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B19BC3040 - Marketing Management - Unit 2
B19BC3040 - Marketing Management - Unit 2
B19BC3040 - Marketing Management - Unit 2
MARKET SEGMENTATION
Market segmentation is one of the most efficient tools for marketers to cater to their target group. It
makes it easier for them to personalise their campaigns, focus on what’s necessary, and group similar
consumers to target them in an effective manner. The process is being practised by marketers since
the late 1900s. Simple though it may be, it is of vital use to forming any marketing plan. Market
segmentation is a process of dividing the market of potential customers into smaller and more defined
segments on the basis of certain shared characteristics like demographics, interests, needs, or location.
The member of these groups share similar characteristics and usually have one or more than one
aspect common among them which makes it easier for the marketer to craft marketing communication
messages for the entire group. There are many reasons as to why market segmentation is done. One of
the major reasons marketers segment market is because they can create a custom marketing mix for
each segment and cater them accordingly.
Behavioural Segmentation - The market is also segmented based on audience’s behaviour, usage,
preference, choices and decision making. The segments are usually divided based on their knowledge
of the product and usage of the product. It is believed that the knowledge of the product and its use
affect the buying decision of an individual. The audience can be segmented into –
3. Create Subgroups
The organizations should ensure their target market is well defined. Create subgroups within groups
for effective results. Cosmetics for females now come in various categories.
Creams and Lotions for girls between 20-25 years would focus more on
fairness.
Creams and lotions for girls between 25 to 35 years promise to reduce the
signs of ageing.
4. Review the needs of the target audience
It is essential for the marketer to review the needs and preferences of individuals belonging to each
segment and sub-segment. The consumers of a particular segment must respond to similar fluctuations
in the market and similar marketing strategies.
TARGETING
Market targeting is a process of selecting the target market from the entire market. Target
market consists of group/groups of buyers to whom the company wants to satisfy or for
whom product is manufactured, price is set, promotion efforts are made, and distribution
network is prepared. A company cannot concentrate on all the segments of the market. The
company can satisfy only limited segments. The segments the company wants to serve are
called the target market, and the process of selecting the target market is referred as market
targeting. Market segmentation results into dividing total market into various segments or
parts. Such segments may be on the basis of consumer characteristics or product
characteristics or both. Once the market is divided into various segments, the company has to
evaluate various segments and decide how many and which ones to target. It is simply an act
TARGETING PROCESS
Market targeting procedure consists of two steps:
1. Evaluating Market Segments: Evaluation of market segments calls for measuring suitability of
segments. The segments are evaluated with certain relevant criteria to determine their feasibility. To
determine overall attractiveness/suitability of the segment, two factors are used:
i. Attractiveness of Segment: In order to determine attractiveness of the segment, the
company must think on characteristics/conditions which reflect its attractiveness, such as size,
profitability, measurability, accessibility, actionable, potential for growth, scale of economy,
differentiability, etc. These characteristics help decide whether the segment is attractive.
ii. Objectives and Resources of Company: The firm must consider whether the segment suit
the marketing objectives. Similarly, the firm must consider its resource capacity. The
material, technological, and human resources are taken into account. The segment must be
within resource capacity of the firm.
2. Selecting Market Segments: When the evaluation of segments is over, the company has to decide in
which market segments to enter. That is, the company decides on which and how many segments to
enter. This task is related with selecting the target market. Target market consists of various groups of
buyers to whom company wants to sell the product; each tends to be similar in needs or
characteristics. Philip Kotler describes five alternative patterns to select the target market. Selection of
a suitable option depends on situations prevailing inside and outside the company.
2. Selective Specialization: In this option, the company selects a number of segments. A company
selects several segments and sells different products to each of the segments. Here, company selects
many segments to serve them with many products. All such segments are attractive and appropriate
with firm’s objectives and resources. There may be little or no synergy among the segments. Every
segment is capable to promise the profits. This multi-segment coverage strategy has the advantage of
diversifying the firm’s risk. Firm can earn money from other segments if one or two segments seem
unattractive. For example, a company may concentrate on all the income groups to serve.
3. Product Specialization: In this alternative, a company makes a specific product, which can be sold
to several segments. Here, product is one, but segments are many. Company offers different models
and varieties to meet needs of different segments. The major benefit is that the company can build a
strong reputation in the specific product area. But, the risk is that product may be replaced by an
entirely new technology. Many ready-made garment companies prefer this strategy.
4. Market Specialization: This strategy consists of serving many needs of a particular segment. Here,
products are many but the segment is one. The firm can gain a strong reputation by specializing in
serving the specific segment. Company provides all new products that the group can feasibly use. But,
reduced size of market, reduced purchase capacity of the segment, or the entry of competitors with
superior products range may affect the company’s position.
