Once segments have been identified, targeting is the process used for selecting the most lucrative market segments for marketing the product in terms of profit and growth; analyzing those offering the firm the best potential. (Doyle, 2002). Positioning involves the formulation of a definitive marketing strategy around which the product at hand would be finally marketed amongst the target audience. The firm has to seek to build a differential advantage that will make its offer preferred to those of competitors (Doyle, 2002).
Segmentation, Targeting and Positioning therefore defines a pivotal managerial decision-making process which provides an opportunity for firms to better capitalize on their resources by enabling carefully considered decisions about their allocations. Many people argue that STP is central to every corporate function (McDonald 2004), and is one of the most critical decisions a marketer will make and thus it is extremely important to collect accurate information to support this decision. According to Gilligan (2003):
“The majority of writers acknowledge the very real strategic importance of segmentation, and in particular the ways in which it enables the organisation to use its resources more effectively and with less wastage.”
However, some organisations believe that market segmentation does not need to be applied in order to remain a profitable firm. This is supported by research from Saunders, (1987), cited by Gilligan (2003) who discovered that a large proportion of British firms do not segment their market and therefore remain using a mass marketing approach. Mass marketing is a marketing approach in which the marketer addresses all segments of the market as though they are the same. The approach results in a single marketing plan with the same mix of product, price, promotion, and place strategies for the entire market. Saunders (1987), cited by Gilligan (2003) quoted a marketing director from a 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 a wide appeal; therefore why break the market down at all?”
Saunders (1987) also quoted a sales director with a similar comment, who stated:
“We do not see the market as being made up of specific segments. Our market is made up of the whole industry.”
The above quotes contain relevant points because it seems that the company is currently profitable and has enough market share; making it worthless to spend capital on developing a strategy of STP when the mass marketing approach appears to be functioning well. Whatever variables are used in terms of segmentation, according to Dibb et al (2001):
“Haphazard implementation can lead to ineffective market segmentation, missed opportunities and inappropriate investment…There must be real differences in the needs of consumers for the product or service because there is no value in segmenting a homogenous market.”
The appeal of mass marketing is in the potential for higher total profits. Companies that employ the system expect the larger profit to result from (1) expanded volume through lower prices and (2) reduced costs through economies of scale made possible by the increased volume. In order for the system to work, the product must have broad appeal with features that distinguish it from competing products. One of the most widely recognized examples of mass marketing is Ford. Henry Ford applied the concept in the automobile industry. His Model T was conceived and marketed as a "universal" car—one that would meet the needs of all buyers. By adopting mass-production techniques and eliminating optional features, he was able to reduce costs and sell his product at an affordable price. The combination catapulted the Model T to the top of the market which proves that mass marketing can be effective if you have the right product and strategy (unknown author). The Internet has also added a major new dimension to the marketing of mass-market products. Web sites give marketers the ability to interact with millions of previously anonymous customers and collect information about them.
Although it is possible to have a mass market approach within a company marketing strategy, it is essentially more difficult to apply this in recent years due to the increasing amounts of competition. A significant change to the company environment such as this is only when firms content in the same market sector become aware that they need to reposition in order to appeal to new sectors of the market (Gilligan, 2003). The research by Saunders (1987) is quite dated and therefore, the increasing competition of today has led firms to change their strategy in order to meet different customer requirements and gain a competitive advantage within the industry. This process involves a market planning strategy of STP to identify the most lucrative segments of customers within the market, and how they can cater for their demands.
Coca Cola once used a mass marketing approach because they assumed that their product appealed to everyone since it is one of the most recognisable and widely sold commercial brands (Wikipedia, 2006). However, Coca Cola were often scrutinised for their product being unhealthy so if they were to keep up with their competitors such as Pepsi, they therefore had to implement a strategy that would attract consumers from different segments of the market and away from the bad publicity. They succeeded from this by introducing new ranges from the original Coca Cola brand, and now have an astonishing 26 different varieties such as diet coke; remaining the largest of the industry competitors (Wikipedia, 2006). Before they implemented this strategy, sales of Coca Cola were decreasing significantly and being over taken by industry rivals such as Pepsi. If STP was not introduced to the Coca Cola Company, and they carried on with a mass marketing approach, it is likely that the profitability of the company would have diminished completely. This example therefore highlights the importance of STP towards market planning.
Modern airlines are another prime example of firms that demonstrate market segmentation as a strategy for building growth and profitability. Previously, airlines did not segment their markets but it soon became known that passengers using the service differed in their expectations. Most leisure passengers wanted a low-cost airline, whilst business travelers expected convenience, comfort and service, who weren’t so concerned with the price of the flight. The airline began to move to a differentiated strategy which offered three levels of service on one plane – economy, business and first class at very different pricing levels. Consequently, the segmentation strategy increased the profitability of the company significantly because it could cater for all of the customer needs and demands, thus providing a higher level of satisfaction for all consumers. (Cited by Doyle, 2003).
Although many people argue that STP is the fundamental part of any modern business, adopting the market-segmentation approach can also be accompanied by some drawbacks. Particularly when multiple segments are targeted, both production and marketing costs can be more expensive than mass marketing. Different product models, for example, are required for each segment, and different promotion may be required for each market. In addition, administrative expenses go up with the planning, implementation, and control of multiple marketing programs.
In conclusion, it is evident that the majority of the supporting material maintains that market segmentation is imperative for meeting the demands of different customer requirements, and therefore increases the growth and sales of the business. This is particularly true for a modern day business where the competition has increased significantly since the days when mass marketing was prevalent. Although there may be certain implications by segmenting the market, I think that the evidence provided firmly supports that a carefully considered strategy of market segmentation, targeting and positioning contributes significantly to effective market planning. Segmentation also helps businesses to remain at a competitive advantage, and to allocate financial and other resources more effectively. By focusing these resources on the most attractive areas of the market, segmentation encourages businesses to play to their strengths.
MM203 – References
Dibb, S and Simkin, L (1997) Market segmentation: strategies for success Marketing Intelligence and Planning vol. 16 no. 7 pp 394 - 406
Dibb S, Simkin L and Bradley J (1996) The Marketing Planning Workbook Routledge; London
Dibb, Simkin, Pride and Ferrell (2001) Marketing Concept and Strategies 4th ed, Houghton Mifflin Company; Boston
Doyle, P (2002) Marketing Management and Strategy 3rd ed, Pearson Education Limited; Essex
Gilligan, C and Wilson, R (2003) Strategic Marketing Planning 1st ed Butterworth-Heinemann; Oxford
McDonald, M and Dunbar, I (2004) Market Segmentation 1st ed, Butterworth-Heinemann; Oxford
Unknown author, Market segmentation – business study guide [online] [cited 3rd March 2006. Available from
Wikipedia (2006) Coca Cola [online] [cited 5th March 2006] Available from
Wind, Y. (1978), Issue and advances in segmentation research, Journal of Marketing Research, Vol. 15 pp.317-37
