Marketing: Nature & Scope of Marketing,Concepts - production, product, selling,marketing & societal marketing, marketingenvironment –marketing management and itsenvironment.
What is Market?A “Market” was a public place in a town or village, where householdprovisions and other objects were available for sale. The definition ofmarket has expanded in this globalized world. The traders may be spreadover a whole town, or city or region or a country and yet form a market. Forexample, stock market, Oil & Oilseeds market, Steel or Metals market etc.where people across the countries can participate in the business.
The essentials of a market are: A commodity / item which is dealt with (like gold, Silver, Iron, Electronic gadgets, Eatables etc.) The existence of buyers and sellers A place; be it a certain region, a country or the entire world &… Interactions between buyers & sellers to facilitate transactions.
Classification of markets: 1. On the basis of Geographic Area –Local Market is the place where the purchase and sale of goods / services involve buyers andSellers of a small local area. The example of local market is a village or a town, market. In thisMarket day to day requirement like vegetable, fruits, meat and fish are sold.Regional Market – When the purchase and sale of goods involve buyers and sellers of a region,such as a large town market catering to needs of a group of villages or towns, such a market iscommon in case of wholesale/ retail sale of food grains.National Market – When the purchase and sale of goods involve both buyers and sellers of theentire nation then it is called as national market. This type of market in the case of commoditiessuch as Cotton & Textiles Market located in Mumbai, Tea and Jute Markets located in Kolkata.Global or World Market – When the purchase and sale of goods involve buyers and sellers ofmany nations, there is said to be a World or Global Market. Many commodities such as Gold,Silver, Tea, Coffee, Spices are sold in such global markets. Many manufactured products andspecialized services are also sold across the globe by many companies. Indian companies likeTCS, Infosys, and WIPRO sell and provide their IT enabled services to many companies indifferent parts of the world. They operate in a Global Market.
2. On the basis of Nature of Competition in the market –Perfect Market –It refers to a market or market situation where there is perfect competition.Competition is said to be perfect when (a) the sellers & buyers of a particularproduct are so many that none of them have to sell or buy at a single uniform price.(b) Price is determined by the market forces of supply & demand.Imperfect Market –In contrast to the perfect competition, the imperfect market will have imbalancebetween number of buyers and sellers. In this case of imperfect competition themarket can be dominated by number of Buyers or Sellers. There may be restrictivetrade practices.
3. On the basis of Nature of Goods Sold –Consumer Goods Market –Definition: “A Consumer Goods Market is defined as a market where the final output of thefirm goes for the consumption of individual or household”.This is a market, where the buyers who are individuals and households purchase a variety ofproducts and services to satisfy their needs and wants. For example, an individual buyschocolate for his personal consumption whereas a family buys a refrigerator for household orfamily consumption. Products sold in consumer goods market are classified as Nondurables,such which are frequently purchased such as bathing soap, detergent etc. and Durables suchas refrigerator, TV Set, Washing Machine, Car, Clothing etc. Nondurables are also known asFMCG – Fast Moving Consumer Goods e.g. Soap, detergent etc...Industrial Goods Market –Definition: A business market is defined as a market where output of one firm goes either asraw material, goods in process or as consumables of another industry.Nonprofit and Government Markets –This market which consists of nonprofit organizations such as social service agencies,educational organizations, charitable organizations and Government Departments andagencies needs special skills to sell to them. These buyers have limited purchasing power whichis why pricing to this market needs to be planned carefully. Government, which is a large buyer,makes purchases on the basis of tenders, bids and negotiation.
Marketing ! “Marketing is Base of Every Activity”
Definitions of marketing: “The management process that identifies, anticipates and supplies customer requirements efficiently and profitably” Marketing is "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. Marketing is the process of identifying the customer/market need, want & desires & then converting those need wants & desires into Profitable Products or Services.*The Ultimate Goal of Marketing Should be the Satisfaction of CustomerNeeds . The Companies that tries to ignore the need want and desire ofcustomer or targeted market are always prone to failure of below the lineresults*
Importance of marketing / Functions of Marketing:The delivery of goods and services from producers to their ultimate consumers or users includesmany different activities. These different activities are known as marketing functions. Marketinghas proved its importance in following fields:1 Marketing Research and Information Management -- Marketers need to take decisionsscientifically. Marketing research function is concerned with gathering, analyzing andinterpreting data in a systematic and scientific manner. The ultimate purpose of any MIS is togather data from market in order to build customer friendly products or services and to retain orgain profitable market share.2 Advertising and Sales Promotion – Advertising is a mass media tool used to inform,persuade or remind customers about products or services. It is an impersonal message targetedat a chosen group through paid space or time.3 Sales Promotion is a short-term incentive given to customers or intermediaries to promotesales. It supplements advertising and personal selling and can be used at the time of launchinga new product or even during its maturity period. •Cont…..
