CHAPTER FOUR

MARKET SEGMENTATION, TARGETING AND POSITIONING

4.1. Introduction
A company that decides to operate in a broad market recognizes that it normally cannot serve all
customers in that market. The customers are too numerous, widely scattered and diverse in their
buying requirements. Instead of competing everywhere, the company needs to identify the
market segments that it can serve most effectively.
To choose its markets and serve them well, many companies are embracing target market. In
target marketing, sellers distinguish major market segments, target one or more of those
segments, and develop products and marketing programs tailored to each segment. Instead of
scattering their marketing effort they can focus on the buyers whom they have the greatest
chance of satisfying. Therefore, in order to achieve their objective marketers are required to take
three major steps (see figure 4-1)
a) Market segmentation: - Dividing a market in to distinct groups of buyers with different
needs, characteristics or behavior who might require separate products or marketing
mixes.
b) Market targeting: - is the process of evaluating each market segment’s attractiveness and
selecting one or more segments to enter.
c) Market positioning: - is formulating competitive positioning for a product and a detailed
marketing mix.

Market Segmentation Market Targeting Market Positioning

1. Identify segmentation 3. Evaluate the attractiveness 5. Identify possible positioning

variables and segment of each segment. concepts for each target segment.
the market.
4. Select the target 6.Develop a marketing mix for
2. Develop segment segment(s) each segment.
profile

Figure 4-1
Steps in market segmentation, Targeting and positioning

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4.2. MARKET SEGMENTATION

4.2.1. Meaning of Market Segmentation

Markets consist of buyers, and buyers differ in one or more ways; in their wants, resources,
locations, buying attitudes and buying practices. Through market segmentation companies divide
large heterogeneous markets into smaller segments that can be reached more efficiently with
products and services that match their unique needs.
Why market segmentation? Because
 buyers are too numerous,
 buyers are too widely scattered and
 Buyers are too varied in their needs and buying practices.
 Different companies vary widely in their abilities to serve different segments of the
market.
4.2.2. Levels of Market Segmentation
Market segmentation has four major steps which can be illustrate as follows (see figure 4-2)

Mass Marketing Segment Marketing Niche Micro

Marketing Marketing
No segmentation complete segmentation

Figure 4-2
Steps in the market segmentation
I. Mass Marketing
In mass marketing the seller engages in the mass production, mass distribution and mass
promotion of one product for all buyers. The traditional argument for mass marketing is that it
creates the largest potential market, which leads to the lowest costs, which in turn can translate in
to either lower prices or higher margins. However, many factors now make mass marketing more
difficult.
Advantage
– It creates the largest potential market
– Low production cost
– Lower prices or higher profit margins
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Disadvantage
– Difficult to create a single product that appeals to a groups of customers
– The rise of advertising media and distribution channel

ii. Segment Marketing

It recognizes that buyers differ in their needs, perceptions buying behaviors, purchasing power,
geographical location, buying habits and attitudes. Therefore, the company tries to isolate broad
segments that make up a market and adapts its offers to more closely match the needs of one or
more segments.
Segmentation is a midpoint between mass marketing and individual marketing. The consumers
belonging to a segment are assumed to be quite similar in their wants and needs. Yet they are not
identical.
A market segment consists of a large identifiable group within a market with similar wants,
purchasing power, geographical location, buying attitudes, or buying habits. i.e. An auto
company may identify four broad segments: car buyers who are primarily seeking basic
transportation or high performance or luxury or safety.
Segmentation marketing offers several benefits over mass marketing such as:
i. The company can market more efficiently, target its products or services, channels and
communication programs to ward only consumers that it can serve best.
ii. The company can also market more effectively by fine tuning its products, prices and
programs to the needs of carefully defined segments.
iii. The company may face fewer competitors if fewer competitors are focusing on this
market segment.
iii. Niche Marketing
A niche is a more narrowly defined group, usually identified by dividing a segment into sub
segments or by defining a group with a distinctive set of traits who may seek a special
combination of benefits.

While segments are fairly large and thus normally attract several competitors, niches are fairly
small and normally attract only one or a few competitors. Niches typically attract smaller
companies.

