Making marketing decisions: segmentation, targeting, positioning

Welcome to Marketing Strategy!

In this chapter, we are looking at how businesses decide exactly who they are selling to and how they want to be seen by those people. Think of it like a party: you can’t invite everyone in the world, so you have to decide who your friends are, which ones you’ll actually invite, and what kind of "vibe" your party will have. In Business, we call this STP: Segmentation, Targeting, and Positioning.

Don't worry if these terms sound a bit technical—we are going to break them down into simple, everyday ideas!

1. Market Segmentation: "The Slices of the Cake"

Market segmentation is the process of dividing a whole market into smaller groups of customers who have similar needs or characteristics. A business can't be everything to everyone, so it "slices" the market up.

Methods of Segmentation

According to your AQA syllabus, there are four main ways to segment a market:

1. Demographic: Dividing the market by "who" the person is. This includes age, gender, social class, or family size.
Example: A brand like "Jorgensen" might segment by age (anti-aging cream for over 50s).

2. Geographic: Dividing by "where" people live. This could be by country, region, or even whether they live in a city or the countryside.
Example: A clothing brand might sell heavy coats in Scotland but light rain jackets in London.

3. Income: Dividing by how much money people earn.
Example: Waitrose often targets high-income earners, while Aldi often targets those looking for more value.

4. Behavioural: Dividing by "how" people act or use a product. This includes brand loyalty, how often they buy, or what benefits they are looking for (e.g., "convenience" vs. "quality").
Example: Gyms often target "New Year's Resolution" buyers in January.

Memory Aid: The "G-I-B-D" Rule

To remember the types of segmentation, think of a GIBD (pronounced like "gibed"):
Geographic
Income
Behavioural
Demographic

Quick Review: Why Segment?

Businesses segment so they can understand their customers better, avoid wasting money advertising to people who aren't interested, and design products that people actually want.

2. Targeting: "Choosing Your Slices"

Once a business has segmented the market, it has to decide which segments to go after. This is Targeting.

Niche vs. Mass Marketing

There are two main ways to target:

Mass Marketing: The business targets the entire market with one product. They ignore segments and try to sell to everyone.
Example: Coca-Cola or basic white bread.
Pros: Huge potential sales; lower costs per unit (economies of scale).
Cons: High competition; low prices usually mean lower profit margins per item.

Niche Marketing: The business targets a very specific, small segment of the market.
Example: High-end vegan hiking boots or left-handed guitars.
Pros: Less competition; you can charge higher prices because the product is specialized.
Cons: Small number of customers; if the niche disappears, the business has no backup.

Influences on Choosing a Target Market

Why choose one over the other? It depends on:
- Business Resources: Small startups usually start with Niche because they don't have the money to fight big brands in the Mass market.
- The Competition: If a market is crowded, a business might look for a small "gap" (a niche) that others have missed.

Takeaway: Targeting is about focus. If you try to catch two rabbits, you usually catch none!

3. Positioning: "Where Do You Sit?"

Positioning is about the "place" a product occupies in the customer's mind relative to the competition. It’s how customers perceive the brand.

Market Mapping

The best tool for positioning is a Market Map. This is usually a simple 2D grid with two scales (like Price and Quality).
- High Price / High Quality: (e.g., Rolex)
- Low Price / Basic Quality: (e.g., Casio)
- High Price / Low Quality: (The "Danger Zone" where businesses usually fail!)

Did you know?

Market maps aren't just for looking at existing brands. Businesses use them to find "Gaps in the Market"—spots on the map where no competitors currently sit. This could be a huge opportunity for a new product!

Common Mistake to Avoid

Don't confuse Targeting with Positioning.
- Targeting is the business choosing the customer ("I want to sell to students").
- Positioning is the business trying to influence how the customer sees them ("I want students to think I am the cheapest and coolest brand").

Summary: The STP Process

Think of STP as a 3-step ladder:
1. Segmentation: Break the market down into groups (e.g., by age or income).
2. Targeting: Choose which group(s) you will actually sell to (Niche or Mass).
3. Positioning: Create an image for your product that appeals to that specific group (using Market Mapping).

Key Takeaway: Effective marketing isn't about shouting at everyone; it's about finding the right people, focusing your resources on them, and making sure they see your brand in a way that makes them want to buy from you.

Quick Review Checklist:
- Can I name the 4 types of segmentation?
- Do I know the difference between Niche and Mass marketing?
- Can I explain how a Market Map helps with Positioning?