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Lesson 5: Marketing Strategy-STP
Lesson 5
The purpose of this lesson is to create understand of the core of
Marketing strategy
Lesson 5
1. Segmentation
2. Targeting
3. Positioning
• These three issues lie at the very heart of
developing a successful marketing strategy.
• The effectiveness of planning in these areas
determines whether the business will succeed
in its markets or not.
What is Market segmentation?
• Market Segmentation is the subdivision of a large market into
homogeneous sub-set of customers, where any subset may
conceivably be selected as a market target to be reached with
distinct Marketing Mix (Kotler, 2008).
• It entails dividing the entire market into small parts with more
or less similar features.
• It is the way to group together the buyers, who have common
needs in order to serve them better based on their common
needs and characteristics
Segmentation cont…..
 Customers are not a homogeneous group because: – Different types of customers have different needs.
– Different categories of customers have different price
– Different types of customers respond to different marketing
activities and programmes differently
 Customers are therefore a heterogeneous group.
Segmentation cont….
– Different categories of customers react differently to different
marketing activities.
• Identifying and taking advantage of these differences between
customer groups or segments is the key to profitable marketing
• Every organization must therefore
Sub divide its entire market for all its
Customers and offer products at prices that are
Acceptable to every one of its market segments
• Procter and Allan (the cereals company) can segment its
market as follows
- Institutions e,g Hotels, Restaurants, boarding learning
- Large supermarket chains
- Wholesalers
- Convenience stores etc
Qn. How can a bank like KCB or Equity bank segment its market?
• Using Inter-continental hotel, come up with different market
segments that the hotel can service
Criteria of Market Segmentation
• Measurable
A segment should be measurable. It means you should be able
to tell how many potential customers and how many
businesses are out there in the segment.
• Accessible
A segment should be accessible through channels of
communication and distribution like: sales force,
transportation, distributors, telecom, or internet.
Segmentation Criteria cont..
• Substantial
Make sure that size of your segment is large enough to warrant as a
segment and large enough to be profitable
• Differentiable
Segments should be different in their response to different
marketing efforts (Marketing Mix).
• Actionable
The firm must have an ability to draw an effective marketing
program for its customers
Benefits of Market Segmentation
• Market segmentation facilitates formation of marketing-mix which is
more specific and useful for achieving marketing objectives.
• Facilitates introduction of effective product strategy: Due to market
segmentation, product development is compatible with consumer
needs. Market segmentation facilitates the matching of products with
consumer needs.
• Facilitates the selection of promising markets: Market segmentation
facilitates the identification of those sub-markets which can be served
best with limited resources
Segmentation benefits cont…
• Provides proper direction to marketing efforts. Due to segmentation, a
firm can avoid the markets which are unprofitable and irrelevant for its
marketing purpose and concentrate on certain promising segments only
• Facilitates effective advertising: Advertising media can be more
effectively used because only the media that reach the segments can be
employed. It makes advertising result oriented.
Segmentation benefits cont…
• Facilitates optimum use of resources: Market segmentation facilitates
efficient use of available resources.
• It enables a firm to use its marketing resources in the most efficient
manner in the selected target market.
• The marketing firm selects the most promising market segment and
concentrates all attention on that segment only.
• This offers best results to the firm in terms of sales and profits
Levels of segmentation
Mass Marketing
• This is where a company targets the whole market with its
products and services without considering any unique
differences in customers
• It involves mass production, mass distribution and mass
promotion of the products in the same way to all consumers
• Was optimoized by Henry Ford when he offered the Model T
Ford to all buyers - ‘they could have the car in any colour as
long as it was black’
Mass Marketing
• Initially coca cola also offered Coke in only one variant to the whole
• Mass marketing was believed to create a wide market with low costs of
targeting thus lower prices and higher margins
• This argument was challenged due to many benefits of segmentation
Market Segmenting
• Consists of a group of customers who share a similar set of
needs and wants.
• Identifiable group within a Market with Similar
- Wants
- Purchasing Power
- Geographical Location
- Buying Attitudes
Niche Marketing
• Group of customers seeking a distinctive mix of benefits and are ready to pay
extra premium.
