Segmentation, Targeting and Positioning Essay

This essay will illustrate the extent to which effective marketing must incorporate Segmentation, Targeting and Positioning. Marketing effectively differs from one organisation to another as each has their own separate goals, which they pursue. To answer how important each of the afore mentioned marketing tools are, one must define what Marketing is and then take into account how each is applied and why if not applied in an organisations approach to selling could mean abrupt failure, or maybe that they do not matter at all.

The Chartered Institute of Marketing (CIM) defines marketing as: ‘The management process responsible for identifying, anticipating and satisfying customer requirements.’ (Lancaster & Reynolds 1998, p.11)

An alternative definition is offered from the American Marketing Association (AMA): ‘The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.’ (Lancaster & Reynolds 1998, p.11)

The CIM definition perhaps sums up the overall aim of marketing whereas the AMA definition identifies the tools which effective marketing would use when realising the firm’s objectives (Lancaster & Reynolds 1998). Looking at both definitions, they both finished stating that something must be satisfied, customer requirements and organisational objectives. So to market effectively you must be able to reach the organisational goals whilst also meeting your customer requirements.

Market segmentation is defined by Kotler and Armstrong (2001, p.244) as ‘Dividing a market into distinct groups of buyers on the basis of needs, characteristics or behaviour who might require separate marketing mixes.’ These needs, characteristics, and behavioural factors, which signify different demands, come from a multitude of different reasons. The main profilers used to segment the consumer markets are Geographic, Demographic, Behavioural and Psychographic factors. On the other hand organisational market profilers are Industry, Type of Organisation, Size, Geographic, Application, Usage and Purchasing Organisation factors. (Doyle 1994)

It begs the question; 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 (2001). They go on to use the example of Henry Ford’s marketing strategy of the Model T Ford. When he put the car into production, he told the cumsers, they could have the car “in any colour 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 (1997). Black & Decker faced a drop in its worldwide share of the power tool market from 20% 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 1994). Being able to satisfy more customers with your brand or brands, brings one back to the definition offered by the CIM. More customers satisfied equals marketing more effectively. An example of a company, which uses segmentation within the USA, is Proctor & Gamble. They manufacture many products including washing detergent.

‘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 2001, p.244)

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 2001). Lesser and Hughes (1986, The Generalizability of Psychographic Market Segments Across Geographic Locations. Journal of Marketing. 50(January) 18-27) 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’.

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 1997). Three factors which the strategist will have to consider are ‘the size and growth potential of each segment, their structural attractiveness and the organisation’s objectives and resources’ in coming to a final decision on which segments to target (Wilson & Gilligan 1997, p.297). 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 Porter’s Five Forces Model (McDonald 1999). The company would now have to decide which and how many segments to serve, which is the problem of target market selection (Kotler & Armstrong 2001). The firm can adopt one of three market coverage strategies, ‘Undifferentiated Marketing, Differentiated Marketing or Concentrated Marketing’ (Kotler & Armstrong 2001, p.266).

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 2002]). 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 2001, p.266). Thus to market effectively the company must weight the increased costs against increased sales to market effectively. (Kotler & Armstrong 2001)

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 2001). An example of this is ‘Steve Warrington’s business which sells ‘everything ostrich’ and generated in excess of $4 million revenue in 2000. Today the low cost of setting up an Internet company makes it increasingly possible to serve seemingly minute niches’ (Kotler & Armstrong 2001, p.267). 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 don’t need to segment and offer different products (Brassington & Pettitt 2000, p.198).

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 1997). This will relate to task of ensuring the company’s 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 1998).

The company would build a position for itself by following the three steps outlines by Kotler & Armstrong (2001, p.270) 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 company’s 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 absolute failure due to the product itself not being properly thought through (Brassington & Pettitt 2000). For example the work of Pring (see Brassington & Pettitt 2000, p.364) 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 (1994) recalls the problem IBM faced when the personal computer prices began to decline in the early 1990’s. Instead of threatening their own high price brand image they instead, created a new 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.

To summarise, 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 need’s 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 company’s objectives to be realised as well as ensuring your potential customers will be satisfied, thus your marketing will be effective.
________________
Our professional custom writing service can provide you with a 100% non-plagiarized custom essay, research paper, term paper, thesis, dissertation or other assignment of high-quality. All custom papers are written from scratch by professional academic writers. Any topic, any discipline, any deadline. Feel free to order a custom essay on Marketing now.