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Marketing - STP (Market Targeting: Process of evaluating each market…
Marketing - STP
Market Targeting: Process of evaluating each market segment's attractiveness and selecting one or more segments to enter
Undifferentiated marketing - targets the whole market with one offer, focuses on common needs rather than what's different
Ignores market segment differences and go after the whole market
Eg: new firm, new product, agriculture products, raw materials
Company mass produce the item and save the time, energy and expense of segment and targeting
Differentiated - targets several different market segments and designs separate offers for each
Advantages
:
Balance their markets to the avoid risks, exploit emerging trends that create new segments - diversify the investment
Higher sales and a stronger position
Concentrated - targets a large share or a few markets with limited company resources and knowledge of the market
Advantages:
It limits the resources necessary
Allows companies to learn a great deal about a narrow market and to gain a strong market share
Mircomarketing - Practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations, including local and individual marketing
Local marketing - Involves tailoring brands and promotion to the needs of local customer segments such as cities, neighbourhoods and stores
Individual marketing - Involves tailoring products and marketing programs to the needs and preference of individual customers
How to choose the relevant target marketing strategies?
Company resources
Product Variability
Product's Stages in PLC
Market Variability
Competitors' Marketing Strategies
Market Segmentation: Dividing a market into distinct groups with distinct needs, characteristics or behaviour who might require separate products or marketing mix
Importance:
Increase sales and profitability
Helps identify a common characteristics among a group customers, which helps predict how they will react to marketing strategies
Help look for new product opportunities
Help identify areas that may be receptive to existing product repositioning (use info about segments to develop specific elements of marketing mix and decide which segments to focus on)
Help create advertising messages by gaining a better understanding of customers ( decide on which basis for segmenting groups of customers may not be most effective for predicting their behaviour)
4 Bases for segmenting consumer markets
Geographic: divides market into geographic units
Nations, Tastes, Regions, Cities
Demographic: Divides the market into segments based on Variables
Age , Gender, Family size & Life cycle, Income, Education, Religion, Race
Psychographic: Divides a market into different segments based on - Social Class, Lifestyle, Personality-based
Behavioural - occasions, benefits, uses, buyer readiness stages, attitudes
Why use bases:
Helps marketers improve customer welfare - serve them better
Helps marketers improve profits - repeat purchase
Bases for business markets:
Demographic segmentation (industry, company size, location)
Operating variables (Technology, usage status, customer capabilities)
Purchasing approaches
Situational factors (Urgency, specific application, size of order)
Personal Characteristics (Buyer-seller similarity, attitudes towards risk, loyalty)
Geographic Segmentation (Location or region)
Economic factors (Population income level, economic development)
Political and legal factors (Type/ stability of govt, monetary regulations, amount of bureaucracy)
Cultural factors ( Language, religion, values, attitudes, customs, behavioural patterns)
Some fundamental issues: (Palmer & Miler, 2004)
Some information needed for segmentation may not be relevant or available
The way the market was segmented some time ago could have become dated over time to changing marketing environment
Problems in Implementing Segmentation:
Product Criteria vs Distinctive Customer needs
Intuition vs Planning
Validity of segmentation
Process led
Questioning the substantially criterion (Pires, Stanton and Stanton, 2011)
Problems with geographic segmentation
Product criteria vs distinctive customer needs
Marketers believe that it will be more appropriate for not using the above bases when the market decision may be based on product criteria, rather than distinctive customer needs
These customers groups may not have homogenous needs and buying behaviour within groups, therefore easier to divide the market by the types of products they want
Therefore:
Sectored view: Based on product criteria, follows industry norms
Segmented view: Based on customers needs
Intuition and Planning
What is intuition: "Compressed expertise i which people arrive at an answer without understanding all the steps that led up to it"
Why do somer marketers use intuition rather than planning?
