MBA – 202 MARKETING MANAGEMENT UNIT – 2

MBA – 202  

MARKETING MANAGEMENT   

UNIT – 2

Q1. What do you mean by Segmentation? Define a Segment. What are the characteristics of a good segment?

Ans. SEGMENTATION :- The process of dividing a market into smaller homogeneous market with the similar characteristics is called a segmentation.

Market segmentation is the process of dividing the total market into relatively distinct homogeneous sub groups of consumers with similar needs or characteristics that lead with them to respond in similar ways to a particular marketing programme.

“Market Segmentation is the sub dividing of market into homogeneous sub-sectional of customers, where any sub section may conceivably be selected as a market target to be reached with a distinct marketing mix” – Philip Kotler

Market segmentation consist of taking the total heterogeneous market for a product and dividing it into several sub markets or segments, each of which tends to be homogeneous in all significant aspects.

SEGMENT :- A Segment/Market Segment is a portion of a larger market in which the individuals , groups or organizations share one or more characteristics that cause them to have relatively similar needs.

An identifiable group of individuals, families, businesses or organizations, sharing one or more characteristics or need in an otherwise homogeneous market. Market segment generally respond in a predictable manner to a marketing or promotion offer.

CHARACTERISTICS OF A GOOD SEGMENT :-

There are certain characteristics of a good segment which are as following :-

(a)   MEASURABLE :-  Market segment are usually measured in terms of sales, value of volume (i.e. the number of customers within the segment). Reliable market research should be able to identify the size of a market segment to a reasonable degree of accuracy, so the strategists can then decide whether, how, and to what extent they should focus their efforts on marketing to this segment.

(b)  SUBSTANTIAL :-  Simply put, there would be no point in wasting marketing budget on a market segment that is insufficiently large, or has negligible spending power. A viable market segment is usually a homogeneous group with clear defined characteristics such as age group, socio-economic background and brand perception. Longevity is also important here : No market segmentation expert would recommend focusing on an unstable customer group that is likely to disperse or change beyond recognition within a year or two.

(c)  ACCESSIBLE :-  When demarketing a market segment, it is important to consider how the group might be accessed and crucially, whether this falls within the strengths and abilities of the company’s marketing department. Different segments might respond better to outdoor advertising, social media campaigns, television infomercials, or any number of other approaches.

(d) DIFFERENTIABLE :-  An ideal market segment should be internally homogeneous (i.e. all the customers within the segment have similar preferences and characteristics), but externally heterogeneous. Differences between market segments should be clearly defined, so that the campaigns, products and marketing tools applied to them can be implemented without overlap.

(e)  ACTIONABLE :-  The market segment must be practical value – its characteristics must provide supporting data for a marketing position or sales approach, and this is in turn must have outcomes that are easily quantified, ideally in relation to the existing measurements of the market segment as defined by initial market research.

A good understanding of these principles of marketing segmentation is an important building block of a company’s marketing strategy – the foundation for an efficient, streamlined and ultimately successful approach to customers and a means of targeting its products and services accurately, with the minimum of wastage.

Q2. Discuss the various basis of Segmentation and explain with suitable examples ?

Ans. There are majorly four basis of segmentation which are as following below :-

(a)   DEMOGRAPHIC SEGMENTATION :- Demographic Segmentation divides the markets into groups based on variables such as age, gender, family size, income, occupation, education, religion, race and nationality. Demographic factors are the most popular bases for segmenting the consumer group. One reason is that consumer needs, wants and usage rates often vary closely with the demographic variables. Moreover, demographic factors are easier to measure than most other type of variables.

AGE : McDonald’s targets children, teens, adults and seniors with different ads and media. Markets that are commonly segmented by age includes clothing, toys, music, automobiles, soaps, shampoos, etc.

GENDER : clothes for men, women and kids. Like Chhabra 555 sales only women ethnic wear.

Cosmetics : different cosmetics for men & women.

