MKTM028 - Strategic Marketing: Segmentation, Targeting, Positioning

This essay provides a comprehensive analysis of segmentation, targeting, and positioning (STP) within the context of strategic management. It begins by introducing the evolution of marketing and the significance of STP in gaining a competitive advantage. The essay delves into the three components of STP, explaining different segmentation approaches (a priori and post hoc) and bases (customer background characteristics, attitudes, and behaviors). It further discusses targeting strategies, including mass marketing, differentiated marketing, and concentrated marketing, emphasizing the importance of selecting identifiable, attainable, measurable, and obtainable segments. Finally, the essay explores positioning strategies, highlighting the need for differentiation and the key concepts of superiority, communication, distinction, profitability, affordability, and importance. The essay also provides examples of organizational uses of STP and offers generic recommendations for companies applying these concepts. The document is available on Desklib, a platform offering study tools and resources for students.

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STRATEGIC MANAGEMENT
By
Name of the Class
Professor
Name of the University
The Date

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Table of contents
Introduction……………………………………………………………………………………2
Segmentation, targeting and positioning………………………………………………..……..4
Segmentation……………………………………………………………………………….….5
Targeting ………………………………………………………………………………………...9
Positioning………………………………………………………………………………………9
Organizational uses of STP (segmentation, targeting and positioning) …………………........10
Recommendation for applying STP………………………………………………....................13
Conclusion…………………………………………………………………………………….14
References ……………………………………………………………………………………16

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Introduction
Marketing field has developed over the last decades as a result of dynamic changes of
aspects, characteristics and arising needs of the environment (Kotler et al., 2010). From 1950 to
1970, manufacturing sectors were doing very well thus being more productive compared to other
sectors. During that period marketing was used as a tool to generate demand for manufactured
products (Kotler, 2015). This traditional marketing was also known as 4P’s which explain the
process, from developing a product, coming up with the price, how to offer promotion and
finally coming up with the place where the product will be distributed to. Therefore, this
traditional marketing was based according to the marketing mix as explained by McCarthy
(1998). Due to the oil crisis of 1973 (Alpanda and Peralta-Alva, 2010), it enhanced discipline of
marketing strategies this was a result of improvement of technology (through innovations) and
environmental changes as a result of globalization. As a result of maintaining marketing
discipline as the traditional model mass marketing of products was not enough (Hooley et al.,
2012). The companies came up with a conclusion that each and every customer has different
characteristics, needs and objectives as they purchase the product. Therefore, it was not
beneficial to companies to offer a similar product to customers according to the existing super
competitive market (Weinstein, 2004).
Marketing emerged from the ingenious management of product model to a
strategic model concerning the customers and the brand instead of the products (Nijssen,
2017). As a result of that shifting in focus, they decided to come up with concepts such as
segmentation, targeting and positioning to help them gain a competitive advantage over
their competitors since in modern way of marketing it acts as a distinct part (Hooley et al.,
2012). Segmentation is the action of dividing the diverse markets into segments of

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homogenous customers by use of specific features called bases (Kotler, Keller and
Armstrong, 2012). Targeting is the process of estimating and evaluating the divided
segments for one to select the most favourable ones. Lastly, positioning involves knowing
how the customers view the company and its competitors so that they can come up with an
effective and efficient positioning strategy (Kotler, Keller and Armstrong, 2012).
At first, the aim of this paper is to explain the review and evaluation of segmentation,
targeting and positioning (STP). Secondly, it will consist of illustrations of those concepts
depending on different organisations and industries according to its objective, capabilities,
finances and resources. lastly, it will consist of present generic recommendations applicable by
several companies that need to apply the concepts of STP.
Segmentation, Targeting and Positioning
In modern marketing strategies segmentation, targeting and positioning are popular
in the marketing process since it enables an organization to enjoy marketing advantage
over their rivals by dividing the wide market to smaller unique market segments (Lilien
and Grewal, 2012). Smith (1956) explained the origin of STP for managing both the
customers and the product claiming that it is of great importance when the companies
emulate this strategy. STP is currently the main used strategy in marketing but its
implementation, becomes a challenge to the organization (Dibb et al., 2012) since it tends
to be too extensive, inconsistency and research inconclusive. The cost of implementation
is very high (Weinstein, 2004), availability of data is also a problem (Simkin, 2008), the
need to hire skilled workers (Dibb, 2010) and finally experienced operational challenges
(Clarke and Freytag, 2008). Appropriate approaches and methodologies should be applied
to solve all these problems to make the process productive.

