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Marketing

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Dhaval Bhatt
Dhaval Bhatt

The document discusses market segmentation, which involves dividing a market into distinct groups of customers with distinct needs, characteristics, or behaviors. It describes the need for segmentation due to differences between customers. It outlines criteria for effective market segments and bases for segmenting consumer and industrial markets, including geographic, demographic, psychographic, and behavioral factors. The key aspects of segmentation covered are identifying segment needs and measuring, accessing, and sustaining substantial segments.

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The Marketing Mix (The 4 P's of Marketing) Marketing decisions generally fall into the following four controllable categories: Product Price Place (distribution) Promotion The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below: The Marketing Mix These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. Product Decisions The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made: Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty
Accessories and services Price Decisions Some examples of pricing decisions to be made include: Pricing strategy (skim, penetration, etc.) Suggested retail price Volume discounts and wholesale pricing Cash and early payment discounts Seasonal pricing Bundling Price flexibility Price discrimination Distribution (Place) Decisions Distribution is about getting the products to the customer. Some examples of distribution decisions include: Distribution channels Market coverage (inclusive, selective, or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation Reverse logistics Promotion Decisions In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include: Promotional strategy (push, pull, etc.) Advertising Personal selling & sales force Sales promotions Public relations & publicity Marketing communications budget Limitations of the Marketing Mix Framework The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it.
Market Segmentation Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers. The Need for Market Segmentation The marketing concept calls for understanding customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike. Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication. The drawback of mass marketing is that customer needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. If firms ignored the differing customer needs, another firm likely would enter the market with a product that serves a specific group, and the incumbant firms would lose those customers. Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segments and their needs. Requirements of Market Segments In addition to having different needs, for segments to be practical they should be evaluated against the following criteria: Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified. Accessible: the segments must be reachable through communication and distribution channels. Substantial: the segments should be sufficiently large to justify the resources required to target them. Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes. Durable: the segments should be relatively stable to minimize the cost of frequent changes. A good market segmentation will result in segment members that are internally homogenous and externally heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments. Bases for Segmentation in Consumer Markets Consumer markets can be segmented on the following customer characteristics. Geographic Demographic Psychographic Behavioralistic Geographic Segmentation The following are some examples of geographic variables often used in segmentation. Region: by continent, country, state, or even neighborhood Size of metropolitan area: segmented according to size of population Population density: often classified as urban, suburban, or rural
Climate: according to weather patterns common to certain geographic regions Demographic Segmentation Some demographic segmentation variables include: Age Gender Family size Family lifecycle Generation: baby-boomers, Generation X, etc. Income Occupation Education Ethnicity Nationality Religion Social class Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the children. Psychographic Segmentation Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include: Activities Interests Opinions Attitudes Values Behavioralistic Segmentation Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic variables include: Benefits sought Usage rate Brand loyalty User status: potential, first-time, regular, etc. Readiness to buy Occasions: holidays and events that stimulate purchases Behavioral segmentation has the advantage of using variables that are closely related to the product itself. It is a fairly direct starting point for market segmentation. Bases for Segmentation in Industrial Markets In contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision process usually involves more than one person.
