Module 2:

Segmentation & Positioning

•The Scope of Customer Analysis

•Segmentation- Key Points
•Segmentation Criteria (Variables)
•Segment Attractiveness- Selecting Target
Segments
•Targeting & Strategic Positioning
•Evaluating Positioning Decisions

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 Scope of Customer Analysis
In Business Strategy development through SMM, the 1st logical step is to Customer Analysis
consisting of 3 distinct exploration areas; each of them addressing specific questions:

Who
Who are the biggest  What elements of the product Why are some Customers dissatisfied?

Why
Customers? The most to Customers value most? Why are some switching/ changing
profitable? The most attractive  What are the Customers’ brands?
Potential Customers? Do goals? What’re they really
How serious & frequent are the consumer
Customers & Prospects fall buying? problems?
into any logical groups based
on certain parameters?  How do segments differ in
What unmet needs can Customers
their motivation & priorities? identity? Are there some, of which they’re

How can market be unaware?
segmented into different  What are the changes
groups that would require a occurring in Customer
Do unmet needs mean leverage points for
unique offering strategy? motivation & priorities ? competitors, or a new business model?

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 Segmentation- Key Points
1. Customer Segmentation or Market Segmentation is the process of establishing
healthy associations/ alignments between various offerings of the Firm (the
products/ services within each product line/ category) and specific “Customer (or
Prospect) Groups/ Segments, called “Target Segments”. A particular customer/
market segment is defined by one or more parameters or “segmentation variables”
that are common across all the members of the group. For instance: Age, gender,
income range, marital status, culture/ religion/ ethnicity, etc.
2. The logic underlying Customer/ Market Segmentation as a Strategy is that, within a
narrower market space (Target Segment), its more feasible for a Firm to manage its
position, revenue & growth for each distinct Product/ Product Variant, through more
focussed marketing & sales, without overburdening the associated costs/ budgets.
3. Segmentation must obviously be coupled with intent, capability & specific offering
development programs to deliver offerings specific to the different Target Segments
Without a willingness to conceptualize, develop & evaluate a customized & competitive
offering for each potentially lucrative segment, a Segmentation exercise will be a total
waste of time & resources!
4. Its critical that, within a particular Product Category/ Line, the different offerings are, to the
extent possible, aligned to fairly different segments. This avoids “brand cannibalization”!

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 Segmentation Criteria
Customer / Market Segments are identified/ defined on the basis of segmentation criteria/
variables. A difficult task, since there can be a vast number of such variables and in any
analysis, its impossible to identify all segments. The attempt is to consider as wide a range of
variables as possible, in the context of the each product category. Commonly used
segmentation variables fall into two sets:

General Customer Characteristics Product Related

Related Segmentation Variables Segmentation Variables
• Geographic/ Cultural/ Religious • User Type
• Type of Organisation • Usage
• Size of Firm • Benefits sought (taste, flavour, calories,
• Income Group and/or Lifestyle sugar-free, 0 cholestrol, fat content, etc.)
• Gender and/ or marital status • Price Sensitivity
• Age (Demography) • Competitor
• Family • Application
• Occupation • Brand Loyalty

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 Segmentation Criteria
Depending on what the Firm’s offerings are, relevant segment defining variables need to be
selected, based on which a number of distinct market segments will emerge. This is followed
by strategic decisions on which segments to actually venture into/ target (or otherwise):

Segmentation Variable Can be relevant, to identify strategic segments, for:

Geographic, Cultural, Religious Restaurants, Packaged Foods & Snacks, Beverages, Clothing, etc.

Type of organisation IT equipment, Software, Consulting & Training Services, etc.

Size of the Firm IT equipment, Software, Air Conditioning, Security, etc.

Income group and/or Lifestyle FMCG, Consumer Durables, Automobiles, BFSI, Clothing, etc.
Gender and/or marital status Clothing, Cosmetics, Beverages, Grooming services, Accessories, etc.

Age (Demography) Practically all offerings can be tailored to multiple demographic groups.

Family Health Clubs, Restaurants, Entertainment & Hospitality, etc.

