What Is Market Segmentation? Targeting, Positioning & Marketing Mix Explained

Chandan 10/09/2019
Hello everyone, welcome to the next very interesting concept of segmentation, targeting, positioning and marketing mix. Earlier we have discussed the definition of marketing. We also discussed value creation, communication, delivery, exchange, need, want and demand. Read what is marketing first if you haven’t read that yet.

What Is Market Segmentation

Now, once we have understood the market, needs, wants and demands, we need to understand one other thing that is very relevant to how marketing operates and that is you have very limited resources.

Any company, for example, has a limited amount of money to advertise, has limited people in the sales force and has limited partners to reach out to the market. So it becomes very essential for marketers to identify the right set of customers for whom they should create value, communicate value, exchange and deliver value. So to do this, we use the concept of segmentation, targeting and positioning.

What Is Market Segmentation?


You would have heard this term very frequently. What is segmentation? Now if you take, for example, any market out there, the market consists of a large number of people. We generally called markets to be heterogeneous in nature.

When you have a large number of people, say, for example, people who are using mobile phones, there are a large number of people out there. There are consumers who are interested in buying mobile phones, which are cheaper. There are consumers who are interested in buying mobile phones which can be used for playing very sophisticated games, there are consumers who might be interested in having mobile phones that have great cameras, there are other customers who are interested in buying mobile phones that have longer battery life.

So if you take for example, any product or any service or any offer, the consumers or the market, in general, is very large. It is heterogeneous.

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To satisfy the needs of all customers out there, it becomes very difficult for organizations. Think about the case of building a mobile phone that is the best for all customers. It might be a very difficult activity. One, you might not be able to achieve excellence in all different things that you do and even if you are able to achieve excellence in all different things, your product might be extremely expensive, because of which the customer cannot buy it. So it becomes extremely important for you to divide this heterogeneous market down into smaller, homogeneous groups for whom you can create products, for whom you can have campaigns that can target them, for whom you can basically reach out to the customer by having a retail channel or having a delivery channel.

So the act of dividing the entire market down into smaller, homogeneous groups is what is essentially called segmentation.

Geographic Segmentation


Segmentation can be done by different means. One of the most commonly used methods of doing segmentation is at a geographic level.

Geographic segmentation is where you basically break down the market into different regions on a geographical map.

Say for example, if we're talking about India, food habits in the northern part of India and the southern part of India are diverse. People like certain foods in the northern part of India, people like certain other foods in the southern part of India. So you can have different offerings for different parts of the country depending on the kind of food habits that they have. Such kind of segmentation is called geographic segmentation.

Demographic Segmentation


Another way of which segmentation happens is based on demographics. Demographics can include anything from age, income, gender, lifecycle stage, all of these different things.

Say, for example, if you take offerings out there, for example, mobile phones. There might be mobile phones that are offered to customers who are in a certain age group. For younger people, you will have mobile phones that are more worthy of playing games, which might be more entertaining, which might have greater battery life. For a little older people, you might have phones which are loaded with features that can be used in a professional space.

For people who are elderly, people who have difficulty to see and use a touch-screen, you might have mobile phones with large buttons which can be easily used by these people. So this is a segmentation that has happened based on age.

Similarly, you might have offerings that are for the really wealthy and really rich class of people. You might have other offerings for people in the middle class. There are people who don't earn as much. You will have offerings even for them. So segmentation can even happen with respect to the income group of people.

There are different people who are indifferent lifecycle stages, for example, somebody who has just married versus somebody who is thinking about getting married. There are different types of consumption that these two people might think. For people who have just recently had a child versus people who are still in college, there might be different ways in which these two sets of people are consuming products. So based on age, gender, income, lifecycle stage, and other parameters that you can see on the screen, there might be a demographic segmentation that might happen. So geographic segmentation and demographic segmentation are very obvious, very easy to understand.

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Psychographic Segmentation


The third basis by which segmentation can happen is based on how people think, how people believe that the world should be, how people's attitudes are about different things and different objects. So this is known as psychographic segmentation.

Say, for example, if you are somebody who is an adventure-lover, say for example, if you're somebody who believes in the idea of using green things versus somebody who is only interested in saving a lot of money; these are basic elements of the personality of these people.

So segmentation of the market can also be done based on the ways in which people behave, the ways in which people have the attitude, depending on the different things that they see in the world. 

So this is basically psychographic segmentation, which is the third way in which segmentation can happen.

Behavioral Segmentation


And the last way in with segmentation can happen is based on behaviors that people show in the marketplace.

Say, for example, if you are a frequent flyer, you get greater benefits from the airline because your behavior is in such a way that you consume air tickets and consume air travel much more than other people. So you might get extra miles for your travel. You might get freebies for your travel. You might not have to wait in long queues. You might get privileged checking counters, etc. based on the behavior that you show and depict in the marketplace.

There might be other consumers who might be heavy users, say for example, if you consume the internet as part of your mobile package, and if you are a heavy internet user, the service provider will give you a package that is suited for you because you are a heavy user.

So based on your behavior, based on the kind of consumption that you do, you can be also segregated into different sets of people. So that is the last basis by which segmentation can happen.

