BF3316

PRINCIPLES OF Customer-Driven
Market Strategy

MARKETING Understanding the

Key Concepts
Market
Segmentation
Market Targeting
Marketing
Positioning

Week 6: Market Segmentation,

Targeting and Positioning Bases of
Segmentation
Evaluating Market
Segments
Positioning Map

Segmenting
Consumer, Business Target Market
Positioning Strategy
and International Strategy
Markets

Effective
Segmentation

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LEARNING OUTCOMES
At the end of this chapter, you will be able to:
• explain the importance of information to companies
• define and explain the marketing information system and its components
• explain the steps in marketing research process
• describe how companies analyse marketing information
• discuss the issues in conducting a marketing research

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How Businesses Use Marketing to Create
Value for Customers
1. Choose which customers to serve
• Market Segmentation (parts of a market)
• Targeting (segments to enter)

2. Decide how to serve those customers

• Product differentiation (what makes it difference from
the competition)
• Market positioning (how customers perceive the
product)

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Market and Market Segmentation
Market
• Market is the set of all actual and potential buyers of a product or service
• Market is a group of people or organisations with wants and needs that can
be satisfied by particular product categories
Market Segmentation
• Market segmentation involves dividing a market into parts that reflect
different customer needs and wants
• The purpose is to enable marketer to tailor the marketing mixes to meet
the needs of one or more specific segments

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Main Categories of Market Segment
Geographic
Segments

Behavioural Demographic
Segments Segments

Psychographi
c Segments

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Geographic Segmentation Cars designed for regions
with four seasons are built
with both heat and air-
conditioning features as
compared to cars in tropical
regions which only require air
conditioning.

Neighbourhoo
Nation Regions States Counties Cities d Climate

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 Demographic

Ethnicit
Age Gender Religion Income
y

H&M: Kids and H&M: Male and Islamic China town: High end brands for higher
Adults Sections Female Tourism to Chinese food, income groups: LV & Hermes
cater Halal products etc
food 7
Psychographic

Personalit Social
y Motive Lifestyle class

Marina Bay Sand

Health concern Celcom advert Mini Cooper by Hotel targets upper
people will opt promote the BMW most class groups
for healthy food motive of being likely appeal to
able to be young
connected with
family members

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Behavioural

Benefits Applicatio Brand

Occasion User status Usage rate
sought n loyalty

Graduation Dove’s Free trials. It Emirates Membership Customers

day – whitening aims Airlines retain packages are loyal to
increase cream is returning heavy users targeted at Colgate would
sales of targeted at potential through regular not buy other
flowers, women who customer frequent flyers. customers brands
cards, gifts want lighter into regular 7% of air
and other skin tones customers. travelers
products generate 80%
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of ticket sales.
Benefits of Effective Market Segmentation
• Focuses resources on parts of a market where the business
can succeed
• Allows a business to grow share in markets or to “ride the
wave” of fast-growing segments
• Helps with new product development – focused on needs of
customers in the segment
• Helps make the marketing mix more effective – e.g. better
targeting of promotion

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Potential Drawbacks of Market
Segmentation
• Segmentation is an imprecise science – data not
always available, up-to-date or reliable
• Just because you can identify a segment doesn’t
mean you can reach the customers in it
• Markets are increasingly dynamic – fast changing; so
too are the segments

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What is a Target Market?
• A target market is the set of customers sharing
common needs and wants that a business decides to
target
• Thus, a marketer needs to do the market
segmentation before they begin their market
targeting to know the precise needs of the people
according to their segmentation.

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Steps in Market Targeting
1. Market segmentation: Divide a market into smaller groups of
buyers with distinct needs, characteristics, or behavior who
require separate products or marketing mixes.
2. Target marketing: Evaluating each market segment’s
attractiveness and selecting one or more of the market
segments to enter.
3. Market differentiation: Differentiating the firm’s market
offering to create superior customer value.
4. Market positioning: Setting the competitive positioning for
the product and creating a detailed marketing mix.
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Segmenting Business Market
• Business buyers can be segmented geographically, demographically (industry,
company size), or benefits sought, user status, usage rate and loyalty status.
• Business marketers use additional variables such as business description,
operating practice, purchasing approach, situational factors and personal
characteristics.
• Segmentation bases and factors to be considered in business markets are:
1. Geographic location: where does the organization operate?
2. Business description: What sort of business is it, and where does it fit into the industry?
3. Behavioral / operating practice: How does the organization undertake its purchasing
decisions?
4. Cultural / personality: What is the management style of the organization?
5. Organisational goal: Does the organization have aggressive growth sale?

