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Running Head: SEGMENTATION, TARGETING, AND POSITIONING
Marketing Strategy & Competitive Positioning
Segmentation, Targeting & Positioning (STP) Model
Tapas Chakraborty
“Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied
with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs
of the customer by means of the product and the whole cluster of things associated with creating, deli
`vering and finally consuming it.”
Theodore Levitt
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SEGMENTATION, TARGETING, AND POSITIONING
THE CONCEPT OF SEGMENTATION, TARGETING, AND POSITIONING (STP)
MODEL
A firm can gain competitiveness in the market if it can effectively use its competitive
advantages, through product design, in a particular product or service market. Customer
satisfaction is the chief objective of firms as the returns they get from satisfied customers, by
adopting business level strategies, is the life-blood for firms. The market leaders search for new
and better ways to satisfy existing customers and to meet demands of the potential and new
customers. Noteworthy is that the customer satisfaction strategies should be judiciously balanced
to sustain competitive advantage. In 1990s Dell Computers set its objective to satisfy low-price
need of customers. The firm concentrated on cost-effective supply chain management, and soon
became the top global seller of personal computer. In doing so, the company lost focus on other
customer satisfaction parameters and started losing ground to Hewlett Packard (HP). HP learned
from the mistake of Dell and focused on differentiated product needs of the customers. While
fine-tuning its supply chain network strategy, the firm offered a portfolio of differentiated goods
and services, and thusly satisfied a wide range of needs and wants of customers across the world
(Ireland, Hoskisson and Hitt, 2008).
Interaction with the customers is the foundation stone of the marketing strategy of a firm, which
enables the firm to meet customer needs while remaining profitable. STP is a 3-stage strategic
marketing model which constructs upon customer information and uses customer satisfaction in
order to improve the firm’s brand value and customer loyalty. The three stages consist of
segmenting the market on acceptable basis, targeting the most attractive segment, and
positioning the brand in the segment. STP model is widely accepted by the strategic management
fraternity due to its more focus on customer satisfaction relative to the earlier product oriented
marketing models like product differentiation model. This write up critically reviews the
functioning and effectiveness of STP model in achieving value addition, and resultant customer
satisfaction based on review of academic literature, and empirical evidences of application of the
model by different companies in different industries, and the resultant benefits.
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SEGMENTATION, TARGETING, AND POSITIONING
THE CONTEXT OF STP
A marketer can rarely satisfy everyone in a market. Not everyone likes the same soft drink,
automobile, college, and movie. Therefore, marketers start with market segmentation. They
identify and profile distinct groups of buyers who might prefer or require varying products and
marketing mixes. Market segments can be identified by examining demographic, psychographic,
and behavioral differences among buyers. The firm then decides which segments present the
greatest opportunity—those needs the firm can meet in a superior fashion. For each chosen target
market, the firm develops a market offering. The offering is positioned in the minds of the target
buyers as delivering some central benefit(s). For example, Volvo develops its cars for the target
market of buyers for whom automobile safety is a major concern. Volvo, therefore, positions its
car as the safest a customer can buy. Traditionally, a “market” was a physical place where buyers
and sellers gathered to exchange goods. Now marketers view the sellers as the industry and the
buyers as the market (see Figure 1). The sellers send goods and services and communications
(ads, direct mail, e-mail messages) to the market; in return they receive money and information
(attitudes, sales data). The inner loop in the diagram in Figure 1 shows exchange of goods and
money, and the outer loop shows exchange of information.
Figure 1: Marketing system in gist
THEORITICAL AND CONCEPTUAL PERSPECTIVE OF STP MODEL
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SEGMENTATION, TARGETING, AND POSITIONING
Segment Target Position (STP) Model
STP is a 3 – stage strategic marketing model through which detailed, relevant, and specific
information about the market is used by firms in order to compete in the market. The marketing
mix is determined at the end of the STP process. The whole process is directed to develop the
effective market mix, as shown in the following diagram.
Figure 2: STP Directed to Market Mix
STP
Figure 3: Three stage STP model
Segmentation
Selection of Target
Market
Positioning
MARKET MIX
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SEGMENTATION, TARGETING, AND POSITIONING
Market Segmentation
This is the first stage of the STP model. Market segmentation refers to strategically divide the
whole market into distinct sub-markets, each consisting of customers with similar characteristics.
