Module-3-Market Segmentation, Targeting and Positioning

Unit 3: (10 hours)

Market Segmentation, Targeting & Positioning: Concept of Market Segmentation, Benefits,
Requisites of Effective Segmentation, Bases for Segmenting Consumer Markets, Market
Segmentation Strategies.Targeting - Bases for identifying target Customer target Marketing
strategies, Positioning - Meaning, Product Differentiation Strategies, Tasks involved in
Positioning,Branding - Concept of Branding, Types,Brand Equity, Branding strategies.

Market Segmentation : Meaning

Market Market Targeting Market

Segmentation Positioning

1. Identify 5. Identify possible

segmentatio positioning
3. Evaluate the
n variables concepts for each
attractiveness of
and segment target segment.
each segment.
the market. 6. Select, develop
4. Select the
2. Develop and communicate
target segments
profiles of the chosen
resulting positioning
concept.
Segmentation is the process of dividing a market into distinct subgroups of consumers with
distinct needs, characteristics or behavior, who might require separate products or marketing
mixes.
Need for Segmentation
If all consumers were alike and had the same education, background and experience, mass
marketing would be a logical strategy.
 Companies cannot appeal to all buyers in the market or at least not to all buyers in the same
way.
 Consumers are too numerous, too widely scattered and too varied in their needs and buying
practices. Companies vary widely in their abilities to serve different segments of the market.
 Strategy of segmentation allows companies to avoid head-on competition in the market by
differentiating their product offering, not only on the basis of price but also through styling,
packaging, promotional appeal, distribution methods and superior service.
Eg. Coca Cola – Bottles of various sizes and cans and with different ingredients like Diet coke.
Air Deccan..
Initially Indian Airlines had a monopoly in Airlines industry. But low cost airlines like Air
Deccan, GoAir, and Indigo revolutionized the sector. 30-70% lower than full fare airlines and
 Module-3-Market Segmentation, Targeting and Positioning

marginally higher than second class AC train fares. Train passengers upgraded to Air Deccan.
No longer the luxury of business executives. No frills service. Save on ticketing cost- only
through Internet, avoids commission. Focus on price sensitive and less service sensitive
customers.

Levels of Segmentation

Mass Segment Niche Local

Marketin Marketing Marketin Marketin Individu
g Consists g g al
Seller of a group More Tailored marketi
engages of narrowly to the ng
in mass customers defined needs Designin
producti who share customer and g the
on, mass a similar group wants of product
distributi set of seeking a local and
on, and needs and distinctiv custome service
mass wants. e mix of r groups offerings
promotio Can offer benefits. in of
n of one better Eg. Mom trading individu
product price, n Me, a areas, al
for all design branded neighbo choices.
buyers.e and can outlet urhoods Eg.
 Module-3-Market Segmentation, Targeting and Positioning

Basis for Market Segmentation

Segmentation Analysis

Consumer Characteristics Consumer Responses ( Product

(Personal Segment Basis) Related Basis)

Geographic Demographic , Psychographic Benefit (Quality, Usage, Loyalty

Socio Economic Service, Economy, Occasion
Speed)

Bases for Segmentation

 Geographic Segmentation – Dividing the market into different geographical units such
as nations, states, regions, countries, cities or neighborhoods.
Rural and urban markets – Difference in literacy levels, income, spending power and
availability of infrastructure such as electricity, telephone network and roads.
Product requirements – Arid regions – Desert coolers, Humid regions – Air Conditioners.
Food Habits – South India freshly brewed coffee, Rice etc.
Other states – Tea, Chapatis.
Countries – Asian, Asia Pacific, Europeon, American
Region – South India, Western Region, North East.
City – Class I, Class II, Metro
Climate – Arid, Humid.
Rural and semi urban areas.

 Demographic Segmentation
 Age – Under 6, 6-11, 12-19, 20-34, 35-49,50-60, 60+.
 Family Size – Young, Single, Two Member family, Married no children, Married two
children.
 Family Life Cycle – Bachelorhood, Young Married couple, Grown up children not living
with parents, Grown up children dependent upon parents, Older and single people.
 Gender – Male, Female.
 Education – Illiterates, high school dropouts, high school passouts, degree holders,
professional degree holders.
 Religion – Hindu, Muslim, Sikh, Christians.
 Nationalty – Indian, American, Pakistani.
 Income – upto 40000 pm, 40-80000, 80-120000, 120000-160000, above 160000.
 Module-3-Market Segmentation, Targeting and Positioning

 Occupation – Farmers, Salaried class, Businessman, Retired, Students, Unemployed

and professionals.
 Social Class – Lower, Upper – lower, Middle class, Upper Middle Class, Lower upper
class, High upper class.