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Segmentation
Segmentation helps to identify the appropriate segments which have specific
needs, new markets for getting new customers and deliver focused marketing strategies
through dividing the wide heterogeneous market to small homogeneous segment (Hooley
et al., 2012). This process is considered to be both scientific and creative since there is no
single standard plan to divide the markets into distinct segments (Moore and Pareek,
2010).
There are two approaches applied in this phase: “a priori” model which comprises
subdividing the market depending on customer characteristic and pre-defined and the
“post hoc” model which is determined by the primary research that is, the attitude and
behaviour of the customer. This segmentation phase is said to be the most creative
approach to marketing (Liu et al., 2012). A “priori” model is commonly used because it is
not expensive and the required data are easily accessed. However, it is not guaranteed for a
homogeneous segment that enables the organization to gain a competitive advantage
(Wedel and Kamakura, 2012). In comparison “post hoc” model is more efficient approach
as it helps an organization to realize the reason as to why consumers behave that way to
the area of the market, therefore, it gives an organization the ability to divide and target its
consumers to enjoy a competitive advantage (Wedel and Kamakura, 2012).
Different results will be obtained from different bases depending on the variables
selected in the segmentation phase (Sausen et al., 2005). The choice of characteristics to
group the market is highly controversial to segmentation (Schlegelmilch, 2016).
Therefore, the organization need to be more careful and creative when selecting this bases
so that they can enjoy a competitive advantage over the existing competitors in the market

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(Jobber and Ellis-Chadwick, 2012). In the segmentation phase, the bases are grouped into
three categories namely; customer background characteristic, their attitudes and
behaviours. The first two are concerned with the ability of an individual to an action while
the last one is concerned with the concrete behavior of individuals to the area of the
market (Hooley et al., 2012). The table below shows the categories of those bases.
Categories of segmentation bases
Customer background
characteristic
The attitude of the
customer
The behaviour of the
customer
Geographic
Demographic: sex,
Age and subculture Benefit segmentation
The buying behaviour
of the customer
Social-economic:
Level of education,
income and consumer
life cycle
Psychographic:
lifestyle and
personality
Views of customers
and their preferences
Usage behaviour
Communication
behaviour
The bases of customer background have become more popular because of
becoming more reliable and accurate (Nijssen, 2017). This bases (characteristics) can be
measured according to the income, location, culture, gender and occupation

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(Schlegelmilch, 2016). Even if these bases are difficult to measure they help the
organization to understand individuals (Lilien and Grewal, 2012).
The main disadvantage of the segmentation approach is that it there is no guarantee
for segmented market areas to internally homogeneous and externally different from other
market areas (Jobber and Ellis-Chadwick, 2012). In those segmented areas, individuals
may behave differently in the marketplaces while individuals of different areas may
behave in similar manners in the marketplaces (Schlegelmilch, 2016). The background of
the customer’s characteristics is a useful part and can be used as a first step in the
segmentation process. The outcome of the segmented areas needs to be redefined since
they are too broad thus failing to explain why customers behave that way in the
marketplace (Nijssen, 2017).
In the second category, the attitude of the customer which tries to link the customer
characteristics with their actual behaviour In the marketplace, therefore, being the more
effective base of market segmentation (Kotler, 2015). Customer’s attitude according to
traditional approach involves researching the possible benefits enjoyed by the customers
from the product. Due to dividing the market into a more directly pertinent to decision
making this approach has become the most effective in market segmentation (Armstrong
et al., 2015 and Haley, 1968). Recently perception (view) and preferences approach are
commonly used in customer’s attitude. They involve selecting individuals with the same
needs and they perceive (view) product in the same way (Jobber and Ellis-Chadwick,
2012). In segmentation customer attitude is very important since it links customer’s
characteristics and behaviours directly making it a more useful base (Diamantopoulos et

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al., 2003). This approach tends to be time-consuming and expensive since it relies on data
that are not easily accessed (Baker, 2014).
The final base of category used in market segmentation is the customer behaviour,
it is declared as the most direct and effective method according to the exact behaviour of
the consumer (Rogers, 2003). This approach includes the purchase behaviour which shows
the pattern of customers purchase level, usage (consumption) behaviour which includes
the volume of products consumed and communication behaviour which involves how the
consumer communicate about the product such as their opinions (Hooley et al., 2012). The
behavioural segmentation approach is declared more accurate in terms of predicting how
the consumer will react to toward the product (Lilien and Grewal, 2012). This therefore
makes a behavioral approach most used base for marketing segmentation. For one to
understand the reaction of consumers of a product attitudinal approach is said to be more
efficient (Jobber and Ellis-Chadwick, 2012). Behaviour approach should be used in-line to
a customer’s background characteristic making the scheme more relevant and efficient
(Schlegelmilch, 2016).
Targeting
It is the second phase of STP which mostly deals with identifying and assessing the
favourable segment. The nature of the organization, its long-term objective, resources and
its sources of finances determine the marketing strategies (Diamantopoulos et al., 2014).
An organization may target the whole market or its entire part to offer a similar product to
its customers, this is called mass marketing (Franke et al., 2010). This process greatly
benefits well-established organisations whose products are popular and valued by the
customers (Tedlow and Jones, 2014). On the other side, some organization prefers

