Baines & Fill: Marketing, Chapter

3rd edition 6: Market Segmentation and Positioning

 Learning Outcomes

• Describe the principles of market segmentation and

the STP process
• List the characteristics and differences between
market segmentation and product differentiation
• Explain consumer and business-to-business market
segmentation
• Describe different targeting strategies
• Discuss the concept of positioning
• Illustrate how the use of perceptual maps can assist
in the positioning process

Baines & Fill: Marketing, 3rd edition

 Case Insight - Brompton Bicycle Limited

• Brompton Bicycles is a niche British engineering company which produces

folding bikes from its base in Brentford, West London.
• A key selling point is the portability of the bike.
• Companies like Giant and Specialized have built huge markets worldwide for
bicycles for leisure use.
• Brompton, however, saw a market opportunity for a revived market for
bicycles as a mode of transport, particularly given the current trend for both
keeping fit and reducing usage of cars and, therefore, carbon emissions.
• How should Brompton Bicycle re-segment its market domestically and
how should it go to market internationally?

Baines & Fill: Marketing, 3rd edition

 STP Process

• Method by which whole markets are

subdivided into different segments
• Three activities that should be undertaken,
usually sequentially, if segmentation is to be
successful:
– Segmentation
– Targeting
– Positioning

Baines & Fill: Marketing, 3rd edition

 STP Process

Baines & Fill: Marketing, 3rd edition

 Benefits of STP Process
• Enhancing a company’s competitive position,
providing direction and focus for marketing strategies,
including targeted advertising, new proposition
development, and brand differentiation, e.g. Coke Zero.
• Examining and identifying market growth
opportunities through identification of new customers,
growth segments, or proposition uses, e.g. Lucozade.
• Effective and efficient matching of company
resources to targeted market segments, promising
greater return on marketing investment (ROMI). For
example, ASDA Wal-Mart.

Baines & Fill: Marketing, 3rd edition

 Market Segmentation

• Market segmentation is the division of a market into

different groups of customers with distinctly similar
needs and product/service requirements.

• Purpose of market segmentation:

– To leverage scarce resources.
– To ensure that elements of the marketing mix are designed
to meet particular needs of different customer groups.
– Allows organisations to focus on specific customers needs,
in most efficient and effective way.

Baines & Fill: Marketing, 3rd edition

 Marketing Segmentation

• Market Segmentation and Product Differentiation

Baines & Fill: Marketing, 3rd edition

 Process of Market Segmentation

• There are two main approaches to segmenting

markets:

• Breakdown Method: Adopts the view that the

market is considered to consist of customers which
are essentially the same, so the task is to identify
groups which share particular differences.

• Build-Up Method: Considers a market to consist of

customers that are all different, so here the task is to
find similarities.

Baines & Fill: Marketing, 3rd edition

 Process of Market Segmentation
• Aim is to identify segments where:
– identifiable differences exist between segments (segment
heterogeneity).
– similarities exist between members within each segment (members
homogeneity).

Baines & Fill: Marketing, 3rd edition

 A Priori and Post Hoc Segmentation Approaches

Note: N/A,
stage not
applicable.
Sources:
Adapted from
Wind (1978);
and Green
(1979).

Baines & Fill: Marketing, 3rd edition

 Segmenting Consumer Markets

• Segmentation Bases/Criteria

– Profile Criteria - Who my market are and where

are they?

– Behavioural Criteria - Where, when, and how

does my market behave?

– Psychological Criteria - Why does my market

behave that way?

Baines & Fill: Marketing, 3rd edition

 Segmenting Consumer Markets

Baines & Fill: Marketing, 3rd edition

 Segmenting Consumer Markets

Baines & Fill: Marketing, 3rd edition

 BMRB-TGI lifestage segmentation groups

Source:
Reproduced with
kind permission
of Kantar Media

Baines & Fill: Marketing, 3rd edition

 Segmentation Model: Barclays Bank

Baines & Fill: Marketing, 3rd edition

 Segmenting Business Markets

Baines & Fill: Marketing, 3rd edition

 Organizational Characteristics

Baines & Fill: Marketing, 3rd edition

 Buyer Characteristics

• Decision Making Unit

– Policy factors
– Purchasing strategies
– Attitudes towards vendors and toward risk

• Choice Criteria
– What specifications of product/service they choose

• Purchase Situation
– Structure of the purchasing procedures
– Type of buying situation
– Stage in the purchase decision process

Baines & Fill: Marketing, 3rd edition

 Targeting

• To determine which, if any, of the segments

uncovered should be targeted

• Evaluation of Market Segments - DAMP

– Distinct – is each segment clearly different from other
segments?
– Accessible – can buyers be reached through appropriate
promotional programmes and distribution channels?
– Measurable – is the segment easy to identify and measure?
– Profitable – is the segment sufficiently large to provide a
stream of constant future revenues and profits?

Baines & Fill: Marketing, 3rd edition

 Segment Attractiveness Factors

• Rating approach for different segment attractiveness

factors:
– Market growth
– Segment profitability
– Segment size
– Competitive intensity within the segment
– Cyclical nature of the industry

• Each of these attractiveness factors is rated on a

scale of 0-10 and loosely categorized as high,
medium or low in attractiveness.

Baines & Fill: Marketing, 3rd edition

 Segment Attractiveness Factors

Baines & Fill: Marketing, 3rd edition

 Segment Attractiveness Evaluation
Matrix

Baines & Fill: Marketing, 3rd edition

 Targeting Approaches

Baines & Fill: Marketing, 3rd edition

 Positioning

• The act of designing the company’s offering and

image so that they occupy a meaningful and distinct
competitive position in the target customers’ minds.

• Two fundamental elements:

– Physical attributes - the functionality and capability that a
brand offers.
– Communication - the way in which a brand is
communicated and how consumers perceive the brand
relative to other competing brands in the market place.

Baines & Fill: Marketing, 3rd edition

 Example of a Perceptual Map

Baines & Fill: Marketing, 3rd edition

 Positioning Strategies

Baines & Fill: Marketing, 3rd edition

 Repositioning Strategies
The following four ways outline how to approach repositioning a
product, depending on the individual situation facing a brand. In
some cases, a brand might need to be adapted before relaunch.
1. Change the tangible attributes and then communicate the new pr
oposition to the same market.

2. Change the way a product is communicated to the original marke

t.

3. Change the target market and deliver the same product.

4. Change both the product (attributes) and the target market.

Baines & Fill: Marketing, 3rd edition

 Summary

• Described the principles of market segmentation

and the STP process.
• Listed the characteristics and differences
between market segmentation and product
differentiation.
• Explained consumer and business-to-business
market segmentation.
• Described different targeting strategies.
• Discussed the concept of positioning.
• Illustrated how the use of perceptual maps can
assist in the positioning process.

Baines & Fill: Marketing, 3rd edition