Segmentation, targeting, positioning and differentiation of services

Segmentation, Targeting, Positioning
and Differentiation of Services
Prepared By
Jitendra Patel
Assistant Professor
Prestige Institute of
Management and Research,
Indore

Module II
1. Marketing Segmentation Definition
1.1 Need for Segmentation
1.2 Quality of Good Segmentation
1.3 Basis of Segmentation
1.4 Service Attributes and Levels
1.5 Developing Right Service Concept for a Specific Segment
1.6 Important vs. Determinant Attributes
1.7 Establishing Service Levels
2. Target market strategies
3. Positioning and its example
3.1Elements of Positioning
3.2 Types of Positioning
3.3 Developing an Effective Positioning Strategy
3.4Using Positioning Maps to Analyze Competitive Strategy
4. Differentiation of Service
4.1 The 5 Market Differentiation Strategies
8/29/2019 2Jitendra Patel, Assistant Professor, PIMR

Market Segmentation Forms the
basis for Focused Strategies
3Jitendra Patel, Assistant Professor, PIMR8/29/2019

Market Segmentation
• Market Segmentation is the sub dividing of
customers into homogenous sub set of customers
where any sub set may be selected as market
target to be reached with distinct marketing mix.
-Kotler
• The process of defining and subdividing a large
homogenous market into clearly identifiable
segments having similar needs, wants or demand
is called Segmentation

Need for Segmentation
• To develop Marketing Activities
• Increase market effectiveness
• Greater customer satisfaction
• Create savings
• To overcome competition effectively

The Good Segment Must be
• Well Defined
• Small
• Manageable
• Targeted and Focused.
• Profitable
• Substantial Size

Basis of Market Segmentation
Segmenting Consumer Markets
• Geographic
• Demographic
• Psychographic
• Behavioral

Geographic
Geographic segmentation divides the market into
different geographical units such as
• nations,
• regions,
• states,
• counties, or cities

Demographic
Demographic segmentation divides the market into groups based on
variables such as
– age, gender
– family size
– family life cycle,
– income,
– occupation,
– education,
– religion,
– race,
– generation, and
– nationality

Psychographic
• Psychographic segmentation divides buyers
into different groups based on
– social class,
– lifestyle,
– personality traits

Behavioral segmentation
Behavioral segmentation divides buyers into
groups based on their knowledge, attitudes,
uses, or responses to a product
• Occasion
• Benefits sought
• User status
• Usage rate
• Loyalty status

Buyer Readiness Stage
65%96 46%63 62%29 67%18 50%12 6
Aware Ever tired recent trail Occasional
User
Regular
User
Most Often
Used

User Status
• Non- user
• Ex- users
• Potentail user
• First time user
• Regular Users

Usage Rate
• Light Usage
• Medium Usage
• Heavy Usage

loyalty Status
• Hard Core loyals
• Split loyals
• Shifting loyals
• Switchers

Conversion Model User
• Convertible
• Shallow
• Average
• Entrenched

Conversion Model Non User
• Strongly unavailable
• Weekly unavailable
• Ambivalent
• Available

Advantage of Benefit segment
• Benefit segmentation + Value addition +
Product expansion

Segmentation Examples
Type of Firm Segmentation Base Possible market
segments
Banking Demographic
segmentation
Young couples, young
families, older families,
pre-retirement, retired
Mobile phone carriers Benefit segmentation Highly social, work-
oriented, safety
contact, status symbol
Saloon Benefit segmentation Hair Cut, Hair dye,
Facial and Massage
Restaurant Behavioral segmentation Regulars, special
occasion, business
lunch, quick spot

Market Segmentation
• Firms vary widely in ability to serve different types of customers
– Adopt strategy of market segmentation, identifying those parts of
market can serve best
– A market segment is composed of a group of buyers sharing
common:
• Characteristics
• Needs
• Purchasing behavior
• Consumption patterns
– Within segments, they are as similar as possible. Between
segments, they are as dissimilar as possible

Identifying and Selecting Target
Segments
• A target segment is one that a firm has selected from among those in the
broader market and may be defined on the basis of multiple variables
• Must analyze market to determine which segments offer better
opportunities
• Target segments should be selected with reference to
– Firm’s ability to match or exceed competing offerings directed at the
same segment
– Not just sales potential
• Some ‘underserved’ segments can be huge, especially poor consumers in
emerging economies, e.g. low-income income groups