Thus the market is segmented into many distinctly identifiable homogenous customer-groups
(Lamb, Hair and McDaniel, 2006). Importance of market segmentation stems from three reasons.
Firstly, success in market development, product diversification, and market penetration can be
achieved only when sales can be increased through new markets and new products, and market
segmentation is the inevitable prerequisite for successful implementation of these strategies
(David, 2009). Secondly, correct market segmentation enables the firm to compete in the market
with limited resources as mass production, distribution, and market promotion ate not required
by the firm. A small firm can maximize per segment sales and per unit profit by accurately
segmenting the market. Thirdly, correct segmentation of market positively alters the 4ps of
marketing mix, namely price, product, place, and promotion (Dutra, Frary and Wise, 2006).
McDonald’s and General Motors have successfully segmented their markets on the basis of
regional preferences (Cateora, Gilly and Graham, 2013).
Targeting Segment
The second phase of the STP model consists of segment targeting. After identifying the segment
market opportunities, in this stage the company evaluates each segment by considering the
preferences and needs of the customers of the segment. Activities in this stage enable the firm to
understand how many customers are there and who the customers are. The activities in this stage
are organized subject to two factors, namely attractiveness of the segment and resources at the
disposal of the company. After evaluating the market segments the firm decides upon the
selection pattern. There are 5 strategies/patterns of target market selection:
Single segment concentration strategy: This strategy entails to concentrating on a single market
segment. Porsche manufactures only sports car to concentrate on only sports car segment of the
car industry. Single segment concentration provides the firm deep knowledge about the needs of
the customers, market penetration, and economies of operation. A firm can earn a high return on
investment by gaining the status of segment leader. But concentrating on a single market is not
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without business risks which may arise due to change in customers’ preferences or competition
from powerful new entrant.
Figure 4: Single segment concentration
Selective or multi-segment specialization strategy: A firm employs this pattern of segment
selection when it caters to more than one segment. The main advantage of this pattern of
selection is that the risks can be diversified between different markets and products. McDonald’s
apply selective market specialization by catering to vegetarian and non-vegetarian customers.
Figure 5: Selective/multi segment specialization
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Product specialization strategy: Product specialization pattern is employed by the company
when it intends to manufacture one product to sell in different market segments. The pattern is
suitable for such company which specializes in high quality and has the capability to supply
customized products to suit varied customer needs. Manufacturers of Espresso coffee sells coffee
at small kiosks, shopping malls, multiplexes, and restaurants but do not sell other products sold
at these places. This pattern gives the firm advantage in terms of cost reduction, but runs the risk
of product obsolescence.
Figure 6: Product specialization
Market specialization strategy: Under this pattern a company targets a particular market
segment and supplies all the products demanded by customers in that segment. Johnson and
Johnson manufactures only baby care products and produces all the products in the baby care
segment. The greatest advantage of market specialization is that the manufacturer enjoys high
reputation and has less difficulty to add product lines in the segment. But budget cut by
customers can substantially reduce the firm’s revenue from the segment.
Figure 7: Market specialization
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SEGMENTATION, TARGETING, AND POSITIONING
Full market cover strategy: A firm employs full market coverage pattern of target selection
when it caters to all the customers of all the market segments. Only large scale monopolistic
firms can adopt full market coverage. Coca Cola and IBM are examples of firms using full
market cover strategy.
Figure 8: Full market cover
[p = Product, M = Market segment]
Criteria for Evaluating Targets
Criteria for evaluating the attractiveness of individual segments are given below.
Size: Each segment should be reasonable big; small segments can get smaller afterwards.
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Difference: Each segment must be quantitatively and qualitatively distinguishable from another.
Profitability: Anticipated profit from a segment must be more than the budgeted marketing
expenses for the segment.
Communicability: The customers of a segment must be effectively communicable by the
marketing apparatus of the company.
Differential benefits: Each segment should be clearly differentiated in terms of product or
service benefits offered by the firm.
Positioning
After targeting the segment, a firm moves to the next phase of positioning itself in the segment.
