POSTGRADUATE INSTITUTE OF MANAGEMENT

University of Sri Jayewardenepura

Master of Business Administration
MBA 504: Marketing Management

1. Defining Marketing for the New Realities – Chapter 1

2. Marketing Planning & Management – Chapter 2
3. Consumer Buying Behavior & Profiling The Sri Lankan Consumer – Chapter 3 & PIM Publication
4. Conducting Market Research – Chapter 5
5. Identifying Market Segments & Target Customers & Crafting the Brand Positioning – Chapters 6 & 7
6. Designing & Managing Services – Chapter 9
7. Building Strong Brands – Chapter 10
8. Managing Marketing Communication & Designing an IBC in the Digital Age – Chapter 12 & 13
9. Channels & Distribution Strategies – Chapter 15 & 16
10. Revision & Discussion
Dr Asanga Ranasinghe
Identifying Target Customers
• Companies cannot connect with all customers in large, broad, or diverse markets.
• Right market segments need to be identified to serve best & satisfy uniquely to achieve marketing
success.
• To compete more effectively, many companies are now embracing target marketing - focusing on those
consumers they have the greatest chance of satisfying.

• Effective targeting requires that marketers:

o Identify distinct groups of buyers who differ in their needs & wants (segmentation).
o Select one or more market segments to enter (targeting).
o For each target segment establish, communicate & deliver the right benefit(s) for the company’s market
offering (developing a value proposition & positioning).

• Targeting is the process of identifying customers

Millennials loved spices & ate more
for whom the company will optimize its offering. exotic food than their parents. They
just couldn’t cook it at home!
• Targeting reflects the company’s choice of which Campbell’s solution was a new line
customers to prioritize & which to ignore when targeting Millennials—Campbell’s
designing, communicating & delivering its offering. Go! Soup ready-to- eat meals
Identifying Target Customers
• Starting point of targeting is mass marketing.
• In mass marketing firms ignores segment differences & targets the whole market with one offer.
o Sellers engage in mass production, mass distribution & mass promotion of one product for all buyers at the
lowest cost which in turn lead to lower prices & higher margins

• Mass marketing is dying & more & more targeting is required through micro marketing.

• Micro marketing will be required as consumers are becoming savvy & more demanding, mass media is
proliferating, distribution channels are getting complicated & new channels are emerging.

• 4 types of micro marketing

1. Segment marketing
2. Niche marketing
3. Local area marketing
4. Individual marketing
Levels of Market Segmentation
1. Segment marketing
• A segment is a group of customers who share a similar set of needs & wants
• Segment marketing aims to identify & target consumer groups through separate marketing mix
development & deployment based on demand characteristics.
• Marketers cannot create segments, but only identify them & decide which one(s) to target.
• Benefits of segment marketing over mass marketing are
o can better design, price, communicate & deliver value to satisfy the TG
o can fine-tune the marketing program & activities to better be than competitor activities
• Market segments can be defined in many ways , one way is by preference segments, contain
3 different patterns
1. homogeneous preferences - all the consumers have roughly similar preferences
2. diffused preferences - consumers vary greatly in their preferences
3. clustered preferences - consumers belong to distinct preference clusters
Levels of Market Segmentation
2. Niche marketing
• A narrowly defined customer group seeking a distinctive mix of benefits which is identified by dividing
segments into sub-segments
• Characteristics of an attractive niche market are
o customers have a distinct set of needs
o they pay a premium to brands that best satisfies their needs
o unlikely to attract many competitors as the markets are small
o the nicher gain certain economies though specialization
o has to be sizable & has potential to grow

3. Local marketing
• Reflects a growing trend called grassroots marketing, where activities concentrate on
getting as close & personally relevant to individual customers as possible

4. Individual marketing (customization)

• “Segments of one”, “customized marketing” or “one-to-one” marketing
Bases for Segmenting Consumer Markets
• Market segmentation divides a market into well-defined slices.
• A market segment consists of a group of customers who share similar set of needs & wants

• 2 broad group of variables are used to segment the market

1. descriptive characteristics
o geographic, demographic & psychographic
2. behavioral considerations
o consumer responses to benefits,
use occasions or brands
• Marketing programs can be profitably adjusted to
recognize customer differences by correct
segmentation.
• Segmentation allows
o personalized marketing campaigns
o draft better product & communication strategies
according to needs of the segment.
Bases for Segmenting Consumer Markets
• Geographic segmentation
o The division of a total potential market into smaller subgroups on the basis of geographic variables - region,
state or city as people living in the same area have similar needs and wants.
o Marketing programs can be tailor made to the needs & wants of local customer groups in areas,
neighbourhoods, even individual stores

In India consumers in Tamil

Nadu prefer freshly brewed
coffee while in other states
consumers prefer tea.