• Consumer segmentation, marketers believe that buying behavior and benefits

provide the best basis for segmenting business markets.
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Segmenting Business Market
Restaurants
Food service
Independent
firm
Bakery store

Franchise
Existing private
Bread and labels
Pastry
Supermarkets
Business
Market No private
labels Bases of segmentation
in the bread and pastry
business market
Ready-baked

Manufacturers
Packaged
ingredients 15
Segmenting International Markets
• Geographic segmentation assumes that countries close to one another
have common traits and behavior. However there are many exceptions:
• World markets can also be segmented on the basis of economic factors.
• Countries might be grouped by population income levels or by their overall level
of economic development.
• Countries can be segmented by political and legal factors such as the type and
stability of the government, receptivity to foreign firms, monetary regulations
and the amount of bureaucracy.
• Cultural factors can also be used, grouping markets according to common
languages, religions, values and attitudes, customs and behavioral patterns.

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 Effective Segmentation
Criteria Explanation Example
Measurable Non measurable criteria may lead to wrong projection of It is easier to measure the size of a high
production and sales income group compared to a segment of
people against modern technology.
Accessible Each segment must be reached, served and communicated Segmenting a market for online shopping in a
with effectively. rural area with no Internet access may not be
the best decision
Substantial It is necessary to focus on segments that are substantial and The size of Japanese for lovers in rural areas
profitable enough to be served. Low number of customers of Malaysia is not substantial enough for
(<100) may not be effective as the market segment would not Sushi king to consider opening outlet there.
be able to sustain the business in the long run.
Differentiable Each segment od consumers should be relatively unique, as Private colleges offer a variety of programs to
compared to other segments that have been served. fulfill the distinguished needs of each
segment.
Actionable The identified segments need to be defined and matched Cartoon channels, most ads use animated
against the capabilities and resources of the organization, so pictures and jingles to attract the attention of
that effective programs can be designed to attract and serve young children.
the segments.
A complicated ad message would not lead them to react to the
stimuli.
A more simpler and direct approach would be best. 17
Targeting Strategy
Undifferentiated Marketing (Mass Marketing)
• It involves creating the same marketing mix for a broad market of potential buyers.
• A firm might decide to ignore market segment differences and target the whole market
with one offer.
• It focuses on what is common in needs of consumers rather than on what is different.
• For example, Coca-Cola / Pepsi.

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Targeting Strategy
Differentiated Marketing (Segmented)
• It entails targeting two or more distinct market segments with different marketing mixes
and designs offered each. This allows a company to achieve wider market coverage.
• By offering product and marketing variations to segments, companies hope for higher
sales and a stronger position within each market segment.
• However, differentiated marketing also increases the costs of doing business. Developing
separate marketing plans for the separate segments requires extra marketing research,
forecasting, sales analysis, promotion, planning, and channel management.
• The company needs increase sales against increased costs when deciding on a
differentiated marketing strategy.

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Targeting Strategy
Concentrated Marketing (Niche Marketing)
• Niches are smaller and may attract only one or a few competitors.
• Niching offers smaller companies an opportunity to compete by focusing their limited
resources on serving niches that maybe unimportant to or overlooked by larger
competitors.
• The low cost of setting up shop on the Internet makes it even more profitable to serve
seemingly minuscule niches.
• Firms can achieve strong market needs in the niches it serves and the reputation it
acquires.
• It can market more effectively by fine-tuning its products, prices, and programs to the
needs of carefully defined segments.
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Targeting Strategy
Concentrated Marketing (Niche Marketing)
• Concentrated marketing can be highly profitable but it involves higher-than-normal risks.
• Companies that rely on one or a few segments for all of their business will suffer greatly if
the segments turns sour or if other large competitors decide to enter the same segment
with greater resources.
• E.g. Antique car, furniture collectors, art galleries, weight loss centres, and fitness centres.