An attractive niche is characterized as follows.

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  The customers in the niche have a distinctive set of needs;
 They will pay a premium to the firms that best satisfies their needs;
 The niche is not likely to attract other competitors;
 The nicher gains certain economies through specialization; and
 The niche has size, profit and growth potential.
iv. Micro Marketing
It is the practice of tailoring products and marketing programs to suit the tastes of specific
individuals and locations. Micro marketing includes local marketing and individual marketing.
Local marketing:- It involves tailoring brands and promotions to the needs and wants of local
customer groups: cities, neighborhoods and even specific stores. Local marketing derives certain
drawbacks such as: increasing manufacturing and marketing costs, reduces economics of scale,
creates logistical problems and diluted the overall image of brands if the product and message
vary too much in different localities. However, the advantages of local marketing overweigh the
drawbacks as it is supported by new developed technologies.

Individual marketing:- also known as markets-of-one marketing, customized marketing and

one-to-one marketing. It involves tailoring products and marketing programs to the needs and
preferences of individual customers. New technologies permit companies to consider a return to
customized marketing or what is called mass customization. Mass customization is the ability to
prepare on a mass basis individually designed products and communications to meet each
customer’s requirements.
4.2.3. Requirements for Effective Segmentation
To be useful market segments must be:
i. Measurable:- The size, purchasing power and profits of the segment can be measured.
ii. Accessible:- The market segment can be effectively reached and served.
iii. Substantial:- The market segments are large or profitable enough to serve.
iv. Differentiable:- The segments are conceptually distinguishable and respond
differently to different marketing mix elements and programs.
v. Actionable:- effective programs can be designed for attracting and serving the
segments.

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4.2.4. PATTERNS OF MARKET SEGMENTATION
Market segments can be built in many ways. One way is to identify preference
segments. Suppose ice cream buyers are asked how much they value
sweetness and creaminess as the product attributes. Three different patterns
can emerge.
1. Homogeneous Preferences
This preference shows a market where all the customers have roughly the same
preference. The market shows no natural segments. We would predict that
existing brands would be similar and cluster around the middle of the scale in
both sweeteners and creaminess.
2. Diffused Preferences
At the other extreme, consumer preferences may be scattered throughout the
space; indicating that consumers vary greatly in their preferences. The first
brand to enter the market is likely to position center to appeal to the most
people. A brand in the center minimizes the sum of total customers’
dissatisfaction. A second competitor could locate next to the first brand and
fight for market share. Or it clear locate is a cannel to attract a customer’s
group that was not satisfied with the cluster brand. If several brands are in the
market, they are likely to position through at the space and show real
differences to match consumer-preference differences.
3. Clustered Preferences
The market might reveal distinct preference clusters, called natural market
segments. The firm in this market has three options. It might position in the
center, hoping to appeal to all groups. It might position in the largest market
segment (concentrated marketing). It might develop several brands, each
positioned in a different segment of the first firm developed only one brand,
competitors would enter and introduce brands in the others segments.

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 Figure 4-3: Patterns of market segmentation

4.2.5. MARKET SEGMENTATION PROCEDURE

The three steps procedure for identifying market segments: survey, analysis,
and profiling.
Step One: - Survey Stage
The researcher conducts exploratory interviews and focus groups to gain
insight into consumer motivations, attitudes, and behavior. Then the
researcher prepares a questionnaire and collects data on attributes and their
importance ratings, brand awareness and brand ratings, product usage
patterns, attitudes toward the product category and demographics, geographic,
psychographics, and media graphics of the respondents.
Step Two: - Analysis Stage
The research applies factor analysis to the data to remove highly correlated
variables, and then applies cluster analysis to create a specified number of
maximally different segments.
Step Three: - Profiling Stage

