IB Business Management SL

4.2 – Marketing Planning | Marketing | IB Business Management SL

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Unit 4: Marketing

4.2 - Marketing Planning

Segmentation, Targeting, Positioning, Market Types, and USP

Introduction to Marketing Planning

Marketing planning is the systematic process of identifying target customers, understanding their needs, and developing strategies to reach them effectively.

Key components of marketing planning:

  • Market segmentation: Dividing the market into distinct groups
  • Targeting: Selecting which segments to serve
  • Positioning: Creating a distinct image in customers' minds
  • Market type selection: Choosing between niche or mass markets
  • Differentiation: Establishing a Unique Selling Point (USP)

STP Model: Segmentation → Targeting → Positioning forms the foundation of effective marketing strategy

1. Market Segmentation

Market segmentation is the process of dividing a broad consumer or business market into sub-groups of consumers (segments) based on shared characteristics.

Why segment markets?

  • Consumers have different needs and wants
  • One product cannot satisfy everyone
  • Allows focused marketing efforts
  • More efficient use of marketing budget
  • Enables customization of products and messages
  • Identifies profitable market opportunities

Types of Market Segmentation

1. Demographic Segmentation

Definition: Dividing market based on measurable population characteristics

Key variables:

  • Age: Children, teenagers, young adults, middle-aged, seniors
  • Gender: Male, female, non-binary
  • Income: Low, middle, high income brackets
  • Education: High school, university, postgraduate
  • Occupation: Students, professionals, blue-collar workers
  • Family size: Singles, couples, families with children
  • Religion: Different faith groups
  • Ethnicity: Cultural backgrounds

Demographic Segmentation Examples

  • Toys "R" Us: Segments by age (children 0-12 years)
  • Rolex watches: Targets high-income earners
  • Pampers diapers: Targets families with babies
  • L'Oréal Men Expert: Products specifically for male consumers
  • Senior living communities: Target age 65+ demographic

2. Geographic Segmentation

Definition: Dividing market based on location and geographical factors

Key variables:

  • Country/Region: Domestic vs. international markets
  • Urban vs. Rural: City dwellers vs. countryside residents
  • Climate: Hot, cold, tropical, temperate regions
  • Population density: Crowded cities vs. sparse areas
  • Language: Different linguistic regions

Geographic Segmentation Examples

  • McDonald's: Adapts menu for different countries (McArabia in Middle East, Teriyaki Burger in Japan)
  • Snow equipment manufacturers: Focus on cold climate regions
  • Air conditioning companies: Target hot climate areas
  • Language-specific products: Books, software in local languages
  • Regional food brands: Texas BBQ sauce, New England clam chowder

3. Psychographic Segmentation

Definition: Dividing market based on lifestyle, personality, values, and attitudes

Key variables:

  • Lifestyle: Active, health-conscious, luxury-seeking, frugal
  • Personality: Adventurous, conservative, ambitious, creative
  • Values: Environmental concern, social responsibility, tradition
  • Interests: Sports, arts, technology, travel
  • Opinions: Political views, social issues
  • Social class: Upper, middle, working class

Psychographic Segmentation Examples

  • Patagonia: Targets environmentally conscious, outdoor enthusiasts
  • Tesla: Appeals to tech-savvy, innovation-oriented consumers
  • Whole Foods: Attracts health-conscious, organic lifestyle shoppers
  • Harley-Davidson: Targets adventurous, freedom-loving personalities
  • TOMS Shoes: Appeals to socially responsible consumers (one-for-one model)

4. Behavioral Segmentation

Definition: Dividing market based on consumer behavior, usage, and decision-making patterns

Key variables:

  • Usage rate: Heavy, medium, light users; non-users
  • Loyalty status: Brand loyal, switchers, first-time buyers
  • Benefits sought: Quality, convenience, price, status
  • Purchase occasion: Regular, special occasion, seasonal
  • User status: Potential users, current users, ex-users
  • Readiness stage: Unaware, aware, interested, ready to buy

