Ineffective marketing segmentation can have lasting effects and be the cause of many lost opportunities. Therefore it is essential that there is clear and perceived value in the segmenting process. It is of primary importance that the appropriate segmentation characteristics are identified and that time is not wasted and investment is not lost in the selection of the incorrect or inappropriate segmenting variables. For example, there is little point in segmenting a homogeneous market, as it does not provide the basis for effective segmentation.
Therefore the following criteria should be adhered to:
Specific Clearly identified, broken down into a number of meaningful groups Measurable Each group should be quantifiable in order for the organization to identify
opportunities and forecast the future
Achievable The segments themselves need to achieve organizational objectives, they will therefore need to be viable groups and accessible
Realistic What is achievable in the name of segmentation must be realistic in terms of resources, and with a clear indication that customer expectations can be met Timebound Appropriate segments of the market must be targeted in an appropriate and timely
way and in line with the organizational objectives.
While marketing segmentation can be a very process-driven exercise, it will require a degree of common sense and perhaps even a number of related assumptions, in order that the market can be closely defined.
Ultimately the benefits of segmentation are significant and they include:
o It allows target markets to be mapped against organizational competences o It helps identify gaps within the marketplace
o It enables marketers to match the product/service to their customer – a basis of
competitive advantage
o It provides an opportunity for mature/declining markets to identify possible growth
segments
o The failure to segment can reduce competitive strength.
Targeting
Targeting is the process that involves evaluating the attractiveness of a range of potential market segments that have been identified in terms of being commercially viable.
Definition
Targeting – The decision about which market segment(s) a business decides to prioritize for its sales and marketing efforts (Dibb, Simkin, Pride and Ferrell, 2001).
Each organization has several options when deciding on which segment specifically to target:
o Organizations could concentrate on making one product for one market and having one
marketing plan or programme – this is known as undifferentiated marketing or even mass marketing.
o The organization could concentrate its efforts on one market but have a number of
different versions of each product – This is known as differentiated marketing.
o Another alternative is to have a product that meets the need of each segment within the
market with a specific product – this is known as target marketing.
o Concentrating efforts on a small and carefully chosen segment, often referred to as a
niche and the basis of a ‘focus’ strategy.
Targeting in essence is where we identify a number of different segments within the market, whereby a sustainable competitive advantage can be built.
In ascertaining the appropriate target market strategy, the organization must take into con- sideration the following six components:
1. Customer needs, wants and expectations 2. Product market – size and structure 3. Brand strength and market share 4. Company capability
5. Competitive rivalry
6. Economies of scale – production and marketing.
The organization must, through market research, identify which is the most appropriate target, which they can effectively manage to meet the customer needs and wants, in a cost-efficient and effective way, in order that they can meet the corporate goals of the organization.
Segmentation is not an exact science, and will require a balanced view of market conditions, clear and precise criteria for assessing segmentation attractiveness and an understanding of the key components that will enable successful target marketing.
Question 3.5
o Why is it so vital for an organization to undertake segmentation and targeting activities? o What would be the effect of failing to undertake segmentation and targeting?
Positioning
Earlier on in this unit, we looked at the concept of market positioning strategies. Here we want to look at the source of positioning, starting with the product.
Definition
Positioning – The act of designing an offer so that it occupies a distinct and valued place in the minds of the target customers (Kotler et al., 1998).
Simplistically, positioning refers to how you present your product or services to the market- place, it is almost a state of mind, a perception, it is something you as a marketer have to create in the minds of your target audience.
When establishing a positioning strategy there are a number of steps that can be taken in preparing a positioning plan.
o Identify all of the segments within the market
o Decide which segments are the most suitable to target, based upon marketing research
information
o Ensure that the organization clearly understands the customer requirements
o Develop a product or service that specifically meets the needs of the target audience o Identify benefits, usage, user category, competitive positioning components
o Evaluate how the product/service is positioned in the eyes of the target group o Identify an image that matches the requirements of the customer
o Promote the product to the target audience, establish relationships, aim for customer
loyalty.
Pivotal to the success of positioning is the ability to differentiate your products and services from those of your competitors.
From a competitor perspective, there needs to be a comparison of competitor positioning, which means that as a marketer you should:
o Determine competitive positioning o Examine the competitive dimensions o Determine the customer positions
o Understand and identify the positioning decision o Track the positioning strategy.
This will ultimately enable you to monitor competitor positioning and take the necessary retaliatory action.
Perception is a vital component of positioning strategies and therefore it is helpful for organiza- tions to try to represent the similarities between products or services and try to ascertain what the differences are, in respect of position. The key tool to support this process is a perceptual map (see Figure 3.4).
You will see when looking at the perceptual maps that there are four perceptions to be considered:
1. High price and high quality 2. High quality and low price 3. Low price and low quality 4. High price and low quality.
Figure 3.4 Perceptual positioning map
What effectively happens with a perceptual map is that it represents similarities and differences between products/services and ultimately it highlights where products are similar/dissimilar. As we can see here, the service offered by British Airways and Cathay Pacific is of a very high standard. The accommodation and service on board in a British Airways flight is aimed at meeting customer expectations at a high level, which is primarily the executive market. British Airways are known for their superior service in executive, business and first-class flights. But obviously this all comes at a premium. Therefore in this instance British Airways have positioned themselves as premier quality, premium priced. Cathay Pacific seek to achieve the same positioning.
At the lower end of the scale, we have BMI Baby, Ryan Air and EasyJet to name but a few. Therefore for a ‘no frills’ brand, they are actually positioning themselves as an economy brand, ‘low-cost airline’. However, in reality their positioning is somewhere between economy and high price, which is a slightly confused positioning. Other factors to consider with ‘no frills’ is the additional expenses customers incur while in flight, that is they add on expenses of food and drink. Of course, in terms of positioning, reliability will play a significant factor in the minds of the consumer, in respect of value for money, something for which easyJet received extremely poor publicity during the early part of 2001, through the range of television programmes that focused on a day in the life of easyJet.
Whilst positioning is a positive activity from both a customer and a competitor perspective, it is not an exact science. In positioning your organization you are raising an expectation in relation to the level of product or service quality you might offer. The important element of that is achieving the expectations that you have established in the eyes of the consumer.
Plotting on the perceptual map in Figure 3.4 is based upon the perceptions of customers, but it is also useful to consider this from a competitor perspective. Plotting competitor positioning on a perceptual map will enable you to further understand the role and positioning of your competitors, enabling the organization to have a clear understanding of the nature of the
competition and, of course, where to attack. However, remember that when you attack, positioning is something that has to be sustainable, therefore in attacking a competitor it has to be more than a short-term activity and part of a longer-term strategy to compete on product and market positioning.