2018

PMAR01-6 Topic 3
3
 STP
• No business can compete equally in all markets successfully &
meet expectations of all customers;
• Businesses that are sensible will concentrate on certain
identifiable market sectors/segments;
• The selected markets are known as target markets;
• Once a product/service (market offering) has been selected for
the chosen segments the business needs to position the
product in the mind of the customer against competitors
products/services.
Segmentation, Targeting & Positioning
Segmentation is defined as:
– “The process whereby the total heterogeneous (diverse, varied,
mixed, assorted) market is divided into homogeneous market (all
the same, like components, uniform, standardized) segments”.

– The main aim of segmentation is to enhance customer experience

& satisfaction to remain profitable.
Two main approaches to segmentation:

1.) Breakdown method: market consists of

customers that are similar . Thus, we identify
groups of customers who share particular
differences
2.) Build-up method: market consists of
customers who are different. Thus, we try to find
similarities
– Differences = heterogeneity
– Similarities = homogeneity
Targeting

Once the business has identified its market segments and the
opportunities in each segment, it can decide how many and
which segment/s to target for success. This process is known as
“market targeting”.
 Positioning

Defined as:
“Positioning is the place a product or service holds in
a customer’s mind.”
“Positioning strategy refers to the strategy you
intend to take to do so.”
Segmentation Advantages

• Segmentation potentially produces unexplored market potential and

the identification of opportunities
• Provides guidelines for the development of separate market
offerings to meet specific needs (clusters with like requirements)
• A greater degree of customer satisfaction reviewing consumers
needs, preferences and demands
• Better response to changing needs and demands of the customers
 Segmentation Disadvantages

• Development of separate models and market offerings is very

expensive
• Only limited market coverage achieved, activities are only
targeted at those specific markets
• A high degree of differentiation on a basic product can lead to
cannibalism of the original product. This happens when one
product takes away market share from another product in the
same business.
 Good segments are:

• Measurable: Some form of measurement must exist to

determine the value success of marketing to this market
segment.
• Substantial: Big enough to be profitable.
• Accessible: The marketer must have some way of reaching
the consumer.
• Actionable: A marketing programme and sufficient resources
must be available to allow for successful marketing.
• Differentiable: Must be able to identify specific needs of a
segment , people in different segments have different needs.
For segments to be effective, the following must be evaluated:

• Distinct: segments must be different to one another

• Accessible: can buyers be reached via distribution channels and
promotional programmes?
• Measurable: segments must be easy to identify & measure
• Profitable: segment must provide constant stream of revenue/profit
 5 Segmentation bases:

• Geographic: Geographic areas like country, province, towns,

suburbs, density of market, climate.
• Demographic: Age, sexual orientation, gender, family size, family
life cycle, annual income, occupation, religion, race, education, Living
Standard Measures (LSM’s).
• Geodemographic: geographic + demographic
• Psychographic: Social class, lifestyle, personality attributes.
• Behaviourgraphic: Purchase occasion, benefit sought, loyalty,
attitude towards product, usage rate, buyer readiness, usage status.
 The difference between market segmentation &
product differentiation
• Market segmentation: focus on market segments
• Product differentiation: focus on product offering
• Example: If a breakfast cereal manufacturer introduces a
new gluten free range in order for product to appeal to a
health-conscious segment = product differentiation. If the
same company decides to target children they would need to
create fun packaging and ensure it tasted good for them to
pester their parents about it and ask for it again and again =
market segmentation
 Business-to-Business Market Segmentation

• B2B market segmentation is the recognition of a group of

present/potential customers with some common characteristic which
is relevant in explaining/predicting their response to a supplier’s
marketing stimuli.
• 2 major groups of interconnected variables used to segment B2B
markets:
1.) Organisational characteristics (e.g. organisational size aka
‘firmographics’)
2.) Buyer characteristics (e.g. decision making unit; choice criteria &
purchase situation)
1. What is STP?
2. How do we make sure that segments are good segments? HINT: 5 things to
look at…
3. Name the four (4) bases of segmentation.
 Identifying Market Segments