Service Attributes
and Levels

Developing Right Service Concept for a
Specific Segment
• Use research to identify and prioritize which attributes of a given service
are important to specific market segments
• Individuals may set different priorities according to:
– Purpose of using the service
– Who makes decision
– Timing of use
– Whether service is used alone or with a group
– Composition of that group

Important vs. Determinant Attributes
• Consumers usually choose between alternative service offerings
based on perceived differences between them
• Attributes that distinguish competing services from one another are
not necessarily the most important ones
• Determinant attributes determine buyers’ choices between
competing alternatives
– Service characteristics that are important to purchasers
– Customers see significant differences between competing
alternatives on these attributes

Establishing Service Levels
• Need to make decisions on service levels – level
of performance firm plans to offer on each attribute
– Easily quantified attributes are easier to understand and generalizable
– e.g. vehicle speed, physical dimensions
– Qualitative attributes are ambiguous and subject to individual
interpretation – e.g. physical comfort, noise levels
• Can often segment customers according to willingness to give up some
level of service for a lower price
– Price-insensitive customers willing to pay relatively high price for high
levels of service on each important attribute
– Price-sensitive customers look for inexpensive service with relatively
low performance on many key attributes (e.g., Services Insights 3.2
Capsule Hotels)

Target market strategies
• Single Segment Strategy
• Selective Specialization
• Product Specialization
• Market Specialization
• Full Market Coverage

Positioning
The place a
product occupies
in consumers’
minds relative to
competing
products.

Positioning Example
• eBay’s positioning:
No matter what
“it” is, you can find
“it” on eBay!

Elements of Positioning

• The Product:
This is where the consumer decides how
important the product is and what meaning it has
and how he relates it with his need.

• The Company
Every product comes from a company and every
company has its own Image.
Better Company profile, Better the perceived
value of the product.
In some cases the brand name overshadows the
name of the company. Eg. Amul – GCMMF (Gujrat
Co-operative Milk Marketing Federation)8/29/2019 32Jitendra Patel, Assistant Professor, PIMR

• The Competition
Product Positioning is done in relation to various
competitive offerings.
Most of the cases a products are compared with
the dominant brand in the same category.
Selecting a slot distinctly different from the
competitors can avoid direct confrontation with
them.8/29/2019 33Jitendra Patel, Assistant Professor, PIMR

• The Consumer
To re-enforce, Positioning is essentially based on
consumer perceptions rather than factual evaluations.
It becomes very important, to examine, what is the
perceived value of the product for the consumer.
To Analyze this, we should be through with Consumer
Behaviour.

Types of Positioning

• Positioning by Specific Product Attribute and Benefits.
Here the marketer associates a product with an attribute, a product
feature or a consumer feature.
A common approach is setting the brand apart from competitors on
the basis of the specific characteristics or benefits offered.
Every one you know have one
Yahoo.
• Eat fresh
• Subway
• By product class
• Highlights their fresh menu items, against the range of fast food
options available
• “To Fly. To Serve.” British Airways”

• POSITIONING BY PRICE/ QUALITY
The positioning is done based on price and quality
of the product.
Premium products are positioned like this.
JIO
Emirates
Hello Tomorrow
Making the sky the best place on Earth") is the
tagline of ‘Air France’

• POSITIONING BY USE OR APPLICATION
specific image or position for a brand is to
associate it with a specific use or application.
• don’t leave home without it
• American Express
• By use/application
• States that the product is vital when you are
traveling

• POSITIONING BY PRODUCT CLASS
Often the competition for a particular product
comes from outside the product class.
• When it absolutely, positively, has to be there
overnight
• Federal Express
• By product class
• States that there is no competitive alternative
when you want promptness and reliability
• Cisco

• POSITIONING BY PRODUCT USER
Here the persona of the product is associated
with the User.
Eg. Idea – Abhishek Bachaan
Banker to every Indian
SBI

• POSITIONING BY COMPETITOR
This is similar to positioning by product class, although in this case the
competition is within the same product category.
• We try harder
• Avis Rent-a-Car
• Against competition
• Targets the market leader (Hertz), by implying that they are lazy and complacent,
particularly in the area of customer service
• Have it your way
• Burger King
• Against competition
• Highlights the flexibility of their menu choices, implied against McDonald’s
offerings
• Autobell Car Wash
• People can tell........When you Autobell.

