Market segmentation,

target marketing &

positioning (STP)
Tracy Gallagher

.
Markets are not homogeneous. Market segmentation
is an attempt to analyse markets in terms of different
customer characteristics & variations in taste, buyer
behaviour, usage rates, age, gender etc.
By concentrating on a segment of the market it is
possible to increase profit and address the specific
needs and wants of that segment rather than trying
meet the needs of a mass market.
The concept of target marketing is a refinement of
the basic philosophy of marketing. It is an attempt by
companies to relate the characteristics or attributes
of the goods and services they provide more closely
to customer requirements.
2

As consumers become more

affluent/educated/mobile, their aspirations change.
Customers are no longer just happy with a car or a
TV, but want a particular type/brand of product with
specific characteristics that suit their requirements
more accurately.
By targeting to specific groups of consumers or
market segments instead of attempting to service
the demand requirements of the entire population for
a particular product, the firm is able to develop more
effective marketing programmes. Instead of treating
all customers as a homogenous (similar) mass, firms
have identified sub-groups of customers whose
precise needs can be more effectively met.
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It is necessary to attempt to segment the market

in order to balance diverse customer needs with
the capabilities and resources (time, skills,
money) of competing organisations in the same
market. As well as aiding in more specific
marketing programs it also allows the
organisation to identify new opportunities in
under served customer groups. It leads to more
efficient resource allocation. And as a result can
add clarity to the process of marketing planning
and an enhanced appreciation of the competitive
situation.
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Definitions of segmentation
the sub dividing of a market into distinct subsets
of customers, where any subset may conceivably
be selected as a target market to be reached with
a distinct marketing mix (Kotler, 2008)
the art of discerning and defining meaningful
differences between groups of customers to form
the foundations of a more focused marketing
effort

The S-T-P process

A market segment
Consists of a group of customers who share a

similar set of wants.

The marketer does not create the segments; the

marketers task is to identify the segments and

decide which one(s) to target.

The company can presumably better design price,

communicate and deliver the product or service to
satisfy the target market. The company also can
fine tune the marketing program and activities to
better reflect competitors marketing.
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How to segmenting consumer markets

The bases/variables for segmentation
Geographic
Demographic
Psychographic
Behaviour

Geographic segmentation
This basis divides the market into different geographical
units such as nations, regions, cities or even
neighbourhoods. In Ireland the indigenous population
tends to be very culturally similar although there are
some regional difference. Firms can operate in all
geographic areas or in just a few e.g. Maxwell house
coffee sold world-wide but flavoured differently in USA
and Europe. Knowledge of geographic customers
permits a company to modify or change its product
offering. Of particular importance nowadays where
immigration has created pockets of customers with very
different product/service preference. E.g. MC Ds advert
in Japan rely heavily on animation in their adverts and
kids toys whereas in Malaysia they emphasises on family
is evident in most of their adverts.
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Demographic segmentation
This is the simplest method of segmentation. It
consists of dividing the market into groups on the
basis of variable such as age, sex, family size,
income, occupation, education, religion, race, social
class, nationality.
Age and life-cycle - for many products purchase

behaviour is strongly related to age. For example 1824 year age group tends to buy the latest style of
clothing, download certain apps (Snapchat). The
youth market is a specific market segment, as is
the lucrative 18-35 year and 60+ segments.
Although it is one of the most straightforward
segmentation variable, it is also one of the most
important and useful (See FLC).
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Key demographic facts..

Asia is home to 500 million consumers aged 16
and younger.
More than half of the Indian population is younger
than 25.
Half of Japanese will be 50 years or older by 2025.
In the EU consumers 16 and younger is rapidly
approaching the number of consumers aged 60
and older.
USA is home to 28.4 million foreign born residents
with combined income of $233 billion.
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Teens are an interesting segment global teens

(12-19) by virtue of shared interests in fashion,
music, and a youthful lifestyle often have
consistent behaviour across international
borders. They have not yet conformed to
cultural norms they often exhibit shared needs
and wants and desires for name brands
,novelty, entertainment and therefore it may
be possible to reach the global teen segment
with a unified marketing programme.
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Sex/gender - many product purchases are also

related to gender. Men and women tend to have

different attitudinal and behavioural orientation
based partly on genetic make-up and partly on
socialisation. E.g. females tend to be more
communal-minded and men more self-expressive
and goal orientated. Some of these are obvious
such as cosmetics. However men are a fast growing
segment in the beauty market. Some are not as
obvious e.g. some cars are designed with women in
mind e.g. Renault Clio. Banks are also finding
women very lucrative segment especially in Asia as
they increasingly have careers and delay marrying.
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http://expandedramblings.com/index.php/pintereststats/10/