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Each cluster profiled in terms of its distinguishing attitudes, behavior,
demographics, psychographics, and media patterns. Each segment is given a
name based on its
4.2.6. Bases For-segmenting Consumer Markets
There is no single way to segment a market. A marketer has to try different segmentation
variables, alone and in combination, to find the best way to view the market structure. Major
variables used in segmenting consumer markets are: geographic, demographic, psychographics
and behavioral.
i. Geographic Segmentation
Geographic segmentation calls for dividing the market in to different geographical units such as
nations, states, regions, counties, cities or neighborhoods. The company can decide to operate in
one or a few geographical areas or operate in all but pay attention to geographical variations in
wants and preferences.
Geographic segmentation helps companies to pay attention to geographical differences in needs
and wants and to localize the company’s products, advertising, promotion and sales efforts to fit
the needs of individuals in the region.
ii. Demographic Segmentation
In demographic segmentation, the market is divided into groups based on demographic variables
such as age, sex, family size, family life cycle, income, occupation, education, religion race and
nationality. These variables are the most popular bases for segmenting customer groups, largely
because customer’s needs, wants and usage rates often vary closely with demographic variables
and demographic variables are easier to measure than most other types of variables. Even when
the target market is described in non-demographic terms (say, personality type) the link back to
demographic characteristics is needed in order to know the size of the target market and the
media that should be used to reach it efficiently.
 Income ® Under $1000, $1000-$2500, over $2500
 Age ® Under 5, 5-10, 10-19, 20-34, 35+
 Gender ® Male, Female
 Family lifecycle ® Young, single, married, no children
 Education ® High school, Diploma, Degree
 Occupation ® Professional, managers, clerical, employee

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  Religion ® Orthodox, Muslim, catholic, protestant, etc
 Ethnic Background ® African, Asian, European
iii. Psychographics Segmentation
In psychographics segmentation, buyers are divided into different groups on the basis of
lifestyle, social class and personality characteristics. People within the same demographic group
can exhibit very different psychographics profiles.
a. Social class segmentation:- is dividing the market based on the social class they exhibit.
b. Lifestyle segmentation involves dividing the market into group’s based on lifestyles they
exhibit, based on three major dimensions: activities (work, hobbies, shopping, sports, and
social events), Interests (food, fashion, family, recreation), opinions (about themselves,
social issues, business, products). Life style captures something more than the person’s
social class or personality.
c. Personality and self concept segmentation: personality is a person’s distinguishing
psychological characteristics that lead to relatively consistent and lasting responses to his
or her own environment. It can be described in terms of traits such as: self-confidence,
dominance, sociability, autonomy, defensiveness, and adaptability and aggressiveness.
Marketers have used personality variables to segment markets. They endow their products with
brand personalities that correspond to consumer personalities. In the late fifties fords and
Chevrolets were promoted as having different personalities. Ford buyers were identified as
independent, impulsive, masculine, alert to change, and self confident, while Chevrolet owners
were conservative, thrifty; prestige – conscious, less masculine and seeking to avoid extremes.
iv. Behavioral Segmentation
In behavioral segmentation, buyers are divided into groups on the basis of their knowledge,
attitude, use or response to a product. Many marketers believe that behavioral variables:
occasions, benefits, user status, usage rate, loyalty status, buyer readiness stage, and attitude are
the best starting point for constructing market segments.
a. Occasion segmentation
Buyers can be divided into groups according to occasions when buyers get the idea to buy,
actually make their purchase, or use the purchased item. Occasions may include: vacations,
marriage, separation, divorce; acquisition of a home, injury or illness, retirement, death of a
family member. Occasions may also be special occasions or regular occasions.