These characteristics apply to organizations such as manufacturers and service providers, as well as resellers, governments, and institutions. Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets might be segmented on characteristics such as: Location Company type Behavioral characteristics Location In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region. Company Type Business customers can be classified according to type as follows: Company size Industry Decision making unit Purchase Criteria Behavioral Characteristics In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral characteristics may include: Usage rate Buying status: potential, first-time, regular, etc. Purchase procedure: sealed bids, negotiations, etc. Segmentation This is the first of three lessons based upon SEGMENT - TARGET - POSITION. To get a product or service to the right person or company, a marketer would firstly segment the market, then target a single segment or series of segments, and finally position within the segment(s). Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behavior. The world is made up from billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a 'segment'. Think of you r market as an orange, with a series of connected but distinctive segments, each with their own profile. Of course you can segment by all sorts of variables. The diagram above depicts how segmentation information is often represented as a pie chart diagram - the segments are often named and/ or numbered in some way. Segmentation is a form of critical evaluation rather than a prescribed process or system, and hence no two markets are defined and segmented in the same way. However there are a number of underpinning criteria that assist us with segmentation:
Is the segment viable? Can we make a profit from it? Is the segment accessible? How easy is it for us to get into the segment? Is the segment measurable? Can we obtain realistic data to consider its potential? The are many ways that a segment can be considered. For example, the auto market could be segmented by: driver age, engine size, model type, cost, and so on. However the more general bases include: by geography - such as where in the world was the product bought. by psychographics - such as lifestyle or beliefs. by socio-cultural factors - such as class. by demography - such as age, sex, and so on. A company will evaluate each segment based upon potential business success. Opportunities will depend upon factors such as: the potential growth of the segment the state of competitive rivalry within the segment how much profit the segment will deliver how big the segment is how the segment fits with the current direction of the company and its vision. The Segmentation Matrix Business Battlemap is a useful segmentation tool. There are two bases for segmentation. Here we use beer brand versus ages groups. The various products are then plotted on the matrix. The result is a 'battlemap'. Targeting Part of STP - Segment-Target-Position Targeting is the second stage of the SEGMENT "Target" POSITION (STP) process. After the market has been separated into its segments, the marketer will select a segment or series of segments and 'target' it/them. Resources and effort will be targeted at the The first is the single segment with a single product. In other word, the marketer targets a single product offering at a single segment in a market with many segments. For example, British Airway's Concorde is a high value product aimed specifically at business people and tourists willing to pay more for speed. Secondly the marketer could ignore the differences in the segments, and choose to aim a single product at all segments i.e. the whole market. This is typical in 'mass marketing' or where differentiation is less important than cost. An example of this is the approach taken by budget airlines such as Go/ Finally there is a multi-segment approach. Here a marketer will target a variety of different segments with a series of differentiated products. This is typical in the motor industry. Here there are a variety of products such as diesel, four-wheel-drive, sports saloons, and so on. Now have a look at the final stage, positioning. Positioning Part of STP - Segment-Target-Position The third and final part of the SEGMENT - TARGET - POSITION (STP) process is 'positioning.' Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market. Remember this important point. Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning map e.g. what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.
Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy). Take a look at the basic positioning map template below. The marketer would draw out the map and decide upon a label for each axis. They could be price (variable one) and quality (variable two), or Comfort (variable one) and price (variable two). The individual products are then mapped out next to each other Any gaps could be regarded as possible areas for new products. The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer? Trout and Ries suggest a six-step question framework for successful positioning: 1. What position do you currently own? 2. What position do you want to own? 3. Whom you have to defeat to own the position you want? 4. Do you have the resources to do it? 5. Can you persist until you get there? 6. Are your tactics supporting the positioning objective you set? Look at the example below using the auto market. Product: Ferrari, BMW, Kia, Range Rover, Saab, Hyundai. Positioning Map for Cars. The six products are plotted upon the positioning map. It can be concluded that products tend to bunch in the high price/low economy (fast) sector and also in the low price/high economy sector. There is an opportunity in the low price/ low economy (fast) sector. Maybe Hyundai or Kia could consider introducing a low cost sport saloon. However, remember that it is all down to the perception of the individual. Brand Equity A brand is a name or symbol used to identify the source of a product. When developing a new product, branding is an important decision. The brand can add significant value when it is well recognized and has positive associations in the mind of the consumer. This concept is referred to as brand equity. What is Brand Equity? Brand equity is an intangible asset that depends on associations made by the consumer. There are at least three perspectives from which to view brand equity: Financial - One way to measure brand equity is to determine the price premium that a brand commands over a generic product. For example, if consumers are willing to pay $100 more for a branded television over the same unbranded television, this premium provides important information