Positioning is creating a positive perception in the minds of target customers about the brand and
value offering of the firm. In positioning, a firm creates an impression in the target-segment’s
mind that its products are different from that of its customers by offering clearly differentiated
product. Positioning should result in a compelling reason for buying the product or service. Reis
and Trout (2001) opines positioning is more to do with what firms do to the mind of the
customers instead of to the products or services. There is a gap between customers’ and firms’
perception of a good product and service. Product positioning is aimed to fill the gap. (Boshoff et
al, 2002: 154). Position mapping is an effective tool for making positioning strategy. A successful
positioning strategy would lead to highly differentiated product or service, and an expectation of
customers which is slightly less than what the firm can deliver. The firm needs to tutor the
customers what they should expect from a differentiated product or service. Thus the mantra is to
under-promise, and then to over-perform (Kotler, 2002).
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Figure 9: Position mapping
The above diagram is a position map of a segment of automobile market. The positioning of
different brands in the market are shown by circles with F (individual firms) marked. The big
circle is the gap where the firm should posit its brand.
Rules in Positioning:

The firm should not squat in more than one segment. Failure in one segment might
jeopardize the gain of squatting. It may lead to sub-optimization by attempting to
maximize two objective functions with a given set of subjective functions.

If the firm positions itself in two segments with different sets of subjective functions,
strategies in the two segments must be difference. Strategy in one segment cannot suit on
another segment.
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
The firm should identify biggest hole in the segment, preferably a virgin segment.

The firm should not position itself at the middle part of the map, as this would indicate
that the strategy of the firm is devoid of any distinguishing feature.
Figure 10: Chain of Activities in STP Model
DEFINE
ORGANIZATION'S
MARKET
CREATE MARKET
SEGMENTCRITERIAS
CRITERIA BASED
SEGMENTATION
SELECT TARGET
MARKET
EVALUATION OF
SEGMENTS'
ATTRACTIVENESS
CONSTRUCT
SEGMENT PROFILES
DEVELOP
POSITIONING
STRATEGY
DEVELOPMENT &
IMPLEMENTATION
OF MARKETING MIX
PERFORMANCE
REVIEW
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Figure 11: Decision Flow chart of STP
Where is (environmental
and internal analysis)
Did the firm get there
(strategy implementation,
control, metrics)
Where to be (strategic
market decisions,
segmentation, targeting,
positioning))
How to be there (strategies
of pricing, product
innovation, development,
communication)
CRITICAL EVALUATION OF STP MODEL
Focus on Customers
STP is a customer focused marketing strategic model aimed at creating place in the minds of
customers for the brand as well as the product. This section of the essay outlines why it is
important for the companies to understand the customers’ needs, wants, and demands to get
strategic edge in planning, and embark on a STP model. Needs are the basic requirements for
human living. The desire for the objects which satisfy such needs is called wants. Demands, on
the other hand is the desire for the objects backed by adequate purchasing power (Kotler, 2002).
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Thusly, customers do not create needs, as some times criticized, they exist. Marketers, with
inputs from social, cultural, and economic factors, develop means to transform the needs of the
customers into wants.
Why is it supremely important to satisfy the needs of target customers? Because a company’s
sales come from repeat customers. One estimate is that attracting a new customer can cost five
times as much as pleasing an existing one, and it might cost 16 times as much to bring the new
customer to the same level of profitability as that of the lost customer (Kotler, 2008). Customer
retention is thus more important than customer attraction.
STP bears the above mentioned distinctions in the whole body of its process. Segmentation is a
conglomeration of related activities aimed at dividing the whole market into different groups
according to the similarity of needs of the customers. More closely the needs of the customers in
a segment match, smaller is the segment, and more price the customers are willing to pay for a
product or service that satisfies the needs. Thus customers in the luxury car segment are willing
to pay higher premium for new and/or better luxuries in cars (Blythe, 2002; Ladzani and Vauren,
2002).