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 b. Benefit segmentation
This is dividing the market into groups according to the different benefits that consumers seek
from the product. It requires finding the major benefits people look for in the product class, the
kinds of people who look for each benefit and the major brands that deliver each benefit. For
example, while traveling with all airplanes, the traveler either of the three major benefits;
comfort, safety and economy or buy any of the three class tickets; first class, business class and
economic class.
c. User status
Markets can be segmented into groups of nonusers, ex=users, potential users, first – line users
and regular users of a product. For example, the blood banks must not rely only on regular
donors to supply blood. They must recruit new first time donors and contact ex-donors and each
will require a different marketing strategy. The company’s position in the market will also
influence its focus. Market share leaders will focus on attracting potential users, while smaller
firms will often focus on attracting current users away from the market leader.
d. Usage Rate
Markets can be segmented into light, medium and heavy users. Heavy users are often a small
percentage of the market but account for a high percentage of total consumption. Marketers
usually prefer to attract one heavy user to their product or service rather than several light users.
e. Loyalty status
A market can be segmented by consumer-loyalty patterns. Consumers can be loyal to brands,
stores (sellers), companies (producers). Buyers can be divided in to four groups according to
their degree of loyalty status.
 Hard-core loyal:- consumers who buy one brand all the time. It indicates the strength of
the company’s products.
 Split loyal:- Consumers who are loyal to two or more brands. This helps the company
to identify which brands are most competitive with its own.
 Shifting loyal:- Consumers who shift from one brand to another. Here, the company can
learn about its marketing weaknesses and attempt to correct them. The marketer can
attract switchers by running frequent sales.
 Switchers:- Consumers who show no loyalty to any brand. They either want something
different each time they buy or they buy whatever is on sale.

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Note:- What appear to be brand loyal purchase patterns may reflect habit, indifference, a low
price, a high switching cost, or the non-availability of other brands. Thus a company must
carefully interpret what is behind the observed purchase patterns.
f. Buyer readiness’ stage:- A market consists of people in different stages of readiness to
buy a product. Some are unaware of the product, some are aware, some are informed,
some are interested, some desire the product and some intend to buy.
Unaware – aware – informed – interested – desire –intend to buy
g. Attitude: - Five attitude groups can be found in a market: enthusiastic, positive,
indifferent, negative, and hostile.
Marketers rarely limit their segmentation analysis to only one or a few variables. Rather, they are
increasingly using multiple segmentation bases in an effort to identify smaller, better-defined
target groups.
4.2.7. Bases for Segmenting Business Markets
Business markets can be segmented with many of the same variables employed in consumer
market segmentation such as geography, benefits sought, and usage rate. Yet business marketers
can also use several other variables such as demographic, operating variables, purchasing
approaches, situational factors and personal characteristics. The demographic variables are the
most important, followed by the operating variables, purchasing approaches, situational factors
and finally personal characteristics.

i. Demographic: it includes
 Industry:- the type of industry which buy the company’s product or which industries
should we serve?
 Company size:- the size of the company that buys the company’s product or what size
companies should we serve?
 Location:- geographical location to focus on or which geographical areas should we
serve?
ii. Operating variables: it includes
 Technology:- the type of technology customers use and for use required.
 User/nonuser status:- should we serve heavy users, medium users, light users, or non
users?

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  Customer capabilities:- should we serve customers needing many or few services?
iii. Purchasing Approaches
 Purchasing function organization:- should we serve companies with highly centralized
or decentralized purchasing organizations?
 Power structure:- should we serve companies that are engineering dominated,
financially dominated, marketing dominated, etc companies or customers.
 Nature of existing relationships:- should we serve companies with which we have strong
relationships or simply go after the most desirable companies.
 General purchase policies:- should we serve companies that prefer leasing? Service
contracts? Systems purchases? Sealed bidding?
 Purchasing criteria:- should we serve companies that are seeking quality? Service?
Price?
iv. Situational factors:- it includes factors such as:
 Urgency:- should we serve companies that need quick and sudden delivery or service?
 Specific application: should we focus on certain applications of our product rather than
all applications?
 Size of order:- should we focus on large or small order?
v. Personal characteristics:- it includes factors such as:
 Buyer-seller similarity:- should we serve companies whose people and values are similar
to ours?
 Attitudes toward risk:- should we serve risk-taking or risk avoiding customers?
 Loyality:- should we serve companies that show high loyality to their suppliers?

Sometimes business markets are segments based on their stage in the purchase decision process
as follows.
i. First-time prospects:- customers who have not yet purchased. They want to buy from a
sales person or vendor who understands their business, who explains things well and
whom they can trust.
ii. Novices:- customers who have already purchased the product. They want easy-to-read
manuals, hot lines, a high level of training, and knowledgeable sales reps.

