality, best service, lowest price, best value, safest, fastest, most
convenient, most advanced technology
2) Double benefit positioning
May be necessary if two or more firms claim to be the best on the same attribute.
3) Triple benefit positioning
E.g. Smith Kline Beecham promotes its Aquafresh toothpaste as offering these
benefits
- Anti cavity protection
- Better breath
- Whiter teeth

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