about the value of the brand. However, expenses such as promotional costs must be taken into account when using this method to measure brand equity. Brand extensions - A successful brand can be used as a platform to launch related products. The benefits of brand extensions are the leveraging of existing brand awareness thus reducing advertising expenditures, and a lower risk from the perspective of the consumer. Furthermore, appropriate brand extensions can enhance the core brand. However, the value of brand extensions is more difficult to quantify than are direct financial measures of brand equity. Consumer-based - A strong brand increases the consumer's attitude strength toward the product associated with the brand. Attitude strength is built by experience with a product. This importance of actual experience by the customer implies that trial samples are more effective than advertising in the early stages of building a strong brand. The consumer's awareness and associations lead to perceived quality, inferred attributes, and eventually, brand loyalty. Strong brand equity provides the following benefits: Facilitates a more predictable income stream. Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing. Brand equity is an asset that can be sold or leased. However, brand equity is not always positive in value. Some brands acquire a bad reputation that results in negative brand equity. Negative brand equity can be measured by surveys in which consumers indicate that a discount is needed to purchase the brand over a generic product. Building and Managing Brand Equity In his 1989 paper, Managing Brand Equity, Peter H. Farquhar outlined the following three stages that are required in order to build a strong brand: 1. Introduction - introduce a quality product with the strategy of using the brand as a platform from which to launch future products. A positive evaluation by the consumer is important. 2. Elaboration - make the brand easy to remember and develop repeat usage. There should be accessible brand attitude, that is, the consumer should easily remember his or her positive evaluation of the brand. 3. Fortification - the brand should carry a consistent image over time to reinforce its place in the consumer's mind and develop a special relationship with the consumer. Brand extensions can further fortify the brand, but only with related products having a perceived fit in the mind of the consumer. Alternative Means to Brand Equity Building brand equity requires a significant effort, and some companies use alternative means of achieving the benefits of a strong brand. For example, brand equity can be borrowed by extending the brand name to a line of products in the same product category or even to other categories. In some cases, especially when there is a perceptual connection between the products, such extensions are successful. In other cases, the extensions are unsuccessful and can dilute the original brand equity. Brand equity also can be "bought" by licensing the use of a strong brand for a new product. As in line extensions by the same company, the success of brand licensing is not guaranteed and must be analyzed carefully for appropriateness. Managing Multiple Brands Different companies have opted for different brand strategies for multiple products. These strategies are:
Single brand identity - a separate brand for each product. For example, in laundry detergents Procter & Gamble offers uniquely positioned brands such as Tide, Cheer, Bold, etc. Umbrella - all products under the same brand. For example, Sony offers many different product categories under its brand. Multi-brand categories - Different brands for different product categories. Campbell Soup Company uses Campbell's for soups, Pepperidge Farm for baked goods, and V8 for juices. Family of names - Different brands having a common name stem. Nestle uses Nescafe, Nesquik, and Nestea for beverages. Brand equity is an important factor in multi-product branding strategies. Protecting Brand Equity The marketing mix should focus on building and protecting brand equity. For example, if the brand is positioned as a premium product, the product quality should be consistent with what consumers expect of the brand, low sale prices should not be used compete, the distribution channels should be consistent with what is expected of a premium brand, and the promotional campaign should build consistent associations. Finally, potentially dilutive extensions that are inconsistent with the consumer's perception of the brand should be avoided. Extensions also should be avoided if the core brand is not yet sufficiently strong. New Product Launch Strategy A well planned new product launch strategy can result in a very successful business. However, often people do not plan the product launch well enough to get enough publicity and generate enough interest in the new product. The more initial buzz and interest you generate in your product the greater your initial success will be and the more money you will have to market your products and create an even bigger impact. The very first part of your new product launch strategy should contain a well written press release. It is very important to make your press release newsworthy. You can organize a product launch at a trade show which will create additional buzz and interest. If you do this right you can generate substantial interest and free media coverage which could be worth tens of thousands of dollars in advertising. The next step of your new product launch strategy is to announce the product launch to your list. Your list already knows and trusts you. If it is something that interests them they will buy your product. You can create a video which advertises the benefits and this will increase the interest level in the product. The following step is to find suitable joint venture partners. They will announce your product to their list. You have to offer them something in return. You can offer affiliate commissions or offer to send your list an email announcing their product. A well executed new product launch will result in an initial rush of new business helping you to maintain a stable business with a lot of cash flow. The importance of this cannot be underestimated.
New Product Launch Planning Positioning Execution Additional Resources Planning A new product has been conceived, researched, tested in prototype and made it through all the hurdles of the process. The time has come to launch it in the marketplace. What happens now? According to TEC new product development experts Mitch Goozé and Nick Webb, the seeds for the launch phase should be sown back at the very beginning. "In the most successful ventures, planning for the new product launch starts along with preliminary design and development," Goozé says. "Positioning, sales channels and distribution, advertising and public relations all need to be addressed and should be given as much time and energy as the development and design stage. Synchronizing marketing activities with product development is critical for success." Among the key components included in a strong product launch plan: Clearly defined sales objectives Assured sales channel readiness Promotional functions in place (public relations/marketing/advertising) Resources to track, monitor and account for execution "Launch projects often fail because companies don't manufacture adequate quantities of the new product and make them available to prospective customers," Webb says. He suggests creating a launch team with responsibility for, among other things, ensuring that all levels of the company are prepared to handle demand for the product and to train staff in its use for customer support. Positioning "Positioning is not about features and specifications," says Goozé. "It's the core message that differentiates your product from everything else in the marketplace. A unique product identity strengthens the market's perception of your product and in turn reinforces your company's overall positioning." To make sure everyone is working toward the same goal, certain milestones should be established: Have we identified all necessary launch channels? What number of new products do we plan to sell by a specific date? When will the product be ready to launch at a national trade convention? Are sufficient stocking orders placed with key distributors? How can we grow the product into a 5-10 percent market entrenchment by a specified date? "Break down every conceivable launch component," Webb says. "Identify customer databases where appropriate. Send new product samples to industry and trade publication reviewers. Do everything necessary to create a strong, functioning life-support system for that product." Planning for these activities should be as simple as possible, he adds. "We're not talking about writing a 50- page launch overview document. These tasks should facilitate the most favorable deployment of the new product -- that's all."
