McDonald’s, Tesla and Apple: Segmentation, Targeting and Positioning

Introduction

In the contemporary business world, organizations use the segmentation, targeting, and positioning (STP) framework to identify potential clients and satisfy their needs. Segmentation refers to a process where businesses classify and profile clients based on variables that influence market features and trends (Budeva and Mullen, 2014). On the other hand, targeting entails selecting the most appealing divisions from the segmentation phase. The primary goal of an organization is to make a profit. Consequently, targeting involves identifying the most profitable market segments and looking for ways to exploit them. Positioning encompasses evaluating the competitive advantages of an enterprise and using them to persuade customers to do business with an organization. This paper will explore the concepts of segmentation, targeting, and positioning. It will use McDonald’s, Tesla Motors, and Apple Inc. to elaborate on how companies use the STP framework to their benefit. The paper will conclude by giving recommendations on how businesses can use STP to boost shareholder value.

Segmentation, Targeting and Positioning Theory

For investors to expand their businesses, they do not require selling their products to all consumers. Budeva and Mullen (2014) argue that the success of a company depends on the capacity of its management to identify and target the right clients. The STP model was devised to help organizations identify the right customers and formulate ways to sell their products or services to them. Businesses that abide by the regulations found in the STP model are guaranteed success. This does not imply that there are no other factors that affect the growth of an enterprise. Nevertheless, it would be difficult for a company’s marketing efforts to yield positive results without considering the segmentation, targeting, and positioning concepts.

Segmentation

Market segmentation functions at the tactical and strategic levels. At the strategic stage, segmentation influences resolutions made during positioning. On the other hand, at the tactical level, it facilitates the identification of the appropriate consumer groups. Budeva and Mullen (2014) allege that for a market segment to warrant a business’ attention, it must satisfy six essential conditions. The segment must be measurable, substantial, accessible, inimitable, match organizational resources and goals, and stable.

Geographic Segmentation

Businesses divide markets based on four primary variables, which are geographic, demographic, behavioral, and psychographics. The theory of segmentation holds that an organization can use a single variable to segment a market. Nevertheless, studies have shown that the use of a single variable to identify a market may result in a waste of resources and erroneous decision-making (Venter et al. 2015). Geographic segmentation is one of the oldest and most popular methods of market division. The segmentation technique is applicable to both industrial and consumer sectors. Geographic segmentation entails splitting markets into distinct units based on their physical locations like counties, regions, countries, and cities (Venter et al. 2015). A market strategist then decides whether to target all or some of the units depending on their viability. In case a company opts to target all the market segments, it will require adjusting its marketing mix to meet the need of different geographical zones. According to Venter et al. (2015), most marketing strategists prefer to divide a market based on a physical location because the approach is simple and flexible. Moreover, the method is rather straightforward compared to other approaches to market segmentation.

Demographic Segmentation

Demographic segmentation is premised on the assumption that consumers have different tastes and preferences according to their age, gender, career, income, race, religion, education, and nationality. An undoubted attraction of ‘demographic segmentation is the wide availability and easy interpretation of data’ (Venter et al. 2015, p. 72). Some of the variables used in demographic segmentation are income and profession. A household’s earnings determine the level of disposable income. Moreover, individuals are paid based on profession. Persons working in prestigious professions have a high income. Therefore, organizations may classify together individuals working in well-paying jobs and households with high incomes.

A company may not encounter problems selling expensive products to such a market segment. Sex is another variable that businesses use to classify their target consumers. In most cases, this parameter is used to market products like cosmetics, clothes, and magazines (Venter et al. 2015). The ongoing changes in society have contributed to most companies reconsidering the way they use sex as a factor of market segmentation. Currently, the number of employed women has increased significantly. Moreover, the degree of female autonomy has improved remarkably. In the past, cigarette selling companies, hospitality businesses, and car manufacturing firms were reluctant to target female consumers. Today, the number of marketing campaigns that focus on women is growing by the day.