1. Select a market or product category – can be existing or completely

new
2. List needs of the above – brainstorm what motivates the customer
3. Choose bases for segmentation – this is case dependent
4. Select segment descriptors – these fall under the selection above
5. Profile and analyse homogeneous segments e.g. segment size;
expected growth; purchase frequency; brand loyalty; long-terms
sales potential
6. Identify the determining dimensions – related to competitive
advantage i.e. what makes the consumer ultimately buy?
7. Name & select target markets – name the individual segment(s)
Demographics | LSM (Living Standards Measure)

• SA population growth rate is slowing down;

• Average life expectancy is 61 years for men and 63
years for women (2015)
SA’s Demographics

http://www.worldometers.info/world-population/south-africa-population/ https://www.investec.com/research-and-insights/countries/its-true-south-africans-are-better-off.desktop.html
Where do South Africans Spend Their Money?

http://www.statssa.gov.za/?p=944
SA’s Demographics

https://businesstech.co.za/news/general/77737/south-africa-unemployment-1994-2015/
 LSM’s

• LSM = Living Standards Measure.

• Developed by the South African Advertising and Research Foundation (SAARF),
LSM has become the most widely used segmentation tool in South Africa.
• It cuts across race and other outmoded techniques of categorising people, and
instead groups people according to their living standards using criteria such as
degree of urbanisation and ownership of cars and major appliances
• The SAARF LSM (Living Standards Measure) has become the most widely used
marketing research tool in Southern Africa. It divides the population into 10 LSM
groups, 10 (highest) to 1 (lowest).
 Psychographics

Values Attitudes & Lifestyles (VALS)

• This refers to segmenting the market by means of

customer attitudes, values, lifestyles, social classes
or personalities almost like a “social-map”.
 Behaviouristic | Buying Behaviour

• Marketers need to know precisely when customers purchase, what

items they have selected and how much they have spent
• Focus is on customer past behavioural profiles and the odds that they
will buy again if satisfied
• We review the following aspects:
– Purchase occasion
– Benefits sought
– User status
– Usage rate
– Loyalty status
– Buyer readiness stage
– Attitude towards the product/business
 Behaviouristic

 Purchase Occasion

• Some customers may be repetitive buyers while others may

only buy an item once or on special occasions. E.g Valentine
Days & Easter.

 Benefits sought

• Some customers may have specific deliverables they are

looking for from an item. By identifying and addressing these
you can satisfy the needs far better.
 User status
• We find customers in four basic groups : non-users (customers
that don’t use the item), ex-users (customer that used to buy
that item but not anymore), potential users (customer that are
possible new prospects) and regular users (customers that
repetitively buy that item).

 Usage rate
• This is determined on the frequency that the item is bought,
“heavy users” are ideal.
 Loyalty Status
• Loyalty varies by customer – we find from a switcher (a
customer who has no loyalty to any one brand), to a
hardcore loyal (a customer that will not buy any other
brand).
 Buyer readiness stage
• Your marketing approach will be different depending on
the customers readiness to buy. Potential customers
need to be made aware before they will buy, while
those that intend buying need to be persuaded to buy
your item rather than the competitions.
 Attitude towards a product or business

• Marketers can receive a better return on marketing spend if

they understand the attitude towards a product by only
targeting those with a positive attitude and encouraging and
building long term relationships.
• It would be a waste to target customers with a negative
attitude .
Split into groups and discuss the following
companies’ segmentation:
• Honda racing bikes
• Woolworths
• Coca-Cola
Targeting

• Once the business has identified its market segments and the opportunities in
each segment, it can decide how many and which segment/s to target for
success. This process is known as “market targeting”.

• Thus it is the selection of potential customers to whom a business wishes to

sell products or services to, based upon the market's diversity, maturity, the
level of competition and the volume of sales expected.
4 approaches to targeting (after identifying segments):

1.) Undifferentiated (mass) approach: market is viewed as one mass-market,

with one strategy – one product type; one price; one promotional message; one
distribution system.
2.) Differentiated approach: several market segments, each requiring their own
strategy e.g. Toyota vehicles or SAB breweries
3.) Concentrated (niche) marketing strategy: just a few segments with a specific
need satisfied within a larger segment e.g. Sportsman’s Warehouse, Hi-Fi
Corporation or Porsche luxury vehicles
4.) Customised (micro) targeting strategy: strategy developed per individual, not
per segment e.g. in bussiness2business you’ll cater for that specific business’
needs or in customer markets where products are custom made
Lamb, C. et al. 2008. Marketing – The Third South African Edition. 3rd ed. Cape Town. Oxford University Press: 4.

