Segmentation, Targeting and Positioning
SEGMENTATION-TARGETTING-POSITIONING Table of Contents Chapter 1 1. 1 Overview………………………………………………………………………………………….. 3-4 Chapter 2 2. 1 0 STP Process- segmentation and different bases………………………………4 2. 11 Segmentation of B2C markets………………………………………………………….. 4-6 2. 12 Differences between B2B and B2C market segmentation…………………6-7 Chapter 3 3. 10 Target marketing……………………………………………………………………….. 7-8 3. 11 Marketing mix………………………………………………………………………9 Chapter 4 4. 10 Positioning………………………………………………………………………………9-10 4. 11 Branding…………………………………………………………………………………. 1 4. 12 Value Proposition…………………………………………………………………….. 11-12 Chapter 5 5. 10 Conclusion- Benefits of STP ………………………………………………………12-13 References OVERVIEW “A deep understanding of a group of potential customers and a marketing plan specifically tailored for that group helps to ensure the success of a product”(Penny M Simpson, Marketing Best Practices,P. 197) In today’s context, consumers greatly vary in their location, needs and purchasing behavior. Companies cannot satisfy all the consumers nor have an appeal over all of them in the similar way.
Hence arises the strategy of market segmentation, targeting and positioning. Instead of competing in a whole market, the companies select or identify sectors of market where they can sell their products profitably. The first step is market segmentation- dividing markets into smaller segments, target marketing- determine the significance and select the target segments and market positioning- evolve positioning and marketing mix for each segments. It is difficult to target a consumer group without first identifying the various consumer segments present in a particular market.
Brand positioning is also not eligible before knowing who the targets are. STP analysis helps a company or marketer to more conveniently identify the groups of buyers they are aiming at and also how to offer their products more desirably and attractively. It also surfaces unexplored or omitted niches within widely scattered markets. The effectiveness and implementation of STP vary widely with companies. In the same market various companies may device multiple ways to view the segments and approach them.
Some companies identify one or two sub segments and starts targeting that segment with exclusive positioning attracting the consumers. For example PUMA started selling its shoes to mainly athletes and soccer players. Puma had a great impact in those sub segments that their products gained popularity in other segments and wide spread. Now the company has broadened their product range to fashion wear, trainers, sailing, golf motorsport, etc. Some companies like P&G, Unilever, Pepsi co, etc create sub brands for competing in different segments. STP PROCESS
Segmentation and different bases Kotler says that every individual is unique and different, the purpose of segmentation involves grouping customers, buyers, etc into more definite and realistic groups that share similar characteristics. By doing so the marketer can easily target and serve this sub population with what they desire. Segmentation of B2C markets Already developed tools like ACORN, PRIZM classifications provide segmentation assistance for marketers. ACORN classifies UK population based on geodemographics and PRIZM classifies US population into segments based on lifestyle.
Various bases and variables used to segment consumer markets are given below: Geographic * World region: Game consoles manufacturers like Sony, Nintendo, Microsoft Xbox targets countries like US, Japan and Britain consisting of die hard gamers. PUMA concentrates Latin America, Europe and Africa for its soccer accessories sales. * Climate: Air conditioning manufacturers like Carrier, Voltas, etc aggressively target Middle East, Australia, etc where the climate is hot. Snow plough manufacturers similarly go for regions where it snows. Demographics Age and life cycle: Procter and Gamble sells its Pampers range of baby products with segments like new baby (0-4months), baby (6-12), toddler (13-23) and preschool (24+). * Gender: Puma has wide range of footwear and accessories for both men and women. * Family size: whole sale retailers would target a larger family size. * Income: a person earning more than 40000 pounds could afford a ROLEX watch than one earning 15000. * Education: a company like CASIO manufacturing sci-fi calculators aims primarily college or university going students. Occupation: Caterpillar has a range of safety shoes aimed at chemical industry workers with heat resistant, oil and acid resistant soles. * Nationality/ Race: A small South African meat selling shop like Snoggy targets mainly immigrant South Africans in the UK. Behavior * Loyalty: Apple and Blackberry targets a niche of buyers loyal to their brand. * Attitude towards product: Unilever promotes its Marmite food product through “love or hate it” campaign; depicting positive or negative attitude of consumers. * Occasions: Thomas Cook holidays have special travel packages intended for spring.
