Marketing Referance Essay, Research Paper

Introduction

The marketing concept suggest that to achieve organisational goals and be more profitable, an organisation should focuses its efforts on developing marketing mixes that best meet the needs of the consumer. However, since consumer needs within a market vary, one marketing mix could not adequately satisfy the needs of the entire market. Targeting marketing is one of the most important ideas in modern day marketing. Under the idea, the marketer divides the market into subgroups with similar needs and wants or preference, it will then be possible to tailor marketing mixes to specific segments, better meeting their needs.

As figure 1-1 shows, targeting marketing involve three major steps- market segmentation, market targeting and market positioning. Market segmentation is the first step that dividing a market into subgroups of consumers who are homogeneous in their response to a particular marketing mix. The second step is market targeting, in this step, the company select one or more target segments based on evaluating of each segment s attractiveness. The final step is market positioning, the company formulates marketing mix for each target segments and develops competitive positioning for its products.

Figure 1-1 Steps in market segmentation, targeting and positioning

Market Segmentation

Market segmentation can be defined as the the process of dividing a potential market into distinct subsets of consumers with common needs characteristics and selecting one or more segments to target with a distinct marketing mix. Companies generally can not serve entire markets in a effective manner, so rather than trying to compete in an entire market, companies identify subsets of customers whose needs best match their offering.

Segmentation Criteria

The organisation can segment the market in many way, but a number of criteria should be met in order to developing effective segments for market strategy.

Measurablity: Measurablity refers to the degree to which the size and purchasing power of the segments can be measured. Before target groups can be selected, the descriptive characteristics, sales potential and potential profitability of each market segmetn muse be measurable.

Accessibility: The purpose of segmentation effort is to identify consumer groups with different needs and deliver customised marketing mixes to them. In order to do this, the segments should be accessible in terms of the use of media and distribution outlets. If members of a segment have distinctive shopping habits, tending to certain types of stores, they would be accessible through those outlets.

Substantiality: Segments should be of sufficient size to enable specific marketing action. Developing customised, separate marketing mixes rises cost. The company should choose the segments that are profitable enough to have distinct marketing mixes.

Bases for Segmentation

A variety of factors or bases can be used to segment a market, common segmentation bases for consumer markets are show in Table 1-1, including demographical, geographical, psychorgraphic and behavioural segmentation. Segments may be identified on the basis of one of these bases or a combination. In selecting a segmentation base, the marketer should realise that there is no one best segmentation base that will result in effective segmentation in all cases. Instead, the marketer must find a base that best fits the decision to be made.

Demographic Segmentation

Demographic factors are the most popular bases for segmenting customer groups. For example, Table 1-2 show the most established approached to segmentation are on demographic charactertics such as age, gender . Since, generally, demographic variables (age, gender, income, family size or occuption ) are the easiest to identify and consumer needs, wants and usage rates often vary closely with them.

Table 1-2 Typical demographic profile of the drinks market

Weekly alcohol drinkers

Beer(%) Wine (%) Whisky(%)

Age

18-24 58 23 7

25-34 50 29 8

35-49 45 28 14

50+ 30 15 17

Gender

Male 65 22 19

Frmale 21 22 8

Geographic Segmentation

Marketers can divide the market into many segments base on different geographic units such as nations, counties, regions and cities. Geographical segmentaion can be useful where there are regional difference in needs. For example, in the UK, Northerner consume 33% more potatoes and 43% more flour than their peers in the south east but consume 43% less fresh fruit. And they spend far more on alcoholic drink, most of it on beer. Londoners and Scots on other hand prefer wine.

Psychographic Segmentation

Psychographic segmentation divides markets on difference in consumer life-styles, socioeconomic status or personality characteristics. Lifestyles are measured by asking consumers about their activities (work, hobbies, vacations), interest( family, job,communtiy) and opinions( about social issues, buniness). Psychographical segmentation studies often include hundreds of question and provide huge information about consumers. Thus, psychographic segmentation is based on the idea that the more you know and understand about consumers, the more effectively you can communicate and market to them . For example, in the US, Levi Strauss used this type of research to identify the main clothing segments, namely the classic independent , the mainstream traditionalist , the trendy casual and so on.

Behaviour Segmentation

A segmentation strategy may be formed around behavioural characteristics of consumers such as their knowledge, attitudes or usage patterns. In benefits approach, markets are segmented according to the benefits that consumers seek in the product. For example the toothpaste market might be segmented into decay prevention, flovar, bright teeth and economy benefit segments. Beneift segmentation, because it is causal, gives strong direction to focused development of marketing strategies.

Market Targeting

After a segmentation base have been chosen and applied to the market, the resulting segments must be evaluated to determine if they will be effective and usable. Market targeting is th evaluation and selection of one or more market to enter. Segments must be evaluated in terms of their attractiveness.

Segment Attractiveness

What makes one segment attractive and another not attractive? As show in Figure 1-2, marketers can determinse it form the common measurement of market opportunity and competitive environment.

