Market Segmentation, Targeting, Positioning

One first concept of marketing that we need to explain is market segmentation. In order to find value, the marketer must choose the best segment for the best opportunities.
You can group each consumers in terms of geographic, demographic, psychographic and behavioral factors. Each group will become a segment of the market, and this process of differentiating customers is called market segmentation.
According to your product, one must find the proper segment that are relevant to his market. If you sell cars, you don't find useful the same segments as a toothbrush company. You must pay attention to how you segment your market in order to stay relevant.


After you have done this market segmentation, another process takes place in marketing, which is market targeting. After finding the segment, you evaluate, test and mark the segments' attractiveness and select one or more segment to enter. Of course, one must chose the target segment that will provide him with the most benefice over the most number of years. You can chose to develop your product just for one specific market niche, or to sell it to a broader number of people. The best strategy is to enter a new market by serving a single segment, and if the campaign is a success, then you can add more segments.


Finally, sound marketing is about market differentiation and positioning. When you've decided about the market segment you are entering, you must decide how you will differentiate it from the others, and the position you want your product to have. A product position depends of the perception of the product through a customer's eyes. A customer will classify the product according to its needs. So you want to develop unique market positions for you products. A product that is exactly the same as the others won't be bought by customers.

As a result positioning is an important process to work on. You have to plan and improve this position by putting effort into your marketing teams.

The product/ market expansion grid

The product/market expansion grid is a device used to identify growth opportunities.

Depending on the product and the market, you will be able to implement 4 different strategies.

First, the market penetration is when you produce a product in order to enter a new market. The products already existed before, but you want to create your own brand. This helps your company improve sales. If you chose a market in a fast development state, then you will be able to get your slice of market shares.

Then you can do a market development. This happens when you identify new markets for your currently owned products. For example, you target a new customer, one that you traditionally don't have buying your products, or when you target a new geographical market, Asia or Africa for example.

After that, you can find the product development strategy. A product development is when you improve, change or create a new product and apply it to currently owned markets. This might put you in competition with strong players so be careful.

Finally, you may encounter the diversification strategy. The diversification happens when you are starting up a new business in a field that you never tackled before. You are not used to interact with the markets so that makes it sometimes difficult, yet promises growth opportunities and renews you customer base. The company must be careful not to overextend their brands positioning. The issue is that you might lose your customers in the process, if they don't understand your strategies.

The 4 types of Strategic Business Units

The different parts of a company are called Strategic Business Unit. It can refer to a division, a product, or a brand within the company.
A marketer may need to assess them by doing a portfolio analysis. This paper tells you where to invest and what you can expect from your company in the following years by categorizing them in order of attractiveness and strength in terms of market share.
The most famous way to deal with this is the Boston Consulting Group approach.
By using a matrix, you can classify the SBUs in 4 types. Stars, Cash Cows, Question Marks, and dogs.
The star is your best product. It has high growth, and high market shares. They need high investment to finance their rapid growth.
The cash cows are usually stars that has seen its growth rate decline. They are established successful SBUs, and need less investments. As they have high market shares, they produce a lot of cash, and the company can use this cash flows to cover the bills of the other SBUs that need investments.
The Question Marks are new products that are positioned in high growth market. The company has to assess wether it continues investing and make it become a star, or wether it should be left aside.
Finally, dogs are low growth, low share businesses, that may generate enough to survive, but do not promise to become a source of profit.


With this approach, you have to chose a strategy different according to the product. You can build a share of a business unit by investing. You can invest enough to maintain the SBUs share level the same over time to hold. You can also harvest the SBU, for example with the cash cows, milking for the short term cash flows. Finally, you can divest the SBUs by phasing it out and using the investments elsewhere.

Now you have to be careful with this approach. It can be difficult to assess and define the SBUs. You may find it time consuming and costly. Measuring their market share and market growth can be hard. Also, it makes it true for a specific time, but whenever the whole system change, the matrix must be reevaluated. As a result it becomes hard for future planning.