Segmenting and positioning
A marketing strategy is based on expected customer behavior in a certain market. In order to know the customers and their expected buying behavior, a process of segmenting and positioning is used. These processes are chronological steps which are dependent on each other. The processes of market segmentation and of positioning are described elsewhere within the Wikipedia. This topic elaborates on the dependency and relationship between these processes.
The process-data model
Below a generic process-data model is given for the whole process of segmenting and positioning as a basis of deciding on the most effective marketing strategy and marketing mix.
This model consists of the three main activities: segmenting, targeting and positioning. It shows the chronological dependency of the different activities. On the right side of the model the concepts resulting from the activities are showed. The arrows show that one concept results from one or more previous concepts; the concept can not be made when the previous activities have not taken place. Below the three main activities are shortly described as well as their role as a basis for the next step or their dependency on the previous step.
Segmenting is the process of dividing the market into segments based on customer characteristics and needs.
The main activity segmenting consists of four sub-activities. These are:
- determining who the actual and potential customers are
- identifying segments
- analyzing the intensity of competitors in the market
- selecting the attractive customer segments.
The first, second and fourth steps are described as market segmentation. The third step of analyzing the intensity of the competitors is added to the process of segmenting in this process description. When different segments are identified, it is not necessary that these segments are attractive to target. A company is almost never alone in a market -- competitors have a great influence on the attractiveness of entering a certain market. When there is a high intensity of competitors, it is hard to obtain a profitable market share and a company may decide not to enter a certain market. The third step of segmenting is the first part of the topic of competitor analysis.
The need for segmenting a market is based on the fact that no market is homogeneous. For one product the market can be divided in different customer groups. The variables used for this segmenting in these groups are usually geographical, psychographical, behavioral and demographic variables. This results in segments which are homogeneous within and heterogeneous between each other. When these segments are known, it is important to decide on which market to target. Not every market is an attractive market to enter. A little filtering has been done in this activity, but there are more factors to take in account before targeting a certain market segment. This process is called targeting.
After the most attractive segments are selected, a company should not directly start targeting all these segments -- other important factors come into play in defining a target market. Four sub activities form the basis for deciding on which segments will actually be targeted.
The four sub activities within targeting are:
1. defining the abilities of the company and resources needed to enter a market
2. analyzing competitors on their resources and skills
3. considering the company’s abilities compared to the competitors' abilities
4. deciding on the actual target markets.
The first three sub activities are described as the topic competitor analysis. The last sub activity of deciding on the actual target market is an analysis of the company's abilities to those of its competitors. The results of this analysis leads to a list of segments which are most attractive to target and have a good chance of leading to a profitable market share.
Obviously, targeting can only be done when segments have been defined, as these segments allow firms to analyze the competitors in this market. When the process of targeting is ended, the markets to target are selected, but the way to use marketing in these markets is not yet defined. To decide on the actual marketing strategy, knowledge of the differential advantages of each segment is needed.
When the list of target markets is made, a company might want to start on deciding on a good marketing mix directly. But an important step before developing the marketing mix is deciding on how to create an identity or image of the product in the mind of the customer. Every segment is different from the others, so different customers with different ideas of what they expect from the product. In the process of positioning the company:
1. identifies the differential advantages in each segment
2. decides on a different positioning concept for each of these segments. This process is described at the topic positioning, here different concepts of positioning are given.
The process-data model shows the concepts resulting from the different activities before and within positioning. The model shows how the predefined concepts are the basis for the positioning statement. The analyses done of the market, competitors and abilities of the company are necessary to create a good positioning statement. When the positioning statement is created, one can start on creating the marketing mix.
B2C and B2B
The process described above can be used for both business-to-customer as well as business-to-business marketing. Although most variables used in segmenting the market are based on customer characteristics, business characteristics can be described using the variables which are not depending on the type of buyer. There are however methods for creating a positioning statement for both B2C and B2B segments. One of these methods is MIPS: a method for managing industrial positioning strategies by Muhlbacher, Dreher and Gabriel-Ritter (1994).
MIPS: Managing Industrial Positioning Strategies the image of the
B2B Marketing Org - How to develop a positioning statement