West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 5

ChapterSummaries
Chapter5Segmentation,Targeting&PositioningStrategies

INTRODUCTION
Market segmentation is vital for company success. Without a clear idea of the nature of the target
segments,thefirmisforcedtouseascattershotapproachtomarketingstrategicdecisionmakingwith
littlechanceforsuccess.Dividingthemarketupintoreasonablesegmentsisonlyastartingpoint.The
firmthenmustdevelopaseriesofstrategicgoalsandstrategiesforeffectivelyreachingthoseidentified
segments.Targetingrequiresthefirmnotonlytoaimatbuthopefullytohititstargetsegments.The
finalimportantaspectinvolvestheestablishmentofanimportantperceptualpositioninthemindofthe
consumer.Thecompanywhosebrandcomesimmediatelytomindwhenaneedarisesinaparticular
product/serviceclasshasadistinctadvantageoveritscompetitors.Thischapterwillpresentaseriesof
possible foundations for effective segmentation, mechanisms for developing action plans for reaching
those segments, and will discuss ways in which the marketing strategist can enhance their
product/servicepositioninsidethemindofthetargetedconsumer.

FoundationsforEffectiveSegmentation
Withthevastarrayofdifferentwantsandneedsforanyproductorserviceclass,itisunlikelythatany
companycanhavetheluxuryofappealingtoanentiremarket.Thebuyingrequirementsforthiswide
arrayofconsumerswouldbewidelyvaried.Thismightbepossibleinearlystagesofaproductorservice
form life cycle; however, as competition builds, the company is forced to give consumers a reason to
prefer its product offerings from those of the competitors through differentiation. For this to be
successful, it is necessary for the company to identify target segments of consumers and tailor their
offeringstobestmeetthewantsandneedsofthatparticulargroupofconsumers.

GeographicBasesforSegmentation
Geography focuses on the where issues. It ranges from local/neighborhood to global, and it could
encompassanyvariationwithinthetwoextremes.Herethemainmechanismforsegmentationisthe
natureofthegeographicmarketbeingcovered.Localsegmentation,oftenusedbysmallfirmsgetting
their start, keeps the market confined to a manageable area of coverage until a far greater
understandingofpossiblenichesisgathered.

DemographicBasesforSegmentation
Heretheoverallmarketissubdividedusingaseriesofdemographicvariables.Oneofthemostobvious
ways to segment demographically is by gender, but this is a complex term. Gender does not just
addressphysicalsexualmakeup.Italsocontainsapsychologicalcomponent.Howtheindividualsees
themselves in terms of their sexual makeup and orientation is becoming less distinct in a variety of
developedcountries.Sexsegmentationinvolveschoosingmalesorfemalesasthetargetaudience.Age
isanotherbasisfordemographicsegmentation.Animportantapproachtoagesegmentationinvolves
the concept of a cohort of society moving through the ageing process together. While birth age is
relativelyeasytouseasabasisforgroupingpotentialconsumers;however,itactuallyhaslittletodo
withconsumermotivations.Thelevelofeducationcanalsobeaneffectivebasisforsegmentation.

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West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 5

Thecomplexityofcertainproductsmakesthemmoreappropriateforproperevaluationandusageby
individualswithhigherlevelsofeducation.Alogicalbasisforsegmentationislevelofincome,butin
manycountries,thelargerconcernistheindividualslevelofpurchasingpower.Occupationcanalso
serveasanappropriatebasisforsegmentation.Thereareaseriesofproducts/servicesthatareaimed
at homemakers as opposed to professionals, students, white collar workers (managers. executives,
professionals)asopposedtobluecollarworkers(laborers,tradespeople),retirees/pensioners,andthe
unemployed. Religion is an important basis for segmentation particularly when religious
teachings/doctrine make the consumption of certain products mandatory or prohibited. Ethnicity
equates to national country/culture of origin. Family Size is another segmentation variable worth
considering. The existence of the extended family in many developing countries is an important
considerationsincetherearevariousmembersofthefamilyunitwhocanplayavarietyofrolesinthe
product/servicechoiceprocess.Familylifecyclestagereflectsavarietyoflifeconditionsthathavea
potentialimpactonproduct/servicepurchasedecisions.Ifthetargetsegmentissingleasopposedto
married,theremaybeaseriesofpreferenceslinkedtothatlifestate.

