Unit 7: Targeting and Positioning

DEMKT503 — Marketing Management 11 min read

I. Orientation

Targeting and positioning form the central logic of a market-oriented marketing strategy. A firm first divides a broad market into meaningful groups, evaluates those groups, selects the segments it can serve profitably, and then establishes a clear position in the minds of chosen customers. The sequence is commonly expressed as STP: Segmentation, Targeting, and Positioning. For example, a packaged-food company may segment consumers by dietary needs, target health-conscious urban professionals, and position its product as a convenient high-protein meal.

Customer-centred principle: Marketing decisions begin with customer needs, perceptions, and buying behaviour rather than only with production capacity.
Market heterogeneity: A total market contains customers with different incomes, lifestyles, motives, usage rates, and responses to marketing.
Segment distinctiveness: A useful segment should differ from other segments in ways that affect product, price, promotion, or distribution decisions.
Strategic sequence: Segmentation identifies groups; targeting chooses groups; positioning creates a distinctive meaning for the selected groups.
Value exchange: Customers seek benefits and acceptable costs, while firms seek sales, profitability, growth, and long-term relationships.
Evidence-based decisions: Segment attractiveness and brand position should be supported by market research, customer data, competitor analysis, and performance measures.
Consistency requirement: The desired position must be supported by the complete marketing mix: product, price, place, and promotion.

II. Market Segmentation — Dividing the Total Market

Market segmentation is the process of dividing a heterogeneous market into relatively homogeneous groups whose members share similar needs or responses to marketing activities. A segment is not merely a demographic category; it is a group that can be identified and served through a distinct marketing approach.

A. Benefits of market segmentation

The benefits of market segmentation arise because differentiated customer groups can be served more precisely than one undifferentiated mass market. Segmentation improves both customer value and managerial decision-making.

Better understanding of customers: Research into a segment reveals specific needs and motives. For example, commuters may value a compact electric vehicle’s charging range and low running cost more than luxury styling.
More precise product design: Firms can adapt features to segment requirements. A bank may offer a student account with low minimum balances and a business account with payroll services.
Efficient allocation of resources: Marketing expenditure can be concentrated on customers most likely to respond. A specialist sportswear brand may direct digital advertising toward regular runners instead of the entire population.
Improved promotional effectiveness: Messages can use relevant benefits and language. A campaign for parents may stress safety and durability, while a campaign for young professionals may stress convenience and design.
Stronger competitive advantage: Serving a clearly defined group well can create expertise and loyalty. A retailer focused on plus-size fashion may compete through fit knowledge and product variety.
Identification of opportunities: Segmentation can uncover neglected or emerging groups, such as consumers seeking plant-based, allergen-free, or low-sugar products.
More suitable pricing and distribution: Different segments may accept different prices or prefer different channels. Premium customers may purchase through personal consultations, whereas price-sensitive customers may prefer discount retailers.
Improved performance measurement: Sales, retention, conversion, and profitability can be assessed by segment rather than as one aggregate figure. This shows which groups create genuine value.
Stronger customer relationships: Relevant offers reduce perceived effort and increase satisfaction, repeat purchase, and brand advocacy.

B. Criteria for effective market segmentation

A segmentation scheme is effective only when its segments are sufficiently distinct, measurable, reachable, and economically useful. The following criteria help determine whether a proposed segment can support a practical marketing programme.