Market Opportunity

Market opportunity include the size of the segment, rate of growth, market potential and buyer power. Generally, large, growth segments with potential for future growth are more attractive than small segments without potential for growth. The size and growth must be measurable so that the company can determine if the segments are worth the investment in marketing and relationship costs associated with the group.

Competitive Environment

While the market opportunity for a segment may be attractive, the segment may not be attractive form a profitability point of view. If there are many competitors and market entry is relatively easy, market attractiveness diminishes because it becomes more difficult to achieve market share and profit margin objectives. In addition, if there are many substitute products, margins will be further reduced, because substitutes place a limit on the potential prices and profits that can be earned in a segment.

Select Market Segments

The company decide which and how many segments to serve after evaluating different segments. As the Figure 1-3 show, there are three market converage alternatives: undifferentiate marketing, differentiated marketing or concentrated marketing.

Undifferentiate Marketng

As using an undifferentiate marketing strategy, the company focuses on what is common in the needs of consumers rather than on what is different, thus it decide to serve the whole market and ignore market segment differences. The company designs a product and a marketing program that appeals to broadest number of consumers and the narrow product line keep down production, inventory and transporation costs. Thus, generally, undifferentiated maketing is defened on the grounds of cost economies.

Undifferentiate Marketng

As using an undifferentiate marketing strategy, the company focuses on what is common in the needs of consumers rather than on what is different, thus it decide to serve the whole market and ignore market segment differences. The company designs a product and a marketing program that appeals to broadest number of consumers and the narrow product line keep down production, inventory and transporation costs. Thus, generally, undifferentiated maketing is defened on the grounds of cost economies. However, because the company who using the approach, it frequently attempt to use mass promotion effort to give its product are superior image in people s mind. When several companies do this, the large segment may be less profitable because the heavy competition.

Undifferentiated marketing are often more popular in new markets than in mature markets because in the former there are typically few competitors and because buyers have had inadequate experience with the product and have not developed differences in their needs and wants.

Differentiated Marketing

In the case of differentiated marketing, the company decides to serve in several segments of the market and designs separate offers to each of the segments. The company hopes to attain higher sales and a stronger position within each market segment by offering product and marketing variations. Because the company using different marketing mixes to meet each segments, the customers will be more likely to have grater satisfaction and it hopes can bring more repeat purchasing. For example, several car companies such as Toyota, Mitsubishi, and Holden, they all produce difference type of car and advertisements for different segments. Although this approach typically can create higher level of total sales than undifferentiated marketing. The company must realise the higher sales may not mean higher profits, because this approach also increase higher costs in production modification, research and development, promotion, inventory and so on. Thus, differentiated marketing is usually used by a company which is financially strong, well established in the product category and facing strong competition.

Concentrated Marketing

Concentrated marketing is usually applied when the company s resources are limited. The company goes after a large share of one or feew sub-markets instead of going after a small share fo a large market. For example, Compaq concentrated on personal computer; Apollo focues the computer workstation. Because the company owing to it greater knowledge of the segments needs and the the special reputation it acquires, the company typicall can achieves a strong market position in the segments it serves. For example, in most people mind, the

The major advantagve of concentrated segmentation is tha the company can control costs by advertising and distributing only to the market it wishs to attract. In addition, concentrating on a single segment allows a company with restricted resources to compete with much larger organisation. However, concentrated marketing involves higher than mormal risk, because the company s sales depend on a single segment and if the segment s demand for the product declines then the company may suffer the financial problem. For example, because the rapidly development of technology, many product may be outdate and lost its market , such as the traditional typewriter be replace by the personnel computer in recent few years. So, if the company only concentrated on producing traditional typewriter than it will suffer the problem.

Criteria for Deciding on Market Coverage

There are three alternatives can be taken when the company in making the market coverage decisions. The choice among these alternatives can be made using the criteria suggested below.

Can the Product Be Differentiated? Some products are views by consumer as commodities with few differences, such as salt, sugar and egges. Such products are hard to differentiate and hence difficult to customise to the needs of a segment. Such uniform products are more suited in adopting undifferentiated marketing.

What Is the Stage of the Product Life Cycle? Undifferentiated marketing or concentrated marketing will be used during the introductory stage of the product life cycle, since the innovator having the only product in the market. In the maturity stage, it will be more appropriate in using differentiated marketing. For example, many car companies have launched different marketing mixes for different segments in the car market.

What Is the Competitive Environment? The company may gain more market sales in using concentrated or differentiated marketing as competitors use undifferentiated marketing. As discussed early, because the two approach can let the company focusing on what s the customer s needs and provide better matches the customer s desire. Contrary, it is unwise to adopt the undifferentiated marketing when competitors use segmentation.

Marketing Positioning

Why a company properly defined segments, select a target market and then develop a marketing mix to meet the needs of the target market but still face the failure in marketplace ?. The reason might lay on the marketing position. Marketing position can be defined as the dicision the defines marketing mix benefits that will meet the needs of a selected target market in such a way as to create competitive distinction and superiority in the eyes of consumers, based on a real attribute of the product or other element of the marketing mix .