4 Product Planning and Management – A Marketer should identify the desires ofconsumers to develop suitable products / services and make them available. Marketer is alsorequired to maintain the product and its variations in size, weight, package and price rangeaccording to the changing needs and requirements of his customers. Information required forthese decisions can be obtained from MIS.5 Selling –This function of marketing is concerned with transferring of products / services tothe customer. An important part of this function is organizing sales force and managing theiractivities. Sales force management includes recruitment, training, supervision, compensationand evaluation of salesmen. They need to be assigned targets and territories where they canoperate.6 Physical Distribution – Moving and handling of products from factory to consumers comeunder this function. Order processing, inventory, management, warehousing andtransportation are the key activities in the physical distribution system.7 Pricing – This is perhaps the most important decision taken by marketer, as it is the onlyrevenue fetching function and success and failure of the product may depend upon thisdecision. Therefore, the decision regarding how much to charge should be taken such that theprice is acceptable to the prospective buyers and at the same time fetches profits for thecompany. While deciding on the price, the factors to be considered are competition;competitive prices company’s marketing policy, government policy, and the buying capacity oftarget market etc.
Scope of marketingProduct policy or planning: Sales PlanningMarketing research:It Includes: Sales ManagementCollection of dataAnalysis of dataFinding /Conclusions and ATR Miscellaneous Activities:(action taking reports) 4P’s or 8 P’sMotivational Research:Test Marketing: Channels of Distribution Mfg—Distributor– Whole seller –Retailer --- Customer Mfg—Whole Seller—Retailer -- Customer Mfg—Ret-Customer & Many More Transportation & Warehousing
Nature of marketing:A marketer must deliver value for money: marketers have to track customer needs anddeliver the product as per the requirements. This is not the end in itself. The company mustsatisfy the following equation: (Value= benefits/cost)Marketing system affect company strategy marketing has its own subsystems, whichinteract with each other to form complete marketing system that is responsive to companymarketing strategy.Marketing creates mutually beneficial relationships: the customer is the focus of allmarketing activities. But, since the beginning of 1990s; the focus is shifting to the way of doingbusiness, the strategic aspects of marketing.Marketing is customer focused: Marketing intends to satisfy and delight the customer.Marketers can remain in the customer mind if they are provided value for what they spend.Customer focus can optimize costs for the customer while allowing the organizations focus onits core competencies.Marketing is surrounded by customer needs: Marketing starts with the identification ofcustomer needs and requirements. These are turned into probable features that might satisfythe basic needs. More the producer output matches with customer requirements more theprofitable it is.
Marketing Orientations/Concepts: Companies adopt different philosophies to market their products andservices. An analysis of evolution of marketing thought over last several decadesand reliance of marketing managers on specific marketing orientations, leads usto classify marketing concepts into several categories. The philosophy adopted bya company should strike a balance between the interests of the company,customers, society and public. There are five competing concepts and anorganization can choose any one of them for conducting marketing activities.1. Product Concept:2. Production Concept:3. Selling Concept:4. Marketing Concept:5. Holistic Marketing Concept:
1. The Production Concept – This is one of the oldest concepts of marketingand assumes that consumers will prefer those products and services that areeasily available and affordable.Companies which adopt this philosophy for their marketing should focus onimproving production and distribution efficiency. Production concept is auseful philosophy under situations where demand is more than supply and thecompanies are trying to increase production and when production costs arehigh.Companies are trying to achieve economies of scale. Under such conditions, itis likely that quality of products is neglected and service to customers is veryimpersonal.
2. The Product Concept assumes that consumers will prefer those products that offerquality, performance or innovative features. Managers in such companies focus ondeveloping superior products and improving the existing product lines by devotingtime to innovations. The problem with this orientation is that managers forget to readthe customer’s mind and launch products based on their own technological researchand scientific innovations. Very often it is observed that innovations enter the marketbefore the market is ready for the product, or is aware or clear about its benefits. This product oriented management with excessiveattention to product rather than customer leads to shortsightedness about business.This was termed as “Marketing Myopia”. He recommended that companies should havea clearer and broader vision of business they are in and should adapt to the changes inthe needs of the customers and in the environment. For example, a company likeKODAK. FUJI should not think they are only in the business of selling cameras andphotographic films. They should believe that they are in the business of preservingmemories for customers and photography in general.
