MB203

UNIT-4

Market Segmentation, Targeting and Positioning (STP):

Concepts of market segmentation:

Market segmentation is a business practice that brands use to divide their target market into
smaller, more manageable groups of people based on common ground they share to optimize
their marketing, advertising, and sales efforts. Simply put, customers of each market segment
have similar characteristics that businesses can leverage to advance their efforts.

Geographic segmentation: Geographic segmentation consists of creating different

groups of customers based on geographic boundaries.

The needs and interests of potential customers vary according to their geographic location,
climate and region, and understanding this allows you to determine where to sell and
advertise a brand, as well as where to expand a business.
 Demographic segmentation: Demographic segmentation consists of dividing the
market through different variables such as age, gender, nationality, education level, family
size, occupation, income, etc.

This is one of the most widely used forms of market segmentation, since it is based on
knowing how customers use your products and services and how much they are willing to
pay for them.

Psychographic segmentation: Psychographic segmentation consists of grouping the

target audience based on their behavior, lifestyle, attitudes and interests.

To understand the target audience, market research methods such as focus groups, surveys,
interviews and case studies can be successful in compiling this type of conclusion.

Behavioral segmentation: Behavioral segmentation focuses on specific reactions, i.e.

the consumer behaviours, patterns and the way customers go through their decision-making
and purchasing processes.

The attitudes the public has towards your brand, the way they use it and their awareness are
examples of behavioural segmentation. Collecting this type of data is similar to the way you
would find psychographic data. This allows marketers to develop a more targeted approach.

Market segmentation objectives

There are different market segmentation objectives. Here we tell you what each of them are:

• Product: Creating successful products is one of the main objectives of organizations and
one of the reasons why they conduct market research. This allows you to add the right
features to your product and will also help you reduce costs to meet the needs of your
target audience.
• Price: Another objective of market segmentation is to establish the right price for your
products. Identifying which is the public that will be willing to pay for it.
• Promotion: It helps you to target the members of each segment and select them in
different categories so that you can direct your strategies appropriately.
• Place: The ultimate goal of segmentation is to decide how you offer a product to each
group of consumers and make it pleasant to them.

Advantages of market segmentation

Knowing what market segmentation is and the benefits it has for your organization will help
you implement it correctly. Here are some of its advantages:

• Create stronger marketing messages: When you know who you are targeting, you can
create strong, personalized messages that respond to the needs and wants of your target
audience.
 • Find the ideal marketing strategies: You may not know which the right strategy to attract
the ideal audience is. Market segmentation allows you to know the audience, create a plan
that will work successfully and determine better solutions and methods to reach them.
• Design targeted advertising: Market segmentation allows you to target your advertising to
the audience in a successful and effective way, knowing their age, location, buying habits,
interests, etc.
• Attract potential customers: By sending direct and clear marketing messages, you attract
the right audience and are more likely to convert them into buyers.
• Differentiate your brand from the competition: By creating messages specific to your
value proposition, you can stand out from the competition. Segmentation allows you to
differentiate your brand by focusing on specific customer needs and characteristics.
• Identify your niche market: Market segmentation helps you discover your niche market.
Identify the niche with the broadest audience and whether it has needs that your brand can
effectively address.
• Focus your efforts: Allows you to identify new marketing opportunities and avoid
distractions that take you away from your target market.
• Create a customer connection: When you know what your customers want and need, you
can create effective strategies. This allows you to create strong bonds between your brand
and the customer to create brand loyalty and customer satisfaction.

Target Marketing Strategies: - Product or Service is designed to suit the needs of the
market. At times, the products appeal to all or a section of the market. The product that
appeals to everyone falls under the mass marketing strategy. Certain products are
manufactured for a particular section of people. This section of people is known as the ‘target
audience’.

2. VARIOUS TARGET MARKETING STRATEGIES

Broadly the target marketing strategies are classified into the following
types

• Mass Marketing
• Segment Marketing
• Niche Marketing
• Micro Marketing
• Local Marketing
•
A) Mass Marketing
Mass Marketing involves marketing to the entire population with a single strategy. Mass
marketing focuses to reach everyone with maximum exposure to the product. An attempt is
made to spread the message to everyone with mass media such as TV, newspaper, and
mobile.