Occupation Software, BFSI, Learning solutions, etc.

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 Identifying/ Defining Segments
Segmentation Variable Can be relevant, to identify strategic segments, for:
User Type BFSI, Training, Hospitality, IT solutions, etc.
Usage Health clubs, Retailers, FMCG & other manufacturers, etc.
Benefits sought FMCG, Automobiles, BFSI & practically all product categories
Price Sensitivity Hospitality, Transportation, Automobiles, etc.
Competitor A Firm can target segments using specific competing products. Good for entry
Application IT Equipment, Footwear, Clothing, Automobiles, etc.
Brand Loyalty Any organisation, for retention & acquisition strategies

BRAND LOYALTY
BASED SEGMENTS
& THEIR PRIORITIES

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 Selecting “Target Segments”

For a particular Product Line/ Category of a Firm, there would exist a logical Marketplace or “a
broad base of all potential buyers”, which can possibly be divided/ segmented on various
parameters (segmentation variables) into “Customer/ Prospect Groups” or “Market Segments”.
Generally, its not feasible for the Firm to address (appeal to and/ or meet needs/ expectations) all
the Market Segments.

“Target Segments” are chosen by the Firm, from the Market Segments, as the ones to address/
serve. These Strategic decisions depend on “Attractiveness of various Market Segments”,
for the Firm, based on a number of factors such as:
a)Basic segment characteristics: Size & future growth, purchase inclination, whether
underserved etc.
b)Feasibility: How effectively the Firm can develop & implemented a competitive offering that will
appeal to the Segment, based on existing or clearly planned assets & competencies/ skills and
various constraints that may be existing or likely to crop up subsequently.
c) Competition scenario in the segment: 1 or more dominators, Overcrowding & resultant intense/
cut throat competition, Others likely to enter, etc. All these impact the marketing/ promotion
budget, profitability & the sustainability of the offering’s appeal & relationship with the segment.
d)The Investment & ROI factor: Are the expected revenues, profits & associated accrual patterns
from the segment worthwhile, considering the size of investments needed to develop & market
a tailored offering?

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 Targeting & Positioning

The ultimate output of a good Customer/ Market Segmentation analysis related to various
product lines/ categories of a Firm, will emerge in the form of an unambiguous “Strategic
Targeting & Positioning statement”, for each Product & Product Variant, category-wise.

Segmentation analysis enables a Firm to develop appropriate messaging, promotion & general
marketing/ sales strategies at a Product (& if need be, even at a Product Variant) level, based on
where its Targeting & Positioning- the associated focus area (Target Segment). Marketing
campaigns can be very specific & focussed, as desired, leading to better effectiveness & returns.

Meaningful & comprehensive Customer/ Market segmentation is a pre-requisite for focussed
strategies (clear positioning for a specific Target Segment), relating to each Product or Product
variant, with each Product Line/ Category:

Mother Brand

Sub-Brands

Distinct Target Segments Distinct Target Segments Distinct Target Segments

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 Evaluating Positioning Decisions
Segmentation strategies & decisions must be reviewed
periodically (preferably biannually or atleast annually),
considering the market dynamism prevalent currently. In other
words, the targeting & positioning for each product/ variant may
need to be changed periodically, as appropriate, to keep it
relevant. Some factors considered in evaluating / reviewing the
existing positioning/ targeting of a product: Exit a specific Target Segment, from
 Performance (actual vs. targeted revenue, profit, market the set associated with Product Line/
share etc.); Response from targeted buyer base, to the Category
positioned offering. Modify the positioned offering
 Changes in competition scenario, particularly increase in
intensity & cut throat practices. Enter new (Target) Segment(s) with
new offerings/ variants, with a
 If a Target Segment’s basic characteristics have altered Product Line/ Category.
significantly, rendering it unattractive.
Discontinue an entire Product Line/
 Newer market segments that have emerged as more
Category
attractive, warranting addition (with a new product/ variant) or
replacement of an existing product/ variant. Introduce a new Product Line/
Category
 Significant changes in the Firm’s assets & competencies;
emergence of new capabilities.