Positioning
‘Marketing as strategy is the emphasis at the SBU level on market segmentation, targeting, and positioning in defining how the firm is to compete in its chosen businesses.’
(Webster, 1992: 10) The three major steps of segmentation, targeting and positioning are widely considered to be central to the decision and planning process of marketing with the purpose of identifying and selecting potential buyers and communicating distinctive product benefits in the market. This chap- ter considers literature relating to segmentation, targeting and positioning, and finally, the strategic role of positioning in segmentation and targeting.
Segmentation
Wendell Smith (1956: 5) first articulated the need for a ‘more precise adjustment of product and marketing effort to consumer or user require- ments’ based on the recognition that different products are generally purchased by different groups of people. Segmentation attempts to identify homogeneous demand function within a heterogeneous market demand function and Dhalla and Mahatoo (1976: 41) point to the advantage of
‘how these differences can be exploited to increase the productivity of the firm’s marketing program’. Segmentation is the process of partitioning a market into groups of potential customers who are similar in designated ways and who are likely to exhibit similar purchase behaviour (Weinstein, 1987). Market segmentation is a means of identifying and resolving four characteristic types of marketing problem; defining the market; ration- alising policies for existing brands and products; positioning ranges of brands and of product varieties; and identifying gaps in the market which
offer new market opportunities (Tynan and Drayton, 1987). The goal of
‘getting close to the customer’ is meaningless because a marketer cannot effectively satisfy a wide range of customers equally (Shapiro, 1988: 120).
The process of segmentation divides (potential) customers into distinct groups for the purpose of targeting and designing segment-specific mar- keting strategies (Muhlbacher, Dreher and Gabriel-Ritter, 1994) offering the possibility of a better unity between the offer and the desire (Hiam and Schewe, 1993: 65).
There are advantages in trying to match a product offering closely to what the market requires (Hanson, 1972) and, in particular, to concentrate on narrow markets through segmentation and carve out a specific niche in the market (Ries and Trout, 1986b). Specialization and concentration on a well-defined market with a thorough understanding of customer needs is the ability to make subsequent decisions (Cavangh and Clifford, 1986), whereas a product that offers the best average performance across all segments will generally lose out to products that are tuned to the specific needs of specified segments (Czepiel, 1992; Eng, 1994).
Segmentation is only a first step in understanding the market (Shunglu and Sarkar, 1995) producing results that indicate desirable marketing action (Johnson, 1995). Selected segments must form a sound basis for product, distribution, pricing, and communication strategy that can only be realized by stable segments of which buying behaviour can be reliably predicted (Van Raaij and Verhallen, 1994).
There are four key requirements for effective segmentation – homogeneity within segments, heterogeneity between segments, targetability by means of the marketing mix, and viability in commercial terms (Brooksbank, 1994). It has been proposed that segment attractiveness should take account of internal strengths and weaknesses (Lovelock and Weinberg, 1984) but others believe that segment attractiveness should be determined independently of internal strengths and weaknesses because an assessment based on present abilities could lead to a biased view of existing segment potentials (Muhlbacher, Dreher and Gabriel-Ritter, 1994). The usefulness of a particular segmentation approach might be best assessed in terms of ease of measurement, accessibility, and substantiality (Dickson, 1982;
Ball, Lamb and Brodie, 1992).
There are three main purposes for market segmentation research: to learn how the brands or products in a class are perceived with respect to strengths, weaknesses, and similarities; to learn about consumers’
desires and how these are satisfied or unsatisfied by the current market;
to integrate these findings strategically, determining the greatest oppor- tunities for new brands or products and how a product or its image
Segmentation, Targeting and Positioning 23 should be modified to produce the greatest sales gain (Johnson, 1995).
Marketers should not see segmentation as an end in itself but as the first step in understanding a market (Shunglu and Sarkar, 1995). Marketing research should be based on understanding of markets, potential customers, their needs and their awareness so that more is known about customers, more about the reasons for their actions, and this should suggest the marketing policies to be adopted (Esslemont, 1995).
The methods and techniques of determining similarities and homo- geneity can be the result of the application of marketing research.
Research can provide information on different segments in different markets for different products and provide the opportunity to understand and select target markets. Marketing research should inform managers of customer segmentation to assist making decisions in their markets resulting in a ‘brand’s eye-view’ (Bucklin, Gupta and Han, 1995: 66).
Research should be directed at learning more about how the market works, predicting the effect of our actions and choosing between alternative courses of action (Esslemont, 1995). Market segmentation studies can produce results that indicate desirable marketing action by repositioning closer to ideal points of sizeable segments of the market and further from other products with which it must compete, resulting in an increase of a product’s market share (Johnson, 1995).
The use of demographic, geographic and psychographic segmentation techniques does not constitute a prescribed approach. New and creative ways to define a market and to gain insights that provide a potential competitive advantage have been continually sought (Hooley and Saunders, 1993). The use of a combination of judgmental modelling and correspondence analysis can focus directly on the benefits required by each customer by grouping together those requiring similar benefits;
non-overlapping segmentation assumes the existence of discrete segments, and fuzzy clustering techniques might seek escape from theoretical groupings. The fact remains that the reality is made up of many combin- ations of differing individuals (Naudé, 1995).
The use of segmentation research is varied. Sampson (1992) proposes that psychological segmentation is a way of entering into the mindset of different groups of consumers to see how the world looks from the inside looking out, providing marketing management with a better insight into why consumers behave as they do and providing a structure through an underlying model of personality. Segmentation research providing ‘why’ information is a powerful marketing tool (Thompson and Kaminski, 1993). Anderson and Narus (1991: 54) advocate a market segmentation approach ‘drawing on data gathered from several customers
in (a) segment’ to build a ‘value model’ on the premise that not all market segments want the same working relationship, or even value it in the same way. Pine, Peppers and Rogers (1995: 103) suggest that the twin logic of mass customization and one-to-one marketing binds producer and consumer together in what they describe as ‘a learning relationship – an ongoing connection that becomes smarter as the two interact with each other, collaborating to meet the consumer’s needs over time’. An under- standing of segments is important because motives and attitudes influence buying behaviour (Chisnall, 1995).
There are some detractors of elements of market segmentation. Levitt (1973) suggests that a solution to the problem of external change is that companies should define their served markets more broadly rather than narrowly. There is criticism of segmentation based on an absence of
‘actionability’ in segmentation schemes based on demographic variables (Wind, 1978) and a lack of ‘actionability’ in the majority of segmentation studies characterized as ‘15 years of regression’ (Winter, 1982). Ball, Lamb and Brodie (1992) suggest that some types of segmentation, such as the unit of analysis called a person-in-situation, actually ignore consumers because they are always composed of certain kinds of people, or certain kinds of situations, or certain kinds of people in certain kinds of situations without any consistent combinations. Kardon (1992: 19) notes that life would be much easier for marketing if the old adage of ‘birds of a feather flock together’ were still true and claims that ‘consumer schizophrenia is dramatically transforming the structure and competitive dimensions of many industries today as buyers abandon predictable patterns of consumption’. Esslemont (1995: 18) believes that segmentation is arbi- trary and dependent on the ‘statistical procedures used’.
Segmentation seeks homogeneity whilst some managers mistake customer focus to mean they must serve all customer needs or respond to every request leading to a lack of focus on particular markets and there- fore appropriate strategies (Porter, 1996). Segmentation is a way of dealing with widening heterogeneity in a diversifying market (Dibb, 2001) in order to match the needs of the customer to the abilities of the supplier.