Segmentation Targeting and Positioning PDF

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Segmentation Targeting and Positioning
With the world becoming smaller, and global markets becoming more interconnected, marketing has
become a vital ingredient for the business success, exposure, and survival. Market segmentation
nowadays is a major activity providing companies ...

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Segmentation, Targeting, and Positioning Name: Majid Ayoubi Instructor: Dr. Stephen Castle Course: Strategic Marketing MKTM028 Date: 23rd April, 2018

Introduction With the world becoming smaller, and global markets becoming more interconnected, marketing has become a vital ingredient for the business success, exposure, and survival. Market segmentation nowadays is a major activity providing companies with the ability to successfully identify customers, to match with their products. Understanding the fact that it is almost impossible to apply the one size fits all anymore, and, to tackle the diverse tastes, and preferences, companies have introduced several products or even brands, moving away from the age of mass marketing, or the Ford philosophy “You can have any color, as long as its black”, to defining Segmenting, positioning, and targeting strategies in efforts to acquire consumers and expand on the market, or as quoted by Alfred sloan "a car for every purse and purpose" . The three aspects are in importance for the decision planning process. They are used in the identification and selection of potential customers and assess the product benefits it will offer in the market (Kotler & Keller, 2014).

The Process of Segmentation, Targeting, and Positioning.

The formula - segmentation, targeting, positioning (STP) - is the essence of strategic marketing." (Kotler, 2012) categorized as a marketing approach which is commonly applied. Figure 1 provides an overview of these elements. STP positions itself with key advantages through facilitating the creation of marketing communication plans, providing marketers with the capability to prioritize propositions, and then develop and deliver personalized, and relevant messages to different customers (Ellson, 2004).

Figure 1. (Ellson, 2004).

Segmentation comes along with massive data, ranging from customers demographics, incomes, preferences, profiles, educational achievements, and on top of all that a wide array of changing customer needs, the challenge poses itself through translating the big data analyzed, and transform it into an effective marketing mix of product, price, place, promotion, ensuring it satisfies the people, and processes. Although literature regarding market segmentation is abundant, the guidance stays to its minimal for managers to accomplish and achieve (Dibb , 2001).

Product positioning necessitate that marketers keeps it as a point of reference in a product roll outs, as it can side line what customers really want or need from a specific product or service, as what really matter to customer is the perceived benefits of the product. (E.g A customer whose car is nearly fuel empty will not consider which, and what petrol station he/she should consider to refuel). Positioning of a brand, appeals to consumer needs, because of a unique feature, shaping the consumer preference, and leading to creating loyalty (fuchs, 2010).

Segmenting the Market. (Divide & Conquer)

Segmentation is the process of grouping consumers from a particular market with similar needs, preferences, and lifestyles, who demonstrates a similar purchasing patterns (Weinstein, 2013). According to Hassan & Craft (2012) consumers are divided into various groups, and the market is divided to meet their needs. Segmentation involves understanding the individual needs of different groups of customers and grouping them for the target product benefits (Hassan & Craft, 2012). This allows companies to approach customers with products addressing their needs, and meeting the preferences, while maintaining their competitive edge.

Targeting By identifying the market segments, marketers need to decide which market place they intend to serve or offer their products. Upon deciding on or identifying the target group the company may select to apply a single or a combination of marketing strategies; such as mass marketing (undifferentiated marketing) , single segment (differentiated marketing) or multi-segment (concentrated marketing) (Simkin,1998). Figure 2 summarize matrix summarize how & when to apply which strategy. The question remains which strategy the company shall apply is highly dependent on a number of market, product offering, and competitive factors. The factors are the following: existing market/share market homogeneity, product homogeneity, nature of competitive environment, market trends and the marketing environment, customer needs, segment size and company resources. By considering the above, targeting specific population becomes more organized, to ensure cost efficiency, and effectiveness of resources in the marketing efforts, instead of offering it to a mass market (Kotler et al, 2012).

Figure 3.

Positioning The third and final stage in the market segmentation process covers positioning. Once the company identifies the segments and chosen which segment or segments to target the final step is to decide on precisely, on how and where in targeted segments to pitch a product or a brand. Brand positioning “is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market. The end result of positioning is the successful creation of a customerfocused value proposition, a cogent reason why the target market should buy the product” (Kotler, 2003) Positioning is concerned with how the customers perceive the products, and how it is defined by the customers in order to maximize the potential benefit to the company. The end-result is presenting the

target market with an appealing justification on why they would take the purchasing decision of the product (Kotler and Keller, 2009) In this process marketers are recommended to consider what makes the product different, or what are the product unique selling propostion in comparison to other products available. As Describes by (Aaker, 2003) what differentiates a product is not just calling a feature unique, it must mean something to customers in the manner of being relevant and important. Upon definition of the same then draw a clear image on what perception each market segment has about the products, enabling marketers to position their product in a more competitive angle, assisting in devising an effective market campaign appreciated in the minds of customers. Ernst et al., (2010), observes various steps to be followed, for company to achieve a desired or planned, product or service positioning, and listed; • • • •

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What are the expectations and priorities, when the target customer decides on a purchase? Developed Product have to address customers’ needs and expectations. Evaluate the positioning, as perceived by the target customers of competing products in the selected market segment or segments Selection of an image differentiating the company from competing brands, and products on the basis of the characteristics of the brand or product, the needs and expectation of the target customers, and how competing brands’ positioning is perceived. The Final step is communication (Ernst et al., 2010). The marketing team will launch a communication plan to the target customers, with an objective of creating customer awareness on the availability of such product in the market.