3. The Selling Concept – The Selling concept assumes that consumers generally, willnot buy a company’s products unless aggressive selling and promotion efforts areundertaken. It also holds that consumers typically do not think of buying theseproducts which are nonessential goods without persuasion or aggressive selling action.Use of this concept leads people to believe that marketing is all about selling. Theproblem with this approach is the belief that the customer will certainly buy theproduct after persuasion and will not complain even if dissatisfied.In reality, this does not happen and companies pursuing this concept fail in business.This approach is applicable in the cases of unsought goods such as lifeinsurance, vacuum cleaners that buyers normally do not think of buying. E.g.Insurance policies etc..
4. The Marketing Concept The Marketing Concept proposes that a company’s task is tocreate, communicate and deliver a better value proposition through its marketingoffer, in comparison to its competitors; to its target segment and that this customeroriented approach only can lead to success in the market place. Today, marketingfunction is seen as one of the most important function in the organization. Manymarketers put the customers at the center of the company and argue in favor of sucha customer orientation where all functions work together to respond, serve andsatisfy the customer.
5 Holistic marketing Concept: The holistic marketing concept is based on thedevelopment, design, and implementation of marketing programs, processes, and activitiesthat recognizes their breadth and interdependencies. Holistic marketing is thus an approach tomarketing that attempts to recognize and reconcile the scope and complexities of marketingactivities. Social Marketing Holistic Internal Relationship Marketing marketing Marketing Concept Integrated Marketing
Relationship marketing- it aims at building up the good relationship for long-termwith key parties- customers, suppliers, distributors, and other marketing partners- inorder to earn and retain their business. It involves cultivating the right kind ofrelationship with the right constituent group.Integrated marketing- the marketer’s task is to device marketing activities andassemble fully integrated marketing programs to create, communicate, and deliver valuefor consumers. One traditional depiction of marketing activities is in the terms ofmarketing mix, which has been defined as the set of marketing tools. These toolsbroadly grouped in four, which are: product, price, place and promotion.Internal marketing- holistic marketing incorporates internal marketing, ensuring thateveryone in the organization embraces appropriate marketing principles, especiallysenior management. Internal marketing is the task of hiring, training, and motivatingable employees who want to serve customers well.Social Responsibility marketing- holistic marketing incorporates social responsibilitymarketing and understanding broader concerns and the ethical, environmental, legal,and social context of marketing activities and programs.
The Marketing Environment: The marketing environment consists of actors and forces outside theorganization that affect management’s ability to build and maintain relationshipswith target customers. Environment offers both opportunities and threats. Marketing intelligence and research used to collect information about theenvironment. Microenvironment: Forces close to the company That affect its ability to serve customers Macro-environment: Larger, societal forces that affect the organization’s microenvironment
Now a question comes to mind. Why division is important?Well Marketers build both internal and external relationships. Marketers aim todeliver value to satisfied customers, so we need to assess and evaluate ourinternal business/corporate environment and our external environment.
Why Environmental scanning!!“This is the process of gathering, analyzing and forecasting ofexternal environments’ information to identify opportunity andthreats that company faces”.Need for environmental scanning:It helps in 1. Identifying the opportunities that company has in immediate future. 2. Identifying the threats faced by the company. 3. Demand forecasting 4. Developing appropriate business plans. 5. Adjusting the company strategy in changing competitive environment.
Micro-environment: The forces which are very close to company and haveimpact on value creation and customer service.
Marketing intermediaries: The firms which distribute and sell the goods of thecompany to the consumer.Publics: These are microenvironment groups, which helps company to generate thefinancial resources, creating the image, examining the companies’ policy anddeveloping the attitude towards the product.Competitors: A company should monitor its immediate competitor. The productshould be positioned differently and able to provide better services.Suppliers: suppliers are the first link in the entire supply chain of the company.Customers: A company may sell their products directly to the customer or usemarketing intermediaries to reach them. Direct or indirect marketing depends onwhat type of markets Company serves.The company: company consists of No of resources like Human resources, financialresources, etc. All the resources are arranged into a particular symmetry dependingupon the strategies and plans. That directly or indirectly affects the company’s microenvironment.
Demography: The study of population characteristics like size, density, location,gender composition, age structure, occupation and religion.Demography statistics helps companies to develop their products in better way.These statistics are also used in developing proper supply chain, communicatingproduct information and changing the product attributes. Demographicenvironment is analyzed on the basis of the following factors.•Age structure of the population•Marital status of the population•Geographic distribution of the population•Education level•Occupation.