Form the definition, we can realise even the company can design a marketing mix for its target market but cannot achieve success if a competitor was already perceived as satisfactorily meeting the needs of the same target market. Thus, it is important for the company to know as in designing a marketing mix that not only meets the needs of a target market but also have to established a product position that is distinctive and hopefully superior than competitors in consumers minds.

Information Required for the Positioning Decision

In order to develop a sound position strategy, there are three kinds of essential information should be needed for the positioning decision.

Segment Characteristics

As mention early, the segmentation base defines how segment members are similar to one another and helps define their product needs. Positioning requires knowledge of which segment has been chosen as the target market and the characteristics of target market consumers.

Product Characteristics

If the company do not know what are the attributes of it product, obviously, the consumer can not have clear product position in their minds. Thus, a thorough understanding of the attributes of the product that is essential for the company, especially those offer competitive superiority that is essential to positioning. For example, Volvo Car Company knows what are the attributes of its products and has stressed its advantages, hence, Volvo cars successfully positioning safety and durability in most consumers minds.

Competitive Characteristics

It is essential to thoroughly understand the positioning of competirive products, since the objective of positioning is to find a way to differentiate the product form competition. Without knowing competitive characteristics, it is hard to find out what are the attributes of your products that are distinctive and superior form the competitors Moreover, understanding competitive characteristics can help in making position strategy decision. For example, Hyundai has emphasised low price but not stress in safety as Volvo does.

Positioning Strategy

After the marketer have sufficient information in help making position decision, then the marketer can decide which positioning strategy to be used. There are at least five approaches to positioning strategy that marketers can chose, including positioning by attribute, by use or application, by product user, by product class and by competitor.

Positioning By Attribute

Generally, the most frequently used position strategy is positioning by attribute- associating a product with an attribute, a product feature or a customer benefit. For example, Colgate Fluorigard stress reducing cavities and Libra s ads show the high absorption of its product.

Positioning By Use or Application

Another positoning strategy is to associate the product with use or application. For example, Campbell s soup for many years was positioned for use at meal time. Now, many Campbell s soups are positioned for use in sauces and dips, or as an ingredient in main dishes.

Positioning By Product Class

Some product can be positioned for different product class. For example, 7-Up in its uncola campaign, asked consumers not to consider the product as a member of the mixer segment, but as a product alternative in the much larger cola class.

Positioning By Product User

Another positioning approach is to associate a product with a user or class of users. For example, Johnson & Johnson increased its market share when repositioned its shampoo form a product used for babies to one used by adults who wash their hair frequently and need a mild shampoo.

Positioning By Competitors

This strategy also called Head-On Positioning. Normally, the major purpose of this type of positioning is to persuade consumers that a brand is better than the market leader or another well-accepted brand on important attribute. Marketers frequently achieve competitive positioning through comparative advertising, that is, naming competitors in ads. A classic example of this type of positioning was the Avis We re No. 2, so we try harder . Recently, in the TV ads, the Carefree also use this approach to against Libra.

Positioning is a fundamental element of the marketign planning process, since any decision on positioning has direct and immediate implication for the whole of the marketing mix. The marketign mix can be seen as the tactival details of the organisation s positioning strategy. For example, if the organisation is pursuing a high-quality position, this needs to be reflected not just in the quality of the product or service, but also in every element of the mix including price, the pattern of distribution, the style of advertisign and the after-sales service. Without this consistency, the positioning strategy can not be successful.

Why Using Target Marketing (STP Marketing)

Why today s companies are moving away for mass marketing and toward target marketing? The answer are base on the three major benefits by using target maketing.

Consumer Bebefits

Using mass marketing, the company offer only one markeitng mix to a total market of consumers with various needs and asks that consumers adjust their needs to the availavle product. The result is that not all consumers are totally satisfied. For example, before Coca- Cola produced only one drink for the whole market, obverisously, it does not satisfy the people who whold like drik Cock-Cola but also do not want also have too much suger. Target marketing selects a smaller groups of consumers with similar needs and tailor the marketing mix to meet those needs. Thus, target marketing can bring greater satisfication to consumer.

Market Benefits

The target marketer s product more closely meets the needs of the target consumers and thus, often, a higher proportion will purchase and repurchse. If the consumers can have more satisfaction in the target marketer s product than the mass marketer s product, then it should result in a more inelastic demand curve for the product. It means that proces can be set higher. Thus, target marketing shifts competition away form price and toward product desing and imnprovement.

Competitive Benefits

Since the target market strategy ressults in greater satisfied and hence more loyal customers, competitors would have more difficulty in trying take these customers away. In addition, the smaller target market may make it appear to be a less attractive target than the entire market.

Generally speaking, the target marketing is an important idea. However, in my opinion, it is not always can be applied in entire marketplace.