The fast food giant McDonald's serves beer in their German outlets. However, beer
is not a part of the menu in their U.S. outlets. This reflects the food preferences of
different cultures. This fast food giant has incorporated local food in their menu
served at different locations - McDonald's serves McVeggie in India, McArabia in
Middle East & banana pie in Brazil.

o Marketers will also study the population density or regional climate as factors of geographic segmentation.
Bases for Segmenting Consumer Markets
• Demographic segmentation
o Division of the market based on age, family size, family life cycle, gender, income,
occupation, education, religion, race, generation, nationality & social class
o Is popular as consumer needs, wants, usage rates, product & brand preferences
are often associated with demographic variables - easier to measure The Honda Fit targets
young Gen Y buyers as well
o Due to market complexity, segmentation based on ONE variable is inadequate as psychologically young
empty nest parents.
o Scio- Economic Classification (SEC) classify households based on 2 factors.
1. Education level of the chief wage earner
2. Access to & possession of specific
assets by the household, such as TV,
refrigerator, internet etc.

o SEC A & B refer to higher

consumption groups, mostly urban.
o SEC C is semi-urban
o SEC D & E are mostly in rural
with lower consumption levels
Bases for Segmenting Consumer Markets
• Psychographic segmentation
o Psychographic segmentation uses the science of psychology & demographics to better understand consumers.
o Segmentation is in terms of their lifestyle
➢ How people spend their time engaging in activities
➢ What is of most interest or importance to them in their immediate surroundings
& values: such as
▪ their opinions & views about themselves & the world around them

Higher resources Lower resources

Innovators Believers
Consumer resources

Successful, “take charge” Conservative

Upscale, niche-oriented Familiar & established
Thinkers Strivers
Mature, reflective Trendy
Durability, functionality Stylish products
Achievers Makers
Successful career Practical, traditional
Established & prestige Basic, practical
Experiencers Survivors
Enthusiastic, variety Resigned, passive
Fashion, entertainment Loyal to favorite brands
Consumer motivation
Bases for Segmenting Consumer Markets
• Behavioral segmentation
o Consumers are divided into groups on the basis of their knowledge of, attitude toward, use of or response to a
product
o Needs & benefits: Not everyone who buys a product has the same needs or wants. Needs- based or benefits-
based segmentation is a widely used approach because it identifies distinct market segments with clear
marketing implications.
E.g. shampoo based on hair types/ needs

o Decision roles: People play 5 roles in a buying decision. They are

➢ Initiator
➢ Influencer
➢ Decider
➢ Buyer
➢ User.

o Different people play different roles but all are

crucial in decision process & ultimate consumer satisfaction
E.g. doctors are key influencers for pharmaceutical companies
women play a significant role as deciders of kitchen appliances
children are initiators of certain food habits/ holiday destination
Bases for Segmenting Consumer Markets Extended Reading

• Behavioral segmentation
o Segmented based on behavioral variables related to various aspects of user and their usage
o Occasions: Buyers are distinguished according to the occasions when they develop a need, purchase a
product, or use a product - times of day, week, month, year or in terms of other well defined temporal aspects
of a consumer’s life.
E.g. vacations based on school holidays, greeting cards for different festival seasons/ special occasions
o User status: classified into non-users, potential users, first time users & regular users
E.g. blood banks have different campaigns to recruit new/ first-time donors to ex-donors to regular donors
o Usage rate: segmented into light, medium and heavy product users
E.g. Cellular phone service providers monitor average revenue per user (ARPU) based on usage rate
segmentation and run targeted marketing campaigns for each segment
o Buyer readiness stage: Of the target group some people are unaware of the product, some are aware, some
are informed, some are interested, some desire the product & some intend to buy. The proportions of
consumers at different stages make a big difference to the marketing programs.
E.g. educational campaigns to change behaviors – building hand washing habit
o Loyalty status: They are: hard-core loyal (one brand all the time), split loyal (loyal to 2/3 brands), shifting loyal
(shift loyalty from one brand to another) & switchers (no loyalty to any brand)
E.g. Airline frequent flyer programs reward loyal passengers with targeted schemes
Bases for Segmenting Business Markets Extended Reading

• Can use some of the same variables as consumers, such as:

o geographic
o benefits sought
o usage rate

E.g. selling
scientific
equipment for
government
laboratories vs
universities vs
industrial labs
require different
marketing
programs/
approaches
Market Targeting
• A target market is the qualified available market the company decides to pursue. Company can also decide
how many & which segment to target
• Target marketing requires marketers
o Identify & profile distinct groups of buyers who differ in their needs and preferences.
o Select one or more market segments to enter
o For each target market, establish & communicate distinctive benefit(s) of the company’s market offering.