In terms of marketing, the product or offering will be successful if it delivers value and
satisfaction to the target buyer. The buyer chooses between different offerings on the basis of
which is perceived to deliver the most value. We define value as a ratio between what the
customer gets and what he gives. The customer gets benefits and assumes costs, as shown in this
equation:
Value =Benefits/Costs = (Functional benefits + emotional benefits)/ (Monetary costs + time
costs + energy costs + psychic costs). Based on this equation, the marketer can increase the
value of the customer offering by (1) raising benefits, (2) reducing costs, (3) raising benefits and
reducing costs, (4) raising benefits by more than the raise in costs, or (5) lowering benefits by
less than the reduction in costs. A customer choosing between two value offerings, V1 and V2,
will examine the ratio V1/V2. She will favor V1 if the ratio is larger than one; she will favor V2
if the ratio is smaller than one; and she will be indifferent if the ratio equals one. Exchange and
Transactions Exchange, the core of marketing, involves obtaining a desired product from
someone by offering something in return. For exchange potential to exist, five conditions must
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be satisfied: i) there are at least two parties, ii) each party has something that might be of value to
the other party, iii) each party is capable of communication and delivery, iv) each party is free to
accept or reject the exchange offer, v) each party believes it is appropriate or desirable to deal
with the other party. Whether exchange actually takes place depends upon whether the two
parties can agree on terms that will leave them both better off (or at least not worse off) than
before. Exchange is a value-creating process because it normally leaves both parties better off.
Note that exchange is a process rather than an event. Two parties are engaged in exchange if they
are negotiating—trying to arrive at mutually agreeable terms. When an agreement is reached, we
say that a transaction takes place. A transaction involves at least two things of value, agreedupon conditions, a time of agreement, and a place of agreement. Usually a legal system exists to
support and enforce compliance among transactors. However, transactions do not require money
as one of the traded values. A barter transaction, for example, involves trading goods or services
for other goods or services. Note also that a transaction differs from a transfer. In a transfer, A
gives a gift, a subsidy, or a charitable contribution to B but receives nothing tangible in return.
Transfer behavior can also be understood through the concept of exchange. Typically, the
transferor expects something in exchange for his or her gift—for example, gratitude or seeing
changed behavior in the recipient. Professional fund-raisers provide benefits to donors, such as
thank-you notes. Contemporary marketers have broadened the concept of marketing to include
the study of transfer behavior as well as transaction behavior. Marketing consists of actions
undertaken to elicit desired responses from a target audience. To effect successful exchanges,
marketers analyze what each party expects from the transaction. Suppose Caterpillar, the world’s
largest manufacturer of earth-moving equipment, researches the benefits that a typical
construction company wants when it buys such equipment. The items shown on the prospect’s
want list in Figure 2 are not equally important and may vary from buyer to buyer. One of
Caterpillar’s marketing tasks is to discover the relative importance of these different wants to the
buyer. As the marketer, Caterpillar also has a want list. If there is a sufficient match or overlap in
the want lists, a basis for a transaction exists. Caterpillar’s task is to formulate an offer that
motivates the construction company to buy Caterpillar equipment. The construction company
might in turn, make a counteroffer. This process of negotiation leads to mutually acceptable
terms or decision not to transact.
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Figure 12: Two-party exchange map
.
Importance of Segmentation
Importance of market segmentation stems from three reasons. Firstly, success in market
development, product diversification, and market penetration can be achieved only when sales
can be increased through new markets and new products, and market segmentation is the
inevitable prerequisite for successful implementation of these strategies (David, 2009). Secondly,
correct market segmentation enables the firm to compete in the market with limited resources as
mass production, distribution, and market promotion ate not required by the firm. A small firm
can maximize per segment sales and per unit profit by accurately segmenting the market.
Thirdly, correct segmentation of market positively alters the 4ps of marketing mix, namely price,
product, place, and promotion (Dutra, Frary and Wise, 2006). McDonald’s and General Motors
have successfully segmented their markets on the basis of regional preferences (Cateora, Gilly
and Graham, 2013).