PsychographicBasesforSegmentation
Psychographicbasesforsegmentationcenteronperceptualissues.Thesesegmentsaredeterminedby
combiningindividualswhoarepsychologicallysimilarintheirorientations.Thesedistinctionsaremade
based upon similarity of lifestyles, personalities and values. Psychographics are often associated with
theacronymAIO,whichstandsforactivities,interestsandopinions,andsegmentswhichareexactlythe
same in terms of demographics may be significantly different in terms of their psychological makeup.
Lifestyle reflects the ways in which the individual chooses to live their lives. What types of activities
theyenjoy,whatlifesettingstheydesire,andwhotheysurroundthemselveswithareallcomponentsof
lifestyle. Personality is another mechanism for segmentation. Here the idea is to group people into
roughly similar personality types with the underlying assumption that people will be more favorably
disposed toward those of a similar personality profile. Another approach to psychographic
segmentationinvolvestheuseofcorevalues.Thecompanytriestomatchitscorevalueswiththoseof
its customer segments building positive associations. The company stresses values in its
products/servicesaswellasinitscorporateenvironmentandculture,andthehopeisthatthesegment
willbecomeloyaltothecompanybecauseitembodiesthecorevaluesofimportancetotheconsumer.
A multibased approach to segmentation incorporating both individual psychological values and
demographics,knownastheVALStypology,wasdevelopedbyacompanycalledSRIInternational.The
organization, which presently oversees the VALS system, is SRI Consulting Business Intelligence
(http://www.sricbi.com/VALS/). A similar approach has been taken in the UK with the Social Value
GrouptypologyasdevelopedbyConsumerInsightLtd.fromits2003Survey.Thissurveyisthelargest
surveyofsocialchangesthathasbeenattemptedintheUK,andthesegmentsidentifiedarebasedupon
values,beliefsandmotivationsandislinkedtothevariousstagesofMaslowshierarchyofneeds.

BehaviouristicBasesforSegmentation
Thesebasesarebuiltaroundgroupsinwhich consumershavesimilarunderstandingsof,usesforand
responsestoparticularproductsorservices.Usagerateinvolvestheamountthatisnormallyconsumed
bytheindividual,andthenormalcategorizationsare:light,moderateandheavyusers.Loyaltylevelis
another effective base for segmentation. There are five different levels of loyalty: brand insistence,
brandloyalty,splitloyalty,shiftingloyalty,andnoloyalty(theswitchers).Anothertypeofbehaviouristic
segmentationinvolvesthecreation ofspecialevents. TheU.S. florists,greetingscardcompaniesand
candycompanieshavelongfocusedonspecialoccasions.

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Benefitsegmentationisbasedontheassumptionthatconsumerscanbegroupedintermsofthekey
benefitsthattheyseekfromtheuseofcertainproductsorservices.Therecanbetwoormoredifferent
segmentswhichbuythesameproductsorservicesbutseekdifferentkeybenefitsfromtheuseofthe
productsorservices.

SegmentationTools
The main tools used forsegmentation are cluster analysis, conjoint analysis, discriminant analysis and
perceptual mapping. Cluster analysis is a group ofmultivariate techniques whose main purpose is to
classify objects in such a way that withingroup differences are minimized and betweengroup
differences are maximized according to some grouping variable. These objects can be products or
surveyrespondents.Thegoalistocreateclustersthataresimilarwithinanddistinctlydifferentfrom
one another, which are clearly the goals for consumer segmentation. Conjoint analysis on the other
handinvolvestheuseofaseriesofpossibleproduct/serviceattributecombinationstoseewhichones
are actually preferred by survey respondents. The third approach to segmenting is discriminant
analysis,whichinvolvesidentifyingaseriesofvariablesthathelptodiscriminatethemembersofoneor
moregroupsfromothersinthedataset.Thebasicideaistoexamineaseriesofpossibledifferentiating
variables that would explain and hopefully allow prediction of different possible group memberships.
improvementoverpurechance.Thefourthtoolismultidimensionalscaling,whichinvolvesavarietyof
differenttechniquesthatcanvisuallydemonstratehowparticularconsumersviewthevariousofferings
in a particular product or service class. These techniques are also often referred to as perceptual
mapping because the goal is to spatially differentiate the perceptions of consumers relative to their
preferencesfororthesimilaritiesamongasetofobjects(e.g.,companies,products,services)interms
ofdistancesinmultidimensionalspace.

MarketingSegmentationvs.ProductDifferentiation
Thereisatradeoffwithinmostorganizationsthatmustbeconsideredwhensegmentingmarkets,which
involvesproductionandmarketing.Inonecaseunrestrainedmarketingmightidentifyawiderangeof
distinctmarketsegments,butwhiletheremaybedemandforthesesegments,theremaybenocost
effectivewaytodevelopthenecessaryproductvariationstoaddresstheneedsofalloftheidentified
segments. On the other hand, unrestrained product differentiation might identify a wide variety of
productvariationsthatcouldbeproducedbythefirm,buttheremaybenodemandforsomeorallof
theidentifiedsegments.