Pinterest over 100 million users 85% of which

are female.
67% of users consult their mobile when out
shopping.
Watching these demographics 0 it appears a

great place to attract to women but that

provided a gap in male segment similar web
sites with similar functionality set up e.g.
Dudepins and Gentlemint
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.
Family size - this is usually categorised as 1-2, 3-4,

5+. Obviously the size of the family will have some

effect on the types of products purchased and
especially of the pack size e.g. washing powders,
breakfast cereals.

Economic status/income useful segment basis to

examine when companies plan market expansion.

JICNARS classification. Income does not always
predict the best customers for a given product. E.g.
increasing use of soft card allows individuals to
purchase goods beyond their income bracket.
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UK socioeconomic classification
scheme

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.
Social class largely based on groups of similarities

in income, education and occupation. It has a strong

in influence in cars, clothing, home furnishings,
reading habits etc. Many companies design products
and services for specific social classes. 1990s were
about greed and ostentation. Affluent tastes are now
more conservative although luxury brands such as
Tiffany, Louis Vuitton, BMW still sell successfully.
E.g. middle classes typically tend to value
education, family activities and cleanliness than
lower class families.
Careful! Lines are now blurring between classes
some countries are classless (Scandinavia and
Australia)
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Increasingly, companies are finding that their markets

are hourglass-shaped as some middle-market

consumers migrate toward both discount and
premium products.
Companies that miss out on this new market risk
being trapped in the middle and seeing their market
share steadily decline.
Example: General Motors found themselves caught

in middle of German imports in luxury market and

high-value Japanese a and Korean models in
economy class
Example: Lidl and Aldi
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Psychographic (lifestyle) segmentation

- buyers are divided into different groups on the
basis of their social class, lifestyle, personality
characteristics. Psychographic or lifestyle
segmentation deals with the person as opposed to
the product and attempts to discover the
particular lifestyle patterns of the customers.
Lifestyle refers to the distinctive ways of living
adopted by particular subsections of society.
Psychographics is the science of using psychology
and demographics to better understand
consumers. It is very useful and a more
meaningful basis for segmentation for marketers.

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Lifestyle is a controversial issue depends on accurate

description, and numbers following a particular
lifestyle. E.g. hedonistic, upwardly mobile &
ambitious, sporty, sophisticated etc.
It is possible to gain a greater insight into lifestyle
behaviour by cross referencing demographic variables
to the observed behaviour of specific lifestyle types.
Areas like personality and attitudes (e.g. towards
spending, credit, alcohol, political parties etc)

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Behavioural segmentation
buyers are divided into groups based on their
knowledge, attitude, and the use or response to a
product. Many believe that behaviour variables are the
best starting point for building market segmentation.
Includes aspects of displayed behaviour such as special
occasion segmentation (Christmas, Valentines) benefits
sought (status, weight loss, style), usages rate (Kellogs
not-just breakfast), buyer readiness stage. Decision
roles play a part in displayed behaviour. Increasingly
buying roles between males and females are merging
as the gender divide becomes less pronounced.
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.
Special occasion segmentation buyers can be
grouped according to when they make a purchase of
use a product. e.g. airline travel is triggered by
occasions such as business vacation or family.
Airline adverts aimed at business travellers often
incorporate service , convenience, on time
departure. Airlines aimed at the vacation traveller
stress price, interesting destinations, pre-packaged
vacations. Occasion segmentation can help firms to
build product use. Occasions can be defined in terms
of the time of day, week, month year or other well
defined temporary aspects of a consumers life.
Marketers can also try to extend activities
associated with certain holidays to other times of
the year.
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.
E.g. gift giving on Mothers day in a restaurant, St.
Patricks day celebrations, Valentines day,
Christmas/Easter etc.
Coca-Colas research in Japan discovered that half of
the young, working males skip breakfast, suggesting
a new segment for beverages. Coca-Cola introduced
Pocket Dr. a drink which includes vitamins and
mineral. Other examples are cereal bars, breakfast
biscuits and Smoothies.