Magazines : there are certain magazines which are published for women like women’s era. And etc.

INCOME : income of a person decides the life style and purchasing power of that person. This includes housing, furniture, automobile, clothing, alcoholic beverages, food, sporting goods, luxury goods, financial services and travel.

FAMILY CYCLE : Product needs vary according to age, number of persons in the household, marital status and number & age of children. These variables can be combined into a single variable called family life cycle. It includes social class of a family too. Social class is divided into three categories Upper class, Middle class and Lower class.

(b)  GEOGRAPHIC SEGMENTATION :- It refers to dividing a market into different geographical units such as nations, states, regions, cities or neighborhood.

For example : Newspapers are published and distributed to different cities in different languages to cater the needs of the customers.

Geographical variables such as climate, terrain, natural resources and population density also influence consumer products needs.

Companies may divide markets into regions because the differences in geographic  variables can cause consumers needs and wants to differ from one region to another.

(c)  PSYCHOGRAPHIC SEGMENTATION :- It pertains to life style and personality traits. In the case of certain products, buying behavior predominantly depends upon life style and personality characteristics.

PERSONALITY CHARACTERISTICS : It refers to a person’s individual character traits, attitudes and habits. Here markets are segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc. this type of segmentation is used when a product is similar to many competing products, and consumer needs for products are not affected by other segmentation variables.

LIFESTYLES : It is the manner in which people live and spend their time and money. Life style analysis provides marketers with a broad view of consumers because it segments the markets into groups on the basis of activities, interests, beliefs and opinions. Companies making cosmetics, alcoholic beverages and furniture’s segment according to the lifestyle.

(d)  BEHAVIOURAL SEGMENTATION :- In this, buyers are divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. Behavioral segmentation includes segmentation on the basis of occasions, user status, buyer-readiness stage and attitude.

OCCASION : Buyers can be distinguished according to the occasions when they purchase a product, use a product, or develop a need to use a product. It helps the firm expand the product usage.

For example; Cadbury’s advertising to promote the product during wedding season is an example of occasion segmentation.

USER STATUS : sometimes the markets are segmented on the basis of user status, that is, on the basis of non-user, ex-user, potential user, first time user and regular user of the product. Large companies usually target potential users, whereas smaller firms focus on their current users.

USAGE RATE : Markets can be distinguished on the basis of usage rate, that is, on the basis of light, medium and heavy users. Heavy users are often a small percentage of the market, but account for a high percentage of the total consumption. Marketers usually prefer to attract a heavy user rather than several light users, and vary their promotional efforts accordingly.

LOYALTY STATUS : Buyers can be divided on the basis of their loyalty status – hardcore loyal (consumer who buy one brand all the time), split loyal (consumers who are loyal to two or three brands), shifting loyal (consumers who shift from one brand to another), and switchers ( consumers who show no loyalty to any brand).

BUYER READINESS STAGE : The six psychological stages through which a person passes when deciding to purchase a product. The six stages are awareness of the product, knowledge of what it does, interest in the product, preference over competing products, conviction of the product’s suitability and purchase. Marketing campaigns exist in large part to move the target audience through the buyer readiness stages.

 

Q3. What do you mean by Targeting? Explain the process of Targeting? What are the different marketing approaches adopted by a marketer for targeting ?

Ans.  TARGETING :-  The process of selection of potential customers to whom  a business wishes to sell products and services. The targeting involves segmenting the market, choosing which segments of the market are appropriate, and determining the products that will be offered in each segment. A business offering multiple products can determine if the various segments should receive one generic product (such as in mass marketing), or if each segment should receive a customized product (multi-segment), based upon the market’s diversity, maturity, the level of competition and the volume of sales expected. Also called as targeting strategy.

Targeting is the second stage of the SEGMENT “Target” POSITION (STP) Process. After the market has been separated into its segments, the marketer will select a segment or series of segments and “Target” it/them. Resources and efforts will be targeted at the segment.