Behavioral Segmentation

Marketing strategists believe that customers exhibit certain behaviors, which can be harnessed to the benefit of an organization. They include benefits sought, attitudes, loyalty status, and the desire to innovate (Venter et al. 2015). One should appreciate that customers go for different products or services because they associate them with distinct values. For marketing strategists to attain behavioral segmentation, they must have the capacity to gauge customers’ value systems. Moreover, they should have knowledge of the opinions that clients have towards different brands (Venter et al. 2015). It would be difficult to achieve benefit segmentation if a strategist does not understand the kind of values that clients seek from a given product class. Hence, there is a need to recognize the benefits that customers attribute to a given brand.

Psychographic Segmentation

Psychographic segmentation classifies customers according to the personality traits that they demonstrate. The attributes may include interests, values, lifestyles, and attitudes (Fine and Menictas, 2015). This mode of market classification complements behavioral and demographic segmentation. Fine and Menictas (2015) argue that psychographic segmentation enables marketing strategists to identify clients’ unexpressed needs. It allows the strategists to formulate compelling promotional campaigns. It is important to appreciate that psychographic segmentation is difficult to implement, especially if customers are unwilling to partake in a survey. Thus, in most cases, marketing strategists use predictive modeling to subdivide a market, which results in incorrect assumptions.

Targeting

Targeting entails subdividing a market into smaller units and focusing a business’ attention on a single or few divisions depending on a company’s product or service offerings and consumer needs. A business should consider the size and the potential growth of a unit before investing its resources (Sanfelice, 2014). The big companies target market segments with a high number of clients because they are guaranteed increased sales volume. On the other hand, small businesses ignore large segments due to limited resources. A company has to consider the structural attractiveness of the individual segments. The primary objective of targeting a given segment is to boost profit. Therefore, intense competition may prevent an organization from targeting a particular segment even if it has the potential to grow. Sanfelice (2014) warns against targeting market segments that do not correspond to the objectives of an organization. It is imperative to consider the long-term goals of a business before choosing a market segment. A strategist must ensure that a firm has the necessary resources to operate efficiently.

Positioning

The third component of STP entails selecting the gap in the market which a particular product or service is to cover. Lei and Moon (2015) argue that positioning involves communicating the values of a given product or service to customers. A marketing strategist presents a product in a way that differs from the existing and possible competing goods. Positioning determines the perception that customers develop towards a company or brand. Positioning is, therefore, ‘the process of designing an image and value so that customers within the target segment understand what the company or brand stands for in relation to its competitors’ (Lei and Moon, 2015, p. 85). Positioning enables an organization to create a competitive edge, which it expects to attract consumers within a section of the target segment. It is imperative to view positioning as a fight for the client’s mind because it is how a consumer views a business or trademark that dictates its success or failure.

Positioning is an essential component of the marketing planning procedure because it has significant impacts on a company’s promotional mix. Some organizations do not encounter challenges in selecting a positioning strategy to apply in a given market (Wang, 2015). Companies with established positioning techniques can replicate them in new markets. Nevertheless, for new establishments, formulating an appropriate positioning strategy can be a difficult exercise. Some businesses end up copying strategies that are adopted by their rivals. Eventually, it becomes difficult for such companies to overcome competition.

Application in Industry

McDonald’s

McDonald’s is a fast-food company with outlets in over 100 countries worldwide. Brentari et al. (2016) posit that 80% of the company’s outlets function under the franchise model. Despite McDonald’s operating in an industry that experiences stiff competition and constant changes in consumer needs, the company has managed to attract and retain many customers. The business’ success in the fast-food industry lies in its capacity to respond quickly to changes in consumers’ tastes and preferences, demographics, and supply chain management. The firm uses a blend of geographic, demographic, and psychographic factors to divide its market (Brentari et al. 2016). McDonald’s has restaurants in different continents including North America, Europe, and Asia. The company reveres the cultural practices of its target customers. Consequently, it offers different food items based on the tastes and preferences of diverse cultures. In the United States, most customers prefer beef to chicken (Brentari et al. 2016). Therefore, McDonald’s includes beef products in its American menu. On the other hand, Asian customers prefer chicken to beef (Brentari et al. 2016). Hence, McDonald’s makes sure that its menu comprises numerous chicken food items.