Behavioral Segmentation Examples

  • Amazon Prime: Targets frequent online shoppers (heavy users)
  • Hallmark: Occasions-based (birthdays, holidays, graduations)
  • Budget airlines (Ryanair): Price-conscious travelers
  • Luxury hotels (Four Seasons): Quality and service seekers
  • Spotify free vs. Premium: Segments by willingness to pay

Effective Market Segmentation Criteria

For segmentation to be useful, segments must be:

  • Measurable: Size and purchasing power can be quantified
  • Accessible: Segment can be reached through marketing efforts
  • Substantial: Large enough to be profitable
  • Differentiable: Segments respond differently to marketing mix
  • Actionable: Company has resources to serve the segment effectively

2. Targeting

Targeting is the process of evaluating and selecting specific market segments to serve based on their attractiveness and fit with company capabilities.

Key question: Which segments should we focus our marketing efforts on?

Targeting Strategies

1. Undifferentiated (Mass) Marketing

Definition: Targeting the entire market with one product and one marketing strategy

Approach: Ignore segment differences, focus on common needs

Advantages:

  • Economies of scale in production and marketing
  • Lower costs
  • Wide market coverage

Disadvantages:

  • Difficult to satisfy diverse needs
  • Intense competition in mass market
  • May miss niche opportunities

Examples: Coca-Cola (originally), basic utilities (electricity, water), table salt

2. Differentiated (Segmented) Marketing

Definition: Targeting multiple segments with different products and marketing approaches for each

Approach: Customize offerings for each segment

Advantages:

  • Better meets diverse customer needs
  • Higher total sales
  • Stronger position in multiple segments
  • Reduced risk (diversification)

Disadvantages:

  • Higher costs (production, marketing, inventory)
  • More complex management
  • Risk of cannibalization between segments

Examples: Toyota (economy cars, luxury Lexus, trucks), Marriott (various hotel brands), Unilever (multiple brands per category)

3. Concentrated (Niche) Marketing

Definition: Focusing on one specific market segment with specialized products

Approach: Deep focus on narrow target market

Advantages:

  • Strong position in chosen niche
  • Intimate knowledge of segment needs
  • Efficient use of limited resources
  • Less competition
  • Customer loyalty

Disadvantages:

  • Higher risk if segment declines
  • Limited growth potential
  • Vulnerable to larger competitors entering niche

Examples: Rolls-Royce (ultra-luxury cars), Ferrari (high-performance sports cars), The Body Shop (ethical cosmetics)

Factors Influencing Target Market Selection

  • Segment size and growth: Current size and future potential
  • Segment profitability: Expected returns
  • Competition intensity: Number and strength of competitors
  • Company resources: Financial and operational capabilities
  • Company objectives: Strategic goals and mission
  • Product lifecycle stage: Introduction vs. maturity
  • Market accessibility: Ability to reach segment

3. Positioning

Positioning is creating a distinct image and identity for a product or brand in the minds of target customers relative to competitors.

Goal: Occupy a clear, distinctive, and desirable place in consumers' minds

Key question: How do we want customers to perceive our product compared to alternatives?

Positioning Strategies

1. Position by Product Attributes/Benefits

Focus: Emphasize specific features or benefits

Examples:

  • Volvo: Safety
  • FedEx: Speed and reliability ("When it absolutely, positively has to be there overnight")
  • Duracell: Long-lasting power

2. Position by Price/Quality

Focus: Emphasize value proposition

Examples:

  • Rolex: Premium quality, high price, luxury status
  • IKEA: Good design at affordable prices
  • Walmart: Lowest prices ("Save Money. Live Better")
  • Costco: Bulk buying, value for money

3. Position by Use or Application

Focus: How or when product is used

Examples:

  • Red Bull: Energy drink for extreme situations
  • Gatorade: Sports hydration
  • Instagram: Visual storytelling and sharing moments

