Review Paper on: Segmentation Targeting and Positioning

Market segmentation is defined by Kotler and Armstrong (001, p.44) as Dividing a market into distinct groups of buyers on th e basis of needs, characteristics or behavior who might require separate marketing mixes. These needs, characteristics, and behavioral factors, which signify different demands, come from a multitude of different reasons. The main profilers used to segment the consumer markets are Geographic, Demographic, Behavioral and Psychographic factors. On the other hand organizational market profilers are Industry, Type of Organization, Size, Geographic, Application, Usage and Purchasing Organization factors. (Doyle 14) Now the question is; why segment the market instead of mass marketing the same product? The best-known example of Mass Marketing or Undifferentiated Marketing is told by Kotler and Armstrong (001). They go on to use the example of Henry Fords marketing strategy of the Model T Ford. When he put the car into production, he told the customers, they could have the car in any color as long as it is black. This though was many years ago; Ford has progressed and produces many different models today. An example of a company who still uses the Mass Marketing technique is outlined by Wilson and Gilligan (17). Black & Decker faced a drop in its worldwide share of the power tool market from 0% to 15% as more Japanese firms began to compete by marketing in a more aggressive manner than Black & Decker. As a result of this Black & Decker moved away from a policy of customized products for each market and instead focused making a smaller amount of products that could be sold everywhere which the same basic marketing approach. From this example it can be seen that not breaking down the market in terms of product, works for some companies whilst also satisfying customers, hence the increase in market share for Black & Decker. Ultimately segmenting the market is the first step to giving the firm the ability to better match the customer needs, enhance profits, enhance opportunities for growth, retain customers and target communications (Doyle 14).More customers satisfied equals marketing more effectively. Market segmentation involves the grouping of customers with similar needs and buying behavior into segments, each of which can be reached by a distinct marketing programmed. The concept attempts to reconcile differing customer needs with limited company resources, and allows product and marketing offerings to be adjusted to suit different customer groups (Wind, 1978). The theoretical grounding for market segmentation comes from economic pricing theory, which indicates that profits can be maximized when prices that discriminates segments are set (Frank et, al., 1972).According to Kotler (1994), companies from all industries are increasingly embracing target marketing. This has followed a natural progressionMass Marketing, where one product is produced and sold to all buyers and Product-differentiated marketing where more than one product, with different features, styles and characteristics are produced for offer to a variety of buyers. The essence of target marketing is that customers are heterogeneous in their buying requirements and behavior, and therefore these companies will be in a stronger position to serve certain customer segments.To some people, cleaning and bleaching power are most important; to others, fabric softening matters most; still others want mild, fresh-scented detergent (Kotler & Armstrong 001, p.44) Hence there are different groups or segments of the washing detergent buyers and each of these seek a different combination of benefits. Proctor & Gamble have recognised this and have gone on to produce eight different brands of detergent to satisfy these markets (Kotler & Armstrong 001). Lesser and Hughes (186, The Generalizability of Psychographic Market Segments Across Geographic Locations. Journal of Marketing. 50(January) 18-7) study summarises that segmentation plays a vital role in contributing to corporate planning, but there has not enough research into it to make enough generalizations to contribute to the advancement of Segmentation Theory. Market segmentation is important in order for a companys marketing strategy to work properly (Weinstein 1994, Gunter & Furnham 1992). This is because old traditional class patterns no longer exist and consumers have more income to spend. It is therefore important to divide consumers into segments that are more manageable and based on the needs of the segment. This also enables the further developing of the product to the right direction. Targeting all consumers would lead to unnecessary effort to attract consumers and high advertising expenses. It is necessary for companies to understand the consumer segment that they are focusing on regarding factors as age, values, purchase behavior, attitudes and so forth, in order to become successful. (Gunter & Furnham 1992).Demographic segmentation is one of the most widely used ways of dividing consumers into segments (Gunter & Furnham 1992, Kotler & Armstrong 2001, Weinstein 1994). In general when speaking about demographic factors mostly demographic and socio-economic factors are combined together as one. Socioeconomic factors differentiate consumers by economical factors and social classes into segments (Gunter & Furnham 1992, Weinstein 1994). In demographic segmentation the consumers are divided by their age, gender, income, education, religion and life-cycle stage into different segments (Gunter & Furnham 1992, Kotler & Armstrong 2001, Peattie 1995).Demographic segmentation is commonly used by companies as the factors are easy to identify and measure. For example it is easy to estimate a persons age and know what gender the person is. This makes it easier and less costly for companies to gather information about the consumer. (Gunter & Furnham 1992, Kotler & Armstrong 2001)However, relying only on demographic factors has been criticized for being an untrustworthy segmentation strategy. People with the same demographic factors may differ greatly from each other, base on their beliefs and attitudes. The research results regarding demographic factors and their influence on consumer behavior, especially regarding environmental products, are unclear and not always in correlation.(Straughan & Roberts 1999)Another method used to identify and study consumer segmentation is psychographic segmentation. Psychographics where mainly developed by researchers in the late 1960s in order to provide a better picture of what consumers think and believe( Sulekha Goyat , 2011). In the beginning motivation and personality research was used but because of small samples and low correlation they did not provide accurate information about consumer behavior and the segments. In psychographic segmentation values and lifestyles of the consumer are examined. (Gunter & Furnham 1992) However researcher still debate on what constitutes as psychographics