If the associated steps are not carefully assessed during implementation, product credibility may be at stake, such as overemphasizing product attributes during positioning with a limited opinion about the product in the market (Ernst et al., 2010). Product may fail to satisfy the need of the customer, resulting in customer attritions. Failure to use appropriate positioning methods and channels can result in a weak positioning, implying that positioning messages are incorrectly communicating the attributes of a product to the target market. Improper communication, may push the customer to purchase from competitors products, due to the fact of having a vague picture of the company products, and having a full understanding of competitors. Overall, market positioning is a vital activity that allows the customers to differentiate a product from competitors in the market. Through positioning, new customers are attracted and old customers retained. Successful positioning is an indication that the business has understood the customer needs and expectations (Ernst et al., 2010).

STP Critique STP have been found to be an effective strategy in creating and expanding in markets, yet this strategy has been limited by current economic trends (Lynn, 2011). Globalization has opened markets both domestically and internationally, increasing the competition world-wide, making it easier for customers to purchase from any business around the world, posing a challenge on marketers in creating an effective segmentation or strategic positioning. Consequently, governments adopting free-market economic systems has resulted in increased competition because of high number of services and products providers availability locally and globally. At some point, all the useful segments in a market will have been identified and any further segmentation will produce segments that are insufficiently differentiated in terms of drivers of demand or too small to profitably target (Lynn, 2011). Additionally, emergence of e-commerce has exposed consumers to new purchasing channels, implying that a customer may be influenced by a company targeting and positioning strategy, yet, for pricing, delivery, or convenience reasons, the customer may decide to purchase online from another supplier in another region. The above stated demonstrates that with STP nowadays, is not a company specific strategy anymore, with the world turning flat, consumers have adopted the same approach in the decisionmaking process of purchasing, based on price, availability, reliability, and quality (Mihart, 2012) Another criticism is that segmentation becomes outdated overtime consumers’ preferences, tastes, and demands changes. Critiques of STP state that consumers belong to more than one segment rather than just one segment. Further, it is wrong to assume that it is more profitable to target segments with the greatest response because segments outside the target group are in most cases aware of the marketing mix and targeting the segment with the greatest response is not necessarily the same as producing the marketing mix with the greatest response (Lynn, 2011). According to Hassan & Craft (2012) target marketing disregards the customers outside the market segment. Implying a lost business opportunity and may lead to discrimination and exploitation in some instances. Legal & Ethical dilemmas are prone to happen with STP data leveraged towards studying and changing audience behaviors, to favor a product, service, or even political views. This issue has already come to reality resulting in Mark Zuckerberg congressional hearing recently, were 87 million Facebook user’s data were passed to Cambridge Analytica, exposing those users to various political and economical media material to influence their electoral choice, Lapowsky et. Al (2018).

STP Application.

American Express • Realise the Potenital • Don't Leave home without it.

Emirates • Hello Tomorrow

Fly Dubai • Book Direct for Cheap Dubai Flights

Segmentation, Targeting & Positioning (STP) marketing concept is applicable to every organization across different economic sectors and geographical regions. This section will analyze how STP strategy has been applied in three companies: American Express, Emirates, Fly Dubai.

American Express marketing strategies at its core revolves around STP, with its global presence through its 3 main product lines: Consumer, corporate, travel accounts and services. Over 150 Years plus of history, American Express has positioned itself as an accessible, convenient, secure and trustworthy, Bhasin et. al, (2018). The success of American Express company can be accredited to its ability to identify viable, profitable, and long-term segments, and tailor products meeting the needs and demands of global markets across the years of its service. American Express Segments their market primarily on geographical location, psychographics, and demographics. Psychographics refers to variables such as values, attitude, lifestyle, and social class (Bhasin, 2018)

Courtesy of Amex Saudi Arabia https://americanexpress.com.s a/comparecards (Every 3.75 SAR = 1 USD) , Image above demonstrate

how

products

target certain income bracket business professionals.

Targeting

American Express target affluent professionals, business travelers, seeking experience around the payment services offered, and features across the board that may meet their needs, while providing a peace of mind. Applying differentiated marketing, American express effectively reaches to target groups based on their lifestyle, shopping, travel, and status preferences. For example, American Express target early career graduates whose income bracket is between 800 to 1200 USD by the Bleu credit card, offering them financial flexibility, and revolving payment options. Moreover, American express targets High net worth individuals, by offering premium experience meeting their demanding lifestyle, individuals who are categorized as “Money Rich, Time Poor” looking to save time on their daily needs and receive value for money. According to Jet et. Al (2017) American Express introduced Centurion card as exclusive service to selected individuals who demonstrate a financial, and engagement ability, to earn the access to the premium club by invitation only.