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 iii. Sophisticates:- customers who want speed in maintenance and repair, product
customization and high technical support.
A study identified that there are four business segments based on their attitude to price and
service. They are:
i. Programmed buyers: buyers who view the product as not very important to their
operation. They buy it as a routine purchase item, usually paying full price and receiving
below average service. Clearly this is a highly profitable segment for the vendor.
ii. Relationship buyers:- Buyers who regard the product as moderately important and are
knowledgeable about competitive offerings. They get a small discount and a modest
amount of service and prefer the vendor as long as the price is no far out of line. They are
the second most profitable group.
iii. Transaction buyers:- buyers who see the product as very important to their operations.
They are price – and service – sensitive. They receive about a 10% discount and above
competitive offerings and are ready to switch at the slightest dissatisfaction. The
company needs these buyers for volume purposes, but they are not very profitable.

4.3. MARKET TARGETING

4.3.1. Meaning of Market Targeting

Once the firm has identified its market-segment opportunities, it has to evaluate the various
segments and decide how many and which to target. We will now examine the process of
evaluating and selecting marketing segments.
6.3.2. Process of Market Targeting
The process of market targeting involves the following steps.
1. Evaluating the market segments
In evaluating different market segments, a firm must look at three factors: the size and growth of
the segment, the structural attractiveness of the segment, and company’s objectives and
resources.
i. Segment size and growth:- the right size and growth is a relative matter. The largest,
fastest growing segments are not always the most attractive ones for every company. The
firm must ask whether a potential segment has the characteristics that make it generally
attractive, such as size, growth, profitability, scale economics, low risk and so on. In

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 addition to these we should add other considerations. For example, how easy will it be to
persuade the members of the segment to shift their purchases? (The company should
avoid targeting loyal of other brands or deal – prove shoppers; rather, it should go after
dissatisfied shoppers and those who have not become firmly brand loyal). How much is
their business worth? (The company should target consumers who will spend a lot on the
category, stay loyal, and influence others.)
ii. Segment structural attractiveness:- structural attractiveness of a segment may be affected
by the existence of many strong and aggressive competitors, the existence of many actual
or potential substitutes products, the relative power of buyers and the powerful suppliers
who limit cost and quality of ordered goods and services.
iii. Company objectives and resources:- The firm must consider whether investing in the
segment makes sense given the firm’s objectives and resources. Some big, growing and
structurally attractive segments could be dismissed because they do not interconnect with
the company’s long run objectives even if the segment fits the company’s objectives, the
company must consider whether it possesses the skills and resources it needs to succeed
in that segment. The segment should be dismissed if the company lacks one or more
necessary competences and is in no position to acquire them. But even if the company
possesses the required competences, it needs to develop some superior advantages.
Companies should only-enter segments in which they can develop competitive
advantages – offer superior value to customers.
2. Selecting the Market Segments
After evaluating different segments, the company must now decide which and how many
segments to serve. This is the problem of target market selection. In other words, the company
must decide which segments to target. The company can consider the five patterns of target
market selection. They are presented as follows:
i. Single – Segment Concentration/Concentrated Marketing
This is a market coverage strategy in which a firm goes after a large share of one or a few sub
markets. Instead of going after a small share of a large market, the firm goes after a large share
of one or a few sub markets. This provides an excellent way for small new businesses to get a
foot-hold against larger, more resourceful competitors.