5. Full Market Coverage: In this strategy, a company attempts to serve all the customer groups with
all the products they need. Here, all the needs of all the segments are served. Only very large firm
with overall capacity can undertake a full market coverage strategy. Methods of Full Market
Coverage:
(i) Undifferentiated Marketing - Company sells the same products to all the customer groups.
It does not consider difference among buyers. Product and marketing programme remain
common for all the segments. The firm relies on mass production, mass distribution, and mass
advertising. So, it can considerably reduce production, distribution, and promotional costs.
(ii) Differentiated Marketing - Here, company operates in several segments and designs
different marketing programmes for each of the segments. Various groups of customers are
targeted by several types of products and marketing strategies. It is based on the notion that
each group needs different products. This strategy is used by the most of automobile
companies. This strategy creates more total sales, but costs of doing business also on increase.
POSITIONING
Positioning is defined as the target market’s perception of the product’s key benefits and features,
relative to the offerings of competitive products. Positioning is the process of identifying the needs of
different groups of customers and the extent to which competing products are perceived to meet
customers needs. In other words, relating a product to the market is termed as ‘product positioning’.
It also includes activities like determining the market segments towards which major marketing effort
will be directed on behalf of a product and suggesting methods to differentiate products from
competing ones. Thus, the whole process is meant to bring together the market segments and
products. The process can be used to retain existing products and services as well as to introduce new
ones. Thus, product positioning refers to targeting the product at specific class of customers or for
specific needs. It determines the image of the product in relation to the rival products.
IMPORTANCE OF POSITIONING
Effective product positioning ensures that marketing messages resonate with target consumers and
compel them to take action.
Understanding Customer Needs: Effective product positioning requires a clear understanding of
customer needs so that the right communication channels are selected and key messages will resonate
with customers. In addition to identifying the customer based on demographic and psychographic
(personality/lifestyle) attributes, marketers need to understand customer needs, especially relative to
the products and services they have to offer, to clearly convey value as part of their marketing plan.
Weigh Competitive Pressures: Marketers must weigh competitive pressures when they are
considering the positioning elements of their marketing plans. Effective positioning conveys to
consumers why this company's product or service should be preferred over other competitive options
based on what the company knows about the target audience's needs. Effective marketing plans
clearly identify how the company's products or services are different from competitors' offerings and
in what ways. There is no value in being a "me too" product offering and simply copying what
competitors are doing. Marketers must stand out from the crowd in ways that hold value for their
target markets.
Targeting Communication Channels: Product positioning helps marketers consider how their
offerings are different from others that consumers have to choose from. But it is not enough to know
this from an internal perspective – marketers must communicate this to the target audiences. To do
this effectively, they must choose communication channels that are designed to connect with their
identified target audiences at times when they will be most receptive to these messages. Consider how
automobile manufacturers position their products through communication via television commercials
during sporting events, for instance, or how cosmetics manufacturers run full-page, full-color ads in
women's magazines.
Carefully Crafted Key Messages: The final challenge in effective product positioning is conveying the
differentiating, value-added aspects of your product or service to your target audience through the
communication channels you have selected. These messages are designed to convey how your
product is different (and better) than competitive offerings, as well as to address the value-added
attributes that are important to your audience. Product positioning is at the foundation of any effective
marketing plan because it impacts the ultimate purchase decision.
Promote Consumer Goodwill & Loyalty: Systematic product positioning reinforces the company’s
name, its product and brand. It popularizes the brand. The company can create goodwill and can win
customer loyalty. Product positioning signifies those advantages that are significant to consumers.
When such benefits are promoted through suitable means of advertising, it definitely catches the
interest and attention of consumers.
POSITIONING BASES
By product attribute - A product attribute is a specific feature or benefit of the product. Positioning in
this way focuses on one or two of the product’s best features/benefits, relative to the competitive
offerings.
By Benefits - These refer to advantages that promote the well being of the consumer or price-quality
benefits. Some firms will position products based on relative high quality, or based on the claim that
they represent significant value.
By user - This positioning approach highlights the user (the ideal or representative target consumer)
and suggests that the product is the ideal solution for that type of person and may even contribute to
their social self-identity.
By use/application - With this approach, the product/brand is positioned in terms of how it is used in
the market by consumers, indicating that the product is the best solution for that particular task/use.
Against competition - With this approach the firm would directly compare (or sometimes just imply),
a comparison against certain well-known competitors (but not generally not the whole product class
as above).
By product class - This positioning strategy tends to take a leadership position in the overall market.
Statements with the general message of “we are the best in our field” are common.