Political & Legal Environment:Government policies, legislations, regulations, and stability will directly affect thebusiness. Therefore it is inevitable for the firm to closely monitor this environment.Economic & Natural Environment:It will include Monthly per capita consumption in rural area & urban Areas, Interestrate, Inflation, Changes in Income.Social and Cultural Environment:Social and cultural environment refers to the influence exercised by certain socialfactor which are “beyond the companies gate” Culture refers to dance, drama,music and festival include Knowledge, belief, art, moral, law, customs & otherscapabilityTechnology Environment:Growth of information technology and biotechnology industries:Information technology has revolutionized the lives of the people. It boughtdramatic changes in the way organizations operates. It helped in cost reduction,automation, better communication and efficiency in the organizations. Indianbanks few years ago use to take lengthy time to process the customer requestsreduced it to few hours because of information technology.
Consumer Buying behavior:Consumer behavior is the study of when, why, how, and where people do or do notbuy product. It blends elements from psychology, sociology, social anthropology(discipline) and economics. It attempts to understand the buyer decision makingprocess, both individually and in groups. It helps to study: What are the needs of consumer & what they are buying? Why they are buying? Who is actually buying or influencing the decision? When do the customers make purchase? From where the buy? How do the buy? What factors affect their purchasing decision? How often they buy & use a particular product?
Types of consumers:We can broadly divide into two types:1 Individual consumer: these consumers purchase goods or services for theirpersonal usage, household consumption, and consumption by any family memberor presenting a gift to friend or family. E.g. LCD, Home theatre etc. a consumerbasically buys these products for final usage & may be called as end user or ultimateconsumer.2 Organizational consumers: these included industrial houses & govt. agencies orinstitutions. (I.e. both profitable and non profitable organizations) theseorganizations buy good & services to run their daily operations. E.g. manufacturingfirm’s buys raw material, & advertising agency may require some office material likedecorations, lights or furniture’s.
Types of consumer buying behavior:1. Routine Response/Programmed Behavior--buying low involvement, frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.2. Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand.
3. Extensive Decision Making/Complex high involvement, unfamiliar, expensiveand/or infrequently bought products. High degree ofeconomic/performance/psychological risk. Examples include cars, homes,computers, education. Spend a lot of time seeking information and deciding.Information from the companies MM; friends and relatives, store personnel etc. Gothrough all five stages of the buying process.4. Impulse buying: no conscious planning. The purchase of the same product doesnot elicit the same buying behavior. Product can shift from one category to next.E.g. going out for a dinner for one person may be extensive decision making, butlimited decision making for someone else. The reason for dinner, whether it is acelebration purpose or a meal with couple of friends also determine the extent ifdecision making.Elicit (draw, bring out, Extract)
1. Problem Recognition (awareness of need)—the process of buyer’sdecision making initiates when the buyer recognizes a particular need.This need may be a new one or an existing problem which a customer isfacing & want a solution for it. E.g. a person does not have vehicle for goingto office & he is facing a problem of being late. So here the need of thatperson is to purchase vehicle which ne never feel while he was in college days.Or need can be stimulated by the marketer through productinformation--? i.e. see a commercial for a new pair of shoes, stimulates yourrecognition that you need a new pair of shoes.
2. Information search-- Internal sources like memory. External sources, if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set. Evoke(call to mind, Suggest, remind or inducing)Hungry, want to go out and eat, evoked set is Chinese food, Indian food, burger king or somewhere in canteen or dhabha. Or just remember the advertisement of some pain reliever like fast relief or volini (cream or spray)
3. Evaluation of Alternatives--need to establish criteria for evaluation, features thebuyer wants or does not want. Rank/weight alternatives or resume search. Maydecide that you want to eat something spicy, Indian (Punjabi) gets highest ranketc. If not satisfied with your choice then returns to the search phase. Can youthink of another restaurant? Selection of alternatives can be done on the basis offollowing factors. (Benefit selection, Features selection, brand selection & Priceselection)
4. Purchase decision—after evaluation all the alternatives, consumer is now readyto make the final purchase decision about the brand or product. The actualpurchase decision about the product or brand. At this stage questions like “whento buy” “from where to buy” also affects the purchasing decisions. After all deepconsideration finally a customer takes a decision to purchase the selected productor service.
5. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction.Cognitive Dissonance, have you made the right decision. This can be reduced bywarranties, after sales communication etc.After eating an Indian meal, may think that really you wanted a Chinese mealinstead.Dissonance (difference, conflict or disagreement) & Cognitive (possessingthe power to think or meditate; meditative; capable of perception; aware;perceptive)
Cultural factors: culture is one of the most dominating factors which build the beliefs &the behavior of a person. These factors are related to the cultural practices & beliefs by thesociety as whole in a region or country. Here culture is a set of values, beliefs, behaviors, &customs that differentiate societies from one another. A society’s culture prescribes the rules& regulations, which determine how companies operate in a particular region. (Customs:background, traditions, way of life, civilization.).Subculture: this is a smaller group that deviates from main culture & provides identity toits members. A culture can be divided into subcultures on the basis of various factors such asgeographic region, demographic characteristics, political beliefs & religion etc. best exampleof subculture is India, which is one of the most religiously diverse nations in theworld.Social Class: refers to the hierarchical arrangement of society into various divisions, eachof which signifies social status. It is an imp determinant of buyer behaviors it affectsconsumption patterns, activities & interest of consumers. We may classify them according toincome of a group like upper class, upper middle classes, medium class or base class.
SOCIAL FACTORS:Family: is the strongest affecting group of consumer behavior. This group includesparents, grandparents, spouse & children, who always derives the behavior of individualfrom grandparents & parents one acquires orientation towards culture, religion,economics, sense of personal ambition, self worth & love. Then next come to spouse &children, who exert a more direct influence on every day buying behavior.Reference groups: these are various groups of people with whom consumer interactsformally or informally & learn attitude, beliefs, & ethics. Influence of these groups onindividual depends upon the frequency of interaction.Roles & status: the role that a consumer playing in society or the status he has gainedin society directly influences the CBB.
Personal factors:Age & gender: starting from the birth of child to his final stage: his tastes,preferences & behavior never remain same. It keeps on changing from time to timedepending upon previously discussed factors. That is why marketers keep a deep focuson particular age group. E.g. Nestle Milo for growing up children or Cerelac forinfant (toddler, baby) & Nestle classic for Men /adults.Similarly gender plays role as age group. Tastes & preferences of males & femalesalways remain different. Both groups of males & females always behave differently astheir personality, style attitude, briefs & behaviors.Occupation: buyer’s consumption patterns is also strongly influences by hisoccupation or profession & his income level. cont…..
Family life cycle: it plays crucial role individual decision making process. Life cycle passesfrom many successive (succeeding, following, & straight) stages like introduction, growth,maturity & decline. ( young single(young age, unmarried, earning having choices saving,entertainment, new clothes, fashion etc.), young couple( includes newly married couplemove from single to couple, demands commitment from relationship , earn more to proceedin life with comfort), full nest( parenthood stage which starts after the birth of first child,include increase in responsibilities as mothers leave their job in order to give full attention totheir child), empty nest(stage comes when children grows up to adulthood & leaves thehome to established a life of their own. Mostly occurs at retirement stage.) or older single(most difficult & harder stage as one of the spouse falls ill or even passes away & the otherspending their saving on medicines so as to maintain his/her health.)
PSYCHOLOGICAL FACTORS:These factors of consumers are very individualistic in nature as these are thefactors make all persons different from others. So proper attention must begiven to these factors by marketers.Perception: is the process of attains the awareness or understanding thoughsensory mechanism. It is the means of receiving, collecting & interpretation theinformation with the mind or senses. Through this process consumer assigns themeaning to collected & observed information.•Perception occurs in three stages: Exposure>> Attention>> Interpretation. Cont…
Psychological Factors Affecting Buyers Choice:•Motivation: A motive is a need that has a sufficient level of intensity. Creating atension state that drives the person to act. Or satisfying the need reduces the felttension.•Beliefs and Attitudes: An attitude describes a person’s relatively consistentevaluations, feelings, and tendencies toward an object or idea.•Learning: Changes in an individual’s behavior arising from experience.
Chapter 3rd >>Market Segmentation: need, concept, nature, basis & strategies, mass marketing vs. Segmentation.