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differentiated marketing which involves only targeting one segment and disregarding the
others. It can be more productive and effective but it depend on the need of the segment
selected, it can also be more expensive (Schlegelmilch, 2016). concentrated marketing
sometimes tend to be more profitable since it gives an organization a firm position
compared to other companies which doesn’t emulate this process since they understand the
needs of their customers in the targeted area (Schlegelmilch, 2016). Once the targeted
segment loose interest for the product it negatively affects the organization thus it is risky
(Venter et al., 2015).
Potential segment selected by the company should be important and useful to
ensure that it is identifiable, attainable, measurable and can be obtained whenever needed
(Dibb and Simkin, 2016).
Positioning
Being the last phase it is interlinked by segmentation as well as targeting (Keller et
al., 2002). Positioning, therefore, is the process to come up with a new design of products
and services so as to achieve a distinct competitive place in the mind of customers (Kotler,
1997, p.295). Differentiating the product and services gives the organization a position in a
customer’s mind (Nijssen, 2017). It is not a guarantee that all competitive differences will
be successful unless they contain the six main concepts which include superiority (gaining
customers trust), communication (exchanging of messages effectively to ensure they are
understood by customers), distinction (the difference must be special/unique), profitability,
affordable (must be attainable) and importance where the customers must enjoy and value
the difference made. According to jobber (2010), he argued that for positioning to be

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successful it must possess criteria such as clarity, consistency, credibility and
competitiveness (more so the differential advantage).
Organizational Uses of STP (Segmentation, Targeting And Positioning)
Discovering, evaluating and selecting the target market to create a competitive
advantage over the existing competitors and also to gain a strong positioning in the mind
of customers (Schlegelmilch, 2016). For an organization to achieve that it must choose
various segmentation methodologies, approaches of targeting and positioning strategies
according to the size of the organization, available resources, its capability and the set
long-term objectives (Schlegelmilch, 2016). A good example is “Lego” (The Lego Group)
which is very popular and successful construction toy line company due to use of
background customer characteristics especially age as the base for market segmentation
(Lego, 2018). Their products meet the children’s needs covering the age from 1 to 16
years of age. There are products for pre-school kids from 1 to 5 years called “Duplo”, they
are more attractive in terms of colour, shape and numbers, therefore, they easily
manipulate children. They also produce products for children from 4 to 7 years which are
more imaginative and creative. The other collection of their products for children between
the age of seven to sixteen are more elaborated and sophisticated to help them develop
their social and scientific skills (Lego, 2018). Upon understanding the customers
(children) preferences and tastes “lego” company obtained better positioning in the mind
of their customers (The Lego Group Annual Report, 2016). Below are the pictures
demonstrating the happiness of the children due to their favourite toys.

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by use of concentrated marketing, the company has put it focuses on
the children between the age of 2 and 16 thus enabling the company
to achieve a strong position in the entire world. Their brand has
become prominent, cherished and respected since it valued brand
values such as creativity, quality and fun (Lego, 2018).
Comparing the Lego Company which applies concentrated marketing
strategy and the Coca-Cola which target a wide market dealing with a similar
product by use of marketing strategy (Coca-Cola Company, 2018). The brand
keeps launching different varieties of products to meet the rising needs of
customers. For example, the customer who prefer the low amount of sugar or no
sugar the company established “diet coke”, “caffeine-free coke” and “Coca-Cola
Zero” to cater for their needs (Coca-Cola Company, 2018). Again due to the
introduction of Vanilla Coca Coke and its flavoured version, Cherry Coca-Cola

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and its flavoured brand allowed the brands to do best by selling this beverage
(Coca-Cola Company, 2018). Through advertisements, Coca-Cola has achieved a
strong positioning in the mind of the customer linking its brand with enjoyable
moments in the life of their customers.
BMW and Audi companies have decided to segment their market depending on the
first income from medium to high and then the life cycle stages such as a family that has
children, solitary survivors and many more. It employs a differentiated approach to offer
their products to different segments.
BMW offers different series according to the levels of managers, that is, 3 series to middle
managers, 5 series to senior managers and 7 series to the highest level which is the top
managers. It designs its products according to classes, number and preference of their
customers. An example is Z4 sport targeting the unmarried, couples and newly married