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 a ha e a y olor, as lo g as its
la k , 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.
Bra d positio i g is the a t of desig i g the o pa y’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 customer-
focused value proposition, a cogent reaso hy the target arket should uy the produ t Kotler, 00
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;
•
•
What are the expectations and priorities, when the target customer decides on a purchase?
Developed Product have to address usto ers’ 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 o peti g ra ds’ positio i g 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 decision-
making 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
[Link]
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 American Express
Fly Dubai primarily focuses on Offers VIP treatment 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 travel and shopping
Although the services matter, the class are the primary aspects that features, providing members
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. 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: [Link]
High end prices: [Link]
Luxury experience: [Link]
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.
• 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).
• 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.
• Effective positioning & Communications are of essence to target consumers, and create the
required awareness, interest, desire, and make the consumer take the buying Action
(AIDA) model.
• Technological evolution has also changed customers approach to researching, selecting
and buying products, it has been noticed that customer are also applying a reverse STP, by
researching companies in certain product segments, considering which companies holds
the best position, reputation, and customer satisfaction feedbacks. With that being done,
company should also evolve in their overall STP proposition, and are advised to expand
•
their digital presence, ensuring consumers get the right and comprehensive information.
• Usage of big data analytics and applying quantitative methods will be a game changer,
enabling marketers to forecast and predict performance.
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