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.
Benefits sought buyers can be also grouped
according to the product benefits they seek.
Knowing the benefits sought by customers is
useful as it allows managers to develop products
with features that provide the benefits their
customers are seeking. It also allows managers to
communicate more effectively with their
customers if they know the benefits they seek. If
customers seek a holiday, what are they looking
for? Relaxation, rest, sunshine, recreation,
prestige, status.
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Who is this advert aimed

at?

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Tapping into the male

ego

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Unilever and Dove Campaign for Real Beauty

8-27

8-27

Building the Dove

brand.(2009)

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Buyer readiness at any time people are in different

stages of readiness to buy a product. E.g. January is
traditionally a time when consumers start planning
their summer hols. Some consumers are unaware of
the product, some aware, some informed, some
desire the product and some intend to buy. Disney
felt that it had to prepare the Chinese market well
before the opening of its theme park in Hong Kong.
It was the first time that Disney were to open in a
market where not all of their guests would know
them well. Although there was high brand
recognition, there was no depth of story telling.
Disney embarked on a grass roots brand building
campaign using the Communist Youth League to
host sessions telling stories and drawing pictures.
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Benefits of market segmentation

An increased potential profit earning due to the

tailored approach to marketing. A company will

better meet the needs and wants of their
customer and that should lead to
increased/repeat sales.
New marketing opportunities will be identified
because the company should have a better
understanding of the customers needs in each
segment.
An organisation can try gain a competitive
advantage by dominating some segments.

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The company can create a more fine tuned

product or service offering and price it

appropriately for the target market
Easier to select the best distribution and
communications channels
Clearer picture of competitors, going after the
same segment
The product range can be more closely reflect
difference in customer needs. All modern
marketing relies on responsiveness to the
customer. When this is improved, benefits flow.
Segmentation should result in greater customer
satisfaction.
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2. Targeting
After evaluating the segment, the company must
decide which and how many segments to serve.
Targeting means selecting particular customers or
groups of customers at which to aim the firm's
marketing mix (4Ps).
A targeted segment will be one in which the firm
can have a competitive advantage (USP).
By targeting, it allows the marketer fine tune and
develop the product.

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Evaluating and Selecting the Market

Segments
In evaluating different market segments, the firm must
look at two factors:
1. The segments overall attractiveness
Segment size and growth
Segment structural attractiveness
Level of competition
Substitute products
Power of buyers/Powerful suppliers
Company objectives and resources
2. The companys objectives and resources.
8-33

..
There are three market coverage strategies that a
company can employ:
Target Marketing Strategies
Undifferentiated (mass) marketing
Differentiated (segmented) marketing
Concentrated (niche) marketing

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.
1.

Undifferentiated (mass) marketing: Using this

strategy a company basically ignores market
segmentation differences and goes after the entire
market with one market offer. It focuses on what is
common in the needs of customers rather than the
differences. Mass distribution and mass advertising
serve as the basic tools to create a superior image in
the consumers minds. It provides economies of scale,
keeping down production, inventory & transportation
costs. Most marketers question its effectiveness in
today's competitive market. Not suitable for SMEs,
they are forced to adopt market niche strategies.

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2.

Differentiated (segmented) marketing: this

strategy involves a company targeting several
segments and designs separate offers for each.
This strategy typically produces more total sales
than undifferentiated marketing. Cosmetic firm
Estee Lauder markets brands that appeal to
women and men of different taste. The flagship
brand, the original Estee Lauder appeals to older
consumers, Clinique to middle aged, M.A.C. to
younger women. Unilever market the brand
Persil but alos offer Surf aimed at the value
conscious segment.
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.
3. Concentrated (niche) marketing: this is
particularly appealing to companies with limited
resources. Instead of going for a small share of
a large market the firm pursues a large share of
a few small markets. This does involve higher
than normal risk. Most companies prefer to
operate in two or more small markets to reduce
this risk. Premium prices are usually charged.

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.
Choosing a Target-Marketing Strategy Requires thinking
about the following:

Company resources (limited resources means adopting

a concentrated approach makes more sense)

The degree of product variability/homogeneity

(undifferentiated marketing more suited for
homogeneous products)

Products life-cycle stage (early stages may be more

suited to limited product range. Differentiated
marketing more feasible in the mature phases of PLC)

Competitors marketing strategies (when competitors

use segmentation, undifferentiated approach can be
very dangerous. When competitors use
undifferentiated approach a firm can gain competitive
advantage by using differentiated or concentrated
marketing.
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Mc Ds unique approach