Examples of Buying Behavior of Different Segments

 Age and life cycle stage – Johnsons and Johnsons Baby soap and Talcum Powder.
o HUL – Pink Pears for children
o Magazine Magic Pot – for children(joining dots, finding hidden animal by
coloring picture.)
o Just Another Magazine – Young adults(Music, Bollywood films, lifestyle
activities.
o Aastha, Sanskar Channel – old generation
o Cartoon Network, POGO – Children
o MTV – Youngsters.
 Life stage – Getting married – Furniture, Kitchen appliances, cooking gas connection.
Savings cum Insurance schemes – Young parents planning for the education of their
children.
 Gender – Men – Read product information, Women – Relate product on a personal
level. Eg Park Avenue – Men‟s apparel (Masculine Brand) launched women‟s apparel
under a separate brand name Be. Emami – Fair and Handsome (Men), Fair and Lovely
(Women)
 Women – Food , groceries, Household items.
 Men – Electronic items
 Income – Nirma Washing Powder – Lowest priced Detergent targeted at the middle
income segment. Value for money, focus on middle class family.
o Detergents, shampoo, hair oil in sachets with low unit prices for one time
consumption in rural areas.
 Generation – Share same major cultural, political, and economic experiences and have
similar outlooks and values. Younger generation – Initiator and Influencer not as
consumers. Children are major target audience for marketer‟s communication efforts.
 Social class - Different social classes have different purchase preferences in cars,
clothing, home furnishings, leisure activities, reading habits and retailers.

Psychographic Segmentation
 Science of using psychology and demographics to better understand consumers. In
psychographic segmentation, buyers are divided into different groups on the basis of
lifestyle and/or personality. Common lifestyle dimensions are Activities, Interests and
Opinions
 Money – constrained – Low cost Airlines
 Time constrained – Maggi, Top Romen (Fast to cook)
 Module-3-Market Segmentation, Targeting and Positioning

Method of Psychographic Study (AIO Framework)

Activites Interests Opinions

Work Family Themselves
Hobbies Home Social Issues
Social Events Job Politics
Vacations Community Business
Entertainme Recreation Economics
nt Fashion Education
Clubs Food Products
Behavioral Segmentation

 Buying roles- At the time of purchasing medicines, patient is the initiator, doctor is
influencer, pharmacist is the decider, patient‟s relative is the buyer and patient is the user.
Therefore, medical representatives target only doctors and pharmacists.
 Behavioral Variables-
1. Occasions – Buyers can be distinguished according to the occasions they develop a
need, purchase a product or use a product. For eg. Air travel is triggered by occasions
related to business, vacation or family. Archies and Hallmark make cards for different
occasions. Cadbury‟s Raksha Bandhan Pack.
2. Benefits – Classifying buyers according to the benefits they seek from the product. For eg.
Benefits derived from the telecom companies can be sms service, std calls and local calls.
Shampoo – cleansing of hair, conditioning effects, medicinal properties and suitability to hair
types.
3. User status – Market can be segmented into group of nonusers, ex-users, potential users,
first-time users and regular users of a product.
4. Usage rate – Markets can be segmented into light, medium and heavy product users.
Telecom companies provide different offers depending on the usage rate.
5. Loyalty status – A market can be segmented by consumer loyalty patterns.
 Membership cards offered by Reliance Fresh, Pantaloons, shoppers stop etc.

Basis for Identifying Target Markets

 Segment’s overall attractiveness – A potential segment should have the characteristics
that make it generally attractive such as size, growth, profitability, scale economies, low
risk and so on.
 Company’s objectives and resources – Investing in the firm makes sense given the
firm‟s objectives and resources. Some attractive segments could be dismissed because
they do not mesh with the company‟s long run objectives. Even if the segment fits the
company‟s objectives, the company must consider whether it possesses the skills and
resources it needs to succeed in that segment.
 Module-3-Market Segmentation, Targeting and Positioning

Target Market Strategies

Single-segment concentration – The Company selects a single segment and manufactures

single product for it. eg. Mahindra and Mahindra manufacture tractors for agricultural market
segment. Zodiac manufactures formal shirts for executives and professionals.

Selective specialization – Here the firm selects a number of segments, each objectively
attractive and appropriate, given the firm‟s objectives and resources. Eg. Nike manufactures
shoes for running, cycling, golf aerobics etc. Maruti Alto for lower middle class, Maruti swift for
upper middle class and Maruti SX4 for premium segment.