An effective marketing strategy entails a conglomeration of certain market dynamics which
would work in a synchronized manner so as to enable the firms establish the brand, reduce
resistance to sales, and develop interest about the brand and desire for the products in the minds
of potential, new, and existing customers. But market presents a constraint in front of all the
firms; the near impossibility to connect every customer in a wide and diversified market (Goyat,
2011). This is the reason why market is needed to be segmented according to the existing needs
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and wants of different groups of customers in the market. Thus the market is segmented into a
number of homogenous groups to design strategy commensurate with a group. The objective of
market segmentation is to concentrate segmentwise the marketing resources and energy to derive
competitive advantage in individual sectors (Douglas, Ford and Ibrahim, 2012). Concentrating
marketing efforts is the essence of marketing management, and market segmentation enables
firms achieve this focus (Kotler, 2002).
The companies also differ in their resources and abilities. No company can explore all the
segments of the market with equal efficiency. Hence it is better to identify the segment which a
firm can serve efficiently and profitably, rather than to compete in the entire market (Sun, 2009).
Few decades back consumer product firms used to produce and distribute same product in mass
scale and promote by same design for all the customers. It was believed at that time that mass
marketing would automatically develop potential customers. But after globalization, diversity of
consumers and fierce competition in the market place have compelled the marketing mandarins
to discard mass marketing and adopt segmented marketing (Goodwin and Gentry, 2000).
Benefits of Segmentation
Market segmentation centric STP approach offers a number of advantages to the customers as
well as firms. This section briefly outlines the advantages.
Better way to meet customers’ needs and wants
A firm can satisfy the needs of a wide range of customers with a limited range of products. This
can be done by the firm by marketing the same products in different bundles with discount,
incentives, and other promotional packages. It can be seen in IT sector that many major firms
target wide range of customers with the same product. Dell Computers sell computers to private
customers with price incentives, and to corporate customers together with IT services (Mayo,
2005).
Higher Revenue
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Not all the customers in a segment would welcome a price hike by the firm, thus doing so would
not serve corporate interest. But a new segment can be identified in which customers are ready to
pay a higher price for the product or service that serves their needs and wants better. Such
segment would be different from other segments in terms of value addition. International
business-to-business (B2B) sector is growing exponentially relative to manufacturing sector due
to low cost factors as well as ability of the firms to compete in different countries. The price
charged by an international B2B service provider to a segment depends upon the price elasticity
of demand for the service in that segment. If the price elasticity is low the firm can charge a
higher price and increase its total revenue (Sichtmant, Selasinsky, and Diamontopoulos, 2011).
Sustain along customers’ lifecycle1
Preferences and buying patterns of customers change with different stages of their lifecycles. A
firm that serves different segments over different stages of a customer’s life cycle can satisfy
customers needs and wants throughout the lifecycles (Daniel as cited in Goyat, 2011). Many
cosmetics companies provide skin care solutions for different ages of women. Such lifecycle
oriented segmentation improves brand value of the firm.
Growth opportunities
Market segmentation allows a firm to design its own niche products and thus create a different
market segment with additional customers. It is common for cosmetics companies to create a
niche segment within a bigger segment (Dalgic, 1995). These companies often move its
customers from regular products to premium products on the basis of customer loyalty. Thus
segmentation allows for new opportunities for growth.
Better communications with customers
Market segmentation provides opportunity to communicate with the customers of a segment in a
specific way. This segment-specific way of communication facilitates emphasis on segmentspecific criteria, although the brand and the product remain same all over the entire market
(Martin, 2011).
Innovation Stimulated
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Firms operating in the whole market with a full cover market strategy cater to the common
minimum needs and wants of the consumers of the market. This puts innovation in halt.
Segmentation brings out details of needs, wants, preferences, and tastes that exceed the common
minimum. Thus new segments are created on the basis of commonality of additional wants and
needs. The firm produces improved goods or services with added values to serve these wants and
needs. Thusly segmentation stimulates innovation enabling the firm to increase profits (The
Manager as cited in Moyo, 2005)
Enables niche marketing strategy
By segmenting the market the firm can identify the most attractive segments. The marketing
resources of the firm then can be targeted to the selected segments to support niche marketing
strategy for the segments. The marketing mangers of the selected segments can then improve
competitiveness with better communication with supply chain network and the customers.
Thusly market share of the firm would increase which would improve profitability and brand
value (Goyat, 2011).