So geographic, demographic, psychographic, and behavioral are the four ways in which you can do segmentation.

But by doing segmentation in either each of these ways, you basically are trying to break down a very complex and heterogeneous marketplace into smaller homogenous groups.

And by breaking them down into smaller homogenous groups, you are now able to reach out to one or a few of these groups and make products and services and offerings that will be most appropriate for one or a few of these groups, rather than having a product that doesn't necessarily be good enough for any of these set of people. So that is why we do segmentation.

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What Is Target Marketing?

What Is Target Marketing

The next activity that we do is to identify one or a few of these groups, wherein you can go and try to offer your products and try to make revenue from these groups.

Targeting is where you identify which of these segments is going to be the key or the central segment where you're going to offer your products.

So you have to basically look for five different things when you're trying to do targeting. The first of these things is that the segment should be measurable. The second is where it should be substantial. The third is where it should be accessible. The fourth is where it should be differentiable. And the last is where it should be actionable.

Now I'll talk about each of these different things.

The Segments Should Be Measurable


Now think about the case where the entire heterogeneous market was divided into smaller homogeneous groups, which we call segments. The segments should be measurable.

When I say the segment should be measurable, you should be able to measure key factors that are relevant to you in each of these segments.

Say, for example, the number of customers who are there in each of these segments, the total number of competitors that are there in these segments, all of these different elements should be measurable.

The Segment Should Be Substantial


The second element is that the segment should be substantial. When you are thinking about entering a certain segment and trying to offer your products to one certain segment, you should be able to get revenues or get money from that segment, which is going to be enough for sustaining the costs of your business. It should also be able to provide you profits. It should also be able to give you growth potential in the future. So the segment should be substantial in itself.

The Segment Should Be Accessible


The segment should be accessible. The segment should not be something that is very difficult to reach out to. It should not be very difficult for you to get into that segment. You should be able to access the segment and that is where we say that targeting should be done in a way that you are looking into segments that are accessible.

The Segment Should Be Differentiable


The fourth element and the most important of all of these elements according to me is that the segment that you choose should be differentiable. There is going to be a set of competitors that you will have to compete against in the marketplace for the offerings which you are providing to the customer.

Say, for example, if you go back to the example of a mobile phone, there is going to be a set of competitors out there. Now, the segment that you choose should be in such a way that you are able to differentiate your product as opposed to your competitors.

The Segment Should Be Actionable


And the last one is where your segment should be actionable. When I say actionable, there are these elements of a marketing mix that we generally use in order to create a marketing strategy.

You should be able to create a difference from everybody else by using the marketing mix elements that you are employing. So the product, the price, the place, and the promotion should be giving you a different result as compared to another segment.

So that is where we call about the fact that targeting should be in such a way that it is actionable.

Each of these elements together will define the target group that you are going to decide. So we started off with segmentation. We took the whole market, broke it down into different smaller groups. We looked into each of these groups as to what are the key factors that are relevant to us. What kind of potential growth do we have? Do we have enough scope to differentiate ourselves? Do we have an ability to access these segments and are these segments actionable?

All of these elements are looked into, to identify one or a few of these groups that we call as target groups. This is what essentially targeting is. Now, once you have done segmentation, you have gotten down to a set of groups which are most appropriate to you, the next element is called positioning.

What Is Positioning?


Positioning is where you're trying to create a position for yourself and the position that you create is not in the marketplace but in the customer's mind because it is important for us to understand that a customer is a person who thinks, who understands reality, who has a worldview of how his needs are, his requirements are, what are the different products out there? What are the key attributes of each of these products? How is product A different from product B? How is the mobile phone A different from mobile B? And for the marketer, it is important that we create an image in the customer's mind. That is what we try to do by doing positioning. And to do positioning, we have a set of vehicles that we can use.

Say, for example, you can use advertising, sales promotion, retail presence, etc. Your product itself can be used for positioning, but the key here is to understand that you are trying to differentiate yourself from the other players in the market. Now, differentiation can be done based on the product that you offer. It can be done based on the image that you offer. It can be done based on the people who work for you. It can be done based on where your product is available. It can also be done with respect to the price that you offer.

Now to do differentiation, you have to identify what are the specific points of differentiation which are going to make your product different from the other products that are out there.

Say for example, if you're a mobile phone company that is pioneering mobile phones, which have an exceptionally great battery life. We live in an age where most mobile phones have a life of say, at max one day or two days. Now, think about yourself as a company that has come out with a mobile phone that has a battery life of a week. This becomes a point of differentiation as compared to other people in the marketplace.

Now, when you position yourself as somebody who's the leader with respect to battery life, you are able to create a different image. Every customer who now thinks about your product knows that you're known for exceptional battery life.

You can think about creating an image for the durability of the product. You can think about creating an image for the service that you're offering. You can think about any of these elements and identify a point of differentiation. Once you have identified a point of differentiation, you have to create the marketing mix elements, which is the product, the price, the place, and the promotion, which coincide with these points of differentiation that you have created.