Kellogg, a cereal company has approached summer with its “love your summer red dress, look slimmer” campaign. * Benefits: Volvo car manufacturers aim at customers who prefer quality, service and safety in automobiles. * Usage rates: Fast food companies like McDonalds and KFC target customers who are ready to spend and visit restaurants more often. Psychographics * Personality: puma targets achievers with its slogan “winners choose puma”. Internet sites like Facebook, twitter, MySpace, etc utilize social character of customers. * Life style: quicksilver targets surfboarders, skaters who lead fashionable and adventurous lifestyle. Social class: Mercedes Benz, luxury car manufacturers with its slogan “I’m Mercedes Benz” creates a class distinction. According to Kotler, segmentation is most effective when the following are satisfied: Measurable: the size, profiles and purchasing activities in the segments can be quantified Differentiable: the needs of the consumer similar within the segment and different from others. Accessible: the company can reach its products or services to the customers with ease and efficiently Relevant: the segment should be profitable enough to serve.
Feasible: the company must have proper knowledge of the segment and sufficient resources to act upon it. Differences between B2B and B2C markets segmentation Author Michael. D. Hutt says in his book Marketing the best practices (p. 162), “In business marketing, customers are organizations: commercial enterprises, governments and institutions”. According to Kotler most of the similar bases could be used to segment consumer and business markets, in addition to variables like operational features, mode of purchasing, situational and personal traits.
The main segmentation bases employed are: Geographic: depending on customer’s location, growth rate of industries regionally, macroeconomic factors. Customer profile: size of organization and its industry, its position in the value chain. Buying behavior: size of orders, mode of purchasing (e. g. e-procurement), etc. The business market is larger than a consumer market since a single buyer in business market is very high in purchasing activity. For example, P&G spends $83. 5 billion for purchases of raw materials annually (ref www. urchasing. com). In a consumer market the company’s profits mainly rely on the collective purchasing activities of the buyers in their segments. In a business market the activity of each individual buyer can have high implications on the company’s profits owing to high volume of purchases. Comparatively there is a more closer buyer-seller relationship existing in B2B markets. For example there is a long standing relationship between microprocessor manufacturers Intel and Dell computers. Targeting Target marketing refers to the choice of specific segments to serve and is a key element in marketing strategy” (Jobber and Fahy, Foundations of Marketing, 2nd edition, pg 121). Choosing a particular segment to serve than going for the whole is less economical since: * It is less expensive for a company initially to focus product/services promotions to a selected group of consumers than the whole market. * There may be groups of people neglected by other companies and could turn out to be a potential segment. * Helps to formulate variable positioning strategies for each segment and hence provide advantage over competitors.
According to Kotler, Targeting involves selecting the one or more of the identified segments which the company considers have the right size, growth characteristics, attractiveness and the company has the required resources and skills to succeed in that segment. For example Puma initially started as a company selling high performance sport shoes. But a survey revealed most people rarely used puma for the intended purpose. Moreover the company faced high competition in the segment from Nike, Reebok and Adidas. Puma lacked resources to compete in the performance segment.
Hence the company started targeting people who used puma as a lifestyle product and turned out to be profitable and successful for the company. Companies adopt 3 preferred approaches to targeting markets: Undifferentiated marketing which involves targeting mass market focusing on what consumers need commonly. Product is developed and marketed to a large number of consumers ignoring needs of unique segments. Not applicable in the present scenario where there is high competition and consumers vary widely in their wants and needs.
Differentiated marketing involves targeting several segments with various products and offers that serve each. Although the process is expensive, the company could increase sales and develop a strong stranglehold within each of the segments. For example coke has its original cola aimed at mass market, diet coke for people with healthy lifestyle, coke zero for diabetic patients and uncola products like sprite, fanta, etc intended for people who don’t prefer cola. Concentrated marketing/niche marketing is employed by companies when they have few resources to gain share of a large market.
Hence the company identifies niches where they can achieve a large share and growth. For example car manufactures like Bentley and Rolls Royce markets its product to a niche of uber wealthy customers. Marketing mix The 4P’s of marketing includes variables such as Product, Price, Place and Promotion. These can be controlled in a target market to achieve the goals of a company in a segment and at the same time satisfy the customers. The physical product offered to the customer can be varied with respect to its appearance, function, quality, brand, warranty, services, etc. his creates a first time impression in the minds of customers. The prices should be appealing to the customer with reference to the competitor pricing, at the same time the company shouldn’t neglect its profit margins. Pricing variable includes offers, discounts, financing, etc. Place functions involve distribution, how the company could efficiently reach its product to the customers by varying distribution channels, logistics, market coverage, etc. Promotions include communicating the benefits of the product/services to the customers via advertising, media, selling in person, etc. Positioning
Kotler says, “Positioning involves implanting the brands unique benefits and differentiation in customer’s minds”. Marketers bombard consumers with lots of information highlighting their products/services. Hence it becomes entirely difficult for the buyer to decide which product to choose or creates a confusion affecting their buying traits. Hence they classify and differentiate products, companies or services and position them in order of preference in their minds. The whole motive of the strategy of positioning is creating an impression and feeling of trust and loyalty in the minds of consumers.
