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Lesson 5 of 8Introduction to Marketing
Unit 1 · Lesson 5 of 8

Target Marketing and Positioning

Businesses divide a market into segments, choose the segment they can serve best, and position their offering in customers' minds against direct and indirect competitors.

3 min read9 practice questionsAsk AI about this →

Key things to remember

  1. 1STP: segment the market, target the best segment(s), then position the offering.
  2. 2Four segmentation bases: demographic (who), geographic (where), psychographic (lifestyle and values), behavioural (how they buy and use).
  3. 3A good segment is measurable, substantial, accessible, and responsive.
  4. 4Direct competitors sell similar products; indirect competitors sell different products that meet the same need.
  5. 5

No product can be everything to everyone. A skateboard shop that tries to appeal to toddlers, retirees, and professional athletes at the same time ends up appealing to no one. Instead, marketers split the whole market into smaller groups of people with similar needs, pick the group they can serve best, and design everything — the product, the price, the store, the ads — for that group. This three-part approach is often called STP: segmentation, targeting, and positioning.

Market Segmentation

Market segmentation is dividing a large market into smaller groups (segments) of buyers who share similar characteristics, needs, or behaviours. There are four common bases, or ways, to segment a market.

Four ways to divide a market into segmentsDemographicWho are they?Agee.g. 13–17, 18–24, 25–34, 65+Incomee.g. low, middle, or high household incomeFamily life stagee.g. single, young family, empty nesterGeographicWhere are they?Regione.g. Atlantic, Quebec, Ontario, Prairies, B.C.Population densitye.g. urban, suburban, ruralClimatee.g. snowy winters vs. a mild coastPsychographicHow do they live and think?Lifestylee.g. outdoorsy, homebody, gamerValuese.g. eco-friendly, thrifty, status-seekingPersonalitye.g. adventurous, cautious, socialBehaviouralHow do they act toward the product?Usage ratee.g. heavy, medium, light, non-userBenefits soughte.g. low price, convenience, quality, statusBrand loyaltye.g. loyal, brand switcher, first-time buyer
Fig 1The four bases for segmenting a market.
BaseGroups people byExample variablesExample
DemographicMeasurable population statisticsAge, gender, income, education, family size, occupation, ethnicityA bank's account for students aged 16 to 24
GeographicWhere people live or workCountry, province, city size, urban or rural, climateHeavier winter boots stocked in Thunder Bay stores
PsychographicLifestyle and personalityInterests, values, attitudes, activities, personalityOutdoor gear aimed at adventurous, eco-conscious people
BehaviouralHow people act toward the productUsage rate, loyalty, benefits sought, occasion, readiness to buyA coffee shop's rewards card for daily customers
Demographic and geographic data describe who and where; psychographic and behavioural data explain why and how.
Telling psychographic from behavioural
Psychographic is about the person's inner life — what they value and how they like to live. Behavioural is about what they actually do with the product — how often they buy it, why they use it, and how loyal they are. "Values fitness" is psychographic; "buys protein bars three times a week" is behavioural.

Choosing a Target Market

A target market is the specific segment (or segments) a business decides to serve. A segment is worth targeting when it is measurable (you can estimate its size and spending), substantial (big and profitable enough), accessible (you can reach it with your ads and distribution), and responsive (it will react to your offer differently from other segments). Businesses then choose a targeting strategy.

StrategyWhat it meansExample
Undifferentiated (mass) marketingOne offer for the whole market, ignoring segment differencesPlain table salt sold the same way to everyone
Differentiated marketingSeparate offers for several different segmentsA clothing company with a kids' line, a work line, and an athletic line
Concentrated (niche) marketingOne offer aimed at one small, specific segmentSnowshoes made only for backcountry guides
MicromarketingOffers tailored to a very small group, a location, or an individualAn online store recommending products based on your browsing history

Positioning

Positioning is the place a brand occupies in customers' minds compared with its competitors. Marketers often plan it with a positioning map (also called a perceptual map): two attributes that matter to customers, such as price and quality, are drawn as axes, and each competitor is plotted where customers see it. Crowded areas show heavy competition; empty areas may show an opportunity — but only if customers actually want that combination. A positioning statement sums up the plan: for [target market], [brand] is the [category] that [key benefit], because [reason to believe].

premiumeconomyoverpricedHigh qualityLow qualityLow priceHigh priceGAPgood quality,low priceABrand A: basic, lowest priceBBrand B: everyday mid-rangeCBrand C: sporty, well madeDBrand D: luxury designerEBrand E: trendy but flimsyHypothetical backpack market. The gap is the spot farthest from every competitor.
Fig 2A positioning map plots competitors on two attributes customers care about, revealing crowded areas and gaps.

Direct vs. Indirect Competition

ADirect competition
  • Businesses selling the same or very similar products
  • Competing for the same customers in the same way
  • Example for a Sudbury movie theatre: another movie theatre in town
BIndirect competition
  • Businesses selling different products that satisfy the same need
  • Competing for the same customer dollars and time
  • Example for the same theatre: streaming services, a bowling alley, or a concert
Market share tells a business what portion of all sales in its market it captures. Sales can be measured in dollars or in units, as long as both are measured the same way.

Worked examples

Reveal one step at a time and try to beat it to the next line.

Example 1
A hypothetical indoor climbing gym is opening in downtown Ottawa. Build a profile of its target market using all four segmentation bases.
Example 2
In a hypothetical Niagara-region town, total ice cream sales last summer were $1,200,000. The shop Scoop Shack sold $180,000 of ice cream. What was Scoop Shack's market share?
Example 3
A hypothetical restaurant owner in Waterloo plots four competitors on a positioning map with price (low to high) on one axis and healthiness (less healthy to very healthy) on the other: a burger chain (low price, less healthy), a steakhouse (high price, less healthy), a salad bar (high price, very healthy), and a pizza place (low price, less healthy). Where is the gap, and should the owner fill it?

Where marks get lost

  • Mixing up psychographic and behavioural segmentation — values and lifestyle are psychographic; purchase frequency, loyalty, and benefits sought are behavioural.
  • Choosing "everyone" as the target market — a target market must be specific enough to design the product, price, and promotion around.
  • Assuming every empty spot on a positioning map is an opportunity — the gap might be empty because no customers want that combination.
  • Ignoring indirect competition — a movie theatre that watches only other theatres misses that streaming services compete for the same evening and the same dollars.
  • Forgetting to multiply by 100 when calculating market share, or dividing total market sales by company sales instead of the other way around.

Flashcards 10

Market segmentation
Demographic segmentation
Geographic segmentation
Psychographic segmentation
+ 6 more

Practice

1
Match each target market description to its segmentation base.
Teens aged 13 to 17
People living in northern Ontario
People who value eco-friendly living
Customers who buy every week using a loyalty card
2
A hypothetical Ontario sports drink brand sold 45,000 bottles last year in a regional market where 360,000 bottles of sports drinks were sold in total. What was the brand's market share?
%
3
A hypothetical London, Ontario bike shop holds an 8% market share in a local market worth $2,500,000 in annual sales. What are the shop's annual sales in dollars?
$
4
A company that makes snowshoes designed only for backcountry guides is using...
5
For a pizza restaurant in London, Ontario, which is indirect competition?
6
Which of these is a behavioural segmentation variable?
7
Put the steps of target marketing (STP) in order.
  1. 1Evaluate how attractive each segment is
  2. 2Position the product for that target market
  3. 3Select the target market
  4. 4Divide the market into segments
8
Which is NOT a criterion for a useful market segment?
9
What is the term for the place a brand occupies in customers' minds compared with competitors?

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