POSITIONING PROCESS
The positioning process is important to be identified and followed by any organization which wants to
implement its marketing strategy soundly. It is a difficult task to identify and select a positioning
strategy and thereby the correct positioning process for an organization. There are 6 main steps in
positioning process. In each of the steps, marketing research techniques can be employed to get the
necessary information. These steps are discussed as follows:
(1) Identifying the Competitors – A first step is to identify the competition. This step is not as simple
as it seems to be. For example, ‘Pepsi ‘ might define its competitors as follows:
(6) Monitoring the position – An image objective, like an advertising objective should be measurable.
It is necessary to monitor the position overtime, for that you have variety of techniques that can be
employed it can be on the basis of some test and interviews which will help to monitor any kind of
change in the image. Thus, the first four steps in the positioning process provides a useful
background. The fifth one only is taken to make the position decision. The final step is to evaluate and
measure and follow up.
PRODUCT DIFFERENTIATIONS
A company’s offer has to be distinct from those of its competitors and should fulfill the requirements
of the customers of its target markets. A company’s positioning is the result of whatever the company
does. Marketing mix is the most tangible and the most flexible tool to create the desired positioning.
Companies use their marketing mix to create something specific and special for their customers.
Product differentiation results from added features which give customers benefits that rivals cannot
match. Before adding features, a company should thoroughly research the need for the particular
feature among customers in the intended target market. Positioning does assume that consumers are
comparing products based on similar characteristics. Marketers must know what characteristics are
important to their key target markets, and then position their product to fit those requirements. Our
college student car shoppers have decided on fun, cool, innovative, and affordable as their key
purchasing characteristics. The brands that advertise these types of cars would be Maruti, Hyundai
and Tata. These car manufacturers have positioned their cars as fun, cool, and affordable. For
example, the Hyundai has a very creative ad campaign that uses the 'Party Rock Anthem' and a bunch
of hip-hop hamsters to position the car as cool. This use of carving a niche for a product (in this
instance a car for young drivers) requires the use of product differentiation. This is a type of
positioning strategy that Hyundai is using to distinguish their cars from the competitor's in the market
place. Hyundai wants the young driver target market to view that their car has features and offers
much more than any of the competition.
There are several different factors that can differentiate a product, however, there are three main
categories of product differentiation. Those include horizontal differentiation, vertical differentiation,
and mixed differentiation.
Horizontal Differentiation: Horizontal differentiation refers to any type of differentiation that is not
associated with the product’s quality or price point. These products offer the same thing at the same
price point. When making decisions regarding horizontally differentiated products, it often boils down
to the customer’s personal preference. Examples of Horizontal Differentiation: Pepsi vs Coca Cola,
bottled water brands, types of dish soap.
Vertical Differentiation: In contrast to horizontal differentiation, vertically differentiated products are
extremely dependent on price. With vertically differentiated products, the price points and marks of
quality are different. And, there is a general understanding that if all the options were the same price,
there would be a clear winner for “the best.” Examples of Vertical Differentiation: Branded products
vs. generics, A basic black shirt from Hanes vs. a basic black shirt from a top designer, the vehicle
makes.
Mixed Differentiation: Also called “simple differentiation,” mixed differentiation refers to
differentiation based on a combination of factors. Often, this type of differentiation gets lumped in
with horizontal differentiation. Examples of Mixed Differentiation: Vehicles of the same class and
similar price points from two different manufacturers.
DIFFERENCES TO PROMOTE
A product’s unique selling proposition (USP) can be literally anything that makes it unique or
different from others out there. Here’s a few examples of ways companies can differentiate their
products from others in the market.
Quality: How does the quality, reliability, and ruggedness of your product compare to others on the
market?
Design: Have you done something different with your design? Is it minimalistic and sleek? Easy-to-
navigate?
Service and interactions: Do you offer faster support than anyone else on the market? Does your team
provide custom onboarding? How are your customers’ interactions with your team different from
those of your competition?
Features and functionalities: Does your product do something the competition does not? Is it faster
than anything else out there? Is it the only one to offer a certain integration?
Customization: Can you customize parts of the product that competitors cannot?
Pricing: How does your product’s price or pricing model differ from that of the competition? Cheaper
is not the only differentiating factor to consider with product pricing.
CUSTOMER RETENTION
Customer retention refers to the activities and actions companies and organizations take to reduce the
number of customer defections. The goal of customer retention programs is to help companies retain
as many customers as possible, often through customer loyalty and brand loyalty initiatives. It is
important to remember that customer retention begins with the first contact a customer has with a
company and continues throughout the entire lifetime of the relationship. Customers are indeed an
asset to the firms. A good customer base ensures a continuous source of future revenue due to repeat
purchases done by them and cross- buying of other products offered by the service provider. If the
firm is incurring costs to attract new customers then it is advisable for the firms to maintain their
existing customer base rather than continuously losing customers and replenishing the lost customers.