Market specialization – Concentrate on serving many needs of a particular customer group. An

example would be a firm that sells an assortment of stationary products for university like
markers, papers, white boards, pens etc. Eg. Johnson & Johnson targets the kids segment and
provides all the required personal care products to this particular market segment.

Product Specialization – Here the firm concentrates on making a certain product that it sells to
several segments. An example would be a microscope manufacturer that sells microscopes to
university laboratories, government laboratories and commercial laboratories.

Full Market coverage – Here a firm attempts to serve all customer groups with all the products
that they might need.
Undifferentiated Marketing – The firm ignores market segment differences and goes after the
whole market with one market offer. Eg. Coca cola‟s early marketing of only one drink in one
bottle size in one taste to suit everyone.
Differentiated Marketing – The firm operates in several market segments and designs different
products for each segment. Eg. Hyundai produces a car for every purse, purpose and personality.

Positioning
An act of developing and designing the company‟s offering and image to occupy a distinctive
place in the minds of the target market. Goal is to locate the brand in the minds of consumers to
maximize the potential benefits to the firm.
Result of positioning is the successful creation of a customer focused value proposition, a reason
why the target market should buy the product.
Domino’s Pizza – Value Proposition
Target customers - Convenience minded pizza lovers.
Benefits – Delivery, speed and good quality.
Value proposition – A good, hot pizza delivered to your door within 30 minutes of ordering.
CCD – Hangout place for youngsters, Young generation, College students, Outlets near colleges,
Software companies. A lot can happen over coffee. Youngsters can meet and make friends . Chill
out zone, spirited music and bright lighting.
Barista – Premium coffee retail outlet for upwardly mobile executive, Sober and stylish
ambience, Internet connectivity, Executives meet with business associates and make presentation
on laptops.
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Product Differentiation Strategies

 Service Differentiation – Dominos 30 minutes
 Product differentiation – BMW known for its product quality
 Personnel Differentiation – IBM – Professional, McDonalds – courteous
 Channel Differentiation –Fiama di- Wills
Dell Computers, Avon Cosmetics (Direct Marketing channel)
 Price Differentiation – Big Bazaar ( Every Day Low Pricing)
 Image Differentiation – Mercedes has created a distinct image in the minds of the
customers.

Product Differentiation
Ingredients/Formula – Close Up was put on the market with a distinction based on ingredient
as Gel, Non Stick Pans with Teflon coating.
Functional features – Nokia Phone with 8 megapixel camera, Voltas Refrigerator with surround
cooling.
Packaging – Kurkure with ongoing recipe contest, with the winning family making it to the the
pack cover.
Product Design / Styling – Apple MacBook Pro 9The thinnest laptop), Titan (18 carat gold
plated watches)
Product Quality / Technology – Godrej gives quality products.
Customer Care and service – Dominos (Home Delivery within 30 mins), LG(after sales
service)

Task Involved in Positioning:

1. Know your target audience well

It is essential for the marketers to first identify the target audience and then understand their
needs and preferences. Every individual has varied interests, needs and preferences. No two
individuals can think on the same lines.

The products must fulfill the demands of the individuals.

2. Identify the product features

The marketers themselves must be well aware of the features and benefits of the products. It
is rightly said you can‟t sell something unless and until you yourself are convinced of it.

A marketer selling Nokia phones should himself also use a Nokia handset for the customers
to believe him.

3. Unique selling Propositions

Every product should have USPs; at least some features which are unique. The organizations
must create USPs of their brands and effectively communicate the same to the target
audience.
 Module-3-Market Segmentation, Targeting and Positioning

The marketers must themselves know what best their product can do.

Anti-Dandruff Shampoos are meant to get rid of dandruff. This is how the product is
positioned in the minds of the individuals.

Individuals purchase “Dabur Chyawanprash “to strengthen their body‟s internal defense
mechanism and fight against germs, infections and stress. That‟s the image of Dabur
Chyawanprash in the minds of consumers.

USP of a Nokia Handset - Better battery backup.

USP of Horlicks Foodles - Healthy snack

Communicate the USPs to the target audience through effective ways of advertising. Use
banners, slogans, inserts and hoardings.

Let individuals know what brand offers for them to decide what is best for them.

4. Know your competitors

 A marketer must be aware of the competitor‟s offerings. Let the individuals know how your
product is better than the competitors?
 Never underestimate your competitors.
 Let the target audience know how product is better than others.
 The marketers must always strive hard to have an edge over their competitors.