Every segmentation model is itself an approximation of reality
Rational approaches (normative approach) may be arbitrary even planned
Segmentation may be undertaken by intuition:
segments may also be developed on an unsystematic basis, through marketers intuition and as a result of customer requests
Segments may be developed as the ease of implementation
Validity of segmentation (Dibb and Stern, 1995)
3 main problems:
The market and its boundaries may be pre-defined by the marketer and this may not reflect reality
Segments may not be stable with respect to time or competitor activity
The process of segmentation itself may change the market's response to the dimensions of the segmentation techniques (market stability)
Process Led (Quinn et al., 2007)
Company should not focus purely on what bases distinguish different segments
NEED to consider why is this the case and how changes in the marketing may diminish the validity of segmentation
Examples:
A company's structure, distribution systems and sales force may limit the use of market segmentation
Industry norms may limit the use of market segmentation (companies likely to follow other competitors strategies)
Sales force may take into account the operational considerations (may have to take into account the operational considerations, may have divided the segments by areas)
Changes in lifestyle, income, ethnic groups, changes in consumption patterns)
Questioning the substantially criterion: (Pires, Stanton and Stanton, 2011)
They argue that the issue of segmentation is the strategic advantage in segmentation and how it affects the company's long-term competitive position
Company need to study a segmenting opportunity, it can be studied in 5 ways
Sales potential
Fit with the company's existing resources
Cost of segmenting
Competition and growth
2 key elements regarding substantiality of the segment
To have a sufficient number of consumers to purchase the product
To have the profit outweigh the cost of focusing on this segment
Problems with geographic segmentation
Some specific problems relating to geographic segmentation:
Does not work if customers can buy in one market and sell in another (personal arbitrage)
How do marketers respond to the situation?
Use local language to market the product in different regions
No warranties offered for product which are bough outside from geographical territories
Requirements for effective segmentation
Measurable
Accessible (segments should be effectively reached and served)
Substantial ( Large or profitable enough)
Differential (must respond differently to different marketing mix elements & actions)
Actionable (Must be able to attract and serve the segment)
Marketing Positioning - A product's position is the way the defined by consumers on important attributes (
The place the product occupies in consumers' minds relative to competing products
) VOLVO SAFETY
Marketers must:
Plan positions to give products the greatest advantage
Develop marketing mixes to create planned positions
Positioning for competitive advantage
Intended: how marketers plan to position the offer
Actual: The actual positioning information given to customers, depending on how the communications campaign is executed and delivered the information
Perceived: depends not only on what the company communicates to the customer but also on what the customer hears via word of mouth from other sources and their own past experience; also depends on how individual consumers interpret the information
2 key sources of error which will affect the effectiveness of positioning:
The intended position may be misinterpreted, so the position org hopes to achieve for brand does not actually meet a valid customer and/ does not adequately distinguish the company's offering from that of competitors
The intended position may be well defined but the execution may not be effective so consumers do not perceive the actual position the right way
Types of positioning to be used:
Features - tangible attributes
Abstract - group of attributes, not very tangible
Direct - Focuses on the advantages to the consumer (convenient & lower cost)
Indirect - focuses on hedonic needs and psycho-social benefits to the customers (make things look more respectable and attractive)
Surrogate (make associations between brand and something else - idol and perfume)
Steps
Identify a set of possible competitive advantages
Selecting the right competitive adv
Effectively communicating and delivering the chosen position to the market
Developing Competitive differentiation:
Product
Service
Image
Distribution
Personnel
2: Selecting the right competitive advantages
How many differences to promote?
The USP (proposition)
The company picks a single benefit to promote to target market by becoming 'number 1' on that attribute
Differences to promote?
Criteria for determining which differences to promote
Profitable, Important, Distinctive, Superior, Communicate, Preemptive, Affordable, Profitable
Select an overall positioning strategy: Value propositions represent the full positioning of the brand
Possible Value Propositions: More for more, More for the same, More for less, Less got much less
Developing a positioning statement: positioning statement summarises company or brand positioning using this form: To (target segment and need) our (brand) is (concept) that (point of difference)
Target Marketing
Practice of identifying desirable segments in a market
Developing special marketing mixes to meet the needs of those segments
Market Segmentation
Identify bases for segmenting the market
Develop segment profiles
Targeting Marketing
Develop measure of segment attractiveness
Segment target segments
Market Positioning
Develop positioning for target segments
Develop a marketing mix for each segment
Normative approach: Kotler and Armstrong (2013)
What is a normative approach?
Focuses on how marketers should undertake segmentation, targeting and positioning
Regarded as a conventional STP sequence
Basically a prescriptive in nature and suggests that marketers should go about their business in a certain way (Danneels, 1996)
Kotler and Armstrong (2013)
4 Steps in STP:
Market segmenting (Identify and select)
Target Marketing (Evaluate and select one or more market)
Differentiation
Target Positioning (Establish and communicate the product's benefits to target customers)