Segmentation and positioning Chapter

The need for market segmentation
Marketers understand that they cannot be all things to all people, all of the time. Buyers and markets are too complex and diverse for one simple marketing formula to adequately address the needs of all.

Market Segmentation

Segmentation and positioning
Target marketing
Identifies market segments that are bite sized chunks that organisations can manage.
Market segmentation
Identifies markets with common traits.
Market targeting
Process of evaluation of the selected segments and then deciding which market segments to operate within.
Market positioning
Process whereby marketers position the product to occupy a clear and distinctive position relative to other competing products.

Market segmentation
Markets are comprised of buyers and they differ in wants, resources, locations and buying patterns.
Market segmentation is the process that marketers use to divide up the market into smaller segments that can be efficiently addressed.

Levels of market segmentation
Mass marketing
Assumes market is homogenous and uses the same product, promotion and distribution to all consumers.
Segment marketing
Adapting a company’s offerings so they more closely match the needs of one or more segments.
Niche marketing
Adapting a company’s offerings to match the needs of one or more sub-segments more closely where there is little competition.
Micro marketing
Marketing programmes tailored to narrowly defined geographic, demographic, psychographic behavioural segments.

Micro marketing
Local Marketing
Tailoring brands and promotions to the needs and wants of local customer groups.
Individual marketing
Tailoring products and marketing programmes to the needs and preferences of individual customers.
Mass customisation
Preparing individually designed products and communication on a large scale.

Market segmentation
There is no single way of segmenting a market.
Different market segmentation variables to develop the most effective segmentation method.
Major variables used are geographic, demographic, psychographic and behavioural.

Market segmentation
Table 10.1 Market segmentation variables for consumer markets

Table 10.1 Market segmentation variables for consumer markets (continued)

Segmentation (1)
Geographic segmentation
Dividing a market into different geographical units such as countries, states, regions, towns.
Demographic segmentation
Age and life-cycle segmentation.
Ethnic segmentation.
Gender segmentation.
Income segmentation.
Geo-demographics
Study of relationship between geographical location and demographics.

Segmentation (2)
Psychographic segmentation
Social class
Lifestyle
Young and Rubican’s Cross-Cultural Consumer characterisation:
The constrained: limited by income, can be ‘resigned poor’ or ‘struggling poor’.
The middle majority: ‘aspirers’ and ‘succeeders’.
The innovators: ‘transitionals’ and ‘reformers’.
Personality traits

Segmentation (3)
Behavioural segmentation
Markets segmented based upon consumer knowledge, attitude, use or response to a product.
Occasion segmentation
Benefit segmentation
User status
Usage rate
Loyalty status
Buyer readiness stage
Attitude towards product

Table 10.3 Benefit segmentation of the toothpaste market
Source: Adapted from Russell J. Haley, ‘Benefit segmentation: a decision-oriented research tool’, Journal of Marketing (July 1968), pp. 30–5; see also Haley, ‘Benefit segmentation: backwards and forwards’, Journal of Advertising Research (February–March 1984), pp. 19–25; and Haley, ‘Benefit segmentation – 20 years later’, Journal of Consumer Marketing, 1 (1984), pp. 5–14.

Segmenting business markets
Table 10.4 Primary segmentation variables for business markets
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market (Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation Marketing: New methods for capturing business (New York: Harper Business, 1992).

Table 10.4 Primary segmentation variables for business markets (continued)
Source: Adapted from Thomas V. Bonoma and Benson P. Shapiro, Segmenting the Industrial Market (Lexington, MA: Lexington Books, 1983); see also John Berrigan and Carl Finkbeiner, Segmentation Marketing: New methods for capturing business (New York: Harper Business, 1992).

Recent study by Signode Corporation
(industrial packaging division)
Revealed the following four types of buyers:
Programmed buyers
View products as not very important to their business. Pay full price and accept little service. Highly profitable.
Relationship buyers
View products as moderately important. Small discounts and good profitability. Modest amount of service.
Transaction buyers
View products as very important to their business. Large discounts for volume. Well informed on products and competitor products.
Bargain hunters
Demand highest service and biggest discounts. Volume customers though not very profitable.

Segmenting international markets
Common segmentation variables used:
Geographic location
Economic factors
Political and legal factors
Inter-market segmentation
Form segments of consumers who have similar needs and buying behaviour even if they are in different countries.

