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Segmentation, targeting and positioning

The research findings and recommendations presented Dudley Riggs illustrate three interrelated marketing concepts: market segmentation, target marketing, and product positioning. Market segmentation is the process of dividing a market into distinct subset of customers. Each segment consists of people with similar needs and characteristics that lead them to respond in a similar way to a particular product offering and marketing program. In the Brave New Workshop example, the researchers first divided the total population into theater-goers and non goers. They then segmented the theater-goers into three groups according to the benefits each groups sought from attending a theater and the relative importance they attached to various choice criteria (such as price and location) they might use in deciding which theater to attend. They described each segment's demographic characteristics as age, income, and educational levels.
No single theater would satisfy the unique needs of all three segments of theater-goers; therefore, Dudley Riggs had to decide which segment to pursue as his target market. He decided to target the hedonist segment after evaluating the relative attractiveness, of the tree groups as to size, revenue potential, and growth rates. He also compared the strengths and weaknesses of the Brave New Workshop with the benefits sought by the customers in each segment and with other theaters competing for those customers. This process of deciding which segments to pursue is called target marketing.
Finally, product positioning involves designing a product offering and marketing program that creates a competitive advantage in the target market.

Why segment the market?

The past two chapters stressed that individual consumers or organizations have different needs and make purchase influenced by different personal, social, and environmental factors. Where big-ticket installation is involved, such as the development of a new fighter plane or the construction of a custom-designed house, a firm may tailor its products and marketing programs for each customer.
Because, markets are rarely homogeneous in benefits wanted, purchase rates, and price and promotion elasticities, their response rates vary depending on product and marketing program differences. Variations among markets in product preferences, size and growth, media habits, and competitive structures further impact the differences in their response rates. Thus, segmentation is a prerequisite to product and program development.