Segmentation Targeting and Positioning

Sessions 8 and 9

Learning Outcomes
Explain the importance of market segmentation.
Discuss criteria for successful market segmentation.
Describe the steps involved in segmenting markets.
List the steps involved in segmenting markets.
Understand how a company should choose the
most attractive segments
6. Describe the concept of differentiation and its role in
building brands.
7. Understand the positioning process with details on
perceptual positioning.
1.
2.
3.
4.
5.

The STP Process

Segmentation

Targeting

Identifying
similar groups of
customers with
distinct needs,
characteristics or
behaviour

Identifying
segments to aim
based on
attractiveness
and company
objectives and
resources

Male/female
consumers of
skincare products,
aged 18-25. 26-35,
36-45, 46-65, 65+

Female consumers
18-25

Positioning
Creating a
concept to
appeal to the
target segment

Position skincare
products as
essential for selfrespect

Segmenting Consumer Markets

Why segment the market?
o Better focus on customer needs
o Customers are differentially responsive to marketing

efforts.
o Facilitate right choice of target market.
o Leverage scarce resources.
o Help identification of less satisfied segments and
concentrate on them.

The marketer does not create the segments. He only

identifies them and decides which ones to target

Requirements for Effective Segmentation

Measurable
Accessible

Can be reached and served

Substantial

Large enough to warrant a special marketing

mix

Differentiable

Actionable
5

Size, purchasing power, and profile of segment

Respond differently

Effective programs can be developed

Segmentation Criteria
Consumer Criteria
Profile

Psychological

Demographic

Lifestyle

Purchase

Socioeconomic

Personality

Usage

Geographic

Perceptions

Media usage

Attitudes

Technology usage

WHO & WHERE

Motives

Benefits sought
WHY & WHO
6

Behavioural

WHO, HOW, WHERE & WHEN

Segmentation Considerations
Difficult
and
High

Ease and cost of measurement

Behavioural

Psychological

Geodemographic

Demographic
Easy
and
Low
Low
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Predictability of consumer choice behaviour

High

Demographics
Age
Family size
Gender
Generation
Income

Occupation
Education

0 to 5, 6 to 11, 12 to 19, 20 to 34, 35 to 49, 50 to 64, 65 plus

Single, married no children, married with children, old married without children,
senior citizens

Male, female

Pre-independence, post independence, post liberalisation

Low ( up to Rs. 50,000), lower middle ( 50000 to 100000), middle(100001 to

200000, upper middle (200001 to 300000 ), upper (Over 300,000)
Unskilled worker, skilled worker, petty trader, businessman, industrialists, selfemployed professionals, white collared workers, supervisors, managers
Illiterate, school up to 4 years, school 5 to 9 years, SSC/HSC, Non-graduate,
graduate, post graduate, post graduate professional

Most popular and easiest to measure

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New SEC System

Source: MRUC Hansa

Household Distribution New SEC

A1
A2

1.8

A3

3.2

B1

4.3

B2

5.3

C1

7.5

C2

7.9

D1

11.4

D2

14.7

E1

18.4

E2

15.4

E3

9.7
0.0

5.0

Source: MRUC Hansa

10

Punjab has the highest

percentage population of SEC A
(A1+A2+A3) followed by
Maharashtra, Kerala and Goa.
Gujarat, Tamil Nadu and
Uttarakhand are average.
The states with the lowest
percentage of SEC A are Bihar,
Madhya Pradesh and West
Bengal

0.4

10.0

15.0

20.0

Geographic
Urban and rural
o 31% and 69% with buying power of 55% to 45%

Regions
o North, South, West, East

Cities
o
o
o
o
o
o

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Metros / mini metros Popn. of 5 million plus ( 8 22.6%)

Cities with a population of 1 million to 5 million ( 38 17.2%)
Cities with population of 5 lakhs to 1 million ( 45 9.6%)
Cities with population of 2 to 5 lakhs ( 139 13.2%)
Cities with population of 1 to 2 lakhs ( 267 10.9%)
Rurban Population less than 1 lakh (7438 26.6%)

Change in Living Standards

12

HPI

2010 Q4

2011 Q 4

Change

2012 Q 4

Change

200 +

2.1

2.7

28.6%

3.4

25.9%

151-200

1.2

1.5

25.0%

1.7

13.3%

101-150

1.8

2.3

27.8%

2.8

21.7%

71-100

3.5

4.1

17.1%

5.4

31.7%

51-70

2.3

2.8

21.7%

3.3

17.9%

31-50

7.5

8.6

14.7%

10.0

16.3%

21-30

8.1

9.4

16.0%

11.1

18.1%

11-20

30.7

33.6

9.4%

36.6

8.9%

6-10

41.2

46.8

13.6%

50.4

7.7%

0-5

135.0

126.1

-6.6%

118.1

-6.3%

Average HPI

13.7

15.9

16.1%

18.1

13.8%

Source: Indian Readership Survey Reports

Household Premiumness Index is a composite of 50 variables including demographics, product
ownership/usage and services. It is an indicator of Living Standard
It is a continuous variable which lets you define your target group more finely.