Current customers who buy more from the firm are of greater worth than the customers who are new
or those who shop less frequently.
Cost of customer acquisition: It’s no secret, pursuing new business can be an expensive venture. Just
think of all the moving parts involved when courting a new customer: Email campaigns, Social media
sites, Outbound sales teams, Prospecting leads etc. Each of these steps has a hard cost. Whether it’s
the inbound marketing team managing the paid advertising and content strategies or the outbound
sales teams prospecting and calling cold leads. Not just in salaries but in advertising budget as well as
the tools required for prospecting. And even when a new customer has been successfully courted it
can take weeks, months perhaps even years before you turn a profit, depending on the length of your
sales cycle.
Upsell and Cross-Sell: Another one of the benefits of customer retention is the ability to upsell and
cross-sell products and services. Unfortunately many field sales teams make the assumption that once
an initial sale has been made, that’s it – no more work to be done here. But there is, if you listen
carefully to your customers. Field sales reps in constant contact with customers are in the perfect
position to know when a customer’s needs expand beyond their initial offering. When that’s the case,
and they have the budget behind to do something about it, that’s the moment when a potential cross-
sell or upsell can be made.
Referral system: The benefits of customer retention extend far beyond simply cross-selling and
upselling, mind you. If your field sales team is able to keep customers onboard and happy with your
product or service then they can act as a successful referral system. And referrals are a sales rep’s
dream.
Advocacy: One of the related benefits of customer retention that goes hand-in-hand with referrals is
customer advocacy. Customer advocates are those that scream your name from the rooftops, telling
anyone who will listen how great your company is, how solid your products are and how the
competition simply trail in your wake. What’s more, they do all this free of charge!
Shut the Back Door: Just as there’s a hard cost in courting new customers, there’s a hard cost with
them leaving too. What we are of course talking about it churn rate: The rate at which subscribing
customers discontinue their service with your brand. And after all the hard work put in to get them in
the first place it would be a shame to see them leave like that.
CRM DATABASE
CRM is an abbreviation for Customer Relationship Management. It’s a system used to build and
manage customer relationships. A CRM system helps businesses manage all the interactions it has
with customers and potential customers. With a CRM platform, customer preferences are recorded,
and customer activity can be tracked. So every time they are spoken to, regardless of who they talk to,
customers get a fully personalised and consistent experience. CRM software helps organisations
streamline their processes and workflows so that every part of the business is on the same page. Sales
and marketing teams, especially, rely on CRM to create collaboration and improve their productivity.
The overall aim is to provide more engaging customer experiences, increase customer loyalty and
retention, and drive business growth and profitability.
A CRM database encompasses all the customer data that you collected, stored and analysed using
your customer relationship management program. This data equips a CRM with the ability to provide
its users with considerable advantages.
All the personal details of a customer, lead or prospect including their names, email
addresses, Skype addresses, ages and titles etc.
Sources of leads: Depending on the point-of-contact from where the customer got in touch
with the company (website, social media, email campaign etc.), a CRM can automatically
maintain the source of leads.
All the interactions made with the customer including the last time you talked, the last time
they submitted feedback, the last time they requested to receive a newsletter etc.
All the purchase histories of all the customers.
Other information like the names of the customers’ kids (or of their pets), their favourite
hobbies, their dream travel destination or any other personal data that you believe can help
you maintain a healthy, long-term relationship.
Their levels of engagement; e.g. the last time they got in touch with the company or the last
time they visited the company website.
Using this data, a company can not only figure out the needs and desires of their customers, but it can
also identify the hottest leads or the most frequent buyers and make them a priority. In addition to
this, a company can also forecast its sales and create segmented marketing strategies and campaigns.
E-TRADING
This refers to a method of trading securities, financial derivatives or foreign exchange electronically.
Both buyers and sellers use the internet to connect to a trading platform such as an exchange-based
system or electronic communication network (ECN). Also known as e-trading, such methods grew in
popularity in the 1990s thanks to technological advances, and are now rapidly taking over from more
traditional methods such as physical trading floors and phone trading. One of the main advantages of
trading online is the speed of transactions. Instruments can be bought and sold almost instantaneously,
with no delays caused by paper copies of documents being filed. The growth of electronic trading has
also meant lower costs for many third-party brokers, with savings often being passed on to investors
in the form of smaller commissions. The internet has also made trading accessible to far more people
across the world than traditional methods. However, as with most modern technology, IT glitches can
occur.