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3. Positioning
Once a company has chosen its target market
segments, it must then decide what positions to
occupy in those segments. A products position is the
way the position the product occupies in consumers
minds relative to competing products. Consumers are
overloaded with information about products. They
cannot re- evaluate products every time they make
buying decisions. To simplify the buying decisions,
consumers organise products into categories.
If a company does an excellent job of positioning,
then it can work out the rest of its marketing planning
and differentiation from its positioning strategy.
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The goal is to locate the brand in the minds of

consumers to maximize the potential benefit

to the firm.
Positioning requires for similarities and
differences between brands be defined and
communicated to the customers.
This is is done through clever use of the 4 Ps.
The position adopted must be realistic

.
Companies must identify a competitive advantage
upon which to build a position. Then effectively
communicate the position to the target market (e.g.
value for money, quality, style, ease of delivery,
luxury). If competing products are similar it is
necessary to differentiate the product. Not every
difference makes a good differentiator. Each
difference has the potential to create company costs
as well as customer benefits. A difference should be
distinctive, superior, communicable, pre-emptive
(not easily copied), affordable, profitable and
important to the customer.

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Even when a company succeeds in distinguishing

itself, differences can be short lived. Companies
normally reformulate their marketing strategies and
offerings several times.
When communicating the positioning characteristics
all of the companys marketing mix (4 Ps) must
support the positioning strategy.
Building and maintaining a positioning strategy is
not easy. It requires a consistent, long run program
with continuous management support. A companys
positioning strategy determines who its competitors
will be.
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1.

Marketers must believe that their product/

service can be differentiated. 4
differentiation strategies include:
Product differentiation brands can be
differentiated on the basis of a number of
different dimensions: product form, features,
conformance, durability, style, ease of
delivery, installation, quality etc. E.g.
Amazon, Dell

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2. Personnel differentiation companies can gain

a strong competitive advantage through having
better trained people. E.g. Singapore Airlines
reputation, Disney staff. Better staff usually
exhibit 6 characteristics competence, courtesy,
credibility, reliability, responsiveness and
communication skills

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3. Channel differentiation companies can

achieve competitive advantage through the
way they design their distribution strategies,
through coverage, expertise, performance.
E.g. Avon, Dell
4. Image differentiation buyers respond
differently to company and brand images.
Wine and liquor companies work hard to
develop distinctive images for their brands.
Marlboro and the macho cowboy image.
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Such as.. The Great

Escape

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Positioning Water.

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Starbucks Example of ST-P

Starbucks uses demographic segmentation (markets by

age, gender, income, ethnic background, and family life
cycle)as well as geographic segmentation (markets by
region of a country or the world, market size, market
density, or climate) and psychographic segmentation, which
can link with demographics.
Starbucks holds around 33% of the market share for coffee
in the U.S. Starbucks has been able to accomplish this by
catering to a specific target market. Starbucks' main
target market is men and women between the ages of 2540, which accounts for almost half (49%) of its total
business.

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Customers within this range tend to have high

income and professional careers. This group

grows at a rate of about 3% annually. Young
adults, aged 18-24,are the next large group that
Starbucks targets. They bring in about 40% of
Starbucks' sales and Starbucks "positions itself
as a place college students can hang out, study,
write papers, and meet people." They appeal to
this group through the growth of technology and
innovative ideas. The young adult group grows at
about 4.6% each year.
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The last group which are apart of Starbucks' target

market are kids and teens, ages 13-17. This group
accounts for about 2% of Starbucks' sales but lots of
items are bought from the parents of the kids.
Starbucks targets this group by offering certain drinks
that appeal to them.

Starbucks also uses geographic segmentation.

Starbucks is located all around, specifically in upscale
locations, near offices, and near many college
campuses.
After a company decides what is their target market
and market segments, it should choose what positions
they should occupy within those segments. Positioning
within a market is developing a specific marketing mix
to influence potential customer's overall perception of
a brand, product line, or organization in general.
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Starbuckshas positioned themselves as a highly

respected brand. The Starbucks company
hasbecome positioned in a way that it can
distinguish their products from competition, which
gives them an advantage once again. Going back
to their mission, they want "to inspire and nurture
the human spirit - one person, one cup, and one
neighbourhood at a time." Their positioning
strategy is customer based, which allows them to
give the best customer service. As they continue
to do this, they hold onto their sustainable
competitive advantage in terms of their customer
satisfaction as well as their employee satisfaction.

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Nikes Positioning a Universal

brand

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The Future? Attractive

Segments?

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