McDonald’s acknowledges that customers’ tastes and preferences vary according to age, socio-economic status, gender, and level of income. Therefore, the company has segmented its market according to age. In the United States, most kids fancy visiting McDonald’s outlets, especially during holidays (Crawford et al. 2015). Thus, the company’s menu has a variety of foods that target kids. The infamous “Happy meal” comprises food items and an assortment of toys for children. The company has gone to the extent of building playgrounds in some of its food stores to target children (Crawford et al. 2015). Apart from children, McDonald’s has a market segment that constitutes the youths. Crawford et al. (2015) state that the company’s main segment comprises customers aged between 18 and 29. Despite the clients having low disposable income, their sheer number contributes to the high returns for McDonald’s. Moreover, their consumption behavior makes them the most profitable segment for the company.

The increase in the number of people who are overweight, coupled with the high cases of obesity has led to the rise of a market segment that comprises health-conscious customers. McDonald’s has made significant adjustments to its menu to target this group of clients. The company has reduced the amount of sugar, fat, and salt in its burgers as a way to demonstrate its commitment to serving healthy meals (Crawford et al. 2015). Moreover, the company’s “Happy Meal” promotion includes juice, milk, and water as alternative drinks. McDonald’s participates in campaigns aimed at curbing childhood obesity to affirm its dedication to promoting healthy eating.

Initially, McDonald’s main target market comprised families. The company used promotional campaigns that focused on children. Today, the firm targets millennials who form the highest percentage of the population (Ghobadian and O’Regan, 2014). McDonald’s has changed the design of the majority of its outlets to attract millennials. Moreover, most of its advertising campaigns are intended for the youths. Ghobadian and O’Regan (2014) aver that the company has introduced a variety of spicy meals to target young adults. McDonald’s appreciates that most millennials have low disposable income. Hence, the company makes an effort to sell inexpensive meals to attract more customers. Many youths go to restaurants to meet with friends and enjoy free internet. McDonald’s has installed free WIFI in most of its restaurants to attract youths. Apart from millennials, McDonald’s targets a group of clients that is made up of breakfast lovers (Ghobadian and O’Regan, 2014). The company’s management believes that customers are at liberty to take their breakfast at any time. Thus, its menu includes an all-day breakfast for customers who would like to have the meals at any time.

Stiff competition and changes in consumer buying behavior have led to McDonald’s shifting from product-based to value-oriented positioning. The company appreciates that most customers purchase products according to their value. Consequently, it positions itself as a company that is committed to making sure that customers get value for their money (Ghobadian and O’Regan, 2014). McDonald’s has a lot of healthy meals on its menu to promote healthy eating. Moreover, it has invested in technology to enhance service delivery.

Tesla Motors

Tesla Motors has split its market into different units based on geographic, demographic, and psychographic factors. The segmentation enables the company to understand the common and unique needs of customers in a given market. Tesla uses the price of gas to identify the regions to target. According to Lee and Jay (2015), the price of crude oil varies across the continents. The company targets clients from countries where crude oil is expensive (Lee and Jay, 2015). For instance, the company targets most European countries due to the high cost of crude oil and environmentally friendly policies. Tesla’s cars are expensive and therefore, only individuals with high income can buy them. The company has developed different car models for various market segments. The Roadster S is sold to male clients aged 30 and above and with high disposable income. Lee and Jay (2015) argue that Tesla conducts market studies to determine consumers’ opinions regarding the cars that they drive. It enables the company to classify customers according to their interests. For instance, the company has a market segment that constitutes customers who desire to reduce travel costs and conserve the environment.