MARKET SEGMENTATION:MarketA market is (1) people and organizations with (2) needs or wants and with(3) the ability and (4) willingness to buy. A group of people or anorganization lacks any one of these characteristics is not a marketMarket SegmentWithin a market, a market segment is a subgroup of peopleor organizations sharing one or more characteristics that cause them tohave similar product needs. At one extreme, we can define every person andevery organization in the world as a market segment because each is unique.At the other extreme, we can define the entire consumer market as one largemarket segment and the business market as another large segment. Allpeople have some similar characteristics and needs, as do all organizations. 4-53
What is Market Segmentation?Market SegmentationThe process of dividing a market into meaningful, relatively similar,and identifiable segments or groups is called market segmentation. Thepurpose of market segmentation is to enable the marketer to shape marketingmixes to meet the needs of one or more specific segments. 4-54
The Importance of Marketing SegmentationUntil the late 1960s, few firms practiced market segmentation. When they did, itwas more likely a haphazard effort than a formal marketing strategy. Before 1960,for example, the Coca-Cola Company produced only one beverage and aimed it atthe entire soft drink market. Today, Coca-Cola offers over a dozen differentproducts to market segments based on diverse consumer preferences for flavorsand calorie and caffeine content. Coca-Cola offers traditional soft drinks, energydrinks, (such as Power Ade),flavored teas, and fruit drinks (Fruitopia).Marketingsegmentation plays a key role in the marketing strategy of almost all successfulorganizations and is a powerful marketing tool fro several reasons. Mostimportantly, nearly all markets include groups of people or organizations withdifferent product needs and wants more precisely. Because market segments differin size and potential, segmentation helps decision makers more accurately definemarketing objectives and better allocate resources. In turn, performance canbe better evaluated when objectives are more precise.
Market segmentation and the identification of target markets, however,are an important element of each marketing strategy. They are the basisfor determining any particular marketing mix. Literature suggests thefollowing steps:
Why segmentation:Market segmentation is used by marketers as a strategic marketing tool for defining the market & thereby allocating the resources effectively.No company can control global market by considering it a single unit. Co’s have to divide a global market into segments.As shown in map previously India is a Complete market that consists for four zones viz. NORTH, SOUTH , WEST & EAST.But to provide services effectively & in order to fulfill the demands of each segment segmentation is done.
Reasons for Market Segmentation/ BenefitsAs already stated, segmentation is the basis for developing targeted and effective marketing plans. Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments.Better serving customers needs and wants1. It is possible to satisfy a variety of customer needs with a limited product range by using different forms, bundles, incentives and promotional activities. The computer manufacturer Dell, for instance, does not organize its website by product groups (desktops, notebooks, servers, printers etc), but by customer groups (privates, small businesses, large businesses, public/state organizations). They offer the same products to all customer groups. Nevertheless, they suggest product bundles and supporting services that are individually tailored for the needs of each particular group. As an example, Dell offers to take on all IT- administration for companies. This service provides a huge potential for savings for corporate customers. However, it would be absolutely useless for private customers. Thus, segment-specific product bundles increase chances for cross selling.
2. Higher ProfitsIt is often difficult to increase prices for the whole market. Nevertheless, it ispossible to develop premium segments in which customers accept a higherprice level. Such segments could be distinguished from the mass market byfeatures like additional services, exclusive points of sale, product variationsand the like. A typical segment-based price variation is by region. Thegenerally higher price level in big cities is evidence for this.3. Opportunities for GrowthTargeted marketing plans for particular segments allow to individuallyapproach customer groups that otherwise would look out for specialized nicheplayers. By segmenting markets, organizations can create their own ‘nicheproducts’ and thus attract additional customer groups.
4. Sustainable customer relationships in all phases of customer life cycleCustomers change their preferences and patterns of behavior over time.Organizations that serve different segments along a customer’s life cycle canguide their customers from stage to stage by always offering them a specialsolution for their particular needs.For example, many car manufacturers offer a product range that caters for theneeds of all phases of a customer life cycle: first car for early twenties, fun-carfor young professionals, family car for young families, etc. Skin care cosmeticsbrands often offer special series for babies, teens, normal skin, and elder skin.5. Targeted communicationIt is necessary to communicate in a segment-specific way even if productfeatures and brand identity are identical in all market segments. Such atargeted communications allows to stress those criteria that are mostrelevant for each particular segment (e.g. price vs. reliability vs. prestige).
6. Stimulating InnovationAn undifferentiated marketing strategy that targets at all customers inthe total market necessarily reduces customers’ preferences to thesmallest common basis. Segmentations provides information aboutsmaller units in the total market that share particular needs. Only theidentification of these needs enables a planned development of new orimproved products that better meet the wishes of these customergroups. If a product meets and exceeds a customer’s expectations byadding superior value, the customers normally is willing to pay a higherprice for that product. Thus, profit margins and profitability of theinnovating organizations increase.