Market is segmented using certain bases, like income, place, education, age, and life cycle, and so on. Out of them, a few segments are selected to serve them. Thus, evaluating and selecting some market segments can be said as market targeting.

HOWEVER, WE CAN DEFINE THE TERM AS :

-         We can define the term as : 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 distributed network is prepared.

-         It involves basically two actions – evaluation of segments and selection of the appropriate market segments. In this relation, market targeting can be defined as : market targeting is an act of evaluating and selecting market segments.

-         Finally, we define market targeting as : market targeting consists of dividing the total market into segments, evaluating these segments, and selecting the appropriate segments as the target market.

PROCESS OF TARGETING :-

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 reflects 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 take 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 the 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.

Alternative strategies (methods) for Market Targeting :

Basically five alternative patterns/strategies are available :

Company may opt for any one of the following strategies for market targeting based on situations :

1.     Single Segment Concentration :  It is the simplest case. The company selects only a single segment as target market and offers a single product. Here product is one; segment is one. For example, a company may select only higher income segment to serve from various segments based on income, such as poor, middleclass, elite class, etc. All the product items produced by the company are meant for only a single segment.

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 readymade 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 segments are served. Only very large firm with overall capacity can undertake a full market coverage strategy.

The concept of Market Segmentation  identifies three strategic options of  marketing, viz., Concentrated Marketing, Differentiated Marketing and Undifferentiated Marketing.

There are three different marketing approaches adopted by a Marketer for Targeting which are as following below :

1.     Concentrated Marketing :  It is concerned with “focusing all available resources on one segment within the total market”. It is an attempt to match what the firm can do the best with a market niche devoid of strong competitors, a strategy of differential advantage. It means one marketing mix, a rather narrow product and some unique competence, which is the basis for the firm’s competitive advantage in a chosen segment.

Concentrated marketing takes a variety of forms. For example, high fashion boutiques and design-oriented houseware shops. Such marketing has followed by Ambassador cars, HMT quartz, Rolex watches, glass manufacturing units, Johnson and johnson’s strategy for infant market, etc. is a good example of concentrated marketing.

2.     Differentiated Marketing :  It attempts to appeal to the entire market by designing different products and marketing programmes for different segments of the market. By so doing marketers hope achieve additional sales and increased customer identification with brand or company name. this type of marketing is followed by most medium and large sized firms doing business in many markets with a broad product line. For examples, Golden tobacco company in India markets cigarettes under ten brand names: Panama, New Deal, Gold Flake, Taj, Sainik, Gaylord, Tajmahal, Square Target and Diamond. Hindustan Lever Ltd., manufactures and sells bathing soap under different names, such as Lux-supreme, Lifebuoy, Rexona, Saral, Pears, Lyril, etc. Usha Fan Co. markets fan under three different names Usha Prima, Usha Deluxe and Usha Continental. Lipton and Brooke Bond reach all segments of the market through a large number of brands of tea priced in various ranges and promoted through a variety of appeals.

3.     Undifferentiated Marketing :  It treats the entire market as its target by competing successfully using the same marketing mix. Such marketing is resorted to when it is found that there are some products which have a broad-based appeal and hence there is no need for their segmentation. Such marketing proves weak in every segment because there is specialized competition in each segment. For example, Coca-Cola, Pepsi, Thumps-up, Sprint, Canada Dry, Campa Cola, etc.

STRATEGY	ORGANISATIONAL           CHARACTERISTICS
Concentrated	The organization targets a major offering to a specific market segment
Differentiated	Each organization targets several products, one product to each of several market segments
Undifferentiated	All products from all organizations targeted to all or a majority of the market

Q4. What do you mean by Positioning? What are the different strategies adopted by marketer to position its product?