Advantages and Disadvantages of Segmentation strategies
Table 1: Single segment strategy
Advantages
Disadvantages
It enables specialization in one segment
Risk cannot be diversified
All marketing activities and resources can be
Sudden change in consumers’ tastes and
concentrated on one segment
preferences may affect revenue and profit for
the firm
A firm can compete in the market with limited
Expansion in new segments may become
resources
difficult due to lack of expertise
The firm is better informed about the needs and New entrant in the segment may reduce market
wants of the segment
share which is difficult to recover
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Table 2: Multi-segment strategy
Advantages
Disadvantages
Production capacity can be balanced between
Production process and supply chain
different segments
management become difficult
Differentiated price allows for premium from
Cost of producing different products and
different sectors
making different marketing techniques increase
total cost
Risks are diversified between different
Product differentiation between different
segments
segments needs to be very cautiously
maintained
EMPIRICAL LITERATURE ON STP APPLICATION
The STP applications of some the world leaders in consumer goods industries are given in this
section. Brief discussion is made about the segmentation strategy of one brand each from 5
different industries, and resultant benefits derived by the company and the customers.
Sector: Quick Service Restaurant (QSR)
Brand: McDonald’s
McDonald’s has successfully adopted geographical segmentation. The primary geographical
segments of McDonald’s are Latin America, Asia, Africa and Middle East, Europe, and USA.
McDonald’s value addition is based on selling competitive products at different segments
according to regional tastes and preferences. While it sells McAloo Tikki and McVeggie in
India, its American and European outlets serve Beef burger and Bacon Smokehouse burger and
one can find McArabia chicken and Beef burger in Middle Eastern and African outlets of the
restaurant chain. In Europe and Japan McDonald’s offer beer with food to attract adult
customers. In Philippines, the QSR chain offers McSphagetti (Mourdoukoutas, 2015).
In demographic segmentation McDonald’s uses age criterion. The segmentations are child,
young adults, and adults. In order to attract children the firm offers happy meals and toys to
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customer of this segmentation. The young adults segment, like most other consumer products,
gives the highest revenue to the firm among other demographic segment. The Beef and Ham
burger are the chief products offered by the firm for this segment.
McDonald’s segmentation strategy in India is unique as it is the only country in the world where
the firm has applied three segmentation strategies; demographic, psychographic, and behavioral.
The firm’s three demographic segmentations in India are kids, students, and family. In the
children segment the firm sells happy meals and toys, in the student segment the environment
has been created at the outlets where students can have their lunch, and for family segment it
offers take-away and drive-thru meals.
In behavioral segmentation, the firm provides for party room for birth day celebration of
children. McDonald’s pricing strategy varies from country to country. In USA it has dollar
menu, whereas in India it has happy price menu.
In the context of transforming tastes and preferences of the customers, changing buying
behavior, and rising income level, McDonald’s has adopted differentiated targeting strategy to
cater to these changes.
The market segmentation of McDonald’s has benefited the customers on more than one count.
Firstly the company has given emphasis on cultural diversity, and the distinct tastes and
preferences of different regional groups. This has enabled customers enjoy wide range of fast
foods with preferred tastes. In India the menu is divided into vegetarian and non-vegetarian
foods thus the huge numbers of vegetarians in India have got opportunity to test wide range of
vegetarian foods. Secondly the segmentation has made this possible for school children to enjoy
foods in congenial atmosphere, and at reasonable price. Thirdly vegetarian customers in India
have been able to taste favorite Indian foods in safe and clean place un-contaminated by nonvegetarian items (Mourdoukoutas, 2015).
Sector: Mobile Phone
Brand: Motorola
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The mobile phone market in China started to expand since 1990s and by 2000 china had 100
million mobile phone users. Motorola entered the Chinese market in 1987, and till mid 1990s the
firm enjoyed monopoly in the market. But after 1996, with emergence of GSM technology, other
mobile companies namely Nokia and Siemens entered the market and penetrated their positions.
