Topic 5 - Marketing Strategy: Segmenting, Targeting, Differentiation And Positioning

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This article is a topic within the subject Marketing Fundamentals.


Required Reading

Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 184-208.

Market Segmentation

[1] Marketers cannot appeal to all buyers in all markets OR appeal in the same way (diverse needs). Often firms identify the segments it can serve best to build the right relationships with the right customers. To create value for targeted customers, the firm must segment, target, position (perception – think of the product in a particular way) & differentiate its product.

Market Segmentation is the process of dividing a market up into distinct groups of buyers who have different needs, characteristics or behaviours, and who might require separate products or marketing programs. A Segment is a group of consumers who respond in similar way to a given set of marketing efforts (demand is influenced by the same factors).

Bases Of Segmentation

  • Geographic – nations, states, regions, cities
  • Demographic – age (glare, taste, touch), gender, family size, family life cycle, income, occupation, religion, race, nationality
  • Psychographic – social class, lifestyle, socio-economic, values - AIO or personality characteristics
  • Behavioural – occasions (Valentine’s Day), types of benefits sought, user status (new, regular, ex/non), usage rate, loyalty status, attitude & readiness stage

Marketers use multiple segmentation bases to get a smaller & better defined target group. E.g. Geo-Demographic Segmentation – GEO - City, DEMO - low income = low income city dwellers.

Business Markets are segmented by personal characteristics, demographics, operating variables, situational factors & purchasing approaches.

International Markets are segmented by Geographic’s, Economics (Developed), Political/Legal, Cultural (language). Inter-Market Segmentation is segments of consumers with similar needs/buying behaviours located in different countries.

Requirements For Effective Segmentation

  1. Measurable – size, purchasing power & profile of the segment must be measurable
  2. Accessible – can effectively reach & serve the segment
  3. Substantial – large or profitable enough to serve
  4. Differentiable – the segments are conceptually distinguishable & respond differently to marketing mix programs
  5. Actionable – effective programs can be designed for attracting & serving the segments

Market Targeting

[2] Targeting is about evaluating each segment’s attractiveness & selecting 1 or more segments to enter. A target market is a group of customers for whom a seller designs a particular marketing mix.

Evaluating Market Segments

  • Size & Growth – collect data on growth rates, sales & expected profitability. Right size & growth is a relative matter
  • Structural Attractiveness – number & aggressiveness of competitors, substitute products & powerful buyers/suppliers
  • Company Objectives & Resources – Mesh with the company’s long run objectives

Selecting Target Market Segments

  • Undifferentiated/Mass Marketing
    • Ignore market segment differences & target the whole market with 1 offer (to appeal to the most buyers)
    • Focuses on the common needs of consumers rather than on what is different
  • Differentiated/Segmented Marketing
    • Firm decides to target several market segments & designs separate offers for each one
      • Gain stronger market position & more sales in each targeted segment
      • Attain higher total sales but usually at a higher costs (compared to mass marketing)
    • E.g. Toyota Corporation - Corolla, Camry, Aurion + Lexus
  • Concentrated/Niche Marketing
    • Firm targets a large share in a few segments or niche’s
      • Fine tune market mix effectively to its targeted niche
      • usually less competition – may be overlooked by large competitors
    • Many firms start up in niches & broaden markets served after establishment
  • Micro & Local/Individual Marketing
    • Tailoring products & marketing programs to the needs/wants of specific individuals & local customers
    • Local Marketing – easier with communications technology, higher marketing costs, may dilute brand image
    • Individual Marketing – 1 to 1 marketing, custom made products, new technologies help e.g. Nike+.

Choosing A Market Coverage Strategy


  • Limited Resources? - Concentrated
  • Uniform Products? (steel, grapes) - Mass/Undifferentiated,
  • Many Products? - Differentiated
  • Competitor Uses Segmentation? - Cannot use Undifferentiated
  • Buyers have same tastes? - Undifferentiated
  • New Product? - Undifferentiated or Concentrated

Differentiation And Positioning



A products 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 - based on perceptions, impressions & feelings. E.g. Porsche positioned as a performance car.

Step 1 – Identify A Set Of Differentiating Competitive Advantages Upon Which To Build A Position (General To The Industry)

Perceptual Positioning Maps shows consumer perceptions of their brand against competing brands on important buying dimensions


Step 2 – Identifying And Choosing The Right Competitive Advantages

Competitive advantage (gained by providing greater customer value - lower prices / more benefits) occurs from differentiation====

  • Product Differentiation – features, performance, style, consistency, reliability, durability & design
  • Service Differentiation – speedy, convenient or careful delivery, installation or repair
  • Channel Differentiation – channel coverage, expertise & performance. Amazon has smooth functioning direct channel
  • People Differentiation – hiring & training employees better than competitors
  • Image Differentiation – establish images to convey offerings distinctive benefits & positioning + symbols & sponsorship

A company needs to avoid under positioning, over positioning & confused positioning. Differences that are important, distinctive, superior, communicable, pre-emptive (can’t copy), affordable & profitable are worth establishing

Possible positioning strategies can include product attributes, benefits offered usage occasions, users, against a competitor, away from competitors, product class.

Step 3 – Selecting An Overall Positioning Strategy

The full positioning of a brand is known as the value proposition – the full mix of benefits upon which a brand is differentiated & positioned. It is the answer to why should I buy your brand?.

  • More For More – most upscale G/S, higher price, vulnerable to more for the same. E.g. IPhone
  • More For The Same – Lexus Vs BMW
  • Same For Less – Discount stores, Bunning’s
  • Less For Much Less – 2$ Store
  • More For Less – hard to sustain long term

Developing A Positioning Statement

This position must be communicated & delivered & monitored & adapted over time to meet consumer needs. E.g. more for more – high quality products, high price, distribute through high quality dealers & advertise in high quality media.


This is the end of this topic. Click Marketing Fundamentals to go back to the main subject page for Marketing Fundamentals


Textbook refers to Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall.

  1. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 184-196
  2. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 196-201
  3. Mohammed Razzaque, UNSW
  4. Armstrong G., Adam S., Denize, S. and Kotler P.(2012) Principles of Marketing, 5th Edition, Sydney, Pearson/Prentice Hall., pp. 201-208
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