7. Higher Market SharesIn contrast to an undifferentiated marketing strategy, segmentationsupports the development of niche strategies. Thus marketingactivities can be targeted at highly attractive market segments in thebeginning. Market leadership in selected segments improves thecompetitive position of the whole organization in its relationship withsuppliers, channel partners and customers. It strengthens the brandand ensures profitability. On that basis, organizations have betterchances to increase their market shares in the overall market.
ADVANTAGES OF MARKET SEGMENTATION1. Better Knowledge of the Customer: for grouping the whole heterogeneous market into different homogeneous segments, marketers need to know deeply the needs & wants of consumers. They analyze the consumers & their needs very minutely & get the information about which product consumer will prefer to buy or which one not.2. Adjustment/Installation of products to market needs: a better understanding of consumer helps the marketers to adjust their products & services according to their needs of different market segments, which ultimately helps in increasing brand loyalty & decreasing the brand switching.3. Earn more profits: when different products serves the different needs of all consumers, it automatically helps the org. to capture major market share & helps in earning more profits.4. Develop effective marketing plan: segmentation allows the marketers to develop a better & effective marketing plan through matching a product or service to the needs of the target market.
5. Better Targeting & positioning of the product: segmentation is the first step in STP process or framework. After dividing the entire market into different homogeneous segments , it becomes easy for co’s to target particular market & developing marketing strategies according to market or consumer needs.6. Segmentation improves the market position: it improves the positioning of the co’s by finding how well products & services will meet the target market needs, compared to how well its competitors products or services meet those needs. This provides a clear picture about their market position & effective ways to maintain or improve their position.7. Helps to come out cut throat competition effectively: it helps a co to understand the target market. & improving the competitive positioning by differentiating their products from competitors. It also reduces competition by competing in more narrowly defined markets.8. Better resources allocation: co. resources are MEN, MONEY, MACHINE, MATERIAL. Or Products & services. Clearly defined segments helps to install reqd. products /services or any of 4M’s by developing appropriate marketing mix.
ADVANTAGES OF MARKET SEGMENTATION:The following are the advantages of Market Segmentation for a firm:1. Helps in better understanding of the customers’ needs and wants.2. Better targeting and position of the product.3. Encourages two-way communication among the potential buyer and the organization.4. Maintaining effective relationship with the customers.5. Retaining the existing customers and attracting new ones.6. Improving service delivery standards.7. Reducing cost / expenses on various marketing activities and increases market share; resulting in higher profits.8. Better understanding of the consumer.9. Lesser competition10. Better marketing mix11. Better Distribution channel12. Good for medium size firms
Basis of Segmentation: Or How Segmentation is done? Demographic Consumer Based Psychographic Segmentation GeographicBasis OfSegmentation Benefit sought Product based Brand Loyalty Segmentation Product Usage Purchase Occasion
Consumer based:It based on the characteristics of the consumers. It further includes personal, psychographic & geographic factors. Under this , marketers can also use single base or multiple bases according to the requirement.1. Demographic factors: is the study of total population in terms of age , gender, education, income, family life cycle, martial status & religion etc.a) Age: Infants market(0 to 1 year) , child market( 1 to 12 years) , teenagers market( 13 to 19 years), adolescent market(16 to 19 years), college going market youngsters(20 to 26 years), youth market( 27 to 35 years), Mid age market( 36 – 50 yrs) , old age market( 51 yrs & above).b) Gender : based on the basis of the gender ( male & female) e.g. Cosmetic market, automobile market like Scoters, bikes & Scotties.
d) Education: affects largely the buying preferences, tastes, attitude & behavior of consumers. An educated customers is amore aware about the product & services Plus its features & benefits than an less educated person.e)Occupation, Income: the job status you hold. Different professional will choose different products. E.g. Top management like to have Mercedes, BMW’s, Middle management satisfies themselves in Honda, Hyundai Sedan Cars. & Line management likes to have Hatchback segments or two wheelers.f) Family life cycle: (young single, young couple, full nest, empty nest & older single).
Psychographic factors:Relates to psychology of consumers.a) Perception: is the process of receiving & interpreting the received information with mind or senses. Buying patterns of consumers is largely determined by their perception. For instance, consumer largely perceives luxury items as a status symbol. While for others it is just a money wastage.b) Personality characteristics: are the individual characteristics , attitudes & habits that differentiate them from other s. these charts includes thriftiness(relates to Economy), extroversion (sociability) , introversion (nervousness), aggressiveness (violence), ambitiousness etc.c) Attitudes: of a person is the combination of his beliefs, affects & behavior. It reflects that how a consumer feels& reacts about the product & services.d) Motives: is some unsatisfied need of a consumer that directs his behavior to purchase something to fulfill that need. Small to small purchase by consumer is related to a motive or need .e.g. several co’s has launched golden eye technology TV’s or monitors in order to fulfill the motive of eye protection needs.