• A niche is a more narrowly defined group, defined by dividing a segment into
sub segments or by defining a group with a distinctive set of traits that may
seek a special combination of benefits
• E.g. the utility vehicles segment might include light-duty pick up trucks and
sports utility vehicles (SUVs). The sport utility vehicles sub segment might be
further divided into standard SUV (as perceived by Ford and Chevrolet) and
luxury SUV ( as served by Lexus) niches
• Niches are smaller and only attracts very few competitors unlike in mass
Micro Marketing
• Is the tailoring of products and programmes to suit the taste of specific
individuals and locations
• It includes local marketing and individual marketing
• Local marketing is the tailoring of brands and promotions to meet the
needs and wants of local customer groups e,g cities, neighborhoods,
stores etc
Micro Marketing
• Individual marketing involves tailoring of products and programes to
meet needs and preferences of individual customers
• It’s also known as one-to-one marketing or customized marketing
• Examples of individual marketing is with tailors customizing specific
suits for individual customers, furniture shops making products
according to tastes of individual customers etc – not one fits all
Bases of segmentation
• There are number of variables involved in consumer market
segmentation which are:
• Geographic variables
• Demographic variables
• Psychographic variables
• Behavioral variables
Geographic Segmentation
• Market is divided into different geographical units like:
- Regions (by country, nation, state, neighborhood)
- Population Density (Urban, suburban, rural)
- City size (Size of area, population size and growth rate)
- Climate (Regions having similar climate pattern)
• A company, either serving a few or all geographic segments, needs to put
attention on variability of geographic needs and wants.
• After segmenting consumer market on geographic bases, companies localize
their marketing efforts (product, advertising, promotion and sales efforts).
Demographic segmentation
• Market is divided into small segments based on demographic variables like:• Age, Gender, Income, Occupation, Education, Social Class, Family size, Family
life cycle, Home Ownership, Religion, Ethnic group/Race, Nationality.
• Demographic factors are most important factors for segmenting the
customers groups.
• Consumer needs, wants, usage rate etc, all depend upon demographic
variables thereby making considering demographic factors, while defining
marketing strategy, very crucial.
• Qn. Class to share examples of demographic segmentation
Demographic segmentation cont..
• As people age their needs and wants
• Some organizations develop specific
products aimed at particular age groups
for example diapers for babies, toys
for children, clothes for teenagers and
• Gender segmentation is commonly used
within the cosmetics, clothing and
magazine industry.
Psychographic Segmentation
• These are defined on the basis of social class, lifestyle and personality
• Psychographic variables include:
- Interests
- Opinions
- Personality
- Self Image
- Activities
- Values
- Attitudes
Lifestyle groups
Yuppie Associations
• Mobile phone brands
• High valued house/apartment
• Good Salary
• ‘Young’ branded car.
Golden Agers' Associations.
• Over 60's, often empty nest
• Retired early from profession.
• Have more time to spare
• Adventure Seekers
Behavioral segmentation
• Refers to why people purchase products or services
• In this segmentation market is divided into segments based on
consumer knowledge, attitude, use or response to product.
• Behavioral variables include:
- Usage Rate
- Product benefits
- Brand Loyalty
- Price Consciousness
- Occasions (holidays like mother’s day, New Year and Eid)
- User Status (First Time, Regular or Potential)
Behavioral segmentation cont…
• Behavioral segmentation is considered most favorable segmentation
tool as it uses those variables that are closely related to the product
• OCCASIONS - Weddings (Cakes, flowers, attires etc)
• BENEFITS – Shampoo for hair conditioning, cleaning , hair fall dry hair,
dandruff control etc
• USER STATUS- light – medium – heavy user
• LOYALTY STATUS- hardcore loyal , split loyal- loyal to 2-3 brands, shifting
loyal, switcher
 Once you have chosen a possible segmentation scheme, then ask:
– How could we modify our products or services to make it more
attractive to each separate group?
 You must also prepare a profile for each brand and the segment it
 Consider also the price you could offer for each segment.
• Is there an opportunity to get a premium price?
• Premium product or service offerings must be clearly
differentiated in their offerings so as to attract a premium price.
• How can we build an enduring reason for preference among
target customers in the marketing strategy
Targeting: Evaluating Market Segments
• Market segmentation reveals the market segment
opportunities facing a firm.
• The firm now has to evaluate the various segments and decide
the number of segments to cover and the ones to serve
Target market evaluation
• Segment Size and Growth (Analyze sales, growth rate and
expected profitability.profitability.
• Segment Structural Attractiveness (Consider effects of
competitors, availability of substitutes products and the power
of buyers and suppliers.Pros and, the Power of Buyers & Suppliers.