• There are 5 criteria for effective segmentation, useful target marketing

1. Measurable – the size, purchasing power
2. Substantial – should be the largest possible homogeneous groups worth going after with a tailored
marketing program
3. Accessible – can be effectively reached & served
4. Differentiable – conceptually distinguishable & respond differently to different marketing mix elements
5. Actionable – effective programs can be formulated

Kindles marketed to young, smart,

well-to-do consumers, interested in
both books and new technology, and
also able to afford an electronic
device as an e-reader.
Market Targeting
• In evaluating & selecting market segments, firm must look at 2 factors
1. Segment’s overall attractiveness
2. Company objectives and resources to win in the segment
• Michael Porter has identified 5 forces that determine the intrinsic long run attractiveness of a market
segment.
Happens when suppliers are concentrated Happens when there are actual or
& organized & they can raise prices or potential substitutes. There will be a limit
reduce quantity supplied arbitrarily on prices and on profits.
E.g. Fuel/ gas supply to industries in a relatively E.g. store branded private labels offering similar
monopolistic market benefits at lower prices

Happens when entry barriers are low. Will

lead to overcapacity & depressed earnings
for all.
E.g. trading businesses when import tariff
structures are low

Happens when customers become concentrated & Presence of strong & aggressive competitors. Will lead to
organized. Lead to a curtailment of profitability. frequent price wars, advertising battles & NPIs making it
E.g. Markets where Modern Retail is strong such as Walmart expensive to compete.
forcing lower prices from suppliers E.g. intense competition in the cellular phone market
Market Targeting
• Possible levels of targeting segments

Mass market Customization

Full market Multiple Single Individuals as

coverage segments segments segments
• Full market coverage
o Firm attempt to serve all customer groups with all products they might need. Only very large firms can
undertake full market coverage
o 2 broad approaches
1. Undifferentiated marketing
2. Differentiated marketing
Undifferentiated marketing Differentiated marketing
➢ Ignores segment differences & goes after the whole ➢ Firm operates in several market
market with one offer segments, designs different
➢ Relies on mass distribution & products for each segment
advertising ➢ Creates more total sales than
➢ Aims to endow the product undifferentiated marketing
with a superior brand image ➢ Increase cost of doing business
Market Targeting Extended Reading
• Multiple segment specialization
o Through selective specialization a firm selects few segments, each objectively attractive & appropriate, but
each promises to be a moneymaker with the advantage of diversifying the firm’s risk

o 2 approaches
1. Product specialization : Firm makes a certain product which sells to several different market segments but with the
disadvantage of product being supplanted by an entirely new technology
E.g. A microscope manufacturer selling to universities, government and commercial laboratories

2. Market specialization: Firm concentrates on serving many needs of a particular customer group, gaining strong
reputation, but the disadvantage is that the customer groups may suffer budget cuts /shrink in size
E.g. A firm specializing in selling assortment of products only to university laboratories

• Single segment concentration

o Firm markets to only one segment (niche marketing) E.g. concentrate on sports cars
o Firm gain strong knowledge of the segment’s needs & achieves a strong market presence, enjoy operating
economies through specializing its production, distribution & promotion - High ROI
o Main disadvantages are when segment turning sour suddenly & when there is competitor invasion
o Therefore companies prefer to select more than one segment & need to pay more attention on segment
relationships, cost, performance & technology
Developing & Communicating a Positioning Strategy
• Positioning is the act of designing the company’s offering & image to occupy a distinctive place in the mind
of the target market
• Goal of positioning – locate the brand in the minds of the consumers, to maximize the potential benefit to
the firm
• Result of positioning – successful creation of a customer-focused value proposition
• Positioning requires the similarities & differences between brands be defined and communicated
• Deciding on a positioning strategy requires 2 activities
1. Determining a frame of reference by identifying the target market and the competition
2. Identifying the optimal Points-of-Parity (POPs), and Point-of-Differences (PODs)

o Sensodyne carved out a profitable share

through its focused positioning strategy in
the oral care market dominated by Colgate
& Pepsodent

o Identified a positioning gap for a toothpaste

for sensitive teeth in the adult population
Developing & Communicating a Positioning Strategy
• Determining a competitive frame of reference
o Determination of category membership based on the need(s) to be served in the o Coca-Cola focused on
its soft drinks business
target market segment o Missed seeing the
o The products with which the brand competes & function as close market for coffee bars
substitutes (products that satisfy the same customer needs) and fresh-fruit bars
o They eventually
o Competitive analysis consider resources, capabilities & impinged on its soft-
likely intentions of others Marketing Myopia drink business