Now, let me also tell you that we are not always trying to be very different from the competition. There are some elements that also have to be very closely associated with the competition. These are generally known as the points of parity, wherein you're creating a lot of features in your products or offerings which are closely associated with other competitors in that certain category.

We know how a mobile phone looks. If you're going to drastically change the styling of the phone, say, for example, today you have a phone which basically is a flat phone, which has a touch-screen display, which is not very thick, which is basically a rectangle shape. Now think about the case where I'm giving you a phone that is a very bulky cylinder.

Now, the customer doesn't associate it with the regular phones that he sees in the market. So your product has to be different from your competitor to differentiate it, but at the same time, there are a lot of features and a lot of characteristics that customers associate with a certain category of products. So you have to also be close to these category products or these points of parity.

Now, once you have identified which segment we enter into, once you have done your targeting properly, once you have created a position in the customer's mind, then you can actually get to the market with the marketing mix elements, which are the 4 Ps which we'll discuss next.

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What Is Marketing Mix? And The 4Ps of Marketing Mix?


Okay, so the 4Ps of marketing like you would have all heard about or the marketing mix is what we'll discuss next. So these four Ps are essentially what we try to, strategize and what we try to change in the marketplace. These include the product, the price, the place, and the promotion.

What Is Marketing Mix

What Is The Product?


The product is basically the offering that you give to the customer. It can be something that is pure good. It can be something that is a pure service. It can be something that is a combination of the two.

Say for example, in the case of a mobile phone, the product is the mobile phone. It is also associated with a set of services that go alongside. Say, for example, the after-sales service that you get, the warranty that you get, etc. So that is what the product is all about.

What Is The Price?


Now the product is associated with a certain cost that you have to incur. That is what the price is. A mobile phone can be 20,000 rupees worth. The mobile phone can be worth 50,000 rupees.

These two elements are extremely important because many times the customer starts comparing these two elements. The customer starts comparing the product, the features of the product with the price that the customer has to pay. So the product and the price are very critical in the success of any product.

What Is The Place?


The third of these elements is the place or the third P is what place is. Now, place is where the customer can actually come and purchase the product. Remember, we discussed the electronic store near to your house or the department store where you can buy a mobile phone from? That is essentially what the place is. So which is the place in the market where you can go and buy this product? So that is where we talk about place.

What Is The Promotion?


And the last of P is promotion. Promotion is where you're trying to make sure that the customer is aware of your product, the customer is motivated and the customer has a good reason to come and buy your product. So it could be advertising, it could be a sales promotion, etc.

So, all of these four elements is what we have in our hands to play around with and make sure that we can generate as much revenue from the market as possible.

Now, the reason why we dealt into detail of what marketing is, what value concept is, what segmentation, targeting, positioning is, and what the 4Ps are, is because we want to introduce all of these concepts to be similar to what we see in the digital space. Say, for example, marketing in the digital space and in the traditional space is more or less the same.


Conclusion


In the digital space, segmentation becomes very easy. Say, for example, you would have seen a lot of search engine advertising. You would have seen that every time you go to the search engine and type for some specific set of information, you'll see a lot of product advertisements or a lot of links that are sponsored, that popup.

When you go to social media, when you go to Facebook, you would have seen that a lot of advertisements about products that you are looking for at an e-commerce platform and then purchased, are popped up to you. These are all ways in which the value is communicated to you.

Now the way by which the marketer reaches out to you is based on either your geography, either the demographics that you have; your age, gender, income, etc. or the kinds of browsing behavior that you display.

So even in the digital space, there is a very strong presence of segmentation. There's a very strong presence of targeting that is a very critical method by which the products are positioned in your mind.

Say, for example, you might see certain advertisements where products are displayed in certain fashions. You might see that the product is doing certain social campaigns so that they create an image of being socially aware. All of these elements are done in a way to position the product and create an image of the product in your mind.

You would have also seen that in the digital space you have the 4Ps operationalized very effectively.

The product; it could be a traditional product, it could be a product that is completely digital. It could be a product like a mobile phone, it could be something that is similar to a YouTube channel that gives you a lot of really rich content. So the product holds in the digital space. Price; you have traditional channels where you are paying a certain price, you have subscription-based models or a premium model or other business models that are operational in the digital space.

The place that you get the product from in the traditional space was predominantly retail or direct selling where you went to the store and bought products for you. You went to the hospital to get a service or you went to a bank to get certain financial services or you had direct selling where people came to your house and sold the product to you.

With the emergence of the digital space today, you have a new business model that operates. Say, for example, you have e-commerce sites where you can buy the product. The product comes to your house. It is shipped to your house. You have other services and other offerings that are also delivered to you from the digital space.

You have the last P, which is a promotion, which has significantly changed, which will be a major impact or a major area that we'll discuss.

Say for example, how has promotion changed? Traditional advertising is not as relevant as it was earlier. You have digital and social media that are picking up, so all the different elements of the definition of marketing, the concept of value, segmentation, targeting, positioning, and the marketing mix elements, all of them are still relevant in the digital space.

So a basic understanding of what segmentation is, what targeting is, what positioning is, and what the marketing mix elements are, is what this article is offering to you.

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