• Company Objectives and Resources
– Company skills & resources relative to the segment(s).
– Look for Competitive Advantages.
Targeting cont…
• After evaluating different segments, a company must decide on one or
more market segments worth entering.
• It must then decide which and how many segments to serve.
• A target market consists of a set of buyers sharing common needs or
characteristics that the company decides to serve.
• The company can adopt one of three market-coverage strategies:
- Undifferentiated marketing,
- Differentiated marketing or
- Concentrated marketing.
Undifferentiated marketing
• A company might decide to ignore market segment differences
and go after the whole market with one market offer.
• It focuses on what is common in the needs of consumers
rather than on what is different.
• Is also known as mass marketing
• This tends to apply to commodity products
Differentiated marketing
• A company decides to target several market segments, and
designs separate offers for each.
• By offering product and marketing variations, it hopes for
higher sales and a stronger position within each market
• A company considers differences in customers and designs
offerings for individual markets
Concentrated marketing
• Is especially appealing when company resources are limited.
• Instead of going after a small share of a large market, the
company goes after a large share of one or few sub segments
• E.g marketing a product specifically for teenage girls, or a
retailer might market his business to residents in a specific
• Concentrated marketing strategies are often geared for smaller
groups of people, because they are designed to appeal to a
specific segment.
Choosing a market coverage strategy
• Issues to be considered include: i. Company Resources
ii. Product variability
iii. Product’s stage in the Product Life Cycle
iv. Market variability
v. Competitors’ marketing strategies
• Answers to the above enables better and profitable targeting that
ensure complete satisfaction of the customers
• This leads to positioning as a marketing strategy
• Positioning is not what you do to a product but what you do in
the minds of your consumers
• Product’s Position - the place the product occupies in
consumers’ minds relative to competing products; i.e. Volvo
positions on “safety”.
State one word that comes to mind
Importance of Brand Positioning
• Consumers are overloaded with information
about the products and services
• To make buying decisions simpler, consumers
organize and categorize i.e. Position products
and services in their minds.
• A products position is complex set of
perceptions, impressions and feelings that
consumer have for a product compared with
competing products.
Brand Positioning and the Consumer
• Consumers position the products with
or without the help from marketers
• But its risky to leave the products
positioning to chance…
• Hence, marketers plan a position that
will give the product the greatest
advantage, and design marketing
mixes to create these planned
Brand Positioning results in
The creation of a
• A persuasive REASON WHY the target market should buy the product
Effective Brand Positioning
• Meaningful to consumers – Clarifies what the brand is about
• Credible/believable – Why customers should purchase and use the Brand
• Unique to your brand
• Durable over time
If a company decides to build a position it must
deliver that position and maintain it through
consistent performance and communication
Brand Positioning
Starts with…
A Competitive Frame of Reference
And then looks at
Points-of-Difference and Points-of-Parity
Brand Positioning Strategy
Competitive Advantage
Point of Difference
Point of Parity
1. Competitive Advantage
Competitive Advantage can be gained to the extent that the company can position itself as “providing
superior value” by differentiating along the lines of products, services, people or image
How many differences to promote?
• Aggressively promote one benefit to target market.
• Companies should develop a Unique Positioning for each brand and stick to it.
However, if two or more companies claim to have same brand
positioning, then the companies should position themselves on
more than one differentiator attribute
1. Competitive Advantage
Which to promote?
Affordable (to company and consumer)
2. Points of Difference (POD)
• Points of difference are attributes/ benefits that consumers strongly associate with a brand/product,
positively evaluate, and believe that they could not find to the same extent with a competitive
• Points of difference are usually in line with the Brand Positioning and are critical in defining the
competitive advantage of your products.
E.g. Fast-food chain Subway offers healthier meals than other quickserve restaurants because its sandwiches have fewer grams of fat
2. Points of Difference (POD)
The sources of difference can be
Product Design
Additional Services
People (Staff)
3. Points of Parity (POP)
• Associations that are not necessarily unique to the brand but may be shared with other brands.
• While POPs may usually not be the reason to choose a brand, their absence can certainly be a reason
to drop a brand.
Category point of parity
means that the brand offers
necessary but not necessarily
sufficient category features.
E.g. A bank will not be suitable,
for example, unless it offers
adequate ATM service.
Competitive point of parity is
designed to negate a
competitor’s point of difference.