Targeting
Once the firm has identified a series of potential market segments for consideration, the next step is
targeting.Targetinginvolvesthedecisionofthenumberofdifferentsegmentstoselectandserveand
thebestactionplanstoreachtheidentifiedsegments.

MeasuringEffectivenessofTargetSegments
Oncethesegmentshavebeenchosen,thenhowdoweknowwhethertheyareviableornot?Kotler
(2003) presents the most recognizable series of requirements for segments to be appropriate. He
suggests that they must be: 1) measurable (e.g., size of segment, income and purchasing power, and
characteristics of the segment), 2) accessible (reachable by the firm and able to effectively serve the
segment), 3) substantial (large enough and capable of generating sufficient profits), 4) differentiable
(trulydistinctfromothersegmentsintermsofcompositionandresponsetomarketingstimuli,and

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West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 5

5) actionable (marketing programs can be developed to effectively identify, attract and serve the
segment).

TargetingImprovement
Thereisconcernthatsegmentationcanproduceawidevarietyofsegmentswhichcannoteffectivelybe
reachedwithatargetingstrategy.Thereisalsothepossibilitythatsomemarketsegmentsmaybevery
difficult(intermsoftimeandmoney)toeffectivelymeasure.

Positioning
Positioningreferstotheplacingoftheproductorserviceinaparticularperceptualpositionwithinthe
mindoftheconsumer.Thiswouldfollowtheprocessesdescribedinsegmentationandtargeting.The
ideahereisthatthereisaspecificconsumersegmentinmindandaspecificplantoreachit,andnow
theideaistoensurethatthetargetconsumerhasaclearanddistinctiveimageinmindregardingthe
product/serviceofferingsbeingaimedatthemthatisconsistentandpositive.

ConsumerFranchise
Consumerfranchiseistheabilityofthefirmtokeepitsproduct,brandorcompanynameforemostin
themindofthetargetconsumer.Itisconsideredtobeabankableassetsincethereisapsychological
buffering built in for the firm that is on the top rung of the product/service class ladder. Consumer
franchise has two major components, a behavioural component and an attitudinal component. How
doesacompanymeasurewhetheritisthefavoredorpreferredbrandbehaviorally?Byexaminingits
marketsharefiguresandsales,itcanbeseenifthebrandisthefavoredbrandornot.Attitudinally,the
onlywaytoknowistodoconsumersurveys.

PerceptualMapping
Perceptualmappingisthevisualrepresentationofthedifferentcompetitivebrandofferings/objectsof
interest in perceptual space. In other words, it represents a map of the various offerings within the
minds of the target consumers. This is where perception equals reality comes home to marketing
strategists. The only thing that is important is what the consumer believes not what management
believes to be the case. This can only be determined via survey instruments. As was previously
mentioned,theattitudinalcomponentofconsumerfranchiseistheoftenneglectedsideasbehavioris
therepresentationofwhathasalreadybeendone.Theproblemisthatpastbehaviorisnoguaranteeof
future purchase behavior. Two of the most useful approaches to perceptual mapping are factor
mapping and multidimensional preference mapping (MDPREF). Factor mapping combines factor
analysis with two and threedimensional mapping which allows the viewer to see how a placement
according to a multiple variable grouping appears as opposed to a series of individual variables being
usedformappingasisdoneusingMDPREF.

PositioningandtheImportanceofConsistency
As positioning reflects the position that the brand or product has achieved on the product or service
class ladder, the key strategic issue associated with positioning is to present a clear and consistent
messagetothetargetaudience.Thecompanythatconstantlytinkerswithitsimagestandsthechance
ofconfusingitstargetmarket.

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West, Ford & Ibrahim: Strategic Marketing 2e, Chapter 5

SagePositioningWisdom
JackTroutrevisitedtheissueofPositioningin1996withSteveRivkininthebook,TheNewPositioning:
The Latest on the Worlds #1 Business Strategy. The critical message of the book was to report that
many companies had run into positioning problems and needed to take corrective perception action.
The authors suggested that this had occurred as a result of two major problems: 1) companies losing
their focus in the mind of their target markets (through line extension and diversification), and 2)
companies not noticing that their markets were changing underneath them. The answer to these
problemsistorepositiontheproduct.

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