Measurable: The size, purchasing power, and characteristics of a segment must be estimated. Household income, purchase frequency, or website behaviour can provide measurable indicators.
Substantial: The segment must be large or profitable enough to justify serving it. A small niche may still qualify if its margins and loyalty compensate for limited volume.
Accessible: The firm must be able to reach the segment through communication and distribution channels. A segment defined by a need but impossible to identify or contact is operationally weak.
Differentiable: Members of the segment should respond differently to a marketing mix. If two groups react identically to product, price, and promotion, treating them separately adds little value.
Actionable: The firm must possess the capabilities and resources to design an effective programme. A segment requiring technology or service expertise that the firm lacks may not be suitable.
Stable or sufficiently durable: The segment should persist long enough to recover research, product-development, and promotional costs. Temporary trends require flexible, low-commitment actions.
Identifiable: Clear variables should define membership, such as age range, usage rate, location, or purchase occasion. Vague labels such as “people who want quality” are inadequate without observable indicators.
Compatible with objectives: A segment should fit the organisation’s mission, brand image, capabilities, and ethical standards. A premium brand may reject a high-volume segment demanding deep discounts.
Profitable: Attractiveness depends on revenue minus costs, not size alone. A segment with frequent purchases may still be unattractive if service and acquisition costs eliminate its margin.

III. Target Market Selection and Strategies — Choosing the Customers to Serve

Target market selection is the evaluation of identified segments and the choice of one or more segments for focused marketing action. The decision connects external attractiveness with internal suitability: a large, growing segment is not automatically appropriate if competitors are strong or the firm cannot serve it effectively.

A. Target market selection and strategies

Targeting requires evaluating segment attractiveness, comparing strategic alternatives, and selecting a coverage strategy. Managers usually examine market size, growth, profitability, competition, customer needs, and organisational resources.

Segment attractiveness: Analyse current and potential sales, growth rate, price sensitivity, switching behaviour, and expected margins. A growing segment with severe price competition may be less attractive than a smaller premium niche.
Competitive intensity: Consider existing rivals, substitute products, barriers to entry, and competitor strengths. A new airline may avoid a route dominated by established low-cost carriers.
Company fit: Match the segment with finance, technology, distribution, personnel, brand reputation, and production capacity. A small organic producer may target local health-conscious consumers rather than national mass retail.
Customer need clarity: Select groups whose problems are sufficiently understood to support a compelling offer. “Need for affordable convenience” is more useful when linked to occasions such as weekday lunch.
Profitability and lifetime value: Estimate not only first purchase revenue but also retention, repeat purchase, referrals, and service costs. Customer lifetime value can be represented conceptually as future contribution margins minus acquisition and service costs.
Legal and ethical suitability: Avoid targeting practices that exploit vulnerable consumers or use sensitive information unfairly. Financial products require particular care when targeting inexperienced or financially distressed customers.

The major target-market strategies are:

Undifferentiated or mass marketing: The firm treats the total market as one market and offers one marketing mix. This can produce economies of scale, but it risks ignoring meaningful differences in customer needs.
Differentiated marketing: The firm targets several segments with separate offers or programmes. A hotel group may provide budget, business, and luxury brands; the benefit is broader coverage, while the cost is greater complexity.
Concentrated or niche marketing: The firm focuses on one segment or a small number of segments. A company selling adaptive clothing may build specialist expertise, although dependence on one niche increases risk.
Micromarketing: The firm adapts offerings to local areas or individual customers. Localised supermarket assortments and personalised online recommendations illustrate this approach.
- Local marketing: Products and messages are adjusted for cities, regions, or neighbourhoods.
- Individual marketing: Data is used to tailor content, recommendations, or configurations to a particular customer.

Coverage-risk balance: Mass marketing spreads risk but may weaken relevance; niche marketing improves focus but increases dependence on a narrow customer base.
Cannibalisation control: In differentiated targeting, separate offers should attract incremental demand rather than merely shift existing customers between the firm’s own products.
Evaluation metrics: Managers track segment sales, contribution margin, acquisition cost, retention, share of segment spending, and customer satisfaction after selection.

IV. Positioning — Creating a Distinctive Market Meaning

Positioning is the deliberate design of a company’s offering and image so that it occupies a clear, distinctive, and desirable place in the target customer’s mind relative to competing offerings. It is a perceptual outcome shaped by the firm’s actions, competitors’ claims, and customers’ experiences. A positioning statement often follows this structure:

TEXT

For [target customer], [brand] is the [category or frame of reference]
that provides [distinctive benefit] because [reason to believe].