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Concentrated marketing helps companies to achieve a strong market positions in the segments or
niches it serves because of its greater knowledge of the segment’s needs and the special
reputation it acquires. Many operating economies are enjoyed by the company because of
specialization in production, distribution and promotion. However, concentrated marketing
involves higher – than – the normal risks. As a particular market segment can turn sour or larger
competitors may decide to enter the same segment. For these reasons, money companies prefer
to operate in more than one segment.
ii. Selective Specialization
Here the firm selects a number of segments, each objectively attractive and appropriate, given
the firm’s objectives and resources. There may be little or no synergy among the segments, but
each segment promises to be a money maker. This multi-segment coverage strategy has the
advantage of diversifying the firm’s risk. Even if one segment becomes unattractive, the firm can
continue to earn money in other segments.
iii. Product Specialization
Here the firm concentrates on making a certain product that it sells to several segments. The firm
builds a strong reputation in the specific product area. An example would be a microscope
manufacturer that sells microscopes to university laboratories, government laboratories and
commercial laboratories. The firm makes different microscopes for these different customer
groups, but does not manufacture other instruments that laboratories might use. The downside
risk is that the product may be supplanted by an entirely new technology.
iv. Market Specialization
Here the firm concentrates on serving many needs of a particular customer group. An example
would be a firm that sells an assortment of products for university laboratories, including
microscopes, oscilloscopes, Bunsen burners, and chemical flasks. The firm gains a strong
reputation for specializing in serving this customer group and becomes a channel for all new
products that the customer group could feasibly use. The down – side risk is that the customer
group may have its budgets cut.
v. Full Market Coverage
Here the firm attempts to serve all customer groups with all the products that they might need.
Only large firms can undertake a full market coverage strategy. Large firms can cover a whole
market in two broad ways: through undifferentiated marketing or differentiated marketing.

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 a. Undifferentiated marketing: - In undifferentiated marketing the firm ignores market
segment differences and goes after the whole market with one market offer. It focuses on
buyer’s needs rather than differences among buyers. It designs a product and a marketing
program that will appeal to the broadest number of buyers. It relies on mass distribution
and mass advertising. It aims to endow the product with a superior image in people’s
minds. Undifferentiated marketing is often seen as “the marketing counterpart to
standardization and mass production in manufacturing.” Undifferentiated marketing
provides cost economics as such the narrow product line keeps down production, inventory
and transportation costs, mass advertising program keeps down advertising costs, and
research and development costs will be lower presumably, the company can turn its lower
costs into lower prices to win the price – sensitive segment of the market.
However, most modern marketers have strong doubts about this strategy. Because no single
marketing effort may not satisfy all consumers competition will be high in the largest
segments but ignores smaller ones.
b. Differentiated Marketing.
In differentiated marketing, the firm operates in several market segments and designs
different programs for each segment. Differentiated marketing typically creates more total
sales than undifferentiated marketing. However, it also increases the costs of doing business.
The following costs are likely to be higher.

 Product modification costs: Modifying a product to meet different market – segment

requirements usually involves some R&D, engineering costs.
 Manufacturing costs:- It is usually more expensive to produce 10 units of 10 different
products than 100 units of one product. The longer the production setup time and
smaller the sales volume of each product, the more expensive the product became.
However, if each model is sold in sufficiently large volume, the higher costs of setup
time may be quite small per unit.
 Administrative costs:- the company has to develop separate marketing plans for each
market segment. This requires extra marketing research, forecasting, sales analysis,
promotion, planning and channel management.

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  Inventory costs:- It is more costly to manage inventories containing many produces
than inventories containing few products.
 Promotion costs:- the company has to reach different market segments with different
promotion programs. The result is increased promotion – planning costs and media
costs.
Since differentiated marketing leads to both higher sales and higher costs, nothing general can be
said regarding this strategy’s profitability market. If this happens, they may want to turn to
counter segmentation to broadened its target market for its baby shampoo to include adults. And
Smith Kline Beecham launched its aquafresh toothpaste to attract three benefit segments
simultaneously: those seeking fresh breath, whiter teeth, and cavity protection.
3. Choosing a Market – Coverage Strategy
Many factors need to be considered when choosing a market coverage strategy. Which strategy
is best depends on:
i. Company resources:- when the firm’s resources are limited, concentrated marketing
makes the most sense.
ii. The degree of product variability:- If the company produces similar/uniform products,
undifferentiated marketing is appropriate, whereas, as the company produces different
products, differentiated or concentration marketing is appropriate.
iii. The products life-cycle stage:- The market coverage strategy for a product varies at the
different stages of a product life cycle. In the introduction and growth stage,
undifferentiated or concentrated marketing makes the most sense. Whereas, at maturity
and decline stage, differentiated marketing begins to make more sense.
iv. Market variability:- if most buyers have the same tastes, buy the same amounts, and react
the same way to marketing efforts, undifferentiated marketing is appropriate.
v. Competitor’s marketing strategies:- company’s should see competitors market coverage
strategy and develop a counteractive market coverage strategy. For example, when
competitors use segmentation, the company uses differentiation marketing and when
competitors use undifferentiated marketing, the company uses differentiated or
concentrated marketing.