4. Position by User Category

Focus: Target specific type of user

Examples:

  • Gillette Venus: Designed for women
  • Gerber: Baby food
  • Nike: Athletes and active lifestyle

5. Position Against Competitor

Focus: Direct comparison with competitor

Examples:

  • Pepsi vs. Coca-Cola: "Pepsi Challenge" taste tests
  • Avis: "We're #2, so we try harder"
  • Mac vs. PC: Apple's "I'm a Mac" campaign

Positioning Map (Perceptual Map)

Positioning map is a visual representation showing how consumers perceive brands relative to each other on key attributes.

Typical axes:

  • Price (Low to High) vs. Quality (Low to High)
  • Traditional vs. Modern
  • Practical vs. Luxurious
  • Performance vs. Economy

Uses:

  • Identify market gaps (opportunities)
  • Understand competitive landscape
  • Guide repositioning strategies
  • Visualize brand perception

Example: Car Market Positioning Map

Vertical axis: Price (Low to High)

Horizontal axis: Performance (Economy to Sporty)

Positions:

  • High Price + Sporty: Ferrari, Porsche, Lamborghini
  • High Price + Economy: Mercedes E-Class, BMW 5 Series (efficiency models)
  • Low Price + Economy: Toyota Corolla, Honda Civic
  • Low Price + Sporty: Mazda MX-5, Subaru WRX
  • Middle ground: Toyota Camry, Honda Accord

Insight: Identifies crowded spaces and potential gaps

4. Mass Market vs. Niche Market

Market type refers to the breadth of customer base a business targets—either broad (mass) or narrow (niche).

Mass Market

Mass market targets the largest possible customer base with products that appeal to most consumers.

Characteristics:

  • Large volume of sales
  • Wide distribution
  • Standardized products
  • Broad appeal
  • Economies of scale
  • High brand awareness needed

Examples:

  • Coca-Cola: Soft drinks for everyone
  • McDonald's: Fast food for masses
  • Samsung: Consumer electronics for broad market
  • Unilever products: Dove soap, Lipton tea
  • Microsoft Windows: Operating system for general users

Advantages of Mass Marketing

  • Economies of scale: Lower cost per unit through high volume production
  • Large market: Massive sales potential
  • High brand awareness: Widespread recognition
  • Distribution efficiency: Extensive retail presence
  • Risk spreading: Not dependent on small segment

Disadvantages of Mass Marketing

  • Intense competition: Many competitors in large markets
  • High marketing costs: Expensive to reach mass audience
  • Price pressure: Competition often leads to price wars
  • Difficulty differentiating: Hard to stand out
  • Cannot satisfy everyone: Compromise product may not fully satisfy anyone

Niche Market

Niche market targets a small, specialized segment of the market with specific needs and preferences.

Characteristics:

  • Small, specialized customer base
  • Focused product offerings
  • Deep customer relationships
  • Premium pricing often possible
  • Specialized expertise required

Examples:

  • Lush: Handmade, ethical cosmetics
  • Tesla (initially): High-end electric vehicles
  • Rolex: Luxury watches
  • Vegan restaurants: Plant-based dining
  • Left-handed products: Scissors, notebooks for left-handed people
  • Gluten-free bakeries: Celiac-friendly products

Advantages of Niche Marketing

  • Less competition: Fewer competitors in specialized markets
  • Customer loyalty: Strong relationships with specialized customers
  • Premium pricing: Customers willing to pay more for specialization
  • Lower marketing costs: Easier to reach targeted audience
  • Expertise recognition: Become known as specialist
  • Efficient operations: Focus allows efficiency
  • Clear positioning: Easier to differentiate

Disadvantages of Niche Marketing

  • Limited market size: Restricted growth potential
  • Higher risk: Vulnerable if niche disappears or changes
  • Lack of economies of scale: Higher production costs per unit
  • Dependence on segment: Success tied to niche health
  • May attract competition: Success can lure larger competitors
  • Resource intensive: Deep specialization requires investment