• Identifying optimal Points-of-Parity (POPs) and Points-of-Difference (PODs)

o Points-of-Parity
o Associations that are not necessarily unique to the brand, but shared with other brands.
o 2 forms
1. category POPs (necessary but not sufficient)
2. competitive POPs (must have because the others have) Hyundai has pioneered the
car market by successfully
o Points-of-Difference establishing a point-of-
➢ Attributes/ benefits consumers strongly associate with a brand difference on low prices & a
➢ Customers believe that they could not find the same extent with a competitive brand point-of-parity on quality &
➢ Has to be desirable, deliverable & differentiating design.
Developing & Communicating a Positioning Strategy
• Establishing the brand positioning in the marketplace requires that consumers understand 3 aspects.
1. What are the other brands which are targeting to satisfy similar needs and what these brands are offering?
(category membership)
2. What tare attributes or benefit associations that are not necessarily unique to the brand but may be shared
with other brands? (Points of Parity)
3. What makes a brand a superior competitive choice? (Points of Difference)

• Successful positioning must be high on 4 Cs

1. Credibility - Image and reality must meet
2. Clarity - Uncomplicated positioning statements
3. Consistency - Consistent messages across all communication channels & consumer touch points
4. Competitiveness - Something of value must be offered to the consumers

In the credit card category, while Visa strives to match the prestige
of competitor American Express (PoD) by offering gold and
platinum cards, American Express is aiming to extend the reach of
its card to erase Visa’s advantage (Pod) as the most widely
available credit card.
 Unilever—manufacturer of home care, food & Although the Axe & Dove campaigns couldn’t be
personal care brands—effectively uses marketing more different & both have sparked much
communication strategies to target specific age controversy & debate. The two brands have been
groups, demographics & lifestyles. credited with effectively targeting their consumer
base with personal marketing strategies & spot-on
Unilever: Axe & Dove Axe is now sold in over 70 & is the most popular & differentiated messages. Axe’s success in
male grooming brand offering young male consumers personal marketing has lifted the brand to become
page 183 - 184
a wide range of personal care products. Axe the leader in the mature deodorant category. Dove
effectively broke through the clutter by finding the has focused on changing the attitudes of women
Unilever’s Dove speaks to
right target group & luring these customers with and promoting positive self-esteem in the target
women with a different tone
personal marketing messages that hit home. group.
& message. In 2003, Dove
shifted away from its Unilever understands that it must keep the brand fresh, relevant,
historical advertising, which As part of the “Real Beauty” and cool to stay current with its fickle young audience. As a result,
touted the brand’s benefit of campaign, Dove released a series of the company launches a new fragrance annually and refreshes its
one-quarter moisturizing short Films, one of which, online and advertising communications constantly, realizing that
cream & launched the “Dove Evolution, won at the International new males enter and exit its target market each year.
Campaign for Real Beauty.”- Advertising Festival in Cannes. The
celebrated “real” women & film shows a rapid-motion view of Questions
spoke personally to women an ordinary woman transformed by 1. What are the customer value propositions for Dove & Axe? What
about the notion that beauty makeup artists, hairdressers, are the similarities & differences between the brands?
comes in all shapes, sizes, lighting & digital retouching to end 2. Is there a conflict in the way Unilever markets to women & the
ages & colors. The campaign up looking like a billboard way it markets to young men? Is making women sex symbols in
arose from research revealing supermodel. The end tagline is “No Axe ads undoing all the good that might be done in the “Dove
that only 4 % of women wonder our perception of beauty is Campaign for Real Beauty”?
worldwide think they are distorted.” The film instantly 3. How should Unilever manage these brands in the future? Should
beautiful. became a viral hit. it try to find a universal positioning that fits both brands?
 Summary
1. Target marketing includes three activities: market segmentation, market targeting, & market positioning.
Market segments are large, identifiable groups within a market.
2. Bases for segmenting consumer markets are geographic, demographic, psychographic & behavioral.
Marketers use them singly or in combination.
3. To be useful, market segments must be measurable, substantial, accessible, differentiable & actionable.
4. Market targeting can be at four levels – mass (full market), multiple segments, single (or niche) segment
or an individual as a segment
5. A mass market targeting approach is adopted only by the biggest companies. A niche is a more narrowly
defined group. More companies now practice individual and mass customization. The future is likely to
see more individual consumers take the initiative in designing products and brands.
6. Developing a positioning strategy requires the determination of the competitive frame of reference – by
identifying the target market & the resulting nature of the competition – & the optimal points-of-parity
and points-of difference in brand associations.
7. PoD are those associations unique to the brand that are also strongly held and favorably evaluated by
consumers.
8. PoP are those associations not necessarily unique to the brand but perhaps shared with other brands.
9. Successful positioning must be high on 4 Cs – Credibility, Clarity, Consistency & Competitiveness