5. Ways to promote brands

 Choose the right theme for the advertisement.

 Use catchy taglines.
 The advertisement must not confuse people.
 The marketer must highlight the benefits of the products.

6. Maintain the position of the brand

 For an effective positioning it is essential for the marketers to continue to live up to the
expectations of the end - users.
 Never compromise on quality.
 Don‟t drastically reduce the price of products.
 A Mercedes car would not be the same if its price is reduced below a certain level.
 A Rado watch would lose its charm if its price is equal to a Sonata or a Maxima Watch.

Errors in Positioning
 Module-3-Market Segmentation, Targeting and Positioning

 Underpositioning – Buyers have only a vague idea of the brand. Buyers don‟t really
sense anything special about it. For eg. Pepsi was positioned as Clear Crystal Pepsi but
buyers didn‟t see clarity as an important benefit in a soft drink.
 Overpositioning – Buyers may have too narrow an image of the brand. For eg.
Consumer might think that diamond rings at NAKSHATRA start at Rs. 20000 when in
fact NAKSHATRA now offers affordable diamond rings starting at Rs. 5000.
 Confused positioning – Confused image of the brand resulting from the company
making too many claims or changing the brand‟s positioning too frequently.
Next desktop –positioned first for students, then for engineers and then for business
people.
 Doubtful Positioning – Buyers find it hard to believe the brand claims in view of the
product‟s features, price or manufacturer.
For eg. GM‟s Cadillac positioned as luxury competitor with Mercedes but the car
featured leather seats, a luggage rack and logo stamped on chassis, thus failed in
positioning.

Brand
A brand is a name, logo, term, sign, symbol, jingle or design or a combination of them
intended to identify the goods or services of one seller or group of sellers and to
differentiate them from those of competitors.
A brand is essentially a seller‟s promise to consistently deliver a specific set of features,
benefits and services to the buyers.

Selecting Brand Names

 Individual Brand Names – Lux, Liril, Lifebuoy, Dove and Rexona in soap and Surf and
Wheel in Detergent by HUL.
 Blanket Family Name for all products – Companies like GE, Tata, Amul and Philips.
 Company trade name combined with individual product names – Eg Maruti Esteem,
Maruti 800, Maruti SX4, Tata Steel, Tata Tea, Tata Indicom.
 Alphanumeric Names –Nokia E71, Nokia 5132C, Nokia N8.
 Private Labels – Brands created by retailer. Eg. Reliance ATTA, Reliance Value Sugar.

Value of Branding for the Customer and the Marketer

 Brands Facilitate Purchasing – Brands are often easily recognized by consumers and,
because they signify a certain quality level and contain familiar attributes, brands help
consumers make quick decisions.
 Brands establish loyalty – Over time and with continued use, consumers learn to trust
certain brands. They know, for instance, that Band-Aid bandages always perform in the
exact same way.
 Brands protect from Competition and Price Competition – Strong brands are somewhat
protected from competition and price competition, Because such brands are more
established in the market and have a more loyal customer base, neither competitive
pressures on price nor retail level competition is as threatening to the firm.
 Brands reduce Marketing Costs – Firms with well-known brands can spend relatively less
on marketing costs than firms with little known brands because the brand sells itself.
 Module-3-Market Segmentation, Targeting and Positioning

 Brands are assets - Like the physical possessions of a firm, brands are assets the firm can
build, manage and harness over time to increase its revenue, profitability and overall
value.
Brand can convey upto six levels of meaning –
 Attributes – Mercedes suggests expensive, well built, well engineered, durable, high
prestige and fast.
 Benefits – Functional and emotional benefits.
Durable – I won‟t have to buy a new car every few years.(Functional benefit)
Expensive – Car helps me feel important and admired.( Emotional benefit)
 Values – Depicts producer‟s moral values.
Mercedes depicts high performance, safety and prestige.
 Culture – Mercedes shows German culture.(organized, efficient and high quality.)
 Personality – Mercedes shows the personality of „A royal palace‟ and a „Well known
person‟.
 User – Mercedes is meant for a 55 Year old top executive.

Types of brand
There are two main types of brand – manufacturer brands and own-label brands.

Manufacturer brands

Manufacturer brands are created by producers and bear their chosen brand name. The producer is
responsible for marketing the brand. The brand is owned by the producer.

By building their brand names, manufacturers can gain widespread distribution (for example by
retailers who want to sell the brand) and build customer loyalty .

