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  • Writer's pictureOdette Lauzon

Market Segmentation, Targeting, and Positioning

In the increasing information and digital age that we live in, companies need to know how to find their target markets. Since “companies cannot connect with all customers in large, broad, or diverse markets […] identifying and uniquely satisfying the right market segments are often the key to marketing success” (Kotler & Keller, 2016, p. 267).

Philip Kotler and Kevin Keller (2016) states that “effective target marketing requires that marketers:”

1. Identify and profile distinct groups of buyers who differ in their needs and wants (market segmentation)

2. Select one or more market segments to enter (market targeting)

3. For each target segment, establish, communicate, and deliver the right benefit(s) for the company’s market offering (market positioning) (p. 267)

Sounds easy, right? Well, let’s dive into each step to make sure you have a better idea.

“Market segmentation divides a market into well-defined slices” (Kotler & Keller, 2016, p. 268). Therefore, “a market segment consists of a group of customers who share a similar set of needs” (Kotler & Keller, 2016, p. 268). The most popular ways to break up a market can be through “geographic, demographic, psychographic, [or] behavioural segmentation” (Kotler & Keller, 2016, p. 268).

Some companies will combine geographies and demographics “to yield even richer descriptions of consumers and neighbourhoods” (Kotler & Keller, 2016, p. 268). “Nielsen Claritas has developed a geo clustering approach called PRIZM,” which has classified “U.S. residential neighbourhoods into 14 distinct groups and 66 distinct lifestyle segments” (Kotler & Keller, 2016, p. 268).

“Once [a] firm has identified its market segment opportunities, it must decide how many and which ones to target.” (Kotler & Keller, 2016, p. 284). “Marketers are increasingly combing several variables in an effort to identify smaller, better-defined target groups” (Kotler & Keller, 2016, p. 284).

Kotler and Keller (2016) suggest:

“Marketers have a range or continuum of possible levels of segmentation that can guide their target market decisions.” (Kotler & Keller, 2016, p. 286).

Full Market Coverage - “Firm attempts to serve all customer groups with all the products they might need” (Kotler & Keller, 2016, p. 286). Typically, only larger organizations use a full market strategy, such as Microsoft, GM, and Coca-Cola (Kotler & Keller, 2016, p. 286).

Multiple Segments - Selective specialization (“subset of all the possible segments”- ex. The launch of Crest Whitestrips by Procter & Gamble, the target was “newly engaged women, brides-to-be as well as gay males”), product specialization (“firm sells certain products to several different market segments”- ex. A microscope company selling to a “university, government, and commercial laboratories”), or market specialization (“concentrates on serving many needs of a particular customer group”- ex. Selling a range of products “only to university laboratories”) (Kotler & Keller, 2016, p. 288).

Single Segments - “Firm markets to only one particular segment” (Kotler & Keller, 2016, p. 288). For example, Porsche focusing on car enthusiasts (Kotler & Keller, 2016, p. 288).