Approaching the customer with the new product can be the most delicate situation of all, which is why "having your ducks in a row”, is so important. If existing customers encounter design flaws in the new product, they may forgive and forget (particularly if their relationship with the company is strong enough), but it's unlikely new customers will feel the same way. Also, the new product may not be the right "fit" with all of your current customers. Preparedness reduces the risk that the company's credibility may be damaged by missteps at launch time. "In order to establish the new product's identity in the marketplace, the core message must be repeated over and over again," Goozé notes. This requires consistent positioning within all of the company's marketing communications, including: New and current product literature Press releases Product specifications Sales presentations Internal communications Goozé draws a distinction between advertising and public relations. Public relations present the new product as "news" which, he says, "is viewed as impartial as and more reliable than advertising -- even if the news is only a company press release printed verbatim." Advertising, on the other hand, is aimed at presenting the product (specifically, its features and benefits) in the best possible light. "These promotional tools are most effective when used in tandem. The goal is having each activity reinforce each other to influence the market and your customers." Beyond issuing press releases, look for unique angles to interest industry opinion leaders, or try placing stories about how the new product benefits customers in trade publications. "Exposure to your product via both advertisements and public relations generates greater mindshare and higher perception in the marketplace," Goozé says. "Success breeds success." Execution How will the new product reach customers? Are you’re established sales channels (sales force, distributors, dealers, etc.) up to the new challenge? "When introducing a new product, you need to step back and assess its fit with existing channels," Goozé says. For example, if the new product is a features-reduced version of an existing product that is being targeted to a mass market, there are some questions you should ask: Do our existing distributors serve mass marketing retail outlets? Does our current pricing schedule take factors like mass market competition into consideration? If we lower our price, how much can we afford to spend on the sale of each unit at this lower price? Can we reach this market with our current sales force? "Determining your pricing strategy and reviewing your sales channels should be happening while the product is being positioned, as these factors will have a definite impact on the positioning message." Goozé says. In situations where one company partners with another to introduce a new product, Webb advises strict due diligence before the execution phase -- thus ensuring that each partner is fully committed to the process and has the necessary financial resources and familiarity with the marketplace.
"Whatever the circumstances, have clear-cut performance objectives in place and be ready to measure them carefully," he adds. "Use the launch team to track progress and make it responsible for communicating results to senior management." Network marketing Network marketing is a general term for a type of marketing that is usually performed by an individual instead of a company. It refers to the use of interpersonal or social networks to market products and services for business purposes as opposed to the more traditional and common practices of wide-range advertising. The term is technically a type of marketing that can be used as part of an overall marketing strategy which may or may not encompass multiple tactics. For example, the most common marketing tactic in a network marketing strategy is word of mouth. Many companies which utilize a network marketing strategy facilitate it with a multi-level marketing (MLM) compensation structure. For this reason, the two terms are often confused with one another and used interchangeably.