Positioning Strategy – Cultural Symbols
• Culture can be defined as the customs, arts, social institutions, and achievements of a
particular nation, people, or other social group
• A population recognizes itself and the society through the use of cultural symbols
• It is this fundamental principle that leads advertisers to associate a particular product
with a cultural symbol
• This leads the target market populace to associate the product with culture and the
general understanding it identifies as holy, artistic, refined or sophisticated.
• Essentially, identify something that is very meaningful to people and associate the brand
with that symbol.
• This helps to differentiate brands from other competitors.

• POSITIONING BY CULTURAL SYMBOLS
The cultural symbols are used to differentiate
the brands., Air India

Cultural Symbols Positioning Strategy

Developing an Effective Positioning
Strategy

Four Principles of Positioning Strategy
• Must establish position for firm or product in minds of target customers
• Position should provide one simple, consistent message
• Position must set firm/product apart from competitors
• A company cannot be all things to all people - must focus its efforts

Six Questions for Effective Positioning
Strategy
• What customers do we serve now, and which ones would we like to target in
future?
• What does our firm currently stand for in the minds of current and potential
customers?
• What is value proposition for each of our current service products, and what
market segments is each one targeted at?
• How well do customers in chosen target segments perceive our service products
as meeting their needs relative to competitors?
• What changes must we make to our offerings to strengthen our competitive
position?

Developing an Effective Positioning
Strategy
• Positioning links market analysis and competitive analysis to internal corporate
analysis
• Market Analysis
– Focus on overall level and trend of demand and geographic locations of demand
– Look into size and potential of different market segments
– Understand customer needs and preferences and how they perceive the
competition
• Internal Corporate Analysis
– Identify organization’s resources, limitations, goals, and values
– Select limited number of target segments to serve
• Competitor Analysis
– Understand competitors’ strengths and weaknesses
– Anticipate responses to potential positioning strategies

Market, Internal and Competitive
Analyses

Using Positioning Maps to Analyze
Competitive Strategy

Using Positioning Maps to Analyze
Competitive Strategy
• Great tool to visualize competitive positioning and map developments of
time
• Useful way to represent consumer perceptions of alternative products
graphically
• Typically confined to two attributes, but 3-D models can be used to
portray positions on three attributes simultaneously
• Also known as perceptual maps (built on preference maps)
• Information about a product can be obtained from market data, derived
from ratings by representative consumers, or both

Product Matrix
No. of destinations
Destinations
Type
Less
More
Luxury Cultural
heritage
Malaysia
Thailand
India
Dubai
Singapore
China

Positioning of Belleville Hotels:
Service Level vs. Price

Positioning of Belleville Hotels:
Location vs. Physical Luxury

Future Positioning of Belleville Hotels:
Service Level vs. Price

Future Positioning of Belleville Hotels:
Location vs. Physical Luxury (Fig. 3.19)

• To ensure all executives have a clear understanding of firms
current situation
• Simple graphic representations are often easier for managers
to grasp than tables of data or paragraphs of prose
• Charts and maps can facilitate “visual awakening” to threats
and opportunities, suggest alternative strategic directions
Positioning Charts Help Executives to
Visualize Strategy

Positioning in Hotel Industry

Differentiation of Services

Every brand faces the dual
challenge of positively
influencing growth (by
capturing new customers)
and doing it in a way that
promotes loyalty to the
brand.

Strategic differentiation is the key.

Differentation
• The brand’s differentiation strategy should change
and evolve as the market matures and competition
intensifies.
• The 5 primary market differentiation strategies can
be charted for comparison based on market
penetration and market maturity

0%
20%
40%
60%
80%
MarketPenetration
User Experience
Differentiation
Technology
Differentiation
Price/Quality
Differentiation
Product
Differentiation
Customer Service
Differentiation
Market Maturity
The 5 Market Differentiation Strategies

Technology Differentiation
• A new technology may provide sufficient value for
differentiation in the market. Mobile operators make
liberal use of this strategy
• Introduction of 4G.
• Online Shopping and Bookings
• Organic Farming

Price/Quality Differentiation
• The use Price/quality differentiation fosters a
calculative behavior where customers continually
shop for the next best deal. This in turn leads to
customer churn and increased acquisition costs.
• Discount

Product Differentiation
• This strategy is designed to overwhelm the consumer
with features and specifications to provide the value
proposition.
• OYO Rooms
• Ginger Hotel
• Disadvantage
• Product differentiation often leads to market confusion
which can paralyze customer spending. Also, too many
“Big new” things can freeze spending as consumers
fear buying something that may be quickly obsolete.