Multivariate segmentation
Companies generally integrate ways of segmentation in the following manner:
Simple multivariate segmentation
Gender and age
Advanced multivariate segmentation
Geodemographic, lifestyle as well as behavioural
Multistage segmentation
Use a combination of macro and micro segmentation.

Requirements for effective segmentation
Measurability
Degree to which size, purchasing power and profits of a market segment can be measured.
Accessibility
Degree to which a market segment can be reached and served.
Substantiality
Degree to which a market segment is sufficiently large or profitable.
Actionability
Degree to which effective programmes can be designed for attracting and serving the given market segment.

Positioning
Core strategy is the matching of company strengths and market opportunities and has 2 components:
Identification of group of customers to whom the company can clearly show it has a differential advantage.
The firm needs to position its offerings in the customer’s mind.

Differentiation
Marketers strive for competitive advantage defined as a comparative advantage over the competitor gained by offering greater value, either by lower prices or by offering higher quality benefits.

Differentiating markets
Companies and their market offerings can be differentiated along the lines of products, services, personnel or image.

Differentiating markets (1)
Product differentiation
Features and benefits
Quality
Performance
Innovation
Consistency
Reliability
Style and design
Durability
Repairability

Differentiating markets (2)
Services differentiation
Delivery
Installation
Repair services
Customer training services
Consulting services
Speed of service

Differentiating markets (3)
Personnel differentiation
Hiring
Training
Customer focused

Differentiating markets (4)
Image differentiation
Images that reflect the ‘soul’ or ethos of the company

Differentiating markets
Value positioning
A range of positioning alternatives based on the value an offering delivers and its price.
More for more
Premium product and premium price, supported by a premium image. E.g. Mont Blanc pens
More for the same
Brand offering comparable quality at a lower price. E.g. Lexus versus the Mercedes-Benz.
The same for less
Value proposition e.g. Amazon.com
Less for much less
Trade off between luxury and necessity. E.g. Five star hotel versus a budget hotel. Lower performance for much lower cost.
More for less
No-name house brands versus the big brands.

Product Positioning
Strengthen a brand’s current position in the mind of the consumers.
Search for a new unoccupied position that is valued by enough consumers and occupy that.
De-position or re-position the competition.
According to Ries and Trout (1981), there are three positioning alternatives:

Positioning strategies
Product attributes
Nokia’s 6600 ‘Zoom in’.
Technical items
BMW breathable fresh air filters.
Benefits offered
Crest toothpaste reduces cavities.
Usage occasions
Kit Kat, ‘have a break’.
Users
Johnson & Johnson changing focus to incorporate adults as frequent users of their gentle Baby Shampoo.
Activities
Omega, the ‘first and only watch on the moon’.
Personalities
Tiger Woods for Nike

Positioning strategies
Cult positioning
Harry Potter books.
Origin
Perrier ‘bottled at source’.
Positioned with synergistic products and brands
Bentley and Breitling.
Positioned against competitors
Dell and Compaq versus IBM
Positioned away from competitors
7-Up the number 1 ‘Un-cola’.
Product class membership
‘I can’t believe it’s not butter’, the vegetable fat spread, is clearly positioned against butter.

Choosing and implementing a positioning strategy
Ad man Rosser Reeves states that every company should have a unique selling proposition (USP).
The USP is the unique product benefit that a firm aggressively promotes in a consistent manner to its target market. The benefit usually reflects functional superiority: best quality, best services, lowest price, most advanced technology.
Difficulty of maintaining functional superiority forces firms to attempt a more emotional influence by developing an emotional selling proposition (ESP).

What is a positioning statement?
A positioning statement is a statement that summarises company or brand positioning.
It takes this form: To (target segment ad need) our (brand) is (concept) that (point of difference).

Mountain Dew’s
positioning statement
To young, active soft-drink consumers who have little time to sleep, Mountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine.

Common and serious positioning errors
Under-positioning
A positioning error referring to failure to position a company, its product or brand.
Over-positioning
A positioning error referring to too narrow a picture of the company, its products or a brand being communicated to target customers.
Confused positioning
Leaves consumers with a confused image of the company, its product or brand.
Implausible positioning
Making claims that stretch the perception of the buyers too far to be believed.