Market Segmentation, Targeting, and Positioning
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Market Segmentation, Targeting, and Positioning
Introduction
In targeted marketing, a group of people to whom the organization will sell is selected. Targeted marketing is distinguished from mass marketing where a company sells its products to the mass market without differentiating the customers (Bruce & Ireland, 2010). The target market is the portion of the entire market that is made up of consumers who are most likely to buy a given product or service. For example, Ford Motor Corporation succeeded in producing cars and selling them to the mass market without differentiation. Using segmentation, General Motors (GM) came up with many different car models targeting several segments and managed to dislodge Ford as the top automaker in the U.S (Porter, 2008). This essay explores the concepts of segmentation, targeting, and marketing and gives practical examples of how they can be applied to the automobile and other industries (Manzanendo, 2005).
Segmentation Defined
Segmentation is important in targeted marketing as it helps to identify distinct groups and focus or target the message to the identified groups. Segmentation is grouping people or businesses within a particular market based on specific characteristics, needs, or behaviours. Segmentation results in several smaller and homogenous clusters as all potential customers are broken down into different groups with similar characteristics or behaviours (Henry, 2008).
Types of Segmentation
There are different types of segmentation and these include behavioural segmentation, demographic segmentation, geographic segmentation, and psychographic segmentation.
Behavioural Segmentation
In behavioural segmentation, customers are grouped based on their behaviour towards a product or service. Customers can be clustered based on the benefits that they want from a particular product or service offering. For example, toothpaste customers can be classified depending on whether they buy toothpaste due to its price, ability to freshen one’s breath, tooth whitening, or ability to fight tooth decay. Customers can also be classified based on their usage rate of the product or service. The usage rate defines the frequency with which consumers use a specified product. An example is the Frequent Flyer program of KLM where customers are categorized into different groups such as Platinum, Gold, Silver, or Bronze member based on how often they fly with the airline and are awarded points (Porter, 2008).
How customers use the product can also serve as a basis of behavioural segmentation (Robins & Coulter, 2005). An example of the latter is illustrated by Misoprostol. This is a drug that was initially marketed for the treatment of peptic ulcer disease. It was however noted that its main side effect was in the induction of uterine contractions and that people were exploiting this property to use the drug as anti-abortion pill. Its use as an abortifacient surged and the firm producing the drug started marketing it as an abortifacient.
Demographic Segmentation
Demographic segmentation is based on tangible and personal features. Customers are grouped based on their age and or generation, income, gender, social class, ethnicity, nationality, family size, education, occupation, religion, and family life cycle. Grouping according to age and or generation is widely employed. For example, in the United States, generations and characteristics used in demographic segmentation include seniors, baby boomers, generation X, and Generation Y. Examples of how age can influence targeting of products are that pension and retirement funds cannot be targeted at retired individuals or underage children, Disney Cartoons are largely aimed at children, as are diapers and baby food.
Besides age, another demographic factor is income. Baby boomers spend more than half of all consumer expenditure in the U.S. Seniors control about 75% of all the net worth of all households in the United States and their expenditure on luxury items and vacations exceed $200 billion annually. This group therefore has a large purchasing power. Thus, the seniors are a suitable target for luxurious cars such as Lamborghinis, Rolls Royce, and General Motors (GM) luxury brands. Toyota has excelled in coming up with different car brands for different income groups. For instance, Lexus is marketed for the high end market, Camry for the middle class, and Corolla for the low end market. Jaguar targets people with high incomes (Robbins & Coulter, 2005).
Gender is another demographic characteristic used in segmentation. Gender is important because men and women are wired differently and have different needs. Women tend to buy most of the household goods therefore firms dealing in household goods can target women. The women segment can further be segmented into smaller groups of stay-at-home mums, career-oriented women, among others. Examples of marketing based on gender segmentation include razors for women and some razors for men, perfumes and cosmetics for women and perfumes for men and GI Joe toys for boys and Cindy for girls (Porter, 1996).