Psychographic Segmentation
Division of market into
different groups based on
social class, lifestyle, or
personality characteristics.
People in the same
demographic classification
often have very different
lifestyles and personalities.
It measures persons
activities, interests and
opinions.

13

ACTIVITIES

INTERESTS

OPINIONS

Work

Family

Themselves

Hobbies

Home

Social Issues

Social Events

Job

Politics

Vacation

Community

Business

Entertainment

Recreation

Economics

Club Membership

Fashion

Education

Community

Food

Products

Shopping

Media

Future

Sport

Achievements

Culture

VALS Model
Value knowledge
Little interest in image or
prestige
Like educational programming
Voracious readers
Image conscious
Relatively affluent
Attracted to premium products
Average TV watchers

Traditional
Family oriented
Slow to change habits
Look for bargains
Watch TV more than average

14

Restricted consumption
Concerned with security and safety
Brand loyal
Trust advertising

Self-confident
Enjoy the finer things
Receptive to new products and technologies
Sceptical of advertising

Action oriented
Follow fashion and fads
Maximum spend on
socialising
Impulsive buyers
Image conscious
Limited discretionary
income
Spend on clothing and
personal care products
Prefer TV to reading
Hands on
Shop for comfort,
durability and value
Unimpressed by
luxuries

Behavioral Segmentation
Occasion
Benefits Sought

Special promotions & labels for

Different segments desire

holidays.
Special products for special
occasions.

different benefits from the

same products. Examples

Decision Roles

Initiator
Influencer
Decider
Buyer
User

Loyalty Status

15

Hard core loyals

Split loyals
Shifting loyals
Switchers

Usage Rate

Non-users
Light users
Medium users
Heavy users

Buyer Readiness Stage

Unaware
Aware
Informed
Interested
Ready to buy

User & Loyalty Status Segmentation

16

Benefit Segmentation - Toothpaste Market

17

Sensors

Segment
Sociables

Workers

Independent

Principal benefit sought

Flavour, product
appearance

Brightness
of teeth

Decay
prevention

Price

Demographic strengths

Children

Teens, young
people

Large families

Men

Special behavioural
characteristics

Users of
spearmintflavoured
toothpaste

Smokers

Heavy users

Heavy users

Personality characteristics

High selfinvolvement

High
sociability

High
hypochondriasis

High
autonomy

Lifestyle characteristics

Hedonistic

Active

Conservative

Valueoriented

Major Segmentation Variables for Business

Markets
Demographic
1.
2.
3.

Industry:
Company size:
Location:

Which industries should we serve?

What size companies should we serve?
What geographical areas should we serve?

Operating Variables
What customer technologies should we focus
on?
5. User status:
Should we serve heavy users, medium users,
light users, or nonusers?
6. Customer capabilities: Should we serve customers needing many or
few services?
4.

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Technology:

Major Segmentation Variables for Business

Markets
Purchasing Approaches
7. Purchasing-function organization: Should we serve companies with

highly centralized or decentralized purchasing organizations?

8. Power structure: Should we serve companies that are engineering
dominated, financially dominated, and so on?
9. Nature of existing relationships: Should we serve companies with
which we have strong relationships or should we go for the most
desirable?
10. General purchase policies: Leasing? Service contracts? Systems
purchases? Sealed bids?
11. Purchasing criteria: Go for quality, service or price?

19

Major Segmentation Variables for Business

Markets
Situational Factors
12. Urgency:
Do we go for companies with low lead times?
13. Specific Application: Do we focus on some applications of our
14. Size of order:

products or all applications?

Should we focus on small or big orders?

Personal Characteristics
15. Buyer Seller similarity: Should we serve companies whose people

and values are similar to ours?

16. Attitudes towards risk: Should we serve risk taking or risk avoiding
concerns?
17. Loyalty:
Should we serve companies that show high
loyalty to their customers?

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Targeting
Which segment should the company serve?
Normally done on the basis of:
o Segment size and growth
o Segment profitability
o Competitive intensity within the segment
o Cyclical nature of the industry

Each of these factors is rated on a 10 point scale and

loosely categorised as high, medium and low.
Firms select target markets which are a good fit with
the firm.

21

Selecting Target Market Segments

Concentrated
(niche) marketing
Differentiated
(segmented)
marketing

Go after a large
share of a small
segment

Separate offers for

different segments

Undifferentiated
(mass) marketing
Treats market with
no individual
segments

Advantages and disadvantages of each?

22

Micromarketing (local
or individual)
marketing
Seeing the individual in
marketing

Choosing a Target Marketing Strategy

Considerations include:
o Company resources
o The degree of product variability
o Products life-cycle stage
o Market variability
o Competitors marketing strategies

23

Patterns of Target Market Selection:

Product x Market Matrices

24

Positioning

The Battle for the Mind

Act of designing a companys

offering and image to occupy
a distinctive place in the
mind of the consumers
Fundamental elements are
physical attributes and
communication
The result of positioning is
the successful creation of a
customer focused value
proposition.