Own label brands

Own-label brands are created and owned by businesses that operate in the distribution channel –
often referred to as “distributors”.

Often these distributors are retailers, but not exclusively. Sometimes the retailer‟s entire product
range will be own-label. However, more often, the distributor will mix own-label and
manufacturers brands. The major supermarkets (e.g. Reliance, Star Bazaar, Spar) are excellent
examples of this.

Own-label branding – if well carried out – can often offer the consumer excellent value for
money and provide the distributor with additional bargaining power when it comes to negotiating
prices and terms with manufacturer brands.

Brand Equity
Amount of power and value (in monetary terms) the brands have in the market place and in the
minds of the consumers is known as brand equity. Like the physical possessions of a firm, brands
are assets the firm can build, manage and harness over time to increase its revenue, profitability
 Module-3-Market Segmentation, Targeting and Positioning

and overall value. Firms spend millions of dollars on promotion, advertising and other marketing
efforts throughout a brand‟s life cycle.

Advantages of High Brand Equity

High brand equity provides a no. of competitive advantages –
 Company will enjoy reduced marketing costs because of the high level of customer brand
awareness and loyalty.
 Company will have more trade leverage in bargaining with distributors and retailers since
customers expect them to carry the brand.
 Company can charge a higher price than its competitors because the brand has higher
perceived quality.
 Company can more easily launch brand extensions since the brand name carries high
credibility.
 Brand offers the company some defense against fierce competition.

Branding strategies

Individual Branding
Each brand has a separate name, putting it into a de facto competition against other brands from
the same company (for example, Kool-Aid and Tang are both owned by Kraft Foods). Individual
brand names naturally allow greater flexibility by permitting a variety of different products, of
differing quality, to be sold without confusing the consumer's perception of what business the
company is in or diluting higher quality products.

Attitude Branding and Iconic Brands

This is the choice to represent a larger feeling, which is not necessarily connected with the
product or consumption of the product at all. Companies that use attitude branding include: Nike,
Starbucks, The Body Shop, and Apple, Inc. Iconic brands are defined as having aspects that
contribute to the consumer's self-expression and personal identity.

Brands whose value to consumers comes primarily from having identity value are said to be
"identity brands. " Some brands have such a strong identity that they become "iconic brands"
such as Apple, Nike, and Harley Davidson.

“No-brand”Branding

Recently a number of companies have successfully pursued "no-brand" strategies by creating

packaging that imitates generic brand simplicity. "No brand" branding may be construed as a
type of branding as the product is made conspicuous through the absence of a brand name. "Tapa
Amarilla" or "Yellow Cap" in Venezuela during the 1980s is a prime example of no-brand
strategy. It was simply recognized by the color of the cap of this cleaning products company.
 Module-3-Market Segmentation, Targeting and Positioning

Derived Brands
Some suppliers of key components may wish to guarantee its own position by promoting that
component as a brand in its own right. For example, Intel, positions itself in the PC market with
the slogan (and sticker) "Intel Inside. "

Brand Extension and Brand Dilution

The existing strong brand name can be used as a vehicle for new or modified products. For
example, many fashion and designer companies extended brands into fragrances, shoes and
accessories, furniture, and hotels. Frequently, the product is no different than what is already on
the market, except it has a brand name marking. The risk of over-extension is brand dilution,
which is when the brand loses its brand associations with a market segment, product area, or
quality, price, or cachet.

Multi-brands Strategy
Alternatively, in a very saturated market, a supplier can deliberately launch totally new brands
in apparent competition with its own existing strong brand (and often with identical product
characteristics) to soak up some of the share of the market. The rationale is that having 3 out of
12 brands in such a market will give a greater overall share than having 1 out of 10. Procter &
Gamble is a leading exponent of this philosophy, running as many as ten detergent brands in the
US market. In the hotel business, Marriott uses the name Fairfield Inns for its budget chain

Private Labels

Also called own brands, or store brands, these have become increasingly popular. Where the
retailer has a particularly strong identity this "own brand" may be able to compete against even
the strongest brand leaders, and may outperform those products that are not otherwise strongly
branded.

Individual and Organizational Brands

These are types of branding that treat individuals and organizations as the products to be
branded. Personal branding treats persons and their careers as brands. Faith branding treats
religious figures and organizations as brands.

Crowdsourcing Branding
These are brands that are created by the people for the business, which is opposite to the
traditional method where the business creates a brand. This type of method minimizes the risk of
brand failure, since the people that might reject the brand in the traditional method are the ones
who are participating in the branding process.