(Differentiated) (Niche)
Criteria for segmenting a market:

• Must be homogeneous: similar, but not identical

• Must be measurable: size; purchasing power; potential profit etc.
• Must be large enough to be profitable: this depends on the value
of the product
• Must be accessible: i.e. ability to reach the segment with offering
and strategy
• Must be actionable: i.e. develop separate market offerings
• Must be distinct: i.e. have heterogeneous needs and distinct from
the next segment
Criteria for selecting potential target markets:
• Segment size and growth: Is the market suitable? Is the market big enough? Is
the growth potential high enough?
• Segment attractiveness & profitability: Competitive position and profit
potential. Aspect to consider is rivalry, potential entrants, substitutes, strength of
supplier and buyer relationships. What does this remind you of?
Porter’s 5 forces

• Resources and skills: Consider money, people, natural resources.

• Compatibility & cost: Determined by distribution costs, relevance to target and

mediums of communication.
Split into groups and discuss the following companies’
targeting:
• Honda racing bikes
• Woolworths
• Coca-Cola
Positioning

• Positioning refers to the way the customers think about a product

in terms of it’s characteristics, advantages and competitive
position.
• The major value of positioning is to help managers understand
how customers see their market. Perception.
• A marketing manager needs a realistic view of how customers
think about offerings in the market.
• At the same time marketers should know how they want customers to think
about their firms marketing mix in relation to the competitive offerings.
• Positioning is especially important when competitors in a market may be very
similar.
• Ideal is to have “front-of-mind” awareness, the customer thinks of your
product first in a category.
• 2 fundamental elements of positioning:
– Physical attributes: the functionality & capability of a brand
– Communication: how the brand is communicated & how consumers perceive the
brand relative to other competing brands
A product positioning map (perceptual map) is
typically used for this purpose, which indicates,
based on certain criteria for selection, where
your product/business is relating to your
competition.
• Create your own example of a positioning map.
• Where is the “gap” in the market according to
your chosen positioning map?
• Is this a opportunity? Motivate your answer.
Positioning strategy:
• Selecting a positioning strategy will depend on whether you are
introducing a new product/brand or re-positioning an existing
product/brand.
• The key is to always determine the customer’s preferences and
position the product/brand keeping in mind to differentiate
against the competitive offerings.
• Also be aware of the competitors strengths and weaknesses.
(Target weak areas to gain advantage).
 Bridgestone Tyres are
Positioning methods: known for their
product being reliable

Attribute positioning:
• Position on one or more outstanding attribute of the product
• For example the quality of a product like Mercedes-Benz.
Benefit positioning:
• Identifies the unique benefits to be gained by buying and choosing a
product over the competition’s product.
• For example additional customer service or motor plan when buying
a car.
MAC Cosmetics will provide a
makeover in store for you to try
their products before purchasing
Positioning methods:
Use application positioning:
• This is based on its uses of the product.
• A product may have more than one purpose.
• For example an SUV for all purpose vehicle.
User positioning:
• This is focused on the user and the specific requirements they
have. Sennheiser headphones

• For example the 4 x 4 for trail riding. that have noise

cancellation suitable for
airplane usage
Positioning methods:
Competitor positioning:
• Positioning against competitive offerings (not used a lot in
RSA).
• Comparing of product to product, feature by feature.
• Comparing specifications of a product.
• Pepsi vs Coke
Positioning methods:
Product category positioning:
• Within in product category. PEP offers funeral cover

• Not really identified as a place for a specific product.

• Example retail stores like Woolworths offering personal loans.
Quality/price positioning: Dion Wired will give you cash back if
you can provide a better quote within
• Claim to have great quality at the best prices. 21 days
• For example Game offering to beat any price on an item that is cheaper
than their price.
Split into groups and discuss the following
companies’ positioning:
• Honda racing bikes
• Woolworths
• Coca-Cola
Why would a marketer need
to study consumer
behaviour?
Consumer Behaviour
 Consumer Behaviour
• Consumer preferences constantly changing.
• Products/service will change and therefore the marketing of these
products/service will have to change too
• We need information about the way consumers make decisions.
• Marketers need to understand how consumers make purchasing
decisions.
• Marketers need to understand the behaviour to determine well-
defined marketing mix strategies.
 Consumer Behaviour