and what does not (Weinstein 1994). The psychographic factors are more difficult to notice compared to the demographic factors but usually believed to be a more accurate way of identifying consumer segments. Psychographic factors are for example social class, political orientation, personality characteristics, altruism and environmental concern. (Straughan & Roberts 1999) Psychographics have also been called lifestyle or activity and attitude research. Some researchers use activities, interests and opinions when others values and trends in order to determine psychographic segmentation. (Weinstein 1994) Psychographics enables the marketing research to draw a better picture of the consumer segments as psychographics analyses consumer behaviour, what are the motives of the consumers, and why do they act as they do? Companies many know who buys their product but not why theses specific consumers buy. (Weinstein 1994) It is necessary for researchers and companies to better understand how the consumer think and believe. By combining this information to geographic or demographic information a much better picture of the segments can be obtained. (Gunter & Furnham 1992, Weinstein 1994) Having segmented the market the strategist is faced with a series of decisions on the amount of and which segments to approach. The Strategists main concern is choosing a target would be profitable (Wilson & Gilligan 17). Three factors which the strategist will have to consider are the size and growth potential of each segment, their structural attractiveness and the organisations objectives and resources in coming to a final decision on which segments to target (Wi lson & Gilligan 17, p.7). Referring back to the AMA definition of marketing, they say that marketing involves satisfying organisation objectives. The importance of targeting is so choose the correct segment(s), which fulfil the company objectives. Effective marketing would be achieved if the strategist chose the right segment or segments to target, which would reach the company objectives. However each company has different objectives, and to demonstrate a company objective which each company, excluding non-profit organisations have, one can use Profit. The strategist would then assess the profit potential of the segments, for instance using Porters Five Forces Model (McDonald 1). The company would now have to decide which and how many segments to serve, which is the problem of target market selection (Kotler & Armstrong 001). The firm can adopt one of three market coverage strategies, Undifferentiated Marketing, Differentiated Marketing or Concentrated Marketing (Kotler & Armstrong 001, p.66). Choosing the correct marketing strategy will depend on the type of product you have to supply. Undifferentiated marketing has already been explained. Differentiated marketing is when the company adopts several segments to market to and provides separate offers for each. The example of Proctor & Gamble was used before, another example of a company marketing effectively to many segments is Nike, who supply training shoes to many different market segments including Soccer, Basketball, Aerobics, Martial Arts and many more (Nike. Available at URL http//www.nike.com[Accessed 16 November 00]). By offering these product variations, these companies hope for increased sales and a stronger position within each market segment. For instance Proctor and Gamble obtain a higher market share with eight brands than they would if they only made one. Nevertheless operating differentiated marketing usually increases costs to the business, for example it would cost more to produce 10 units of 10 different products rather than 100 of the same product (Kotler & Armstrong 001, p.66). Thus to market effectively the company must weight the increased costs against increased sales to market effectively. (Kotler & Armstrong 001)Concentrated Marketing is when the company focuses on one or a few segments or niches rather than going for a small share of a large segment. This type of marketing is especially appealing when there are limited company resources (Kotler & Armstrong 001). An example of this is Steve Warringtons business which sells everything ostrich and generated in e xcess of $4 million revenue in 000. Today the low cost of setting up an Internet company makes it increasingly possible to serve seemingly minute niches (Kotler & Armstrong 001, p.67). It is important to locate the correct segment for your product and company to move into, it can lead to being able to move in quickly to dominate a niche or that you can dramatically increase your market share by offering many products to many segments. On the other hand you may realise that your product is what everyone wants, for example Petrol, whether your car is a Lada or a Rolls Royce petrol will make it go and you dont need to segment and offer different products (Brassington & Pettitt 000, p.18). Finally once the market has been segmented and a segment or segments targeted by the company, they have to identify the positioning concept within each target segment and select and develop the appropriate positioning concepts for each (Wilson & Gilligan 17). This will relate to task of ensuring the compan ys products operate a planned-for place in the chosen segments appropriate to its competition. This notion of positioning is applicable to both consumer and organisation markets and each share the same assumptions which are that all products and brands have subjective and objective attributes and potential customers may think about one of these attributes when deliberating whether to buy the respective brand or product. The potential customers will also have predetermined views on the attributes of the various competing products, which they will assess the new product by (Lancaster & Reynolds 18). The company would build a position for itself by following the three steps outlines by Kotler & Armstrong (001, p.70) and acting upon their results. Identification of a set of possible competitive advantages upon which to build a position, choosing the right competitive advantages, an selecting and overall positioning strategy. The company must then effectively communicate and deliver the chosen position to the market.It is important that the companys positioning plan is not flawed, as this is the final stage before putting the product actually on the market shelf. Creating a product image not suited to the target segment could mean abso lute failure due to the product itself not being properly thought through (Brassington & Pettitt 000). For example the work of Pring (see Brassington & Pettitt 000, p.64) gives an example of a failed product from MD Foods. He explained that the results gained from test marketing are not the same as what may happen in the real comsumer environment. The company had to withdraw its cultured dairy product Gaio as consumer groups disputed its claims that to have lower cholesterol levels. Not enough outside factors were taken into consideration prior to the launch of the product, and it led to its failure. The way in which a company positions its product is vital, it must be done correctly or the whole marketing process beforehand, segmenting the market and choosing the target segments can be a waste of time. Doyle (14) recalls the problem IBM faced when the personal computer prices began to decline in the early 10s. Instead of threatening their own high price brand image they instead, created a ne w company under IBM called Ambra, effectively cloning the IBM machine but selling it at a much lower price to satisfy the

