Segmentation, targeting and positioning

Market Segmentation' definition

The process of splitting customers, or potential customers, in a market into different groups, or segments, within which customers share a similar level of interest in the same or comparable set of needs satisfied by a distinct marketing proposition.

Marketing proposition; the 'tools' or means available to the organization to improve the match between benefits sought by customers and those offered by the organization so as to obtain a differential advantage. Often referred to as the four Ps, this is usually the appropriate mix of product features, price, promotion and place (service and distribution). For the customer, this manifests itself as benefits, cost, relevant image and convenience; in other words, a customer value proposition.

Motives and attitudes influence buying behaviour. Successful marketing is closely linked with an appreciation of motivational influences in specific product markets. Rarely does one motive alone influence human behavior: motivations interact and modify the effects of single motives, for example consumers may be motivated by economy to choose the lowest-priced brand of a product, but, at the same time, they will also be motivated by safety, security, or risk factors. So they tend to select well-known brands, even though lower-priced alternatives may be available.

The complexity of motivational influences was fully discussed earlier and it would be useful to recall some of the general findings of motivational theories when considering buying motives as bases for market segmentation. Generalizations over products are not advisable; research should be centered on motivational influences connected with specific types of product and services.

Segmentation can be viewed as the art of discerning and defining meaningful differences between groups of customers to form the foundation of a more focused marketing effort.

Macro segmentation bases

Macro segments are based on the characteristic of organizations and the broader purchasing context within which they operate. Defining a macro segment assumes that the organizations behavior and responses to marketing stimuli. The bases used for macro segmentation tend to be observable or readily obtained from secondary information (i. e. published or existing sources) and can be grouped into two main categories each of which will now be discussed.

Micro segmentation bases

Within a macro segment, a number of smaller micro segments may exist. To focus on these, the organization needs to have a detailed understanding of individual members of the macro segment, in terms of their management philosophy, decision-making structures, purchasing policies and strategies, as well as their needs and wants. Such information can come from published sources, past experience of the potential buyer, sales force knowledge and experience, word of mouth within the industry, of at first hand from the potential buyer.

Geographic segmentation

Geographic segmentation defines customers according to their location. This can often be a useful starting point. A small business, for example, particularly in the retail or service sector, operating on limited resources, may look initially for custom within its immediate locale. Even multinationals, such as Heinz, often tend to segment geographically by dividing their global organization into operating units built around specific geographic markets. In neither case, however, is this the end of the story. For the small business, simply being the on the High Street is not enough. It has to offer something further that a significant group of customers want, whether it is attractively low process or a high level of customer service.

Demographic segmentation

Demographic segmentation tells you a little more about the customer and the customer’s household on the measurable criteria that are largely descriptive, such as age, sex, race, income, occupation, socioeconomic status and family structure. Demographics might even extend into classifications of body size and shape! It has been suggested that any male with a waist over 102cm or female with wait over 88cm should consider it a warning of obesity. That amounts to an awful lot of people, especially in the UK, Germany and the USA, where the working classes are relatively affluent (Stuttaford, 2001)

Over 9 million people in the UK alone are classified as clinically obese and are the risk of weight-related illness. That could be good news for some pharmaceutical and diet food manufacturers, but it presents a challenge to some other business sectors.

Geodemographic segmentation

Geodemographic can be defines as ‘the analysis of people by where they live’ (Sleight, 1997) as it combines geographic information with demographic and sometimes even lifestyle data about neighbourhoods. This helps organizations to understand where their customers are, to develop more detailed profiles of how those customers live, and to locate and target similar potential customers elsewhere. A geodemographic system, therefore, will define types of neighbourhood and types of consumer within neighbourhood according to their demographic and lifestyle characteristics.

Psychographic segmentation

Psychographics, or lifestyle segmentation is an altogether more difficult area to define, as it involves intangible variables such as the beliefs, attitudes and the opinions of the potential customer. It has evolved in answer to some of the shortcomings of the methods described above as a means of getting further under the skin of the customer as a thinking being. The idea is that defining the lifestyle of the customer allows the marketer to sell the product not on superficial, functional features, but on benefits that can be seen to enhance that lifestyle on a much more emotional level. The term lifestyle is used in its widest sense to cover not only demographic characteristics, but also attitudes to life, beliefs and aspiration.

Positioning is the use of marketing to enable people to form a mental image of your product in their minds (relative to other products)

Dictionary definition:

Efforts to influence consumer perception of a brand or product relatice to the perception of competing brands or products. Its objective is to occupy a clear, unique, and advantageous 'positioning' in the consumer's mind such as 'the best driving car' , 'the most economical car', or 'the safest car'.

(Susan Ward) Targeting is the actual selection of the segment you want to serve

the target market is the group of people or organizations whose needs a product is specifically designed to satisfy.

It involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments.

Target marketing can be the key to a small business’s success.

The beauty of target marketing is that it makes the promotion, pricing and distribution of your products and/or services easier and more cost-effective. Target marketing provides a focus to all of your marketing activities.

Essentials of marketing: Frances Brassington & Stephen Pettitt

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