Ladders in the Mind

Product ladders with each brand ranked as a step on them
To gain a step you either dislodge the brand above you or
relate to the other companys position

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The Positioning Process

Identification of relevant set of competitive products serving a target market
Identify the set of determinant attributes
Collect data about customers perceptions in the competitive set
Analyse the current positions of products in the competitive set

Determine customers most preferred combination of attributes

Examine the fit between preferences of market segments and current product position
Identify positions where products may be placed
Write positioning statement or value proposition to guide marketing strategy
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1. Competitive Frame of Reference

Define the category and sub-category of product.
Identify the relevant competitors in the category.
Competitors can be based on industry or markets they
serve.
Identify each competitors real and perceived strengths
and weaknesses.
Determine their objectives and strategies.
Review customer ratings on key success factors.

28

Possible Competitive Advantages

Product
differentiation

Service
differentiation

People
differentiation

29

Channel
differentiation

Image
differentiation

Right Competitive Advantage

Important
Distinctive
Superior
Communicable

Pre-emptive
Affordable
Profitable

30

The idea is to
create a
Unique
Selling
Proposition

2. Determinant Attributes
Features
Benefits
Parentage
Manufacturing process
Ingredients
Endorsements
Comparisons
Pro environment
Price/Quality

Consumers can consider only

attributes of which they are
aware
More the variables, more the
confusion
Consider only the important
ones
Attribute may not be
considered important if all
alternative brands considered
more or less equal

Defining Associations
Points-of-difference

Points-of-parity

Attributes or benefits
consumers strongly associate
with a brand, positively
evaluate, and believe they
could not find to the same
extent with a competitive
brand

Associations that are not

necessarily unique to the
brand but may be shared
with other brands

Strong brands may have

multiple PODs

Some are seen to be

essential to a category

3. Collect Data
Qualitative research through interviews or focus
groups
Quantitative research to determine scores of
competitive products

33

4. Perceptual Map
A visual technique to show the average target market
consumer s understanding of competing brands and their
associated attributes.
Normally done on two axes which represent the two most
important determinant attributes in consumer purchase
decision
You may superimpose the various segments on the map .
Examine the map for gaps to launch a new brand or
reposition an existing brand

Steps for Perceptual Maps

1.

Select two determinant attributes

Price is preferably not taken as a key dimension:
o Imitable by competitors
o Claim normally not credible

CATEGORY

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Likely Determinant Attributes

Shoes

Comfort, design/style, quality, functionality

Instant coffee

Flavour/taste, country of origin, variety, quality

Breakfast cereal

Healthiness, sugar level, variety, fun element

Holiday destination

Temperature, travel distance, culture difference, facilities

Camera

Zoom, memory, size/weight, picture quality

Steps for Perceptual Maps

List the main competitors in the category
Create scores for these brands. Simplest way is to
use a 5 point scale
4. Plot the same on a graph paper. This can actually be
done from an excel sheet by converting it to a
diagram
5. Superimpose the tastes of different segments.
2.
3.

36

Soft Drinks Perceptual Map

37

Market Positioning Analysis

Check whether axes represent those which the
customers normally use.
Are the labels on the axes polarised?
Does our product have a clear and distinct market
positioning?
Are we positioned correctly in regard to our target
market?
Are the company products positioned too closely
together? Does this raise competitive barriers or lead
to cannibalisation?

Value Propositions
Represent the full positioning of the brand.
Possible value propositions are:

Review the positioning of Dominos and how it is

changing.
39

Example of a Perceptual Map

40

Constructing a Brand Positioning Bulls-Eye

Developing a Positioning Statement

A concise description of your target market as well as
a compelling picture of how you want that market to
perceive your brand.
It needs to look at the competitive positioning and the
frames of reference that the customer uses while
making choices.
It becomes a guide post for your marketing efforts.
It should be simple, memorable and credible.
It should provide an easily understood picture of your
brand.

42

Communicating and Delivering the

Chosen Position
Once position is chosen, company must take strong
steps to deliver and communicate the desired position
to target consumers.
All the companys marketing mix must support the
positioning strategy (e.g., IMC).
Positioning strategy must be monitored and adapted
over time to match changes in consumer needs and
competitors strategies.
..\..\STP\Big Bazaar.docx

Alternative Positioning Strategies

Attribute Positioning
o The largest theme park in the world

Benefit positioning
o The park for people seeking a fantasy experience

Use/Application positioning
o The park for people who can spend only an hour

User positioning
o The park for thrill seekers

Competitive positioning
o More animals than the Japanese Deer Park

Product category positioning

o The educational park

Quality/Price positioning
o Best value for money

Which Positioning Approach to Follow?

Look for gaps and see whether you can fill them
Internal capability to deliver on the promise
Are benefits of most interest to target market?
Possible reaction by competitors
Profitability
Communicability

45

Next Session

Google Case
Deliverables
Chapter 12 with case lets

Single sheet hand written on plain A 4 by each

student
Power point presentation by each group

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