B2B Marketing

Lecture Six: Segmentation, Targeting, And

Positioning of Business Markets

Lecture Objectives:

Describe the principles of market segmentation

and the targeting.

Explain the characteristics and differences

between market segmentation and product

differentiation.

Explain how market segmentation can be

undertaken in both consumer and business to

business markets.

Describe different targeting strategies.

Explain the concept of positioning and its

attributes

Visualize the application of market STP as

applied in the real world of business.

Segmentation and Targeting and Position (STP) Process

Method by which whole markets are

subdivided into different segments

Three activities that should be

undertaken, usually sequentially, if

segmentation is to be successful:

– Segmentation

– Targeting

– Positioning

STP Process

Benefits of STP Process

Enhancing a company’s competitive position by providing direction & focus for marketing strategies.

Examining and identifying growth opportunities in the market through the identification of new customers, growth segments or new product uses.

More effective and efficient matching of company resources to targeted market segments.

Market Segmentation Market segmentation is the division of a market

into different groups of customers with distinctly

similar needs and product/service requirements.

Purpose of market segmentation:

– Leverage scarce resources.

– To ensure that the elements of the marketing mix are

designed to meet particular needs of different customer

groups.

– Allows organisations to focus on specific customers

needs, in the most efficient and effective way.

Marketing Segmentation

Market Segmentation & Product

Differentiation

Process of Market Segmentation

There are two main approaches to segmenting

markets:

Breakdown Method: Adopts the view that the

market is considered to consist of customers

which are essentially the same, so the task is to

identify groups which share particular

differences.

Build-Up Method: Considers a market to consist

of customers that are all different, so here the

task is to find similarities.

Process of Market Segmentation

Aim is to identify segments where:

– identifiable differences exist between

segments (segment heterogeneity).

– similarities exist between members within

each segment (members homogeneity).

Segmenting Consumer Markets

Segmentation Bases/Criteria

– Profile Criteria - Who my market are and

where are they?

– Behavioural Criteria - Where, when, and how

does my market behave?

– Psychological Criteria - Why does my market

behave that way?

Segmenting Consumer Markets

Segmenting Business Markets

Segmentation Bases/Criteria

– Organisational Criteria – e.g., Organisational

size and location

– Buyer Characteristics – e.g., Choice criteria,

purchase context

Organisational Characteristics

Source: McDonald and Dunbar (2004).

Buyer Characteristics-Criteria

Decision Making Unit – Policy factors

– Purchasing strategies

– Attitudes towards vendors and toward risk

Choice Criteria – What specifications of product/service they choose

Purchase Situation – Structure of the purchasing procedures

– Type of buying situation

– Stage in the purchase decision process

Segment Attractiveness Factors

Rating approach for different segment

attractiveness factors:

– Market growth

– Segment profitability

– Segment size

– Competitive intensity within the segment

– Cyclical nature of the industry

Each of these attractiveness factors is rated on a

scale of 0-10 and loosely categorized as high,

medium or low in attractiveness.

Targeting Approaches

Positioning

The act of designing the company’s offering and

image so that they occupy a meaningful and

distinct competitive position in the target

customers’ minds.

Two fundamental elements:

– Physical attributes - the functionality and capability that

a brand offers.

– Communication - the way in which a brand is

communicated and how consumers perceive the brand

relative to other competing brands in the market place.

Positioning Strategies

Position a brand either functionally or

expressively (symbolically)

Functional

– Features

– Quality

– Use

Expressively

– User

– Benefit

– Heritage

Repositioning Strategies

1. Change the tangible attributes and then communicate the new product to the same market

2. Change the way a product is communicated to the original market

3. Change the target market and deliver the same product

4. Change both the product (attributes) and the target market

References

Hutt, M., and Speh, T., 2006. Business

Marketing Management. 4th Edition. USA:

Dry Press

McDonald and Dunbar (2004). Market

Segmentation: How to do it, how to profit

from it. 3rd Edition. USA: Palgrave

Macmillan

Kotler, P. (2003). Marketing Management.

International Edition. New Jersey, USA:

Pearson Education Ltd.

B2B Marketing

Tutorial Questions

1. Compare the segmentation process between

business markets and consumer markets. Give

appropriate example/s.

2. Social responsibility will be an important factor

affecting the targeting marketing strategies of

most firms in the new millennium. Provide an

example of an organization that you believe

takes a socially responsible approach to

targeting markets. Critically explain your

reasoning.

B2B Marketing

Tutorial Questions

3. What factors does a firm need to examine before

deciding to target a market? Give concrete

examples to illustrate the concepts.

4. Why do companies position their products?

5. Is it always harder to find new customers than it

is to retain old ones? Agree or disagree. Why?