Marketing: Segmenting-Targeting-Positioning & Identification and Managing Competition (Unit 2)

Market Segmentation 

Market segmentation : Buyers have unique needs and wants & each is potentially a separate market but designing a separate marketing program for each buyer is not worth while. Marketers look for broad classes of buyers who differ in their product needs or buying responses.

What is Market Segmentation?

Market Segmentation is dividing market into smaller groups of buyers based on their unique needs, behaviours or personality.

Advantages of Market Segmentation.

Distinguish one customer group from another.

Understand Potential Customers.

Pay Proper attention to them.

Formulate Maketing Programmes & Marketing Mix.

Select channels of distribution.

Understand Competition

Efficient use of marketing resources

Accurate measurement of goals & performance.

Facilitate proper choice of target market.

Helps achieve specialization.

Helps spot the less satisfied segments and succeed in satisfying them.

Market Segments require separate products, have unique needs and wants, have unique responses and behaviour, 

Requirements for Effective Segmentation.

To be useful, market segments must have the following characteristics.

1. Measurability - The degree to which the size and purchasing power of the segment can be measured.

2. Accessibility - The degree to which the segments can be reached and served.

3. Substantiality - The degree to which segments are large and profitable enough.

4. Actionability The degree to which affective. programs can be designed for attracting and serving the segments.

5. Growing

6. Compatible with present policies.

7. Profitable.

Bases of Segmenting Consumer Markets.

Geographic: North, s, e, w, region, city, density of population, climate .

Demographic: age, family size, family life cycle, gender, income, occupation, religion, social class.

Psychographic: life-style, personallity, Activities, Interests, Opinions. 

Behavioral

Occasions: regular, special

Benefits: quality, economy, features

User status: non-user, ex- user, potential user, first time user, regular user.

User Rate: light, medium, heavy

Loyalty Status: none, medium, strong, absolute, 

Readiness Stage: unaware, aware, informed, interested, desirous, intending to buy

Attitude : enthusiastic, positive, indifferent, negetive, hostile.

Market Targeting

Market targeting requires to 

1. evaluate the market segments and 

2. selecting one or more of them.

 1 Evaluating Market segments

 In evaluating different market segments, a firm must look at three factors: 

1. segment size and growth 

2. segment structural attractiveness and 

3. company objectives and resources.

 -Segment Size and Growth

 

company must collect data on current sales, projected sales, growth rates cand expected profit margins for various segments.

It must select the segment appropriate in size and growth for the company.

Large and fast growing segments are not always the most atractive for every company.

Smaller companies with lack of skill and resources may find smaller segment more profitable.

 

-Segment Structural Attractiveness

The company must examine several major structural factors

1. The impact of potential competitors.

2. The threat of substitute products.

3. The relative power of buyers. If the buyers possess strong bargaining power they will force the price down or demand more service at the expense of profitability. 

4. The relative power of suppliers. Suppliers may raise prices or reduce Quality or quantity of goods or services.

 

-Company Objectives & Resources

Some attractive segments can be dismissed if they are not in line with company's long run objectives.

Even if the company has required strength it must have superior resources if it wants to win.

 

 2 Selecting Market Segments

 After evaluating different segments, a company hopes to find One on more market segments worth entering.

 A Target Market consists of a set of buyers sharing common needs or characteristics that the company decides to serve.

 

• The firm can adopt three market coverage strategies. 

1. undifferentiated marketing

2. differentiated marketing.

3. concentrated marketing.

 

-Undifferentiated Marketing 

• Undifferentiated Marketing is market -coverage strategy in which a a firm decides to ignore market segment differences and go after the whole market with one market offer.

It focuses on what is common in the needs. of consumers rather than what is different.

It provides cost economies, low inventory, low transportation cost, low marketing research cost, low advertising cost, low marketing. cost and product management cost.

 

-Differentiated Marketing

• Differentiated marketing is a market coverage strategy in which a firm decides to target several market segments and design separate offers for each. 

-Concentrated Marketing

Concentrated Marketing is a market-coverage strategy in which a firm goes after a large share of one or a few sub-markets. The firm concentrating on a segment, market or product.

Another way of describing market coverage strategy is 

Single segment concentration

Selective specialisation

Product specification 

Market specialization 

Full market coverage strategy.

 

 Choosing A Market-Coverage Strategy

Many factors that must be considered when choosing a market-coverage strategy are -

• Company resources - if limited concentrated marketing makes sense.

•Product variability-

•Products stage in the life cycle - For a new product, undifferentiated marketing or concentrated marketing makes most sense.

Market variability - If most buyers have same taste differentiated marketing is appropriate.

