Market Segmentation,
Targeting and Positioning
(STP)
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Key Terms
• Market: people or institutions with sufficient purchasing
power, authority, and willingness to buy.
• Market segmentation is the process of dividing a market of
potential customers into groups, or segments, based on
different characteristics.
• Market segmentation is the act of dividing a large target
market into distinct groups of consumers who have similar
characteristics, needs or behaviors.
• A target market is a group of customers within a business's
serviceable available market at which a business aims its
marketing efforts and resources. A target market is a subset of
the total market for a product or service.
• Positioning refers to the place that a brand occupies in the
minds of the customers and how it is distinguished from the
products of the competitors.
Overview: Segmentation, Targeting &
Positioning
Typically, to evaluate your business opportunity, you will
need to define your TAM, SAM, and SOM: Total
Available Market, Serviceable Available Market, and
Serviceable Obtainable Market.
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Market segmentation
Definition:
This is the process of dividing the
total market for a good or service
into several smaller, internally
similar (or homogeneous) groups.
All members in a group have similar
factors that influence their demand
for
the particular product.
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Segmenting Consumer
Markets Psychographic
Geographic
Geographic Psychographic Behavioral
Behavioral
Segmentation Demographic
Demographic Segmentation
Segmentation segmentation
Segmentation segmentation
Segmentation (based
Segmentation (basedon
onAIO)
AIO)
World Age Social
Socialclass
class
Worldregion
region Age Occasions
Occasions
Country Gender
Gender Lifestyle
Lifestyle Benefits
Country Benefits
City Family
Familysize Personality
Personality User
City size Userstatus
status
Climate
Climate Income
Income Usage
Usagerates
rates
Occupation
Occupation Loyalty
Loyaltystatus
status
Education
Education Readiness
Readinessstage
stage
Religion
Religion Attitude
Attitudetoward
toward
Nationality
Nationality product
product
Bases for segmentation
Geographic — The city size, urban/
suburban/ rural population distribution
and climate.
Demographic — The distribution of a
population’s age, sex, income, stage in
family cycle and ethnic background.
Psychographic — Personalities, lifestyles,
social class including activities, interests
and opinions (AIO).
Behaviour towards products.
◦ Benefits desired or sought.
◦ Product usage rate.
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Market Segmentation:
Levels
No segmentation
Segment
Segment
Mass
Massmarketing
marketing Niche
Nichemarketing
marketing Micromarketing
Micromarketing
marketing
marketing
Complete segmentation
A niche market is the subset of the market on which a specific product is focused. The
market niche defines the product features aimed at satisfying specific market needs, as well
as the price range, production quality and the demographics that it is intended to target.
Micromarketing is an approach to advertising that tends to target a specific group of
people in a niche market. With micromarketing, products or services are marketed directly
to a targeted group of customers.
Benefits of segmentation
Segmentation enables marketers to:
Identify and satisfy specific benefits
sought
by particular groups.
Divide the market into segments by
separating marketing programs.
Select target market.
Action the market segmentation plan.
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Market segmentation
process
The process involves:
Identifying the needs and
wants of customers.
Identifying the different
characteristics between market
segments.
Estimating the market
potential.
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Conditions for effective
segmentation
A segmentation process must meet 3 conditions:
1. The characteristics used to categorise
customers must be measurable and the data
obtainable.
2. The segment itself must be accessible through
existing marketing institutions with a minimum
of cost and waste.
3. A segment must be large enough to be
profitable.
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Target market
strategies
The target market should be compatible
with
an organisation’s goals and image.
The marketing opportunity presented by
the segment must match the company’s
resources.
The business must generate a profit if it is
to continue its existence.
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Market coverage strategies
A. Undifferentiated marketing (Aggregation)
Company
Company
marketing
marketing Market
Market
mix
mix
B. Differentiated marketing (Single segment)
Company
Companymix
mix11 Segment
Segment11
Company
Companymix
mix22 Segment
Segment22
Company
Companymix
mix33 Segment
Segment33
C. Concentrated marketing (Multiple segments)
Company Segment
Segment11
Company
marketing Segment
marketing
mix Segment22
mix
Segment
Segment33
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Undifferentiated Strategy/ Mass
Marketing Strategy
Single
Marketing
Mix
Organization
Target Market
Differentiated Strategy
Marketing Mix 1
Marketing Mix 2
Organization
Target Market
Differentiation strategy
Businesses have the option of
differentiating their marketing
strategy in three ways:
by modifying the product
by offering different levels of
service
by offering products through
different channels
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Concentrated Strategy
Single
Marketing
Mix
Organization
Target Market
Positioning
Definition:
Customers’ image or perception
of a
particular brand or company,
relative to their perceptions of
others in the same category.
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Positioning strategies
Positioning is assessed:
• In relation to a competitor.
• According to a product class or attribute.
• By price and quality.
Positioning can be in various forms,
although it always incorporates a
statement that identifies, (based on
the marketing mix) how a business
wants its products or services to be
perceived
by the consumer.
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Positioning of a brand
The positioning of a brand or
product is a strategic process
that involves marketing the brand
or product in a certain way to
create and establish an image or
identity within the minds of the
consumers in the target market.
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Selecting a position
Factors to consider:
Competition — look for a gap or niche.
Customers — seek product attributes.
Company image — what is the current
image?
Target market — have the needs of the
target market changed? Do we need
repositioning?
The marketing mix — does it support
the selected position?
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BCG Matrix/ Growth Share
Matrix
BCG matrix is a framework created by Boston
Consulting Group to evaluate the strategic position of
the business brand portfolio and its potential. It classifies
business portfolio into four categories based on industry
attractiveness (growth rate of that industry) and
competitive position (relative market share).
A BCG matrix helps organizations determine which areas
of their business deserve more resources and investment.
It is based on the product life cycle theory that can be
used to determine what priorities should be given in the
product portfolio of a business unit.
BCG matrix (or growth-share matrix) is a corporate
planning tool, which uses relative market share and
industry growth rate factors to evaluate the potential of
business brand portfolio and suggest further investment
strategies.
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BCG Matrix
Cash Cows – High market share but low growth
rate (most profitable). Retention strategy
Stars – High market share and High growth
rate (high competition). the concentration
and investment strategy
Question marks – Low market share and high
growth rate (uncertainty). New Customer
acquisition strategies and marker
research
Dogs – Low market share and low growth rate
(less profitable or may even be negative
profitability). divestment strategy (i.e. stop
investment or reduce investment)
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BCG Matrix
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Examples
An example that can be considered as a
‘Dog’ in the BCG Matrix is the plasma TV
from Philips.
An example that can be considered as a
‘Question mark’ in the BCG Matrix is the
tablet from Philips.
An example of a product that can be
classified as a ‘Cash Cow’ is the Philips
energy-saving lamp.
An example of a product that can be
classified as 'Star' in the BCG Matrix is the
LED lamp from Philips.
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The Porter's Generic
Strategies
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Porter’s Five Forces Model
Porter's Five Forces is a model that identifies and
analyzes five competitive forces that shape every
industry and helps determine an industry's
weaknesses and strengths.
Five Forces analysis is frequently used to identify an
industry's structure to determine corporate strategy.
Porter's model can be applied to any segment of the
economy to understand the level of competition
within the industry and enhance a company's
long-term profitability.
The Five Forces model is widely used to analyze the
industry structure of a company as well as its
corporate strategy.
Five Forces analysis can be used to guide business
strategy to increase competitive advantage.
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THANK YOU
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