Market Segmentation, Targeting And Positioning

Market segmentation, targeting and positioning

Introduction

You must have ever wondered why marketers only target certain markets and how these markets are identified. Think about universities: how do they identify which students to touch with about degrees schemes? What criteria or base (variables) do they use? Do they base it on where you live, your age, or your previous schooling scores? Do they market to postgraduate and undergraduate groups differently, what about international and domestic student groups----is this difference important for the effective marketing of higher education services to students?

This essay gives a brief answer to it. Firstly it introduces market segmentation and its methods; then it describes how to identify market differentiation. Thirdly, it introduces how to target a market and the judgement criteria and also puts forward targeting approaches and how to implement the positioning of the target market as well, finally 2 examples are given to support the above view.

This essay is intended to provide a simple understanding about market segmentation for readers.

Market segmentation

Market segmentation is the division of a market into different groups of customers with similar needs. Or to express it in another way, market segmentation is the division of a mass market into identifiable and distinct groups or segments, and each has common characteristics and needs and displays similar response to marketing actions. The purpose of market segmentation is to leverage scarce resources; or to ensure that the elements of marketing mix (price, distribution, products and promotion) are designed to meet specific needs of different customer groups. For companies have limited resources it is not possible to produce all possible products for all the people all the time. The best way is to provide selected offerings for selected groups of people most time. This allows companies to focus on particular customers’ needs in the most efficient and effective way (RIES and TROUT, 1972).

There are two main approaches to segmenting markets. The first adopts the point of view that the market is considered to consist of customers which are basically the same, so the task is to identify groups which share detail differences. This is referred as the breakdown method. The second approach considers a market to consist of customers that are all different, so here the task is to find similarities. This is known as the build-up method. Nowadays these 2 methods become similar in some way. The aim of both methods is to identify segments in the market where identifiable differences exist between segments and similarities exist between members within each segment.

Other segmentation researchers have distinguished between a priori or post hoc segmentation methods (Green, 1979). For the former, segments are predetermined using the judgment of the researchers beforehand (i.e. a priori). The procedure encompasses 7 stages as followed: в' seletion of the base (a priori) for segmentation (e.g. demographics, geographic); в'ÐŽselection of segment describing words; в'Ñžsample design---mostly using stratified sampling methods and occasionally a quota sample; в'Јdata collection; в'¤forming the segments based on a division of respondents into categories; в'Ґsetup of the profile of the segments using multivariate statistical methods (e.g. multiple discriminate analysis, multiple regression analysis); в'¦translation of the findings about the segments’ size and characteristics into specific marketing strategies. For the latter, the process is slightly different from the former, the segments are deduced from the research and the flow is as follows: в' sample design---mostly using quota or random sampling methods; в'ÐŽidentification of suitable statistical ways of analysis; в'Ñž data collection; в'Јdata analysis: forming distinct segments using multivariate statistical methods; в'¤ establishing the profile of the segments using multivariate statistical methods (e.g. factor analysis ) and selection of segment descriptors; в'Ґ translation of the findings about the segments’ size and characteristics into specific marketing strategies.

Every step of the above is important in establishing an effective segmentation, especially the data collection must be from customers in a wide scope. Only through the accurate information can companies know what offerings can be provided to the target market.

How to identify the characteristics of consumers

To segment markets, we must know about customers and collect the data and use market information in brands. As shown in the following figure, companies normally use the following segmentation bases(variables) for segmenting market: profile (e.g. who are my market and where are they?); behavioral (e.g. where, when, and how does my market behave?); and psychological criteria (e.g. why does my market behave that way?). (Elizabeth C.Thach, 2006)

Figure: Segmentation criteria for consumer markets

In order to understand the above figure in details, let’s analyze the picture item by item, see the following table for reference:

Table: Segmentation criteria for consumer markets in details

Base type Segmentation criteria explanation

profile Demograhic Age, sex, occupation, level of education, religion, social class and income characteristics etc., this item determines a potential buyer’s ability to purchase a product or service

lifestage Based on the fact that people need different products at different stages in their lives ( childhood, adulthood, young couples, retired)

geographic The needs of potential customers in one area are different from those in another area, due to climate, customs etc.

geodemographic A relationship between the type of housing and location that people live in and their purchasing behaviours.

psychological Psychographic or lifestyles From customers’ activities, interests and opinions, we can know individual lifestyles and behaviour patterns, and this in turn affect their buying behaiviour and decision-making processes.

Benefits sought From customers’ motivations in purchases, we can know the benefits customers get from product