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  • 1. The Marketing Mix (The 4 P's of Marketing) Marketing decisions generally fall into the following four controllable categories: Product Price Place (distribution) Promotion The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below: The Marketing Mix These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response. Product Decisions The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made: Brand name Functionality Styling Quality Safety Packaging Repairs and Support Warranty
  • 2. Accessories and services Price Decisions Some examples of pricing decisions to be made include: Pricing strategy (skim, penetration, etc.) Suggested retail price Volume discounts and wholesale pricing Cash and early payment discounts Seasonal pricing Bundling Price flexibility Price discrimination Distribution (Place) Decisions Distribution is about getting the products to the customer. Some examples of distribution decisions include: Distribution channels Market coverage (inclusive, selective, or exclusive distribution) Specific channel members Inventory management Warehousing Distribution centers Order processing Transportation Reverse logistics Promotion Decisions In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include: Promotional strategy (push, pull, etc.) Advertising Personal selling & sales force Sales promotions Public relations & publicity Marketing communications budget Limitations of the Marketing Mix Framework The marketing mix framework was particularly useful in the early days of the marketing concept when physical products represented a larger portion of the economy. Today, with marketing more integrated into organizations and with a wider variety of products and markets, some authors have attempted to extend its usefulness by proposing a fifth P, such as packaging, people, process, etc. Today however, the marketing mix most commonly remains based on the 4 P's. Despite its limitations and perhaps because of its simplicity, the use of this framework remains strong and many marketing textbooks have been organized around it.
  • 3. Market Segmentation Market segmentation is the identification of portions of the market that are different from one another. Segmentation allows the firm to better satisfy the needs of its potential customers. The Need for Market Segmentation The marketing concept calls for understanding customers and satisfying their needs better than the competition. But different customers have different needs, and it rarely is possible to satisfy all customers by treating them alike. Mass marketing refers to treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, mass distribution, and mass communication. The drawback of mass marketing is that customer needs and preferences differ and the same offering is unlikely to be viewed as optimal by all customers. If firms ignored the differing customer needs, another firm likely would enter the market with a product that serves a specific group, and the incumbant firms would lose those customers. Target marketing on the other hand recognizes the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segments and their needs. Requirements of Market Segments In addition to having different needs, for segments to be practical they should be evaluated against the following criteria: Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified. Accessible: the segments must be reachable through communication and distribution channels. Substantial: the segments should be sufficiently large to justify the resources required to target them. Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes. Durable: the segments should be relatively stable to minimize the cost of frequent changes. A good market segmentation will result in segment members that are internally homogenous and externally heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments. Bases for Segmentation in Consumer Markets Consumer markets can be segmented on the following customer characteristics. Geographic Demographic Psychographic Behavioralistic Geographic Segmentation The following are some examples of geographic variables often used in segmentation. Region: by continent, country, state, or even neighborhood Size of metropolitan area: segmented according to size of population Population density: often classified as urban, suburban, or rural
  • 4. Climate: according to weather patterns common to certain geographic regions Demographic Segmentation Some demographic segmentation variables include: Age Gender Family size Family lifecycle Generation: baby-boomers, Generation X, etc. Income Occupation Education Ethnicity Nationality Religion Social class Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the children. Psychographic Segmentation Psychographic segmentation groups customers according to their lifestyle. Activities, interests, and opinions (AIO) surveys are one tool for measuring lifestyle. Some psychographic variables include: Activities Interests Opinions Attitudes Values Behavioralistic Segmentation Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic variables include: Benefits sought Usage rate Brand loyalty User status: potential, first-time, regular, etc. Readiness to buy Occasions: holidays and events that stimulate purchases Behavioral segmentation has the advantage of using variables that are closely related to the product itself. It is a fairly direct starting point for market segmentation. Bases for Segmentation in Industrial Markets In contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision process usually involves more than one person.
