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Segmenting, Targeting and Positioning in Business Marketing

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Chapter Questions
What is market segmentation? What are its benefits, limitations, and requirements? What is the process of segmenting and targeting business markets? What are the bases used for segmenting business markets? How market segments are evaluated and selected? What are the target market strategies? What is positioning and how to develop a positioning strategy?

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What is market segmentation?

It is the process of dividing (i.e. segmenting) a market into groups of customers (i.e. market segments), who have similar requirements for a product or service (i.e. market offering). Business marketers first identify market segments and then decide which segments to target.

Benefits and Limitations of Segmentation

Benefits of market segmentation:
Enables the marketer to study the market Smaller firms can survive and succeed Effective allocation of resources to segments

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Limitations of market Segmentation

Due to small market or few customers Increase in marketing costs

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Requirements of Effective Segmentation

For effective segmentation, criteria used by marketers to evaluate potential segments are:

Measurable
Substantial Accessible Differentiable

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Process of segmenting and targeting Business Markets

Conduct marketing research

Identify and select macro-segments

Go for microsegmentation (if selected macrosegments do not explain difference in buying behavior of buying firms) Profile selected target segments

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Bases / Variables for Segmenting Business Markets

Major Macro-variables
Type of customer or industry Size of customer companies Usage rate of customers Customers geographic location Application, end-use, or benefits of the product

Major Micro-variables
Buying situations Customer firms capabilities Purchasing criteria Personal characteristics of buying-centre

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Evaluating and Selecting Market Segments

Criteria used for evaluating each segment: Size or market potential Market growth Profitability Competitive analysis Company objectives and resources

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Target Market Strategies

After selecting target market segments, firms adopt one of the following strategies: Concentrated marketing Differentiated marketing Undifferentiated marketing Niche marketing

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What is positioning?
It is a distinct (or unique) place a product (or service) occupies in the minds of target customers.

In business marketing, it is the value proposition of the market offering to target customers that should answer the question:
Why the target customer should buy the companys product/service instead of competitors

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Process of Developing Positioning Strategy?

Decide target market segments (Segmenting and targeting) Identify major benefits for differentiation (Through Marketing Research) Select one or few differentiating benefits (Use perceptual map) Communicate the positioning strategy (With clarity and consistency)