chapter  8
46 Pages

Market segmentation, targeting and positioning

In Chapters 4-6, we focused on approaches to environmental, customer and competitor

analysis, and the frameworks within which strategic marketing planning can best take

place. Against this background we now turn to the question of market segmentation,

and to the ways in which companies need to position themselves in order to maximize

their competitive advantage and serve their target markets in the most effective man-

ner. It does need to be recognized, however, that for many organizations the strategic

issues of market segmentation, market targeting and positioning often take on only a

minimal role. Saunders (1987, p. 25), for example, points to research that suggested that

a substantial proportion of British companies still fail to segment their market. He

quotes the marketing director of one consumer durables company as saying:

“We have not broken the customers down. We have always held the opinion that the market is wide . . . and the product has wide appeal, therefore why break the market

down at all?” A similar comment emerged from a sales director, who stated:

“We do not see the market as being made up of specific segments. Our market is made up of the whole industry.” There are several possible reasons for views such as these, although, in the case of com-

panies with a broadly reactive culture, it is often due largely to a degree of organiza-

tional inertia, which leads to the firm being content to stay in the same sector of the

market for some considerable time. It is only when the effects of a changing environ-

ment become overwhelmingly evident that serious consideration is given to the need

for repositioning in order to appeal to new sectors of the market. For other organiza-

tions, however, a well-thought-out policy of segmentation plays a pivotal role in the

determination of success. It is the recognition of this that has led to the suggestion in

recent years that the essence of strategic marketing can be summed up by the initials

When you have read this chapter you should be able to understand:

(a) the nature and purpose of market segmentation;

(b) the contribution of segmentation to effective marketing planning;

(c) how markets can be segmented, and the criteria that need to be applied if seg-

mentation is to prove cost-effective;

(d) how product positioning follows from the segmentation process;

(e) the bases by which products and brands can be positioned effectively.