Mass Market vs. Niche Market Comparison

AspectMass MarketNiche Market
TargetBroad, general populationNarrow, specialized segment
Product RangeStandardized, wide appealSpecialized, customized
CompetitionHigh, many competitorsLow, fewer competitors
PricingCompetitive, often lowerPremium pricing possible
VolumeHigh sales volumeLower sales volume
Marketing CostsHigh (reach mass audience)Lower (targeted reach)
DistributionWide, extensive channelsSelective, specialized channels
ExamplesCoca-Cola, McDonald'sRolls-Royce, vegan restaurants
Best ForLarge companies with resourcesSmall businesses or specialists

5. Unique Selling Point (USP)

Unique Selling Point (USP) is a distinctive feature or benefit that makes a product or service stand out from competitors and gives customers a compelling reason to choose it.

Also known as: Unique Selling Proposition, Competitive Advantage

Key question: Why should customers buy from us instead of competitors?

Characteristics of an Effective USP

  • Unique: Different from competitors
  • Valuable: Matters to target customers
  • Clear: Easy to understand and communicate
  • Defensible: Difficult for competitors to copy
  • Relevant: Addresses customer needs or problems
  • Believable: Credible and provable

Types of USPs

1. Product-Based USP

Focus: Unique product features or quality

Examples:

  • Dyson: Bagless vacuum technology, powerful suction
  • Apple iPhone: Ecosystem integration, user-friendly interface
  • Volvo: Safety features and innovation
  • Bose: Superior sound quality

2. Service-Based USP

Focus: Superior customer service or experience

Examples:

  • Zappos: Exceptional customer service, free returns
  • Amazon Prime: Fast delivery, convenience
  • Ritz-Carlton: Personalized luxury service
  • Nordstrom: Hassle-free returns, customer-first approach

3. Price-Based USP

Focus: Best value or lowest price

Examples:

  • Walmart: "Everyday Low Prices"
  • Costco: Bulk buying savings
  • Ryanair: Ultra-low-cost flights
  • Dollar Shave Club: Affordable razors delivered

4. Convenience-Based USP

Focus: Ease of access or use

Examples:

  • Netflix: Watch anywhere, anytime, no commercials
  • Uber: Transportation at your fingertips
  • 7-Eleven: Open 24/7, convenient locations
  • Instacart: Grocery delivery in hours

5. Brand-Based USP

Focus: Brand heritage, reputation, or status

Examples:

  • Rolex: Prestige and status symbol
  • Coca-Cola: "The Real Thing," heritage brand
  • Nike: Performance and inspiration ("Just Do It")
  • Mercedes-Benz: "The best or nothing"

6. Ethical/Values-Based USP

Focus: Social responsibility, sustainability, ethics

Examples:

  • Patagonia: Environmental activism, sustainable materials
  • TOMS: One-for-one giving model
  • The Body Shop: Cruelty-free, ethical sourcing
  • Ben & Jerry's: Social justice advocacy

Real-World USP Examples

Famous USPs from Well-Known Brands

  • M&M's: "Melts in your mouth, not in your hands"
  • FedEx: "When it absolutely, positively has to be there overnight"
  • Domino's Pizza (original): "Fresh, hot pizza delivered in 30 minutes or less, or it's free"
  • DeBeers: "A diamond is forever"
  • BMW: "The Ultimate Driving Machine"
  • L'Oréal: "Because you're worth it"
  • Red Bull: "Gives you wings"
  • Kit Kat: "Have a break, have a Kit Kat"

Developing a USP

Steps to create an effective USP:

  1. Identify target market: Who are your customers?
  2. Understand customer needs: What problems do they have?
  3. Analyze competitors: What are they offering?
  4. Identify your strengths: What do you do best?
  5. Find the gap: What's unique about your solution?
  6. Test and refine: Does it resonate with customers?
  7. Communicate clearly: Make it part of all marketing

