📣Marketing Strategy Unit 4 – Market Segmentation & Positioning Strategies

Key Concepts & Definitions

• Market segmentation divides a market into distinct groups of buyers with different needs, characteristics, or behaviors who might require separate products or marketing mixes
• Positioning refers to the act of designing a company's offering and image to occupy a distinctive place in the minds of the target market
• Target market consists of the set of buyers who share common needs or characteristics that a company decides to serve
• Differentiation involves actually differentiating the firm's market offering to create superior customer value
• Market segment profitability analysis assesses the potential profitability of each identified market segment
• Perceptual mapping is a visual representation of consumer perceptions and preferences, often used in positioning
• Competitive advantage is an advantage over competitors gained by offering greater customer value either through lower prices or providing more benefits that justify higher prices

Market Segmentation Basics

• Market segmentation is a crucial strategic tool for identifying and targeting specific customer groups within a broader market
• Segmentation allows companies to better understand and serve the unique needs, preferences, and behaviors of different customer segments
• Effective segmentation requires identifying relevant variables that differentiate customers and influence their purchasing decisions
• Segmentation variables can be demographic (age, gender, income), geographic (region, climate), psychographic (lifestyle, personality), or behavioral (usage rate, brand loyalty)
• Market segments should be measurable, substantial, accessible, differentiable, and actionable to be viable targets for marketing efforts
• Segmentation enables more targeted and efficient allocation of marketing resources and development of tailored marketing mixes
• Successful segmentation can lead to increased customer satisfaction, loyalty, and profitability by better meeting the needs of specific customer groups

Segmentation Variables & Criteria

• Demographic segmentation divides the market based on variables such as age, gender, income, education, occupation, and family size
  • Age segmentation can be used to target specific generations (Baby Boomers, Millennials) with tailored products and messaging
  • Gender segmentation is common in fashion, cosmetics, and personal care products
• Geographic segmentation divides the market based on location, such as region, country, city, or neighborhood
  • Climate-based segmentation can be relevant for products like clothing, outdoor equipment, and seasonal items
• Psychographic segmentation groups customers based on lifestyle, personality, values, and social class
  • Lifestyle segmentation can identify segments such as health-conscious consumers, adventurers, or environmentally conscious buyers
• Behavioral segmentation focuses on customer behaviors, such as usage rate, brand loyalty, occasion, and benefits sought
  • Usage rate segmentation can divide customers into heavy, medium, and light users of a product or service
  • Benefit segmentation identifies the primary benefits customers seek from a product (convenience, performance, prestige)
• Effective segmentation requires segments to be measurable (size and purchasing power can be quantified), substantial (large and profitable enough to serve), accessible (can be effectively reached and served), differentiable (distinct and respond differently to marketing mix elements), and actionable (effective programs can be designed to attract and serve them)

Targeting Strategies

• After identifying market segments, companies must decide which and how many segments to target
• Undifferentiated (mass) marketing involves ignoring segment differences and targeting the whole market with one offer, focusing on common needs rather than differences
• Differentiated (segmented) marketing targets several market segments, designing separate offers for each
  • This strategy allows for greater sales and stronger position within each segment but also increases costs
• Concentrated (niche) marketing focuses on gaining a large share of one or a few smaller segments or niches
  • Niches can be defined by dividing a segment into subsegments or by defining a group with a distinctive set of traits seeking a special combination of benefits
  • Concentrated marketing can be highly profitable but also riskier due to reliance on fewer segments
• Micromarketing involves tailoring products and marketing programs to the needs and wants of specific individuals and local customer segments (local marketing) or individual customers (individual marketing)
• Factors influencing targeting strategy selection include company resources, product variability, product life cycle stage, market variability, and competitive marketing strategies

Positioning Fundamentals

• Positioning is the act of designing a company's offering and image to occupy a distinctive place in the minds of the target market
• Effective positioning helps guide marketing strategy by clarifying the brand's essence, identifying goals it helps the consumer achieve, and showing how it does so in a unique way
• Positioning requires determining a frame of reference by identifying the target market and relevant competition
• Identifying the optimal points of parity and points of difference is key to establishing competitive advantage
  • Points of parity are associations shared with other brands that are necessary to be considered a legitimate offering in the category
  • Points of difference are attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe they could not find to the same extent with a competitive brand
• Positioning maps are visual representations of consumer perceptions and preferences, plotting brands along relevant dimensions
• Repositioning involves changing the identity of a product relative to competing products in the minds of consumers
• Positioning strategies can focus on specific product attributes, benefits, usage occasions, user categories, or competitors

Developing a Positioning Strategy

• Identify the target market and competitive frame of reference to define the context for positioning
• Determine key points of parity and points of difference to establish a unique and advantageous position
• Craft a positioning statement that succinctly captures the essence of the brand's positioning
  • A positioning statement should include the target segment, brand name, point of reference, points of difference, and reasons to believe
• Develop and implement integrated marketing programs that consistently communicate and deliver the chosen position to the target market
• Monitor the effectiveness of the positioning strategy over time and make adjustments as needed based on changes in consumer preferences, competitive landscape, or market conditions
• Consider potential growth opportunities through line extensions, brand extensions, or multi-branding strategies that leverage the established position
• Ensure consistency and clarity of positioning across all touchpoints, including product design, pricing, distribution, and marketing communications

Tools & Techniques for Segmentation & Positioning

• Market research techniques, such as surveys, focus groups, and interviews, can provide valuable insights into consumer needs, preferences, and perceptions for segmentation and positioning
• Cluster analysis is a statistical technique used to identify distinct groups of customers with similar characteristics or behaviors
• Conjoint analysis is a research technique that measures consumer preferences for different product features and attributes, helping to optimize product design and positioning
• Perceptual mapping is a visual tool that plots brands or products on a grid based on consumer perceptions of key attributes or dimensions
  • Perceptual maps can identify gaps in the market, assess competitive positions, and guide positioning strategies
• Brand tracking studies monitor changes in brand awareness, perceptions, and preferences over time, helping to assess the effectiveness of positioning efforts
• Customer profitability analysis evaluates the profitability of individual customers or customer segments, guiding resource allocation and targeting decisions
• Predictive analytics and machine learning algorithms can analyze large datasets to identify patterns, predict customer behavior, and optimize targeting and positioning strategies

Real-World Applications & Case Studies

• Nike's "Just Do It" campaign and positioning as a brand for athletes and active individuals across various sports and fitness pursuits
• Apple's positioning as a premium, innovative, and user-friendly technology brand, focusing on design, ease of use, and seamless integration across its product ecosystem
• Coca-Cola's "Share a Coke" campaign, using personalized packaging to connect with individual consumers and leverage the power of social media sharing
• Patagonia's positioning as an environmentally responsible and sustainable outdoor clothing brand, appealing to nature-conscious consumers
• Marriott International's segmentation of its hotel brands to target different traveler segments, from budget-conscious (Fairfield Inn) to luxury (Ritz-Carlton)
• Unilever's "Real Beauty" campaign for Dove, positioning the brand as an advocate for body positivity and self-esteem among women
• Tesla's positioning as a premium electric vehicle brand, focusing on performance, innovation, and environmental sustainability