Social class, nationality, family size, education, occupation, religion, and ethnicity are the other demographic factors used in segmentation and which influence the purchasing behaviour of people. Finally, family life cycle also helps in demographic segmentation. Family life cycle describes the phases through which a family goes and the effects that these phases have on the buying behaviour of individuals. Based on this, examples are that there is no need for geriatric services for a young couple without parents, and there is no need for paediatric healthcare or infant products for young people without children (Kotler, 2001).
Geographic Segmentation
Geographic segmentation entails the clustering of customers based on geographical considerations or locations. Characteristics used to segment customers geographically include population density, region, city or town size, and climate. Regarding regions, customers are grouped based on their continent, country, state, neighbourhood, or other geographical areas such as county, province, and district. On climate, examples are that snows boots are marketed in the Northern U.S.A more than in the Southern region; more northerners consume soup than Southerners, and people living in the south need to use more chlorine in their swimming pools than people living in the north. Another example is that cars are tropicalized for the African market (Porter, 1996).
Psychographic segmentation
In psychographic segmentation, customers are grouped based on their activities, values, opinions, lifestyles, attitudes, and interests. It is useful for products that cut across several market segments. Data that is used in psychographic segmentation is obtained through various techniques such as the VALS survey (Values, Attitudes, and Lifestyles Survey). An example of psychographic segmentation is represented by Porsche which markets different cars for different market segments. The segments here include Top guns or people with ambition, control-freaks, and power; Elitists or people with old money and who have no particular preferences of cars; Proud patrons or people who view a car as the reward for hard work; Bon vivants or people who view a car as a tool for generating excitement and adventure; and Fantasists who are people who see the car as a means of escape (Porter, 2008).
Steps and Advantages of Market Segmentation
The five steps of market segmentation are identification of the segmentation process, development of pertinent profiles, forecasting market potential and market share, and choosing explicit segments. Advantages of market segmentation and targeting are that it assists in the identification of early adapters, enables a firm to remarket brands and products that are being brought back to the market, and allows companies to hang on to customers who might be considering moving to competing firms of products/services. Market segmentation is advantageous also because it permits companies to come up with novel products and services and to develop profitable product lines and brands and allows businesses to focus their resources and efforts on the most profitable customers. Finally, market segmentation allows businesses to circumvent head-on rivalry with other businesses fighting to take over the same customers (Kotler, 2001).
Targeting and Positioning
Targeting is the next logical step after segmentation and it involves the assessment of the identified segments and the deliberate concentration of the marketing efforts on those segments that can potentially offer the firm the highest returns. Positioning defines the marketing activities targeted at the identified segments and which seek to conjure mental images of a company’s product or service in the minds of the target audience (Porter, 2008).
An example of positioning is illustrated by Peugeot 106 which is positioned differently in different countries. The positioning is largely based on the size of the small car market in each of the countries. In Portugal, small cars make up 59% of the total car market while in France and Germany small cars comprise 40% and 18% respectively of the car market. In Portugal therefore, the Peugeot 106 is positioned as a family car and is targeted at middle income households. In contrast, the car is positioned as an urban car and as small ecological car in France and Germany respectively. The target group in France is people aged between 20 to 30 years while the target market in Germany is wives (such as positioned as the wife’s car). Another example of positioning relates to Alka Seltzer which is marketed as an antidote for hangover among beer lovers. The same product is marketed as a reliever of upset stomachs and headache for people who are non-drinkers. In positioning, the attributes and benefits of a particular brand are proclaimed over those of the competition.
Conclusion
For market segmentation to be effective, it must be possible to measure the market segments as well as the consumer purchasing ability. Secondly, markets should be large enough to enable the firm return a profit. Thirdly, there must be a match between the firm’s abilities and the segment numbers. Finally, it must be possible for the firm to promote and serve the identified market segments
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