Week 10 COMPETITIVE MARKETING

Selecting a Market and Establishing

a Position

 To succeed, a new firm must know who its customers are and how to reach them.
 A firm’s target market is the limited group of individuals or businesses to which it
attempts to appeal to and sell to
 A firm uses a three-step process to determine who its customers are:
 Market segmentation

 The first step in selecting a target market is research to determine the different potential
target markets in that industry
 Who (type of person or type of organisation) is interested in your product

 This market segmentation can be based on: geography (city, district, country),
demographic variables (age, gender, family size, income), psychographic variables
(personality, lifestyle, values), behavioral variables (benefits sought, product usage rates,
brand loyalty), and product type (varies by product).
 For example, the computer industry can be segmented by product type (i.e., handheld
computers, tablet computers, laptops, PCs, work stations, minicomputers, mainframes, and super
computers) or customers served (i.e., individuals, businesses, schools, and government).
 Testing whether your market has been
segmented successfully
 Consider these requirements:
 Homogeneity (same) of needs and wants appears within the
segment.
 Differences within the segment should be small compared to
difference across segments.

 Heterogeneity (difference) of needs and wants exists between

the segments.
 The segment should be distinct enough so that its members
can be easily identified.
 The segment should be large enough for the firm to earn
profits.
 It should be possible to determine the size of the segment, if
possible
Market segment profile
Selecting a target market

 After a firm has segmented the market, the next step is to select a target market.
 The market must be sufficiently attractive, and the firm must be able to serve it well.
 A firm (especially a startup venture) doesn’t target all segments of a market – too
much with limited resources
 Instead, most firms target a part of the whole market within the segment - represents a narrow
group of customers that similar within the whole market
 For example, sell chickens to restaurants
 Crafting a unique marketing
position
 Next step is to establish a “position” within it the market
 Position is concerned with how the firm is situated relative to competitors
 What differentiates you from your competitors?
 Selling village chickens

 A tagline is a catchy phrase that’s used consistently in a company’s literature,

advertisements, stationery, and even invoices, and thus becomes associated with that
company—to reinforce the position it has staked out in the market
 A company has created a successful tagline if the message makes you think of its products or
services and the position it has established in its market.
 Branding

 A brand is the set of attributes/characteristics that people associate with a company.

 These attributes can be positive, such as trustworthy, innovative, dependable, or easy to deal
with.
 Or they can be negative, such as cheap, unreliable, arrogant, or difficult to deal with
 Brands are multi-faceted – many ways people think of them – see table on next slide

 Companies monitor the integrity of their brands through brand management,

 A program used to protect the image and value of an organization’s brand in a consumers
mind
 Branding

 Start-ups must build a brand from scratch; this process begins with selecting the company’s
name
 One of the keys to effective branding is to create a strong personality (cool, healthy) for a
firm, designed to appeal to the chosen target market.
 Southwest Airlines, for example, has created a brand that denotes fun

 Brands are built through a number of techniques, including advertising, public relations,
sponsorships, support of social causes, social media, and good performance.
 A firm’s name, logo, website design, Facebook page, Instagram account, and even its
letterhead are part of its brand
 Creating buzz also helps a firm establish a community of true believers and early evangelists for a
product or service
 Ultimately, a strong brand can be a very powerful asset for a firm. Over 50 percent of consumers say
that a known and trusted brand is a reason to buy a product
Brands can influence partnership and
investment prospects
 Brand loyalty
 Name recognition
 Perceived quality (of a firm’s products and services)
 Brand associations in addition to quality (e.g., good service)
 Other proprietary assets, such as patents, trademarks, and high-quality
partnerships
The 4Ps of Marketing for New Ventures

 Once a company decides on its target market, establishes a position within that
market, and establishes a brand, it is ready to begin planning the details of its
marketing mix.
 Marketing is the action or business of promoting and selling products or services, including
market research and advertising.
 A firm’s marketing mix is the set of tactical marketing (communication) tools that it uses to
produce the response it wants in the target market
 Most marketers organize their marketing mix into four categories:
 product,
 price,
 promotion, and
 place (or distribution)
Product

 A firm’s product, in the context of its marketing mix, is the good or service it
offers to its target market.
 A product is something that takes on physical form (Apple iPhone, a bicycle, or a
solar panel)
 A service is an activity or benefit that is intangible and does not take on a physical
form (an airplane trip or advice from an attorney)
 But when discussing a firm’s marketing mix, both products and services are lumped
together under the label “product.”
 The product or products to be sold is central to the firm’s entire marketing
effort.
 the most important attribute of a product is that it adds value in the mind of its target
customers
 Value basis of marketing
Five characteristics of a product

 A quality level,
 Features (what can it do),
 Design (how made),
 a brand name, and
 packaging
Price

 The amount of money consumers pay to buy a product.