Regularly consumed products like toothpaste and toothbrushes, mass marketing is all that is
needed.

B) Segment Marketing
Segment Marketing known for its differentiated targeting strategy focuses on a section of
people known as the ‘target audience’. The target marketing concept is to attract customers to
their products. This segment marketing fetches good results for new products entering to
market with established organizations. This differentiated marketing is expensive. The
differentiated marketing strategy can be designed uniquely for the different target audiences.

C) Niche Marketing
Niche marketing also known as concentrated marketing targets a small section of the market.
The entire campaign is around this small section of the market. Luxury goods like Rolex and
Armani are examples of niche marketing. Niche marketing yields results for small companies
with limited production and sales. There are advantages and disadvantages to niche
marketing.

Advantages of niche market segment are:

• Generates high revenues.
• Loyal customer base.
• Competition is less.
Disadvantages of niche marketing are:

• The market is small.

• Scope for growth is less.
• Less competition so keenness to improve is minimal

D) Micromarketing
Micromarketing focuses on a much smaller section of people than niche marketing.
Micromarketing definition is customized marketing or one-to-one marketing. The products
are customized to the requirements of the customer. The micro marketing strategies involve
customer tastes, whims, and wishes. A good example of a micromarketing strategy is
Etsy.com that focuses on handmade goods taking orders from customers with their specific
requirements.

E) Local Marketing
Local marketing strategy involves nearby and neighborhood areas. The organizations use this
marketing strategy to thrive on local connections and make their presence felt. Amazon Local
is a good example of a local marketing strategy. The online service providers along with local
businesses come up with offers for hotel booking, spa treatments, and restaurant meals at
regular intervals. The local companies earn good revenue with sales.

Customization: Customization refers to the action of altering a product or service to suit a

person’s or company’s preferences or requirements. We can also use the term when we
modify something for a specific task. In other words, we can use it when focusing either on
customers or functions.

Differentiation
Differentiation refers to the marketing strategy that a company adopts to make
its product or service distinct from all other products or services available in the
market. Through differentiation, the products stand out from all other competing
products, such that they offer unique value and become attractive to the customers.
 Differentiation can be achieved through adding or modifying one or more of numerous
attributes like price, quality, performance, design, features, order processing, availability,
timing, location, distribution and after sale services and support.

For successful and result oriented differentiating, companies must consider the
following important points:

• The differentiation should result in added value. It requires a detailed market research and
outlining the existing market gaps in terms of unfulfilled needs, issues and challenges faced
by the customers in targeted market and comprehending how the effective solutions can be
offered.
• The customer should be able to perceive the value added through differentiation. If the
customers are unable to understand the value, it means either the differentiation actually has
not added any value to the product or the company has failed to communicate the same to
customer.

• The differentiation should be such that the competitors are not able to easily copy it, i.e., the
added value should be exclusive to the organization for a long time.

• The value introduced through differentiation should be affordable which means the customers
are agree and are financially able to pay for the additional features or attributes added to the
products.

Positioning
Product positioning is the outcome of many previous marketing efforts and activities
like market segmentation, target marketing and product differentiation. If a company has
successfully performed in these steps, it would certainly position itself successfully. Product
positioning (or just positioning, for short) refers to the place occupied by a product in the
minds of the customers in relation to other competing products in the targeted market or
segment. It basically signifies how the company would like the product to be considered by
its customers. It includes feelings, perceptions and impressions that actual as well as potential
customers should have about the products being offered by the company.

The difference between Positioning and Differentiation

Positioning Differentiation
Positioning is referred to acquiring a space Differentiation is a marketing
in the mind of the customer. strategy companies use to make their
product unique to stand out from
competitors.
Positioning is a technique used by all Differentiation strategy is adopted by some
companies based on specific criteria. companies.
Success of positioning strategy depends on Success in differentiation depends on
the nature of the market conditions. company’s competitive advantage based on
internal resources.