Competitor's Marketing Strategies - when competitors use segmentation undifferentiated marketing can not be used.

 

Positioning Strategies

 The following broad positioning strategies are available to the marketer.

1  Product attributes: Based on some special feature or service.

2  Benefits : Based on some special benefit to the consumer.

3  Usage occasions : The product is to be used in special occasions.

4  Users of certain class :The product is for users of specific class.

5  Against a competitor : Providing same benefit as the competitor.

6  Away from competitor : Providing benefits different from the competitor.

 

 

Choosing and implementing a positioning strategy

Positioning consists of three steps. 

1.    Identifying a set of possible competitive advantage.

2.      Selecting the right set of competitive advantages.

3.      Effectively communicating and delivering the chosen position to the market.

 

1 Identifying a set of possible competitive advantage

Competitive Advantage is an advantage over competitor gained by offering consumers greater value, either through lower prices or by providing greater value by providing more benefits that justify higher prices.

 

Positioning consists of differentiating the offer and delivering the promised quality or service.

A company can differentiate the offer on the following lines.

 

·         Product differentiation: …

·         Service differentiation ….

·         Personnel differentiation …

·         Image differentiation ….

 

  

2 Selecting the Right Competitive Advantage

How many differences to promote? This answer can be solved by understand the following

·         Understanding the USP

·         Mistake of under positioning

·         Mistake of over positioning

·         Mistake of confused positioning

 

 

 

Which differences to promote?

Only those differences must be promoted which are- 

·         Important

·         Distinctive

·         Superior

·         Communicable

·         Preemptive

·         Affordable

·         Profitable

 

 

3 Communicating & Delivering the Right Chosen Position

 

This is done by designing the marketing mix of four Ps.

Identification and Managing Competition

• Under marketing concept, companies succeed by designing offers that satisfy target consumers' needs better than competitors' offers.

• Thus marketing strategies must consider not only the needs of target consumers, but also the strategies of competitors which require two steps 

1 competitor analysis and

2 compititive strategies.

1  Competitor Analysis

Competitor Analysis is the process of identifying. major competitors; assessing their objectives, shategies, stengths and weaknesses and reaction patterns; and selecting which competitors to attack or avoid

Competitive strategies are the strategies that strongly position the company against competitors and that give the company the strongest possible strategic advantage.

Competitor Analysis

• Steps in analysing competitors are

1. Identifying the company's competitors. 

2. Determining competitors objectives.

3. Identify competitors' strategies.

4. Assessing competitors' strengths and weaknesses. 

5. Estimating competitors' reaction patterns

6. selecting competitors to attack and to avoid.

___________________________

1. Identifying the company's competitors. 

Industry point of view - Those who are part of the present industry.

Market point of view - Those who can become part of industry in future.

2. Determining competitors objectives.

What do the competitors short term and long term objectives? Profitability, Market share, growth, cash flow, Technology leadership, and other goals 

3. Identify competitors' strategies.

Competitor's product, quality, features, mix, customer service, pricing policies, distribution coverage, sales strategy, advertising, sales promotion , R&D, manufacturing, purchasing, and other strategies.

4. Assessing competitors' strengths and weaknesses. 

Using secondary data, personal experience and hearsay.

Conducting 'Costomer Value Analysis ' to know what benefits customers Value and how they rate various customer offers.

5. Estimating competitors' reaction patterns

Understand the customers' philosophy, internal culture, and guiding beliefs. Do they live in harmony or fight constantly.

6. selecting competitors to attack and to avoid

Close or distant 

Strong or weak 

Well behaved or disruptive.

2   Competitive Strategies 

Michael Porter has described four basic competitive Strategies.

1. Overall cost leadership 

2. Differentiation 

3. Focus 

4. Middle of the roaders

A different classification of competitive positions can be adopted based the roles firms play in the target market.

# Market Leader Strategies 

1. Expanding the total market - new users, new usage, more usage 

2. Protecting the market share. - position defense, franking defense, preemptive defense, counter offensive defence, mobile defense (market diversification), contraction defense.

3. Expanding the market share - gain more share 

# Market Challenger Strategies 

1. Concentrate on its strength 

2. Attack competitors' weakness - frontal attack, flanking attack, encirclement attack, bypass attack (target easier Markets), guerrilla attack (periodic attack to harass and demoralise the competitor)

3.Bypass and develop new product and new market.

# Market Follower Strategy 

1. Cloner- copies everything product, distribution, advertising etc.

2. Imitator - copies with some differentiation.

3. Adapter- builds on leaders products but improves on them.

# Market Nicher Strategies 

Vertical Level Specialist(A niche specialist eg healthcare, education), customer size specialist, geographic specialist, feature specialist.