Targeting strategies for Air Arabia, Emirates and American Express Fly Dubai

Emirates

VIP

treatment

American Express

Fly Dubai primarily focuses on

Offers

and

Offers round the clock premium

lower prices targeting immigrant

relaxing travel flight services to service experience to customers.

workers and blue collars in the

customers.

Offers customers Payment cards

UAE and GCC.

Privacy, quality and

with

Although the services matter, the

class are the primary aspects that features,

company’s first focus is the

emirates uses to target the high- with access to various high end or

affordability of the services.

end customers.

travel

and

shopping

providing

members

premium services.

Positioning The American express company with its range of payment products, positions itself the idle partner for consumers, and corporates, providing expense management solutions, closed loop payment cycle, bringing a financial peace of mind to both card member and merchants. Closed loop cycle provide quick resolution of financial disputes that might arise between card members and merchants, resolving such dispute in a record time to maintain customer and merchant loyalty, Sidi et. al (2015). With all written, American express applies the consumer-benefits positioning. Making it challenging for competitors to replicate. As most product features, and services provided can be copied or replicated (Moe,2001). Consumers tend to buy brands due to the benefits provided, and not features (Fuchs, 2010). (Fuch,2010) elaborate the features are product centric, while benefits are customer centric. Moreover, Amex positions its products as the companion for every day financial, travel, shopping needs, prioritizing card member needs and satisfaction, over the product features itself. The effectives of positioning have been proven successful when the product is positioned benefit-based (customer), outperforming the feature-based positioning (Fuchs, 2010) as benefits resolve the implicit needs and wants of customers.

American Express Saudi Arabia Positioning its products by linking to the day to day customer activities, and potential needs..

Unique selling proposition: American express is positioning a new airline Co-Brand card in the Saudi market providing a membership privileges, not available with any banking competitor. Courtesy of American express Saudi Arabia.

Fly Emirates & Fly Dubai STP Application

Fly Emirates On the first class suite: https://www.youtube.com/watch?v=a7NJ6Gek9v4 High end prices: https://www.youtube.com/watch?v=84WIaK3bl_s Luxury experience: https://www.youtube.com/watch?v=1bWyKHz10Jc

The airline industry is a typical example of Market segmentation representing 2 different of the STP strategy ends from Segmentation to Positioning perspective. Market segmentation has played a significant role in changing how the various players in the market operate (Hassan & Craft, 2012). The growing customer choices and needs, increased the companies’ involvement in segmentation. Luxury or budget flying are the main areas of segmentation in the airline industry. For instance, the airline industry in the UAE (United Arab Emirates) homes 4 airlines, of which 2 are covered, the Emirates airlines and Fly Dubai. Fly Dubai Accessibility and low-fare flying are two points the airline have applied to segment and target their customers. Whereas, Emirates airlines targets customers who seeks luxury and experience, and are middle to high income, Bhasin et al. (2018). On the other hand, the Fly Dubai targets price conscious passengers; who are only interested in reaching their destination with the least price, regardless of the of service or experience provided. Budget travel enables low or limited income employees to travel more often ensuring the company maintains its profitability. However, the risk lies on focusing at one target segment would be if the target segment, as the target segment changes it will pose extra pressure on the business (Moschis, 1997)

A customer flying emirates will be willing to pay for higher priced items and other products. However, a customer flying Fly Dubai price sensitive, and unwilling to buy at high prices or even pay for amenities. besides their air ticket (Hassan & Craft, 2012). Positioning is about a product vital features, facilitating customers decision-making based on the significant features and advantages perceived about the product. Positioning usually covers, price, quality, product class, and emotions. For instance, Fly Dubai positions itself as low budget price, attracting low-income earners and immigrant workers across the GCC. Onflight meal and services are charged for to acquire incremental revenues. (VanAuken, 2015).

Recommendations •

Companies in the digital age are advised to consider splitting the target market into new types of homogenous groups, such involves dividing consumers depending technologies, smart applications, and social media sites used.

•

Analyze and evaluate each market segment that has been identified. Each market is unique and requires careful analysis of all factors affecting it in order to arrive at informed conclusion on which is the best segment to invest in, and continuously scan markets for emerging segments.

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Define and embed customer benefits of every in every stage of the product lifecycle to ensure its sustainability and superiority to competition. Engage customer with the brand through loyalty programs. Every industry has competitors, it is the company responsibility to identify its competitors through a well-defined SWOT (Strength, weakness, opportunity, and threat).

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It is important to diversify market segments. Markets are volatile and the constant change in PESTEL (Political, Economic, Social, Technological, Ethical, Legal) factors may adversely affect the operations of the business. Diversification ensures that when one product fails, the business can rely on other product portfolios.

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Effective positioning & Communicat...