Marketing and Positioning Eureka Facts

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Segmentation - Targeting – Positioning
Eureka Facts, The Smart Marketing Information. 1
SEGMENTATION – TARGETING – POSITIONING
BY: JORGE A. RESTREPO
President & Principal Researcher EurekaFacts LLC
The strategic marketing planning process flows
from a mission and vision statement to the selection of
target markets, and the formulation of specific marketing
mix and positioning objective for each product or service
the organization will offer. Leading authors like Kotler
present the organization as a value creation and delivery
sequence. In its first phase, choosing the value, the
strategist "proceeds to segment the market, select the
appropriate market target, and develop the offer's value
positioning. The formula - segmentation, targeting,
positioning (STP) - is the essence of strategic marketing."
(Kotler, 1994, p. 93).
Market segmentation is an adaptive strategy. It
consists of the partition of the market with the purpose of
selecting one or more market segments which the
organization can target through the development of
specific marketing mixes that adapt to particular market
needs. But market segmentation need not be a purely
adaptive strategy: The process of market segmentation
can also consist of the selection of those segments for
which a firm might be particularly well suited to serve by
having competitive advantages relative to competitors in
the segment, reducing the cost of adaptation in order to
gain a niche. This application of market segmentation
serves the purpose of developing competitive scope, which
can have a "powerful effect on competitive advantage
because it shapes the configuration of the value chain."
(Porter, 1985, p. 53).
According to Porter, the fact that segments differ
widely in structural attractiveness and their requirements
for competitive advantage brings about two crucial
strategic questions: the determination of (a) where in an
industry to compete and (b) in which segments would
focus strategies be sustainable by building barriers
between segments (Porter, 1985, p. 231).
Through market segmentation the firm can
provide higher value to customers by developing a market
mix that addresses the specific needs and concerns of the
selected segment. Stated in economic terms, the firm
creates monopolistic or oligopolistic market conditions
through the utilization of various curves of demand for a
specific product category (Ferstman, C., & Muller, E.,
1993). This is an expanded application of the
microeconomic theory of price discrimination, where the
firm seeks to realize the highest price that each segment is willing to pay. In this case the theory's reliance on price is broadened to include all 4 P's of the marketing mix (Wilkie, 1990, P. 98). This application of microeconomic theory is

particularly applicable to organizations active in product
categories that are cluttered with competition. It is also
useful where sufficiently large markets with distinct sets of value preferences are found, or when the organization
chooses to proactively build a stronghold by creating value
preferences among a set of consumers.
Segmentation as a process consists of segment
identification, segment selection and the creation of
marketing mixes for target segments. The outcome of the
segmentation process should yield "true market segments"
which meet three criteria: (a) Group identity: true segments must be groupings that are homogeneous within segments
and heterogeneous across groups. (b) Systematic
behaviors: a true segment must meet the practical
requirement of reacting similarly to a particular marketing
mix. (c) The third criteria refers to efficiency potential in terms of feasibility and cost of reaching a segment (Wilkie, 1990). In addition, Gunter (1992) recommends considering
the stability of market segments over time and different
market conditions.
Stage one - segment identification
The first stage of market analysis consists of
segment...
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