Importance of USP

  • Differentiation: Stands out in crowded market
  • Customer attraction: Gives reason to choose you
  • Brand identity: Defines what you stand for
  • Marketing focus: Guides promotional messages
  • Price justification: Supports premium pricing
  • Customer loyalty: Creates emotional connection
  • Competitive defense: Harder for competitors to replicate

Integration: STP Model with USP

How marketing planning components work together:

  1. Segmentation: Divide market into groups with similar characteristics
  2. Targeting: Select most attractive segment(s) to serve
  3. Positioning: Create distinct image in target customers' minds
  4. USP Development: Identify unique benefit that supports positioning
  5. Marketing Mix: Design 4Ps (Product, Price, Place, Promotion) to deliver USP to target segment

Integrated Example: Tesla

Segmentation:

  • Psychographic: Environmentally conscious, tech-savvy, innovation-oriented
  • Demographic: High income, educated professionals
  • Behavioral: Early adopters, performance seekers

Targeting:

  • Initially: Concentrated (niche) - luxury electric vehicle buyers
  • Expanding to: Differentiated - multiple models for different segments

Positioning:

  • Premium electric vehicles that don't compromise on performance
  • Technology-forward, sustainable luxury

USP:

  • Long-range electric vehicles with superior performance
  • Advanced autonomous driving technology
  • Ecosystem integration (Supercharger network, over-the-air updates)
  • "Accelerating the world's transition to sustainable energy"

IB Business Management Exam Tips

Key Definitions to Know

  • Market Segmentation: Dividing a market into distinct groups with similar characteristics
  • Targeting: Selecting which market segments to serve
  • Positioning: Creating a distinct image in customers' minds
  • Mass Market: Targeting the largest possible audience
  • Niche Market: Targeting a small, specialized segment
  • USP: Distinctive feature that differentiates from competitors

Common Exam Questions

  • "Define market segmentation" (2 marks)
  • "Identify two methods of market segmentation used by Company X" (2 marks)
  • "Explain the difference between mass marketing and niche marketing" (4 marks)
  • "Analyse the advantages of targeting a niche market for a small business" (6 marks)
  • "Discuss the importance of having a USP for a new product launch" (10 marks)
  • "Evaluate the STP approach for Company Y entering a new market" (12 marks)

Answer Strategies

For "Explain" questions (4-6 marks):

  • Define the concept clearly
  • Provide relevant examples
  • Show cause and effect relationships

For "Analyse" questions (6-8 marks):

  • Break down into components
  • Identify advantages and disadvantages
  • Use business terminology
  • Apply to specific context given

For "Discuss/Evaluate" questions (10-12 marks):

  • Present multiple perspectives
  • Weigh pros and cons
  • Consider context (size, industry, resources)
  • Use real-world examples
  • Reach reasoned conclusion/recommendation

✓ Unit 4.2 Summary: Marketing Planning

You should now understand that effective marketing planning follows the STP model: Market Segmentation divides markets into groups using demographic (age, income, gender), geographic (location, climate), psychographic (lifestyle, values), and behavioral (usage, loyalty) variables. Targeting involves selecting segments using undifferentiated (mass), differentiated (multiple segments), or concentrated (niche) strategies. Positioning creates a distinct brand image through attributes, price/quality, usage, user category, or competitor comparison, often visualized using positioning maps. Mass markets target broad audiences with standardized products and economies of scale but face intense competition, while niche markets serve specialized segments with customized offerings, premium pricing, and lower competition but limited growth potential. A Unique Selling Point (USP) differentiates products through unique features (product, service, price, convenience, brand, or ethical values) that provide compelling reasons for customers to choose one brand over competitors. Successful marketing requires integrating segmentation, targeting, positioning, market type selection, and USP development to create focused, differentiated strategies that meet specific customer needs better than competitors.

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