  • 5. These characteristics apply to organizations such as manufacturers and service providers, as well as resellers, governments, and institutions. Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets might be segmented on characteristics such as: Location Company type Behavioral characteristics Location In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region. Company Type Business customers can be classified according to type as follows: Company size Industry Decision making unit Purchase Criteria Behavioral Characteristics In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral characteristics may include: Usage rate Buying status: potential, first-time, regular, etc. Purchase procedure: sealed bids, negotiations, etc. Segmentation This is the first of three lessons based upon SEGMENT - TARGET - POSITION. To get a product or service to the right person or company, a marketer would firstly segment the market, then target a single segment or series of segments, and finally position within the segment(s). Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behavior. The world is made up from billions of buyers with their own sets of needs and behavior. Segmentation aims to match groups of purchasers with the same set of needs and buyer behavior. Such a group is known as a 'segment'. Think of you r market as an orange, with a series of connected but distinctive segments, each with their own profile. Of course you can segment by all sorts of variables. The diagram above depicts how segmentation information is often represented as a pie chart diagram - the segments are often named and/ or numbered in some way. Segmentation is a form of critical evaluation rather than a prescribed process or system, and hence no two markets are defined and segmented in the same way. However there are a number of underpinning criteria that assist us with segmentation:
  • 6. Is the segment viable? Can we make a profit from it? Is the segment accessible? How easy is it for us to get into the segment? Is the segment measurable? Can we obtain realistic data to consider its potential? The are many ways that a segment can be considered. For example, the auto market could be segmented by: driver age, engine size, model type, cost, and so on. However the more general bases include: by geography - such as where in the world was the product bought. by psychographics - such as lifestyle or beliefs. by socio-cultural factors - such as class. by demography - such as age, sex, and so on. A company will evaluate each segment based upon potential business success. Opportunities will depend upon factors such as: the potential growth of the segment the state of competitive rivalry within the segment how much profit the segment will deliver how big the segment is how the segment fits with the current direction of the company and its vision. The Segmentation Matrix Business Battlemap is a useful segmentation tool. There are two bases for segmentation. Here we use beer brand versus ages groups. The various products are then plotted on the matrix. The result is a 'battlemap'. Targeting Part of STP - Segment-Target-Position Targeting is the second stage of the SEGMENT "Target" POSITION (STP) process. After the market has been separated into its segments, the marketer will select a segment or series of segments and 'target' it/them. Resources and effort will be targeted at the The first is the single segment with a single product. In other word, the marketer targets a single product offering at a single segment in a market with many segments. For example, British Airway's Concorde is a high value product aimed specifically at business people and tourists willing to pay more for speed. Secondly the marketer could ignore the differences in the segments, and choose to aim a single product at all segments i.e. the whole market. This is typical in 'mass marketing' or where differentiation is less important than cost. An example of this is the approach taken by budget airlines such as Go/ Finally there is a multi-segment approach. Here a marketer will target a variety of different segments with a series of differentiated products. This is typical in the motor industry. Here there are a variety of products such as diesel, four-wheel-drive, sports saloons, and so on. Now have a look at the final stage, positioning. Positioning Part of STP - Segment-Target-Position The third and final part of the SEGMENT - TARGET - POSITION (STP) process is 'positioning.' Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a product within that market. Remember this important point. Positioning is all about 'perception'. As perception differs from person to person, so do the results of the positioning map e.g. what you perceive as quality, value for money, etc, is different to my perception. However, there will be similarities.
  • 7. Products or services are 'mapped' together on a 'positioning map'. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own products from the offerings of their competition (hence the term positioning strategy). Take a look at the basic positioning map template below. The marketer would draw out the map and decide upon a label for each axis. They could be price (variable one) and quality (variable two), or Comfort (variable one) and price (variable two). The individual products are then mapped out next to each other Any gaps could be regarded as possible areas for new products. The term 'positioning' refers to the consumer's perception of a product or service in relation to its competitors. You need to ask yourself, what is the position of the product in the mind of the consumer? Trout and Ries suggest a six-step question framework for successful positioning: 1. What position do you currently own? 2. What position do you want to own? 3. Whom you have to defeat to own the position you want? 4. Do you have the resources to do it? 5. Can you persist until you get there? 6. Are your tactics supporting the positioning objective you set? Look at the example below using the auto market. Product: Ferrari, BMW, Kia, Range Rover, Saab, Hyundai. Positioning Map for Cars. The six products are plotted upon the positioning map. It can be concluded that products tend to bunch in the high price/low economy (fast) sector and also in the low price/high economy sector. There is an opportunity in the low price/ low economy (fast) sector. Maybe Hyundai or Kia could consider introducing a low cost sport saloon. However, remember that it is all down to the perception of the individual. Brand Equity A brand is a name or symbol used to identify the source of a product. When developing a new product, branding is an important decision. The brand can add significant value when it is well recognized and has positive associations in the mind of the consumer. This concept is referred to as brand equity. What is Brand Equity? Brand equity is an intangible asset that depends on associations made by the consumer. There are at least three perspectives from which to view brand equity: Financial - One way to measure brand equity is to determine the price premium that a brand commands over a generic product. For example, if consumers are willing to pay $100 more for a branded television over the same unbranded television, this premium provides important information