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4.4. SEGMENT POSITIONING

4.4.1. Meaning of Segment Positioning

After a target market has been selected a company will naturally find others competing in that
segment. The next task is to develop a marketing plan that will enable your product to compete
effectively against them. It is unlikely that success will be achieved with a marketing program
that is virtually identical to competitors for that already have attained a place in the minds of
individuals in the target market and have developed brand loyalty. Since people have a variety of
needs and tastes, market acceptance is more easily achieved by positioning.
Positioning is the act of designing the company’s offering and image so that they occupy a
meaningful and distinct competitive position in the target customer’s mind.
For example, one auto company might choose to differentiate its cars on durability, while its
competitors may choose to emphasize fuel economy, comfort or smoothness of ride. The end
result of positioning is the successful creation of a market – focused value proposition, a simple
clear statement of why the target market should buy the product.
4.4.2. Positioning Strategies
Marketers can follow several positioning strategies. They can position their products on specific
product attributes such as low price, performance, benefits, usage occasions, against a competitor
and combination of many attribute.
Each firm must differentiated its offer by building a unique bundle of competitive advantages
those appeals to a substantial group within the segment. The positioning task consists of three
steps.
1. Identifying a set of possible competitive advantages on which to build a position.
2. Selecting the right competitive advantages
3. Effectively communicating and delivering the chosen position to the market.
Identifying Possible Competitive Advantages
Competitive advantage is an advantage over competitors gained by offering consumers greater
value, either through lower prices or by providing more benefits that justify higher prices.
Consumers typically choose products and services that give them the greatest value. Thus the
key to winning and keeping customers is to understand their needs and buying processes rather
than competitors do and to deliver more value.

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Positioning begins with actually differentiating the company’s marketing offer so that it will give
consumers more value than competitors’ offers do. A company or market offer can be
differentiated alone the lines of product, services, people or image. Differentiation is the act of
designing a set of meaning-full differences to distinguish the company’s offering from
competitors’ offerings. Areas of differentiation could be:

i. Product Differentiation:- Differentiation of physical products takes place along a

continuum. At one extreme we find products that allow little variation such as chicken,
steel, aspirin. At the other extreme are products that can be highly differentiated, such as
automobiles, commercial machinery and furniture.
 Form: size, shape, physical structure of a product.
 Features: characteristics that supplement the product's basic function.
 Performance quality: the level at which the product’s primary characteristics operate
(low, high, average, superior)
 Conformance quality: the degree to which all the produced unites are identical and
meet the promised specifications.
 Durability: the product's expected operating life under natural or stressful conditions
 Reliability: the probability that the product will not malfunction or fail within a
specified period of time
 Repairability: the ease of fixing a product when it malfunctions or fails
 Style: the product’s look and feel to the buyer – degree of attractiveness
ii. Service Differentiation: - company’s can differentiate their services from competitors
services based on such variables of service as:
 Ordering ease: how easy it is for the customer to place an order with the company
 Delivery: how well the product or service is delivered to the customer. Includes:
speed, accuracy and care attending the delivery process.
 Installation: the wok done to make a product operational in its planned location.
 Customer training: training the customer's employees to use the vendor’s equipment
properly
 Customer consulting: data, information systems, and advising services that the seller
offers to buyers