Tesla joined the automobile industry as a company that focused on the development of high-end cars. Initially, the company targeted clients with high disposable income who needed to purchase lavish and environmentally friendly cars (Stringham et al., 2015). The company’s vehicles were equipped with modern technology, enabling them to offer clients the most needed convenience. Later, Tesla realized that it could not expand its market coverage by targeting rich clients only. Thus, it started to develop different models of vehicles to cater to the needs of diverse customers. Today, the company has eco-friendly cars for middle-income earners. The company sells Model 3, which is affordable to middle-class customers who are environmental-conscious.

Tesla Motors uses an exceptional positioning strategy since it vends not only on vehicles but also on technology. The company positions itself as a high-end producer and seller of eco-friendly luxurious cars (Stringham et al., 2015). The release of the company’s Model S, Roadster, and Model X series of vehicles led to Tesla asserting itself as the leader in the manufacture of electric cars. Currently, the company is shifting from the production of luxurious cars to the manufacture of environmentally friendly automobiles that are affordable to most customers. The company’s goal is to encourage the world to embrace green sources of energy.

Apple Company

Apple Company focuses on satisfying definite user experiences. The company has segmented its market based on geographical, demographic, behavioral, and psychographic factors. Al-Refaie and Bata (2016) assert that Apple manufactures products depending on the age, lifecycle, and career of the target customers. For instance, the company manufactures personal computers that contain many children’s games and others equipped with modern software. The former is meant for families, while the latter belongs to professionals. Moreover, Apple manufactures a collection of smartphones with superior graphics resolution to target millennials (Khan et al. 2015). The company uses behaviors such as attitudes, usage, and product experience to identify potential customers (Al-Refaie and Bata, 2016). The corporation appreciates that most customers prefer smartphones with multiple capabilities. Consequently, Apple continues to introduce novel applications and functionalities into its smartphones as a way to attract more customers, particularly those that are tech-savvy (Hamka et al. 2014). Customers’ lifestyle influences the manufacture of Apple products. The company has manufactured a Mac book, which is popular among fun-loving customers. Apple’s devices come in many colors to target customers who fancy colors.

Apple Company does not have a specific target market. The company targets a unique clientele base that is made up of technology enthusiasts (Hamka et al. 2014). Since its inception, Apple has endeavored to manufacture exceptional products that address the ever-changing digital needs of different customers. Apple has a ‘well-defined target market focusing on consumer lifetime value’ (Hamka et al. 2014, p. 224). The target market comprises distinct customers from diverse segments. These exclusive clients are loyal to Apple products and cannot easily be influenced by other companies.

Apple’s primary competitive advantage lies in its ability to offer exceptional customer experience by manufacturing devices with superior user interfaces. The company positions itself as a firm that offers a unique experience to customers. The corporation has a brand personality that is built on innovation, imagination, lifestyle, passion, aspirations, and hopes among other consumer-centered emotions. Its primary goal is to manufacture devices that have superior functionalities and are easy to use.

Generic Management Recommendations

Market segmentation enables an organization to identify the unique needs of the target customers, thus focusing its resources on their satisfaction. Nevertheless, the marketing strategy denies businesses the opportunity to serve all customers. A big number of clients may not fall under the parameters that most firms use to segment their markets. It implies that a company cannot serve such clients despite them affording its products and services. It is imperative that organizations use a mass marketing strategy together with segmentation to enable them to reach all customers. Weinstein (2014) alleges that target marketing is associated with numerous ethical consequences. For instance, fast food companies may decide to establish restaurants in low-income areas where customers have limited knowledge about healthy eating. Such a move may lead to many customers suffering from health problems that are related to poor feeding habits. Therefore, organizations must ensure that they do not exploit their target market. Companies should make sure that the target clients understand the benefits and dangers associated with using certain products.

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