  • 8. about the value of the brand. However, expenses such as promotional costs must be taken into account when using this method to measure brand equity. Brand extensions - A successful brand can be used as a platform to launch related products. The benefits of brand extensions are the leveraging of existing brand awareness thus reducing advertising expenditures, and a lower risk from the perspective of the consumer. Furthermore, appropriate brand extensions can enhance the core brand. However, the value of brand extensions is more difficult to quantify than are direct financial measures of brand equity. Consumer-based - A strong brand increases the consumer's attitude strength toward the product associated with the brand. Attitude strength is built by experience with a product. This importance of actual experience by the customer implies that trial samples are more effective than advertising in the early stages of building a strong brand. The consumer's awareness and associations lead to perceived quality, inferred attributes, and eventually, brand loyalty. Strong brand equity provides the following benefits: Facilitates a more predictable income stream. Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing. Brand equity is an asset that can be sold or leased. However, brand equity is not always positive in value. Some brands acquire a bad reputation that results in negative brand equity. Negative brand equity can be measured by surveys in which consumers indicate that a discount is needed to purchase the brand over a generic product. Building and Managing Brand Equity In his 1989 paper, Managing Brand Equity, Peter H. Farquhar outlined the following three stages that are required in order to build a strong brand: 1. Introduction - introduce a quality product with the strategy of using the brand as a platform from which to launch future products. A positive evaluation by the consumer is important. 2. Elaboration - make the brand easy to remember and develop repeat usage. There should be accessible brand attitude, that is, the consumer should easily remember his or her positive evaluation of the brand. 3. Fortification - the brand should carry a consistent image over time to reinforce its place in the consumer's mind and develop a special relationship with the consumer. Brand extensions can further fortify the brand, but only with related products having a perceived fit in the mind of the consumer. Alternative Means to Brand Equity Building brand equity requires a significant effort, and some companies use alternative means of achieving the benefits of a strong brand. For example, brand equity can be borrowed by extending the brand name to a line of products in the same product category or even to other categories. In some cases, especially when there is a perceptual connection between the products, such extensions are successful. In other cases, the extensions are unsuccessful and can dilute the original brand equity. Brand equity also can be "bought" by licensing the use of a strong brand for a new product. As in line extensions by the same company, the success of brand licensing is not guaranteed and must be analyzed carefully for appropriateness. Managing Multiple Brands Different companies have opted for different brand strategies for multiple products. These strategies are:
  • 9. Single brand identity - a separate brand for each product. For example, in laundry detergents Procter & Gamble offers uniquely positioned brands such as Tide, Cheer, Bold, etc. Umbrella - all products under the same brand. For example, Sony offers many different product categories under its brand. Multi-brand categories - Different brands for different product categories. Campbell Soup Company uses Campbell's for soups, Pepperidge Farm for baked goods, and V8 for juices. Family of names - Different brands having a common name stem. Nestle uses Nescafe, Nesquik, and Nestea for beverages. Brand equity is an important factor in multi-product branding strategies. Protecting Brand Equity The marketing mix should focus on building and protecting brand equity. For example, if the brand is positioned as a premium product, the product quality should be consistent with what consumers expect of the brand, low sale prices should not be used compete, the distribution channels should be consistent with what is expected of a premium brand, and the promotional campaign should build consistent associations. Finally, potentially dilutive extensions that are inconsistent with the consumer's perception of the brand should be avoided. Extensions also should be avoided if the core brand is not yet sufficiently strong. New Product Launch Strategy A well planned new product launch strategy can result in a very successful business. However, often people do not plan the product launch well enough to get enough publicity and generate enough interest in the new product. The more initial buzz and interest you generate in your product the greater your initial success will be and the more money you will have to market your products and create an even bigger impact. The very first part of your new product launch strategy should contain a well written press release. It is very important to make your press release newsworthy. You can organize a product launch at a trade show which will create additional buzz and interest. If you do this right you can generate substantial interest and free media coverage which could be worth tens of thousands of dollars in advertising. The next step of your new product launch strategy is to announce the product launch to your list. Your list already knows and trusts you. If it is something that interests them they will buy your product. You can create a video which advertises the benefits and this will increase the interest level in the product. The following step is to find suitable joint venture partners. They will announce your product to their list. You have to offer them something in return. You can offer affiliate commissions or offer to send your list an email announcing their product. A well executed new product launch will result in an initial rush of new business helping you to maintain a stable business with a lot of cash flow. The importance of this cannot be underestimated.