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  Maintenance and repair: describes the service programs for helping customers keep
purchased products in good working order.
iii. People Differentiation:- companies can gain a strong competitive advantage through
hiring and training better people than their competitors do. Better – trained personnel
exhibit six characteristics: Competence (possess the required skill and knowledge),
curtsey (friendly, respectful and considerate), credibility (trustworthy), reliability
(perform the service consistently and accurately), responsiveness (respond quickly to
customers’ requests and problems), communication (make an effort to understand the
customer and communicate clearly).
clearly).
iv. Image Differentiation:- A company or brand image should convey the product’s
distinctive benefits and positioning. Image is the way the public perceives the company
or its products. An effective image does three things for a product.
1. It conveys a singular message that establishes the products character and value
proposition.
2. It conveys this message in a distinctive way so that it is not confused with similar
message from competitors.
3. It delivers emotional power so that it stirs the hearts as well as the minds of buyers.
Image can be implanted in the public’s mind through: symbols (a strong image consists of one or
more symbols that trigger company or brand recognition), written and audiovisual media. The
chosen symbol must be worked into advertisement that convey the company or brand
personality, atmosphere (The physical space in which the organization produces or delivers its
products and services), events (a company can build an identity through the type of events it
sponsors.
v. Channel Differentiation:- Companies can achieve differentiation through the way they
shape their distribution channels, particularly those channels’ coverage, expertise and
performance.
Selecting the Right Competitive Advantages (Developing a Positioning Strategy):-
A company must carefully select the ways in which it will distinguish itself from competitors. A
difference is worth establishing to the extent that it satisfies the following criteria:
 Important: - The difference delivers a highly valued benefit to a sufficient number of
buyers.

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  Distinctive: - The difference either isn’t offered by others or is offered in a more
distinctive way by the company.
 Superior: - The difference is superior to other ways of obtaining the same benefit.
 Communicable:- the difference is communicable and visible to buyers
 Preemptive: -The difference cannot be easily copied by competitors
 Affordable: - The buyer can offer to pay for the difference.
 Profitable: - The Company will find it profitable to introduce the difference.
Not all brand differences are meaningful or worthwhile. Not every difference makes a good
differentiator. Each difference has the potential to create company costs as well as customer
benefits. Therefore, the company must carefully select the ways in which it will distinguish itself
from competitors.
Effectively Communicating and Delivering the Chosen Position to the Market: -
Marketers must decide what to communicate and how to deliver their positioning to the target
market. Many marketers advocate promoting only one benefit to the target market. Reeves, said
that a company develop a unique selling proposition for each brand and stick to it. Each brand
should pick an attribute and advertize itself as “number one” on that attributes. The most
commonly promoted number – one positioning are: “Best quality”, “Best service”, “Lowest
price”,” Best value” and “Most advanced technology”. If a company hammers away at one of
these positioning and convincingly delivers on it, it will probably be best known and recalled for
this strength.
Other marketers think that companies should position themselves on more than one
differentiating factor. (Not everyone agrees that single – benefit positioning is always best).
Double – benefit positioning may be necessary if two or more firms are claiming to be best on
the same attribute. The intention is to find a special niche within the target segment. There are
even cases of successful triple – benefit positioning: aqua-fresh (auticauity protection, better
breath, and whiter teeth). Clearly many people want all the three benefits, and the challenge is to
convince them that the brand delivers all three. The company’s solution was to create toothpaste
that squeezed out of the tube in three colors, thus visually confirming the three benefits. In doing
this, the company “counter segmented”; that is, it attracted three segments instead of one.

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However, as companies increase the number of claims for their brands, they risk disbelief and a
loss of clear positioning. In general, a company must avoid four major positioning errors.
1. Under positioning:- failing to ever really position the company at all. Some companies
discover that buyers have only a vague idea of the company or that they do not really
know anything special about it.
2. Over positioning:- buyers may have too narrow an image of a brand.
3. Confused positioning:- buyers might have a confused image of the brand resetting from
the company’s making too many claims or changing the brand’s positioning too
frequently.
4. Doubtful positioning:- buyers may find it hard to believe the brand claims in view of
the product’s factures, price or manufacturer.
The advantage of solving the positioning problem is that it enables the marketer to solve the
marketing mix problem. The marketing mix-product, price, place, and promotion-is essentially
the working out of the tactical details of the positioning strategy. Thus a firm that sizes upon the
“high quality” position knows that it must produce high – quality products, charge a high price,
distribute through high class dealers, and advertise in high – quality magazines. This is the
primary way to project a consistent and believable high-quality image. Once the company has
developed a clear positioning strategy, it must communicate that positioning effectively.

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