The success of the major brands in the world like Apple, Coke, Nike, Sony, etc depicts how efficient they have been in positioning their products to create an ever lasting impression in the minds of consumers. How a customer perceives the product in his/her mind is more important than actual reality of the product. According to jobber, positioning is linking a company’s product or services to the benefits that a consumer looks for in that particular product or services. When a need arises, the particular company’s brand is what comes into the mind of the buyer.
For example a person looking for safety as a prime feature in his car, his/her prime preference would go for Volvo cars. Similarly for performance sports shoes the first brands that come into mind are Nike, Reebok and Adidas. Effective positioning leads to customer loyalty and higher brand preference. For instance Apple now sells its iPhones more than any other mobile company presently in the world. This was achieved through Apple’s creating a consistent image of its product as highly innovative and technological. Three variables are required to determine which position to occupy in a arket: customers, the competitors and the company. It is very important how the buyers value your product in the market and their point of view determines the success of the product. If the competitors are already established, it is better to seek how the product can be differentiated from theirs’. Finally the company should try to build a position based on its unique profile. Once a positioning strategy is decided, a positioning statement should be developed that is clearly represents the advantages of the product over the competitors and is able to capture the minds of the buyers.
Few examples of positioning statements: “The best sportslifestlye brand in the world” Puma “Let’s do things better” Philips “Make. Believe” Sony “Try something new today” Sainsbury’s “Just do it” Nike Branding “Brands represent consumers’ perceptions and feelings about a product and its performance-everything that a product or service means to consumers” (Marketing: an introduction, Armstrong/Kotler, p. 265). According to jobber a company differentiates their product from the competitors and creates a deep image of preference through the process of branding.
A brand is the trust/promise offered by the company to its customer and the trust/promise expected from the company buy its buyer. When a buyer prefers a brand of product over other, they expect their needs and want to be satisfied. They have faith in the brand over its quality and quantity of product/service. Companies benefit from strong brands by: * Improvement of the financial value of the company. For e. g. Kraft’s acquisition of Cadbury’s brand has given it access to world famous confectionary brand like Dairy Milk. * Leads to consumer loyalty. Consumers tend to buy more and more of the preferred brand. Makes it difficult for new brands to compete. Coca-cola and Pepsi Co dominate the cola market which has resulted in the failure of Virgin coke. * Companies can derive high profits. Brands like Apple, BMW, Coca cola, Virgin Atlantic, etc comes with premium prices. * Provide strong base for extending brands. For e. g. Microsoft office, Microsoft internet explorer, Microsoft X-box, etc Value proposition This includes the final mix of values based on which the company positions itself in the market against its competitors. On the basis of value proposition the buyer decides to purchase the brand.
According to Kotler there are 5 techniques for a company to position their products on the basis of value proposition: More for more: BMW, Nike, Rolex, etc have premium pricing and claims best in class quality, style, performance, durability matching the prices More for the same: Nokia introduced its touch screen phones with more features than iphones at lower price. The same for less: AMD develops microprocessors at less cost than Intel. Less for much less: low cost carriers like Easy jet, Ryan air, etc More for less: McDonalds claim to offer more fast-food options for less price. Conclusion – Benefits of STP The core of marketing is the notion of a customer and the need to understand and respond to the customer’s need” (Foundations of marketing, Jobber and Fahy, 2nd edition, P. 14). If a marketer is able to understand and respond efficiently and effectively to the changing needs and wants of buyers, and is able to develop products that are of best value: in terms of price, services and promotions; to the customer, products are more likely to sell in the market. In order to fulfill the concept of marketing and customer needs, it is essential that different offerings are made to various groups of customers in a market.
Hence STP process is a very efficient tool for companies/marketers to determine the changing demands of the buyers, determine the segments that would be benefited by the products/services intended to sell, select the targets and effectively position your product more superiorly in people’s mind. Buyers usually choose a product depending on how they perceive the products qualities as superior over others in the market. Satisfied customers buy more and promote the product whereas dissatisfied buyers will switch to a different product and at the same time discredit the product to others. The STP process is an effective process nd helps a company satisfy their customers by living up to their expectations. The STP process ensures proper management of a company’s resources by targeting the segment of market with potential customers and achieving a place for their product in their minds, thereby achieving growth and profits. By achieving growth in a particular segment the company could extent its product reach to other segments. Once markets have been identified a company can turn its attention towards better understanding of its potential buyers and real customers, also helps in assessing the extent of demand for their product.
Analysis of the market helps in developing marketing mix which suits unique needs of the market. For example car manufacturers sell their same model cars with varying specifications in different markets according to the needs. References Marketing: An Introduction, Armstrong/Kotler, Seventh edition Foundations of marketing, David jobber/John Fahy, 2nd edition Marketing the Best Practices, various authors, 2nd edition www. quickmba. com Positioning: the battle for your mind, Al Ryes and Jack Trout