Summary. Chapter 13 MARKET SEGMENTATION, TARGETING AND POSITIONING

Transcription

1 Summary Chapter 13 MARKET SEGMENTATION, TARGETING AND POSITIONING Learning Objectives: Know about customer demand Factors of Market Demand Market Segmentation Approaches to market segmentation People- Oriented approach in marketing Product-Oriented Approach Market Segmentation Strategies Product Positioning Segmentation 1. Customer Demand- A want is a perceived need. When a want is supported by purchasing power it is called demand. A market is then composed of people with money wanting goods and services. People with unmet wants create marketing opportunities. People with wants and purchasing power make these markets effective. Customer demand is a very important element in the marketing system. In a sense, marketing management is virtually demand management. The marketing executive is responsible to regulate the level, timing and character of demand for various products offered by the enterprise to the market particularly under keen competition. Demand analysis and competition are the twin dimensions of sound marketing management. Both are inter-related. 2. Three variable factors of Market demand- The marketing success depends on the ability to forecast the strength and character of demand as it is the basis for allocation of resources in business. There are three variable factors of market demand: 1. Population Variables (Size of Demand)-Demographic variable (population pattern) to ascertain size of demand. 2. Income (Money to Spend or Purchasing Power)- Effective demand (purchasing power) to ascertain potential demand. 3. Buyer Behaviour (Purchasing Propensity or Social/Psychological Factors)- Life-style patterns reflecting purchasing propensity and indicating customer behaviour(how and why buyers behave as they do). These variables are inter-related. Each factor will change the pattern of demand. Marketing management is management of demand.

2 3. Market Segmentation- A business enterprise can adopt two types of strategies to explore the market: A. Product Differentiation: Product differentiation (through branding) enables the manufacturer to exercise control over demand, prices, and distribution. By differentiating a product from its rivals, the brand owner can establish his own price which cannot be compared easily with prices of competing goods. B. Market Segmentation: Segmentation or subdivision of the market is based upon the modern marketing concept i.e., market-oriented strategy and philosophy. Segmentation gives special emphasis on the demand side of the market. 4. Features of Market Segmentation: i. Market consists of individuals and groups of people/institutions and corporate bodies their needs, their resources, their buying habits, and their preferences differ. ii. Market segmentation is a method for achieving maximum market response from limited marketing resources by recognizing differences in the response characteristics of various parts of the market. iii. Market segmentation enables the marketers to give better attention to the selection of customers and offer an appropriate marketing-mix for each chosen segment, or a group of buyers having homogeneous demand. iv. The identification of customer demand is the main premise of market segmentation. 5. Approaches to Market Segmentation- There are many ways to group customers in segmenting the market. Broadly speaking, we have two main approaches to identify market segments: People-oriented market segmentation, and Product-oriented market segmentation. a) People-Oriented Approach: It is also called customer personal characteristic approach. We can classify the customers by many customer dimensions such as geographic location, demography, socioeconomic characteristics, and psychographic characteristics. These are variables and they are independent of any product or service and the situation encountered by the buyer in making buying decisions. b) Product-Oriented Approach: It is also called customer response approach. The customer response or buyer behaviour may be considered in relation to product benefits, product usage, store patronage, and brand loyalty. 6. People-Oriented Approach(Customer s Personal Characteristics)- A. Geographic Location and Mobility- Geographic location is the usual and popular basis for market segmentation. Marketers are interested more in city and suburban population as we have highly concentrated

