Segmentation, Targeting & Positioning

University of Zimbabwe Graduate School of Management *Marketing Ma*nagement Question: Kotler (1988) has stated that: â€Å"The heart of modern strategic marketing can be described as STP – segmenting, targeting and positioning. ’’ Discuss this statement using appropriate examples. Introduction Market segmentation By definition market segmentation is the division of a market into different groups of customers with similar needs. Or to express it in another way, market segmentation is the division of a mass market into identifiable and distinct groups or segments, and each has common characteristics and needs and displays similar response to marketing actions. ‘’In essence it is the process of dividing a varied and differing group of buyers or potential buyers into smaller groups, within which broadly similar patterns of buyers exist. ’’ (Wilson and Gilligan, 2007, p. 318). There are several ways in which companies can segment their markets. Just as you can divide an orange up into segments you can divide the population as a whole into different groups of people or segments that have something in common. Marketers therefore look for variables they can use to divide up the population. According to Kotler (1997) the commonly used variables are: Geographic segmentation, demographic segmentation, psychographic segmentation and behavioural segmentation. Products can be aimed at a lifestyle. People are grouped according to the way they lead their lives and the attitudes they share. For example, young professionals may drive a sports car because of the image they want to portray. Married parents might want the same things, but have to provide for their children, which is a large extra cost. They will need a family car to suit their lifestyle. Thus you will find a couple that has just married and have no children, will go for a Mazda 3, while older couples with three or so children will go for a Mazda BT-50 because it is bigger and can accommodate the whole family. However the range and variety of marketing decisions suggest that any attempt to use a single basis for segmentation may result in incorrect marketing decisions as well as a waste of resources. Thus increasingly today you will find marketing strategies combining two or more basis for segmentation of their market. TARGETING Once the firm is satisfied that the segments warrants attention there are various ways in which a firm can then target a market. The first is a single product offering. In other words, the marketer targets a single product offering at a single segment in a market with many segments. For example, British Airway’s Concorde is a high value product aimed specifically at business people and tourists willing to pay more for speed. Identifying marketing targets enables organisations to find opportunities and tap into them. It gives firms the information needed to focus on the buyers that are interested in what they have to offer. This saves both time and money in an ever-changing society. However if you pursue one segment of your target market and the demand for your product decreases, so will your financial strength. In essence, you are putting all your eggs in one basket. When your firm becomes well established in a particular market segment, it may be difficult for you to move to another segment. This may occur due to your market reputation or popularity. For example, if Lorimark HR Consultants becomes known for helping college graduates find jobs, unemployed professionals may perceive them as only having the expertise to serve that market. Another downside of target marketing may that a large segment of the population may be left out in the cold. Though demographics and segmentation might give an overall view of the intended market, consumer spending habits change greatly, depending on trends and economic factors. With society taking on more of a unisex lifestyle businesses should be careful when using for example gender to target market. An example of a product that was traditionally targeted at women and is now being targeted with variations in strategy at men is hair colouring. Men now pay particular attention to their hair in much the same way as woman. Thus target marketing should be done with extra care taking into account all factors that may have an effect on the organization’s profitability and the perception or position it wants to create in the market. POSITIONING Thus positioning is all about perception and is inextricably linked to segmentation. It cannot be defined until the market has been divided into unique segments, and target segments have been selected. As perception differs from person to person, so do the results of the positioning map. Positioning reflects the â€Å"place† a product occupies in a market or segment. A successful position has characteristics that are both differentiating and important to consumers and the characteristic may or may not reflect reality. A position is effectively built by communicating a consistent message to consumers about the product and where it fits into the market in terms of the features, performance, quality, conformance, durability, reliability, style and design — through advertising, brand name, and packaging and all the other elements of marketing mix. Kotler, 1997, p. 301) For years OK Zimbabwe has constantly and consistently bombarded the minds of consumers’ with the message ‘†¦. where your money buys you more. ’ Thereby creating in the mind of the consumer that OK has the best prices and your dollar with OK can take you a long way. Another example w ill be that of Colgate and Surf by Unilever, these products are stuck in the minds of consumers (positioned), such that if someone is buying any other toothpaste or washing powder, not necessarily Colgate or surf, they will still refer to the product as Colgate or surf respectively. It is ‘the’ product in mind of the consumers. That is positioning. What is our current position? What does the space look like – what are the most important dimensions in the category? What are the other products in that space and where are they? What are the gaps, unfilled positions or ‘holes’ in the category? Which dimensions are most important? How do these attitudes differ by market segment? What position do we want to have? Some of the positioning opportunities for a product include: Finding an unmet consumer needs – or at least one that is not being adequately met now by completion? Identifying product strength that is both unique and important. Determining how to correct a product weakness and thereby enhance a product’s appeal. For example Ponds â€Å"new and improved†. Changing consumer usage patterns to include different or additional uses for the product. Identifying market segments, which represent the best targets for a product. How do we create a new positioning? Physical product differences. Communications- finding a memorable and meaningful way to describe the Positioning is not what you do to a product; ‘positioning is what you do to the mind of the prospect’. (www. s-m-a-r-t. com/Exp_brandpros. ) Accessed 3 September 2009. Other questions that the marketer should contend with in terms of positioning are: whom do I have to defeat to own the position, do I have the resources to do it, can I persist until I get there and are my tactics supporting the positioning objectives I have set. The positioning map below will show how the motor industry positions their products in the market. Positioning map: +High (price) From the above positioning map it can be concluded that products tend to bunch in the high price/low economy (fast) sector and also in the low price/high economy sector. There is an opportunity in the low price/low economy (fast) sector. Maybe Hyundai or Kia can consider introducing a low cost sport saloon. However it is all down to the perception of the market about the product. Conclusion Undertaking a Segmentation, Targeting and Positioning process is probably one of the most important processes management should undertake both at the onset of a new offer creation as well as part of a periodic revision of the portfolio of offers and strategies used by organization. A market research is always the starting point in the STP process; otherwise the organizations resources will be misdirected. References: Aaker A. David, (1995). Strategic Market Management, 4th Edition, John Wiley & Sons, Inc. Armstrong J. Scott, (2006). Strategic Marketing Management – A Business Process Approach. Brand pros available at http/www. s-m-a-r-t. com/Exp_brandpros. Accessed 3 September 2009. Grahame Dowling, (2004). Creating Corporate Reputation. Identity, Image and performance. Oxford University Press Inc. Kotler P, (1997). Marketing Management, Analysis, Planning, Implementation and Control, 9TH Edition, Prentice Hall. Malcolm H. B. McDonald, (1996) Marketing Plans, How to prepare them how use them, 3rd Edition, Butterworth-Heinemann. Wilson and Gilligan