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Targeting Strategy

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Targeting Strategy
Micromarketing
• Micromarketing targets specific customers within a niche market. It is
more specialised and customized marketing approach.
• It tailor products and marketing programs to suit the tastes if specific
individuals and locations.
• Through local marketing, marketers tailors brands and promotions to the
needs and wants of local customer groups – cities, neighbourhoods, and
specific stores.
• Micromarketing becomes individual marketing – tailoring products and
marketing programs to the needs and preferences of individual customers.
• Individual marketing has also been labeled one-to-one marketing, mass
customization, and markets-of-one marketing. 23
Market Positioning
• Positioning is arranging for a product to occupy a clear,
distinctive, and desirable place relative to competing products
in the minds of target market consumers.
• A product’s position is the way the product is defined by
consumers on important attributes – the place the product
occupies in consumers’ minds relative to competing products.
• Positioning is important because it is the means by which
products and services can be differentiated thereby giving
consumers a reason to buy.
• To simplify the buying process, consumers organize products,
services, and companies into categories and position them in
mind. 24
Market Positioning
• The perceptual map could help to
identify where an organization
should launch a new brand,
maybe at the medium price and
quality range or otherwise.
• However, perceptual maps are
plotted based on one entity’s
perception; what may be a quality
product to one may not be
perceived as quality to another.

Example of perceptual map

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Positioning Strategy
Types of Information Needs
• Position Strategy depends on how competitors position themselves.
• Does the organization want to develop a strategy which positions themselves away
from their competitors? Offering a benefit which is superior depends much on the
marketing mix strategy the organization adopts.
• The pricing strategy must reflect the benefit offered and the promotion strategy
must communicate this benefit.
• A six-step framework for successful positioning:
• What position do you currently own?
• What position do you want to own?
• What do you have to defeat to own the position you want?
• Do you have the resources to do it?
• Can you persist until you get there?
• Are your tactics supporting the positioning objective you set? 26
Positioning Possibilities
Product features Sony is well known for producing the most advance and latest audio visual appliances.

Price/quality Mercedez cars are known as highly durable luxury cars

Positioning Strategies

Pizza Hut delivery has always been the choice in the occasion where people have no time to eating
Usage occasion
out or cooking at home

Ferrari has always been associated with status, sports, luxury and prestige compared to other
Product class dissociation
sports car manufacturers

Air Asia knows their segment well (the middle income and price sensitive), and have come out with
User
the tagline ‘Everyone can fly’.

Competitor Giant has been advertising that they offer the lowest price as compared to Tesco and Carrefour.

De Palma Hotel has claimed that they are the only hotel in Malaysia that is Shariah compliant
Benefits
(halal).

Cultural heritage
Old Town White Coffee is well known for its ambiance of a retro coffee shop tradition in terms of 27
the interior as well as the menu.
Positioning Differences
• The differences chosen in the product positioning strategy must be:
• Important: The difference delivers a highly valued benefit to the target
buyers.
• Distinctive: Competitors do not offer the difference, or the company can
offer it in a more distinctive way.
• Superior: The difference is superior to other ways that the customer might
obtain the same benefit.
• Communicable: The difference can be explained and communicated to the
target buyers,
• Pre-emptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay the difference.
• Profitable: Company can introduce the difference profitability. 28
 Communicating and Delivering the Chosen
Position
• Once it has chosen position, the company must take strong
steps to deliver abd communicate the desired position.
• Designing the marketing mix – product, price, place and
promotion – involves working out the tactical details
positioning strategy.
• Establishing a positon or changing one usually takes a long
time. In contrast, positions that have taken years to build can
quickly be lost.
• Once a company has built the desired position, it must take
care to maintain it through consistent performance and
communication. It must closely monitor and adapt the position
over time to match changes in consumer needs and 29
competitors’ strategies.
Communicating and Delivering the Chosen
Position

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 Repositioning
• Brand repositioning is an attempt to change consumer
perceptions of a particular brand when the existing positioning
doesn’t work.
• It involves changing the identity of a product, relative to the
identity of competing products, in the collective minds of the
target market.
• The changed image (of a company, product, etc.) is meant to
target new or wider market.
• For example, the Johnson & Johnson Company has
successfully repositioned their product lines from baby
products to family products.
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