  • 10. New Product Launch Planning Positioning Execution Additional Resources Planning A new product has been conceived, researched, tested in prototype and made it through all the hurdles of the process. The time has come to launch it in the marketplace. What happens now? According to TEC new product development experts Mitch Goozé and Nick Webb, the seeds for the launch phase should be sown back at the very beginning. "In the most successful ventures, planning for the new product launch starts along with preliminary design and development," Goozé says. "Positioning, sales channels and distribution, advertising and public relations all need to be addressed and should be given as much time and energy as the development and design stage. Synchronizing marketing activities with product development is critical for success." Among the key components included in a strong product launch plan: Clearly defined sales objectives Assured sales channel readiness Promotional functions in place (public relations/marketing/advertising) Resources to track, monitor and account for execution "Launch projects often fail because companies don't manufacture adequate quantities of the new product and make them available to prospective customers," Webb says. He suggests creating a launch team with responsibility for, among other things, ensuring that all levels of the company are prepared to handle demand for the product and to train staff in its use for customer support. Positioning "Positioning is not about features and specifications," says Goozé. "It's the core message that differentiates your product from everything else in the marketplace. A unique product identity strengthens the market's perception of your product and in turn reinforces your company's overall positioning." To make sure everyone is working toward the same goal, certain milestones should be established: Have we identified all necessary launch channels? What number of new products do we plan to sell by a specific date? When will the product be ready to launch at a national trade convention? Are sufficient stocking orders placed with key distributors? How can we grow the product into a 5-10 percent market entrenchment by a specified date? "Break down every conceivable launch component," Webb says. "Identify customer databases where appropriate. Send new product samples to industry and trade publication reviewers. Do everything necessary to create a strong, functioning life-support system for that product." Planning for these activities should be as simple as possible, he adds. "We're not talking about writing a 50- page launch overview document. These tasks should facilitate the most favorable deployment of the new product -- that's all."
  • 11. Approaching the customer with the new product can be the most delicate situation of all, which is why "having your ducks in a row”, is so important. If existing customers encounter design flaws in the new product, they may forgive and forget (particularly if their relationship with the company is strong enough), but it's unlikely new customers will feel the same way. Also, the new product may not be the right "fit" with all of your current customers. Preparedness reduces the risk that the company's credibility may be damaged by missteps at launch time. "In order to establish the new product's identity in the marketplace, the core message must be repeated over and over again," Goozé notes. This requires consistent positioning within all of the company's marketing communications, including: New and current product literature Press releases Product specifications Sales presentations Internal communications Goozé draws a distinction between advertising and public relations. Public relations present the new product as "news" which, he says, "is viewed as impartial as and more reliable than advertising -- even if the news is only a company press release printed verbatim." Advertising, on the other hand, is aimed at presenting the product (specifically, its features and benefits) in the best possible light. "These promotional tools are most effective when used in tandem. The goal is having each activity reinforce each other to influence the market and your customers." Beyond issuing press releases, look for unique angles to interest industry opinion leaders, or try placing stories about how the new product benefits customers in trade publications. "Exposure to your product via both advertisements and public relations generates greater mindshare and higher perception in the marketplace," Goozé says. "Success breeds success." Execution How will the new product reach customers? Are you’re established sales channels (sales force, distributors, dealers, etc.) up to the new challenge? "When introducing a new product, you need to step back and assess its fit with existing channels," Goozé says. For example, if the new product is a features-reduced version of an existing product that is being targeted to a mass market, there are some questions you should ask: Do our existing distributors serve mass marketing retail outlets? Does our current pricing schedule take factors like mass market competition into consideration? If we lower our price, how much can we afford to spend on the sale of each unit at this lower price? Can we reach this market with our current sales force? "Determining your pricing strategy and reviewing your sales channels should be happening while the product is being positioned, as these factors will have a definite impact on the positioning message." Goozé says. In situations where one company partners with another to introduce a new product, Webb advises strict due diligence before the execution phase -- thus ensuring that each partner is fully committed to the process and has the necessary financial resources and familiarity with the marketplace.
  • 12. "Whatever the circumstances, have clear-cut performance objectives in place and be ready to measure them carefully," he adds. "Use the launch team to track progress and make it responsible for communicating results to senior management." Network marketing Network marketing is a general term for a type of marketing that is usually performed by an individual instead of a company. It refers to the use of interpersonal or social networks to market products and services for business purposes as opposed to the more traditional and common practices of wide-range advertising. The term is technically a type of marketing that can be used as part of an overall marketing strategy which may or may not encompass multiple tactics. For example, the most common marketing tactic in a network marketing strategy is word of mouth. Many companies which utilize a network marketing strategy facilitate it with a multi-level marketing (MLM) compensation structure. For this reason, the two terms are often confused with one another and used interchangeably.