For example, a commuter bicycle brand may position itself for urban workers as a reliable, low-maintenance transport option because its model uses puncture-resistant tyres and an enclosed drivetrain.

A. Positioning concept

The positioning concept explains how a brand should be understood and remembered by its chosen target market. Effective positioning combines relevance to customer needs with meaningful distinction from alternatives.

Frame of reference: Define the category in which the brand competes. A plant-based drink may compete not only with other vegan products but with milk, smoothies, and breakfast beverages.
Target-market relevance: The position must address an important customer problem or desired benefit. “Fast delivery” matters most when customers value immediacy.
Point of difference: Identify an attribute or benefit customers associate strongly with the brand and favourably compare with competitors, such as superior battery life or specialist expertise.
Point of parity: Include necessary category features. A digital bank may need secure transactions and mobile access before its budgeting tools can create differentiation.
Perceptual nature: Position exists in customer interpretation, not merely in managerial intention. A firm claiming “premium” must support it through design, service, pricing, and customer experience.
Credibility: The claim must be believable and supported by evidence. A “long-lasting” appliance requires warranty terms, testing, or a demonstrable product feature.
Consistency: Repeated brand signals strengthen memory. Contradictory prices, packaging, service, and advertising can make the position unclear.
Profitability: A desirable position must support a viable value proposition. Customers may value a feature but not enough to cover its development and delivery costs.

B. Bases of positioning

Bases of positioning are the criteria or associations a firm uses to distinguish its offering in the target market. The selected basis should matter to customers and be defensible over time.

Attribute: Position through a specific feature, such as a smartphone’s camera resolution or a detergent’s enzyme formula.
Benefit: Emphasise the outcome customers receive, such as “whiter clothes” or “faster project completion.”
Use or application: Associate the product with a particular occasion, such as an energy bar positioned for pre-workout consumption.
User: Focus on a defined user group, such as professional cyclists, new parents, or small-business owners.
Product class: Present the offering as an alternative to a conventional category, such as sparkling water positioned instead of sugary soft drinks.
Competitor: Compare explicitly with a rival on a meaningful dimension, provided the comparison is accurate and legally defensible.
Quality or value: Stress premium performance, affordability, or value for money. A retailer may position itself as “reliable quality at everyday prices.”
Lifestyle or personality: Link the brand with values or identity, such as environmental responsibility, adventure, or minimalist living.
Symbol or cultural meaning: Use distinctive names, colours, design, or associations to create recognition, provided these signals remain relevant rather than decorative.
Multiple bases: Combine bases when they reinforce one coherent idea. Too many unrelated claims produce a blurred position.

C. Positioning process

The positioning process converts market knowledge into a distinctive value proposition and then checks whether customers actually perceive it as intended. It should be iterative because competitors, technology, and customer expectations change.

Identify the target market: Specify who the brand seeks to influence, including need, usage situation, geography, and relevant behavioural characteristics.
Determine the frame of reference: Establish the category and realistic alternatives customers consider. This prevents the brand from defining competition too narrowly.
Understand customer needs: Use interviews, surveys, observation, search data, and purchase analysis to discover desired benefits and unresolved problems.
Analyse competitors: Map competitor associations, prices, features, strengths, weaknesses, and claims. A perceptual map may plot brands on dimensions such as price and convenience.
Find meaningful differences: Select benefits that are important, distinctive, communicable, affordable, and difficult for competitors to copy.
Select the value proposition: State the promised customer value in concise terms, linking target, need, benefit, and supporting reason.
Develop the positioning statement: Translate the strategy into a formal internal guide using the target, category, benefit, and reason-to-believe structure.
Align the marketing mix: Product features must deliver the promise; price must signal and support value; distribution must provide access; promotion must communicate the same central meaning.
Communicate and implement consistently: Packaging, salespeople, websites, service encounters, and advertising should reinforce the chosen position.
Monitor customer perception: Track awareness, associations, preference, trial, repeat purchase, reviews, and competitive movement. Reposition only when the existing position loses relevance, credibility, or distinctiveness.