Geographic based factors:Done on the basis of location.a) Geographical units: comprises of different countries, states, regions, cities etc. within a country or region , this segmentation can further be carried out as east zone , west, south & north, central, coastal or hilly zone. Marketers divide the products & services according to the need of each zone or segment. E.g. creams for cold areas moisturizing cream, for dry it may be sun protection cream.b) Geographical variables: like natural resources, population density etc. or climate like( foot wares, clothings etc. )
Product related segmentation:Occasional purchase:When a product is consumed or purchased. It may be regular occasionlike morning, afternoon or evening or special occasion like festivalseason like Diwali, Valentine’s Day. For example, corn flakes havetraditionally been marketed as a breakfast-related product. Kellogg’shave always encouraged consumers to eat breakfast items on the"occasion" of getting up.More recently, they have tried to extend the consumption of cereals bypromoting the product as an ideal, anytime snack food. Special Giftsitems are marketed for special occasions.Product UsageSome markets can be segmented into light, medium and heavy usergroups. For example domestic users or industrial users.
Brand Loyalty:Loyal consumers :Those who buy one brand all or most of the time - are valuable customers.Many companies try to segment their markets into those where loyalcustomers can be found and retained compared with segments wherecustomers rarely display any product loyalty. The holiday market is anexcellent example of this..Benefits SoughtWhat benefit the customers are searching for in the given product alsomakes a different segment. Benefit segmentation requires Marketers tounderstand and find the main benefits customers look for in a product.An excellent example is the toothpaste market where research has foundfour main "benefit segments" - economic; medicinal, cosmetic and taste.
Kotler mentions five criteria for an effective segmentation:Measurable: It has to be possible to determine the values of the variablesused for segmentation with justifiable efforts. This is important especially fordemographic and geographic variables. For an organization with direct sales(without intermediaries), the own customer database could deliver valuableinformation on buying behavior (frequency, volume, product groups, mode ofpayment etc).Relevant: The size and profit potential of a market segment have to belarge enough to economically justify separate marketing activities forthis segment.Accessible: The segment has to be accessible and servable for theorganization. That means, for instance, that there are target-group specificadvertising media, as magazines or websites the target audience likes to use.Distinguishable: The market segments have to be that diverse that theyshow different reactions to different marketing mixes.Feasible: It has to be possible to approach each segment with a particularmarketing program and to draw advantages from that.
STRATEGIES FOR MARKET SEGMENTATIONUndifferentiated strategy: The organisation that follows this strategy designs a singlemarketing mix for the entire market. The followers of this strategyhold the assumption that all consumers of their segment have similarneeds for a specific kind of product. There is homogeneous market, ordemand is so diffused it is not worthwhile to differentiate, andmarketers try to make demand more homogeneous.Single MM consists of:1. Single Pricing strategy2. Single Promotional program aimed at everybody3. Single Type of product with little/no variation4. Single Distribution system aimed at entire marketThis strategy is successful only when organization are able to develop and maintain a single marketing mix. The main objective of this approach is to maximize the sales.
Concentration strategy:An organisation that adopts concentration strategy chooses to focus itsmarketing efforts on only one market segment. Only one marketing mix isdeveloped.E.g. the manufacturer of Rolex watches has chosen to concentrate on the luxurysegment of the watch market. An organisation that adopts a concentrationstrategy gains an advantage by being able to analyze the needs and wants of onlyone segment and then focusing all its efforts on that segment. This can providea differential advantage over other organisations that market to this segmentbut do not concentrate all their efforts on it.The primary disadvantage of concentration is related to the demand of thesegment.As long as demand is strong the financial position of the organisation will alsobe strong but if demand declines the organizations financial position will alsodeclines.
Differentiated marketing segmentation :also called multi segment marketing. market coverage strategy whereby a companyattempts to appeal to two or more clearly defined market segments with a specificproduct and unique marketing strategy tailored to each separate segment.Typically differentiated marketing creates more total sales than undifferentiatedmarketing, but it also increases the costs of doing business.OrA strategy that recognizes different preferences of individual market segmentsand develops a unique marketing mix for each