 The price a company charges for its products also sends a clear message
to its target market.
 For example, Oakley positions its sunglasses as innovative, state-of-the art
products that are both high quality and visually appealing. This position in the
market suggests the premium price that Oakley charges. If Oakley tried to
establish the position described previously and charged a low price for its
products, it would send confusing signals to its customers. Its customers would
wonder, “Are Oakley sunglasses high quality or aren’t they?
 Types of pricing

 Cost-Based Pricing. In cost-based pricing, the list/selling price is determined by adding

a markup percentage to a product’s cost.
 The markup percentage may be standard for the industry or may be arbitrarily determined by
the entrepreneur

 Value-Based Pricing In value-based pricing, the list price is determined by estimating

what consumers are willing to pay for a product and then backing off a bit to provide
a cushion.
 What a customer is willing to pay is determined by the perceived value of the product and by
the number of choices available in the marketplace
Promotion

 Promotion refers to the actions the firm takes to communicate the merits of
its product to its target market.
 the goal is to persuade people to buy the product

 Advertising is making people aware of a product in hopes of persuading

them to buy it. Advertising’s major goals are to:
 Raise customer awareness of a product
 Explain a product’s comparative features and benefits
Promotion- advertising

 These goals can be accomplished through a number of media including direct

mail, magazines, newspapers, radio, the Internet, blogs, television, and billboard
advertising.
 The most effective ads tend to be those that are memorable and support a
product’s brand. However, advertising has some major weaknesses, including the
following:
 Low credibility
 The possibility that a high percentage of the people who see the ad will not be interested
 Message clutter (meaning that after hearing or reading so many ads, people simply tune
out)
 The perception that advertising is intrusive
 Promotion - advertising

 Another medium for advertising, which is growing in popularity, is social media sites, such
as Facebook.
 The advantage of Facebook, in particular, is that it allows companies to deliver highly
targeted ads based on where people live and how they describe themselves on their
Facebook profiles.
Public Relations

 Public Relations - one of the most cost-effective ways to increase the

awareness of the products a company sells is through public relations
 Refers to efforts to establish and maintain a company’s image with the public
 The major difference between public relations and advertising is that public
relations is not paid for directly.
 The cost of public relations to a firm is the effort it expends to network with journalists,
blog authors, and other people to try to interest them in saying or writing good things
about the company and its products
 Many start-ups emphasize public relations over advertising primarily because it’s
cheaper and helps build the firm’s credibility
 In slightly different words, it may be better to start with public relations rather than
advertising because people view advertising as the self-serving voice of a company that’s
anxious to make a sale – use a third party to sell you which will probably considered to have
less reasons to stretch the truth
Place (Distribution)

 Place, or distribution, encompasses all the activities that move a firm’s

product from its place of origin to the consumer.
 A distribution channel is the route a product takes from the place it is made to
the customer who is the end user

 The first choice a firm has to make regarding distribution is whether to sell
its products directly to consumers or through intermediaries such as
wholesalers or distributors.
 Within most industries, both choices are available, so the decision typically
depends on how a firm believes its target market wants to buy its product
Place

 For example, it would make sense for a music studio that is targeting the
teen market to produce digital recordings and sell the recordings directly
over the web. Most teens have access to a computer or smartphone and
know how to download music.
 In contrast, it wouldn’t make nearly as much sense for a recording company
targeting retirees to use the same distribution channel to sell its music offerings.
A much smaller percentage of the retiree market knows how to download
music via the web. I
Place

 Selling Direct Many firms sell directly to customers (store or website)

 Advantage - Being able to control the process of moving products from their place
of origin to the end user instead of relying on third parties
 Disadvantage - a firm has more of its capital tied up in fixed assets because it must
own or rent retail outlets, must maintain a sales force, and/or must support an e-
commerce website. It must also find its own buyers rather than have distributors that
are constantly looking for new outlets for the firm’s products

 The advent of the Internet has changed how many companies sell their
products. Many firms that once sold their products exclusively through retail
stores are now also selling directly online
 The process of eliminating layers of middlemen, such as distributors and wholesalers,
to sell directly to customers is called disintermediation.
 Place

 Selling Through Intermediaries Firms selling through intermediaries typically pass off their
products to wholesalers or distributors that place them in retail outlets to be sold.
 Advantage - the firm does not need to own as much of the distribution channel
 Disadvantage – is challenge to find wholesalers and distributors that will represent a firm’s products. A
start-up must often pitch wholesalers and distributors much like it pitches an investor for money in order to
win their support and cooperation.
 The disadvantage of selling through intermediaries is that a firm loses a certain amount of control of its
product - no guarantee that Best Buy’s or Walmart’s employees will talk up the firm’s products as much
as they would if they were employees in the firm’s own stores.
 Selling via distributors and wholesalers can also be expensive, so it is best to carefully weigh all options.
taken by the distributor and the retailer
Sales process

 A firm’s sales process depicts the steps it goes through to identify prospects
and close sales or make sales
 Following a formal or structured process to generate and close sales
benefits a firm in two ways.
 First, it enables a firm to fine-tune its approach to sales and build uniformity into
the process.
 Second, it helps a firm qualify leads, so the firm can spend its time and money
pursuing the most likely buyers of its products or services