• How consumers respond to marketing mix strategies is key in the success of a

company.
• We need to find out what appeals to the target market.
• Marketers should be able to implement the marketing concept.
• Marketers can change attitudes and influence consumer buying decisions.
• Understand, predict and influence consumers’ buying behaviour.
 OBTAINING
DISPOSING

CONSUMING
Model of Consumer Behaviour
3 approaches to understanding consumer behaviour:

1.) Psychoanalytic: stresses self-reported, unconscious

desires

2.) Trait theory: stresses the clarification of personality

types

3.) Self-concept: how customers perceive themselves as

consumers
 Model of Consumer Behaviour

INDIVIDUAL FACTORS SOCIAL FACTORS

-Perception -Culture
-Motivation -Reference Groups
-Learning
-Values, Beliefs, Attitudes
-Opinion Leaders
-Personality, Self-Concept, Lifestyle -Family
-Social Class

BUYING BEHAVIOUR
CONSUMER DECISION
-Purchase Reason
MAKING PROCESS
-Time
-Physical Surroundings

BUY OR NOT BUY

Individual Factors

• Perception
• Motivation
• Learning
• Values, Beliefs, Attitudes
• Personality, Self-Concept
and Lifestyle
Social Factors

• Culture
• Reference Groups (used as an anchor point for evaluating
beliefs/attitudes)
• Opinion Leaders (well-known individual or organisation that can
influence public opinion)
• Family
• Social Class
Buying Behaviour

• Purchase Reason
• Time
• Physical Surroundings
 Summary:

• Internal factors influencing consumer behaviour:

– Personality
– Motivation
– i.e. consumers’ own internal perspectives
• External factors influencing consumer behaviour:
– Opinions, attitudes & values of others
Consumer Decision Making Process
Consumer Decision Making Process
BUYING DECISION MAKING
PROCESS

PROBLEM RECOGNITION Concern of the marketer:

•Measuring consumer problems

INFORMATION SEARCH •Reacting to problem recognition
•Activating problem recognition
•Suppressing problem recognition
EVALUATE ALTERNATIVES

PURCHASE

POST PURCHASE EVALUATION

Consumer Decision Making Process
BUYING DECISION MAKING
PROCESS
Concern of the marketer:

•Maintenance strategy – maintain the

PROBLEM RECOGNITION customer’s attention
•Disrupt strategy – disrupt the
customer’s current attention span &
INFORMATION SEARCH draw attention somewhere else
•Capture strategy – capture the
customer’s attention
•Preference strategy – driven by claims
EVALUATE ALTERNATIVES
in the market e.g. recommended by
dentists
•Acceptance strategy – grabbing
PURCHASE customers’ attention by emphasizing
group acceptance

POST PURCHASE EVALUATION

Consumer Decision Making Process
BUYING DECISION MAKING
PROCESS

PROBLEM RECOGNITION
Quality vs Price

INFORMATION SEARCH

A marketing manager must determine,

for the market segment under
EVALUATE ALTERNATIVES
consideration, which is the most likely
rule or combination of rules and then
develop an appropriate marketing
PURCHASE strategy

POST PURCHASE EVALUATION

Consumer Decision Making Process
BUYING DECISION MAKING
PROCESS

PROBLEM RECOGNITION Consumer:

•Outlet vs. retail image

INFORMATION SEARCH
•Store own label brands
•Retail advertising
•Outlet location and size
EVALUATE ALTERNATIVES

PURCHASE

POST PURCHASE EVALUATION

Consumer Decision Making Process
BUYING DECISION MAKING
PROCESS Consumer:

•If dissatisfied: complain to store or

manufacturer
PROBLEM RECOGNITION
•Stop buy the brand
•Warn friends
•Complain on social media
INFORMATION SEARCH •Take legal action

EVALUATE ALTERNATIVES ‘COGNITIVE DISSONANCE’

Mental discomfort experienced by an individual who holds
two or more contradictory beliefs, ideas, or values at the
same time. Individual may also be confronted by new
information that conflicts with existing beliefs, ideas, or
PURCHASE
values.

POST PURCHASE EVALUATION

Class Activity

Map out the decision-making

process you would go through
when you wish to buy a new
laptop/tablet?