Ans. Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the target market’s mind. The end result of positioning is the successful creation of a market focused value preposition, a cogent reason why the target market should buy the product. Each company must decide how many differences to promote to its target customer. The position of a product is the sum of those attributes normally ascribed to it by the consumers- its standing, its quality, the type of people who use it, its strengths, its weaknesses, any other unusual or memorable characteristics it may possess, its price and the value it represents. Many marketers advocate promoting only one central benefit what Rosser Reeves has referred to as Unique Selling Preposition (USP) number one positioning include “best quality”, “best service”, “lowest price”, “best value”, “safest”, “more advanced technology” etc.

Positioning is a platform for the brand. It facilitates the brand to get through to the target consumer. Positioning is the act of fixing the locus of the product offer in the minds of the target consumers. In positioning, the firm decides how and around what parameters, the product offer has to be placed before the target consumers. The significance of product positioning can be easily understood from David Ogilvy’s words: “the results of your campaign depends less on how we write your advertising than on how your product is positioned”.

Positioning of a product or service is nothing but creating an image in the consumer’s mind. Consumers generally tend to use images while making a purchase; they buy brand images rather than the actual products. There are many brands that have a powerful influence on the consumer’s mind. Just think of Pepsi or Coca Cola in the soft drink market, Maruti and Santro in the passenger car market, LG or Samsung in the television market and so on. Brand names add to the offering and create a “meta product”, an emotional loyalty with consumers. Consumer associate brand names with life styles, social positions, professional roles and these associations combine to form an image or position. The terms “Position” or “Positioning” are frequently used to mean ‘image’. To build up a brand image or corporate image a marketer generally used advertising as a tool.

POSITIONING APPROACHES :

There are several approaches to positioning of products and service offerings:

1.     Positioning by product attributes or customer benefits : This approach to positioning is probably the most common and involves setting the brand apart from competitors based on specific brand attributes or the benefits offered. Many products, such as autos, cameras and other durable product brands offer excellent examples. A product that is well made usually offers more than one benefit. In case of toothpaste, brands are positioned on cosmetics, medicinal, taste or economy dimensions. Some brands are using one, two or even three of the above mentioned dimensions to create dual or triple positioning.

Examples: promise is positioned on gum care.

Close-up is positioned on fresh breath and cosmetic benefit.

Colgate is positioned on fresh breath, decay prevention and taste.

2.      Positioning by price-quality : This approach justifies various price-quality categories of the products. Manufacturers deliberately attempt to offer more in terms of service, features or performance in case to certain products known as premium products and in return, they charge higher price, to cover higher costs and partly to communicate the fact that they are of higher quality.

3.     Positioning by product-user :  This deals with positioning a product keeping in mind a specific user or class of users. For example, cosmetic brands like lakme position themselves targeting fashion-conscious women.

4.     Positioning by use of application :  The idea behind this approach for positioning is to find an occasion or time of use. For instance, Vicks Vaporub is to be used for a child’s cold at night. Iodex is for sprain and muscle pains, Burnol ointment is for burns and Dettol antiseptic is for nicks and cuts. These brands have used this positioning for decades now without any serious challenge from competitors.

5.     Positioning by corporate category :  This positioning is used so that the brand is perceived as belonging to another product category. This is often a strong  positioning strategy when the existing product category is crowded. The consumers then perceive the brand in different context. For example, a milk powder, with suitable additions and appropriate packaging, can be positioned as an ‘energy drink’ for sports people or a health-drink for players or a drink for growing school going children etc.

6.     Positioning by corporate identity :  Companies that become tried and trusted household names, use their names to imply the competitive superiority of  their new brands such as Tata, Sony, etc. Corporate credentials are added as by a by-line. This offers a strong positioning and is used in line extensions or brand extensions.

7.     Positioning by Competitors :  Positioning by competitors may be used because the competitor enjoys a well established image in the market. The marketer wants the consumers to believe that the brand is superior, or at least as good as the brand offered by the competitor. It is like telling the people that you live next to some famous movie personality in Delhi rather than getting involved in explaining the locality and streets.