Till such time Motorola used full market coverage marketing strategy with a conventional
technology oriented brand image, and middle income working class and career professionals
were the companies’ main customer base. But with new entrants and resulting cut in market
share the company adopted market segmentation strategy. The firm divided the market into four
different segments, namely customers who need cutting edge wireless technology, business users
needing efficiency, status seekers, and users for everyday talking. The firm went through a
technologically innovative product design maneuver to develop four product lines for the four
market segments, namely Accompli with latest technology an big touch screen, Timeport with
internet browsing and desk top organizing facilities, V. with amazing style and cutting edge
technology, and Talkabout with standard features needed for everyday use (Sun, 2009).
Since adoption of the market segmentation strategy by Motorola, the firm’s market share started
to improve rapidly and Talkabout model moved to the mass consumer market with fastest growth
rate, and most attractive market segment in Chinese mobile market for all the mobile phone
manufacturers.
The strategy benefitted the customers of the mobile phone market of China in two ways. Firstly
the customers could access mobile handsets with the features they had been wanting to access,
thus getting added value in product, and secondly more customers got access to mobile handsets
for day-to-day talking at reasonable price.
Sector: Personal Computers (PC)
Brand: Dell Computers
Dell Computers entered the Chinese market at very initial stage and targeted the market segment
comprising of customers looking for low cost personal computer. The segment is made of 85%
of the urban citizens of China. Dell targeted the segment with unique innovation of low cost
Smart Personal Computers emphasizing on supply chain management. This provided the firm
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competitive edge in the sector. The low price of the PC boosted the firm’s overall market share
by 5%.
This segmentation strategy of Dell Computers brought about revolution in personal computer use
in China. The urban citizens of China got access to low cost personal computers.
Sector: Health Care
Brand: Horlicks
Horlicks is a renowned brand name in the global health care sector. The brand owner Glaxo
Smith Kline (GSK) is a UK based 8th largest pharmaceutical company in the world (Sync Force,
2018). The market capitalization of the company at the end of 2017 was £681 billion, and the
brand’s revenue for the year stood at £680 million.
The customer base of Horlicks consists of middle class health conscious group. On the basis of
this strategic information, the company divided its market into 4 segments namely, baby and
toddlers, adults, pregnant and other woman, and active adults (Marketing 91, 2018). The four
products designed for the segments are Junior Horlicks and Chocolate flavor Horlicks, normal
Malt Horlicks, Mother’s Horlicks and Women’s Horlicks, and Horlicks Lite. The success of the
brand is, to a large extent, due to effective market segmentation.
The market segmentation has benefitted the health conscious middle income group across the
world. The brand has been able to serve the wants and needs of all the members of individual
families. The market segmentation has also allowed the firm to keep prices within reach so that
more than one product for different members of the family can be afforded by a single family.
Sector: Consumer Goods
Brand: Colgate
The effective market segmentation strategy and powerful promotional campaign have made
Colgate a widely known brand all over the world. The brand accounted for $15,454 million in
net sales and 23.2% operating profit margin (Colgate Palmolive, 2017). The brand value of
Colgate is mainly due to its well crafted STP strategy.
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By demographic segmentation, the company divides the market into two segments namely kids
and adults. The kids segment is further segmented into two age groups 0 – 8 years and 8 – 12
years. For the 0 – 8 years group the company offers fluoride free toothpaste due to tender nature
of teeth, and for the age group 8 – 12 cavity protection toothpaste is market by the firm. For the
adult segment the company offers different products for different wants and needs of the adult
people, namely whitening, teeth sensitivity, and gum sensitivity (Colgate Palmolive, 2017).
Proper segmentation of the market and correct positioning have made Colgate a household name
in many countries in the world. Since the same brand serves different age groups, it is convenient
for the consumers to purchase the correct product to satisfy specific oral and dental wants and
needs.
GENERIC RECOMMENDATIONS
The selection of suitable bases for market segmentation is a challenging task for the companies.
There are millions of consumers in a segment in many industries across the world and it is not
possible to satisfy the needs and wants of all the customers in a segment with a given marketing
mix. Said that, for a particular product, same price, place, and promotional techniques may
provoke different thoughts in different customers in the same segment. Hence firms need to
select the most suitable segment by strategic choice. The criteria for such selection would be;
firstly, the segment must be big enough to earn profit for the company, secondly the buying
habits of the customers must suit the operational process of the firm, and thirdly there should not
be too many competitors in the segment.
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