E.g. Lifebuoy soap will establish
competitive POP with Dettol
soap by claiming that it has germ
killing qualities and vice versa.
In Fast-food outlets
More menu
Higher quality
Similar menu choice,
similar in-store facilities,
similar pricing
Brand Positioning - Differentiation
Marketers must choose which level of a Brand’s POD to highlight
(What a
brand does)
Social Image)
I am a
good Mom
My children
will love me
Or this?
Brand Positioning Statement
The outcome of the process of creating a value
proposition is a Positioning Statement:
For (Target consumers)
Who (have the following problem)
Our product is a (describe the product/solution)
That provides (cite the breakthrough capability)
To family oriented adult car owners concerned with safety,
Michelin Tires are the premium tires that can provide
greater peace of mind
Overall Brand Positioning Strategy
• Consumers want product and services that
give them greatest value
• Hence, companies should position their
brands on key benefits that they offer
relative to competing brands.
• The full positioning of a brand is called the
brand’s Value Proposition – the full mix of
benefits upon which the brand is
Brand Positioning Mistakes
• Under-positioning:
– Not positioning strongly enough.
• Over-positioning:
– Giving buyers too narrow a picture of the
• Muddled Positioning:
– Leaving buyers with a confused image of
the product.
Brand Positioning Concepts
• Functional Positions
- Solve problems
- Provide benefits to customers
- Get favorable perception from stakeholders and customers
• Symbolic Positions
- Self image enhancement
- Ego Identification
- Belonging/Social Meaningfulness
• Experiential
- Provides sensory stimulation
- Provides cognitive stimulation
By using customer research and perception mapping a marketer can create a
positioning statement using one of the three main bases above
As a mother who cares about the health and well being of
those you love,
Dettol is the one you know you can trust to protect them
from harm, by safely removing the germs that cause ill
and because it is recommended by medical experts, you
can rest assured that you, your family and home are
healthy, clean & protected.
Coca-Cola: It’s the real thing
“For people around the world, Coca-Cola is the soft drink that has been the real thing
since 1886.”
Figure 16: An example of a Coca Cola advertisement that brings to life the positioning
proposition. (Source:
AXE: The AXE effect
“To young men on the prowl, the AXE brand of body spray will give you the
confidence to attract and get the girl you desire.”
A good positioning statement
Be real and credible;
Reflect the way people really think and use real language;
Be simple, specific, and consistent (while still being competitive);
Say something that indicates how you can offer a solution to your target
• Be unique (just because a competitor can make the same claim, it does
not mean that you cannot);
• Avoid generic words that are really quite meaningless (e.g. unique); and
• Be tangible, vivid, snappy, and specific.
Effective Positioning
Meaningful to consumers
Unique to your brand
Durable over time
If a company decides to build a position it must deliver that
position and maintain it through consistent performance and
Segmentation, Targeting and Positioning Applied
A flour manufacturing company is looking to introduce a range of
porridge products in the market. It chooses to segment possible
markets according to age groups including:
a) Infants (0-5 years)
b) Children (6-12 years)
c) Teenagers (13-19 years)
d) Adults (20-55 years)
e) Elderly (56-99 years).
Segmentation, Targeting and Positioning Applied
Based on market research the most viable segments in terms of
size and likely hood of consumption are infants, children, adults
and the elderly. The company therefore chooses to target these
markets by creating products that will uniquely suit their needs.
Segmentation, Targeting and Positioning Applied
In positioning these products, the company looks at the unique
needs of each target market and therefore develops the
following positioning statements:
a) For infants, porridge W provides all the nutritional needs
required for proper growth and development of all vital
organs in the body.
b) For children, porridge X is a tasty nutritional easy to make
breakfast option that will provide energy required throughout
the day for school and play.
Segmentation, Targeting and Positioning Applied
a) For adults, porridge Y provides a healthy food option that
helps in healthy weight maintenance whilst also providing
nutrients not easily found in other foods.
c) For the elderly, porridge Z is an easy to consume and digest
food option allowing for easy bowel movement and meeting
all nutritional needs.
 Market segmentation, Targeting and positioning are at the heart of modern
 Successful profitable marketing depends on asking and getting good
answers two questions:
– What is target market segment?
– What are we going to offer customers in this segment to make them prefer us to
—If you answer these two strategic questions properly, the rest of the
planning is very straightforward.