booming mass and economy markets. A well- developed strategy of market segmentation, targeting and positioning together would enable the company to market effectively, in the way in which its customers needs and wants are satisfied and the organisational goals are realised. A wide variety of processes have developed to segment the market, target the most long-term profit potential customers and to enable the product to be positioned so it will be a success. Although as there is no definite product, which always needs these strategies, one can realise that it is important to use them because it will allow increased potential for the companys objectives to be realised as well as ensuring you r potential customers will be satisfied, thus your marketing will be effective.

Segmentation barrier
The customer data necessary for segmentation may not be available. Additionally, once the gaps in the organisations database have been identified,it may be difficult to find viable processes to address those gaps. Where data is available, in some cases, it is more accounting rather than marketing driven. This data shortage may force insurance companies to continue with relatively simple forms of segmentation which, while they are practical, are likely to overlook important issues which could enhance the insurance companies understanding of the customer needs and profitability. The need for a comprehensive customer database in the financial service sector is key to segmentation and to the understanding of customers in general.

Targeting barrier
The insurance companies may find that it is not appropriately positioned to make best use of segmentation. Effective segmentation requires clear strategic objectives, and a willingness to embrace customer selectivityall with strong senior management support

Positioning barrier
There may not be a good fit between the chosen segmentation approach and the distribution channel that the insurance companies use to reach its customers. (Festus M Epetimehin ,2011)

Summary
We can now appreciate how marketing begins to work. Having defined the purpose of segmentation we have looked at the obvious and the less obvious bases for segmentation in both consumer and industrial markets. We have also ascertained that used well, the techniques and concepts described in this chapter can contribute significantly to overall company marketing success. Market segmentation, targeting and positioning decisions are thus more strategic than they are tactical. Segmentation variables should be examined in detail, especially new segments. These should then be authenticated in terms of viability and potential profit. Targeting investigates specific segments in terms of how they should be approached. Positioning relates to how the product is perceived in the minds of consumers and a suitable marketing mix should then be designed.

Refrences
Brassington, F. and Pettitt, S. (000), Segmenting Markets, Marketing Planning, Management and Control, Principles of Marketing, Prentice Hall. Doyle, P. (14), Segmentation, positioning and the marketing mix, Marketing Management & Strategy, Prentice Hall. Festus M Epetimehin (2011) Market Segmentation: A Tool for Improving Customer Satisfaction and Retention in Insurance Service Delivery Journal of Emerging Trends in Economics and Management Sciences (JETEMS) 2(1):62-67

Frank, R.W. Massy and Y. Wind (1972).Market Segmentation, Englewood Cliffs: Prentice-Hall Inc. Kotler, P. and Armstrong, G. (001), Market Segmentation, Targeting, and Positioning, Principle s of Marketing, Prentice Hall.

Lancaster, G. and Reynolds, P. (18), Development of the Marketing Concept, Customers and Marketing, Marketing, Macmillan Business. Lesser, J.A. and Hughes, M.A. (186), The Generalizability of Psychographic Market Segments Across Geographic Locations, Journal of Marketing, 50(January), pp 18-7. McDonald, M. (1), Completing the marketing audit The product audit, Marketin g Plans, Butterworth Heinemann. Wilson, R.M.S. and Gilligan, C. (17), Market Segmentation, Targeting, and Positioning, Strategic Marketing Management, Butterworth Heinemann.

Wind, Y. (1978). Issues and advances in segmentation research. Journal of Marketing Research, Volume 15, August, Pp 317-37. American Marketing Association Weinstein, A. (1998), Defining your market: Winning strategies for high-tech, industrial, and service firms, New York: Haworth Press. Weinstein, A. (2006), A strategic framework for defining and segmenting markets. Journal of Strategic Marketing, 14(2), 115127.

Sulekha Goyat , (2011), The basis of market segmentation: a critical review of literature, European Journal of Business and Management Vol 3, No.9, 2011