3 population in metropolitan areas. The consumer needs and responses vary geographically and the market could be divided into entities such as State, District, Taluka, and Village. B. Demographic and Socio-economic Characteristics- Demography is the study of population. Demographical characteristics are sex, age, marital status, number and age of children, place of residence and mobility of a household. Socio-economic characteristics are income, education, occupation, family life-cycle, social class, religion and culture. C. Psychographic Characteristics- Personality and Life styles are the two characteristics of Psychographic. Psychographic research is now being used more frequently in market segmentation studies for four reasons: (1) To find and explain markets and for target market identification, (2) To understand consumer behaviour as markets are people, e.g., brand choice, company loyalty, (3) To formulate marketing strategies for the firm, e.g., positioning new product, improving services, promotional strategies, new distribution methods, and (4) To minimize risk of product failure by incorporating psychographics into your product testing and R & D programme. 7. Product-Oriented Approach (Customer Response):We want to know also why consumers buy a product and their response or behaviour towards a product or a store selling the products or brands. Hence, we must find out the bases of segmentation reflecting buyer behaviour. These may be: benefits expected, usage response, loyalty response brand loyalty and store patronage. Let us describe these bases briefly. A. Use Pattern: The use of the total consumption of a family unit for a given product may act as a basis of segmentation. A buyer may be classified as heavy, medium, light user or non-user. Marketer is usually interested in heavy users. Example: Air Deccan came out with a very low air fare to attract non-fliers like rail passengers. B. Benefits Pattern: Benefits segmentation lays emphasis on wants and desires of consumers. Benefits sought by consumers are the basic reason for the very existence of the market segment. Customer satisfaction directly depends upon product benefits, e.g., economy, performance, style, durability, status, product appearance, taste, flavour, etc. C. Brand/Store Loyalty: Brand loyalty means that a satisfied customer continues to use a brand even when competing products unavailable. In the case of store loyalty, the consumers buy from the same shop. Customer loyalty may be used as a basis for market segmentation.

4 Example: In rural areas, shop loyalty is high since shop keeper extends credit to his customers. 8. Market Segmentations Strategies(Market Targeting Strategies)- A firm should identify the most potential and convenient segment of the total market and make effective use of the marketing-mix to achieve the marketing objectives. Marketer has three strategic options: Undifferentiated marketing (Mass market strategy), Differentiated marketing, (Market segmentation strategy), and Concentrated marketing (Target Marketing). A. Undifferentiated Marketing: Marketer may not prefer the idea of market segmentation and differentiated marketing. In that case, we will have one marketing-mix for several market segments. The advantage is that there is potential savings on production and marketing costs. Examples: Undifferentiated, mass marketing of namkeens, biscuits and local soft drinks. B. Differentiated Marketing: An organisation, under differentiated marketing strategy, enters many marketing segments but has a unique marketing-mix appropriate for each segment. It wants to do business successfully in several segments. Example: Hindustan Lever has one brand of bath soap for each market segment.such a marketing strategy offers higher sales, and higher customer satisfaction. The firm can develop brand preference and repeat sales. C. Concentrated Marketing: A firm may decide to concentrate all available resources on one chosen segment within the total market. It selects a market area where there is no strong competition and it can do best in that area. 9. Product Positioning- In simple words, product positioning refers to the position or image which a product enjoys in the minds of the present and potential customer. According to Philip Kotler positioning is the act of designing, the company s offer so that it occupies a distinct and valued place in the target customer s minds. Positioning is based on some unique selling proposition (USP). It is normally based on some unique feature of the product, brand, some unique feature of the market or some feature of the competition which becomes the core idea and around that feature, the product is placed in the market. 10. Important steps in product positioning are given below: (1) Find out competitive differences. (a) Product differences, (b) Service differences, (c) Differences such as image of the producer and Brand equity. (2) Select major differences. (a) Product benefits, (b) Warranty, (c) Prices, (d) Packings. (3) Develop positioning strategy. Positioning by price, benefits, competition, etc.

5 (4) Communicate the product positioning through appropriate media and methods.example: Pepsi sponsoring cricket matches. (5) Follow up. Assess the impact of the positioning through brand awareness, sales, etc. 11. Segmentation of Industrial Market- Industrial market can be segmented using many of the variables employed in consumer market segmentation. The following factors should be borne in mind to segment industrial market. 1. Demographic factors to be considered are: (a) The type of industries to which goods are to be sold. (b) The geographical location, area to be covered. (c) Size of the Company large, medium and small, based on sales volumes, marketshare, etc. 2. Operating factors would include the following: (a) User or non-user status i.e., Heavy users, medium and light users and non-users. (b) Customers requirements: Whether to focus on customers who require a packageof services or only a few services. 3. Purchase policies do play an important role in segmenting business markets. A marketer may have developed strong relationship with key executives in the purchase department and he may like to deal with such friendly buyers/companies. 4. Situational factors: The marketer should consider the following: (a) Whether to focus on large or small orders. (b) To serve buyers who give advance orders or buyers who need quick supplies at short notice or both. 5. Personal factors to be considered are: (a) Buyers who are risk-taking or risk avoiding. (b) Buyers whose ethical values matches with that of the marketer or buyers who show loyalty towards suppliers based on past performance.