Customer Service Differentiation
• Moving up the differentiation scale and focusing on superior
customer service is a way to avoid the limitations of a
product/service play.
• This strategy is used frequently by the insurance and
investment industries.
• Differentiating on customer service may be more costly for
the brand in that it requires the infrastructural support and
continual advertising or messaging to remind the potential
customer of the service offer.
• Introduction of Video Calling feature by Indus Ind Bank.

Example of Customer Service Differentiation

User Experience Differentiation
• In a commoditized market, differentiating based on
an emotional bond with the customer is both very
powerful and difficult to do successfully. The brand
that is able to build emotional or social connections
will have fiercely loyal customers with low churn.
• Amusement Parks
• Cinema
• Shopping Malls
• Airline.

How to differentiate using the User Experience strategy
• Research what your consumers aspire to. Find out
what excites them, what their affinities are, what idols
they have? The customer dialog must extend into the
realm of individual values, aspirations, and social
interests.
• To make an emotional bond, the brand values must
match what the customer aspires to. These aspirations
may include the environment, social responsiveness,
exclusivity, career ambition, family, security, fun and
style.
• The key metric to gauge success with this strategy is
the customer’s ability to brag about the experience.
• Are they cooler, more stylish, more caring, or smarter
for choosing your brand

Service Differentiation
• Ordering ease: Refers to how easy it is for you to place
an order with the company. These services have
differentiated themselves through ease of ordering.(
OYO Rooms, Big Basket)
• Delivery: It is related to how well the product or
service is delivered to the customer, covering speed,
accuracy and customer care. (Dommino’s Pizza, IRCTC,
Amazon)
• Installation: refers to the work done to make a
product operational in its planned location. Buyers of
heavy equipment expect good installation service.
Differentiation by installation is particularly important
for companies that offer complex products such as
computers.(Eureka Forbes, LG)

• 4. Customer/Employee training: refers to how
the customer’s employees are trained to use the
vendor’s equipment properly and efficiently. ( Taj
Hotel, Mc Donald, General Electric. Euera Forbes)
• 5. Customer consulting refers to data,
information system and advising services that the
seller offers to buyers.( Insurance Agent, Financial
Advisors, Indian Railway , Hotel)
• 6. Maintenance and repair: describes the service
program for helping customers keep purchasing
products in good working order, an important
consideration for many products.(Dell, LG)

References
1. Bhasin, H. (2018) “Service Differentiation and 7 Ways to Differentiate Service from Competitor”
retrieved from https://www.marketing91.com/service-differentiation/ last Assessed on 20
August 2019.
2. Christopher H. Lovelock, Chatterjeee (2010.), “Services Marketing – People, Technology,
Strategy”, 7th Edition, Pearson Education Asia, New Delhi,
3. McInnes, G. (2011) “5 Levels of Market Differentiation Strategies” retrieved from
https://www.slideshare.net/GrahamMcInnes1/5-levels-of-market-differentiation-strategies last
Assessed on 20 August 2019.
4. Philip Kotler, Kelvin Lane, Keller, Abraham Koshi, Mitihlesh Jha.(2011), Principles of Marketing
Management, South Asian Perspective, Pearson Education, 14th Edition.
5. Rao (2009),” Services Marketing”, 2nd edition, Pearson Education Asia, New Delhi.
6. Reddy, S.(2014) “Positioning Services in Competitive Markets” retrieved from
https://www.slideshare.net/suryareddy999/positioning-services-in-competitive-markets-
38785172 last assessed on 09 August 2019.
7. S. M. Jha. (2011), “Services Marketing”, Himalaya Publishing House, 7th Edition, New Delhi.
8. Sonwane, N. (2014) “Market positioning in services” retrieved from
https://www.slideshare.net/nikssonawane/market-positioning-in-services last assessed on 09
August 2019.
9. V. A. Zeithamal and M. J. Bitner (2008), “Service Marketing: Integrating Customer across the
Firm”, Tata McGraw Hill, New Delhi.

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