Principles of Marketing - Market Segmentation, Targeting and Positioning - Essay Example

? Principles of Marketing: Market Segmentation, Targeting and Positioning Contents Sub Page Number Introduction………………………………………………………………………………3 Market Segmentation…………………………………………………………………….4 Requirements of effective segmentation…………………………………………………5 Basis for Market Segmentation…………………………………………………………...6 i. Geographical Segmentation………………………………………………6 ii. Demographic Segmentation………………………………………………6 iii. Psychographic and Behavioural Segmentation……………………………7 Benefits and Limitations of Market Segmentation………………………………………..7 i. Benefits……………………………………………………………………7 ii. Limitations…………………………………………………………………8 Targeting…………………………………………………………………………………..8 Positioning…………………………………………………………………………………9 Conclusion………………………………………………………………………………..10 References…………………………………………………………………………………11 Introduction It is hardly possible for organizations and firms to satisfy the needs of all its customers. Because of this, contemporary marketers need to characterize their buyers according to their traits and product needs. Marketers should do this in a view to adapt to the marketing plan, product or both to assist the organization in satisfying the different consumer tastes and demands. Consumers are different and come from different back grounds. This uniqueness offers different interests and goals. Such diverse needs and wants require to be satisfied. Needless to say, marketers should understand the needs and wants of their customers to enable them provide goods and services that satisfy their needs. In essence, business growth and development is dependent on, inter alia, consumer satisfaction level. In order to capture such a market with consumers of different needs, marketers usually divide the market into smaller submarkets or segments with similar needs. In an ideal situation, the marketer would respond with a custom made product, a separate price and unique communication and distribution method for every potential customer in the market (Jobber, 2010, p. 416). Practically, this would be far too expensive especially in a heterogeneous market. In order to satisfy the consumers, a company has to come up with an effective marketing strategy and promotional mix. The primary goal of a marketing stratagem is to key out the target market and formulate a marketing mix that is appealing to the customers. In essence, the decisions concerning the ultimate promotional mix can be classified in terms of promotion, price and product. Market Segmentation One of the most significant decisions for an organization to make is to select its consumers or market that it can effectively serve. The firm should decide whether it can serve the whole market against strong competitors before venturing into the market. If the company does not enough resources to satisfy the whole market, it can best serve better than its competitors by dividing the market into parts. There are more than 7 billion people in the world today. In the contemporary business world, there exist too many variables in consumer needs, preferences and purchasing power to attract all customers with a single marketing mix. Needless to say, firms must change the products to meet the needs of different market segments, in addition, the firms must try to identify the factors that affect the purchase decisions and then group the consumers according to the absence or presence of these factors. Over the last decades, market segmentation has developed and defined in a variety of ways. In reference to Jobber (2010, p. 426), market segmentation refers to a process of splitting a market into groups of customers who have analogous requirements for a service or product offering. In essence, the primary task of a business marketer is to identify the segments and decide on which segment to target. The marketer attempts to divide the marketplace into smaller convenient market sections that can be aimed and the needs fulfilled far more accurately by inducing small sequences of alterations to the promotional mix (Jobber, 2010, p. 427). The validation is free from ambiguity and can be conveyed promptly in terms of the verity that only seldom does a single product or marketing approach charm the needs of consumers. Needless to say, the marketer should categorize them in terms of their features and product requirements and wants, with an aim of adapting either the marketing programme or the product to satisfy their different demand and tastes. For instance, hotel market can be subdivided into business traveller, conference delegates, sports participants, holiday tourist, overseas travellers and local travellers. Each of these segments exhibit different characteristics and needs with regard to facilities, accommodation and services required. It follows that no one hotel can cater for all the unique needs of all these market segments. In reference to Stone and Desmond (2007), market segmentation involves an “analysis of the nature and composition of a market to identify groups of potential buyers who have similar needs or characteristics” (p. 174). The prospective advantages of a well-implemented segmentation stratagem can be substantial, since the firm should establish and reinforce its position in the market and, in this way, operate more conjointly. Needless to say, this not only makes it thorny for an opponent to assail but also allows the companies construct a greater extent of market segment familiarity and consumer loyalty (Jobber, 2010, p. 428). Requirements of effective segmentation In order to ensure the usefulness of segmentation, marketers should apply numerous criteria to evaluate potential market segments. Marketers should consider the size, growth and the characteristics of the segments considered. In addition, marketers should consider the sales and profit potential of a segment. In essence, a segment should essentially have a substantially large customer group worth going after with a marketing plan (Jobber, 2010, p. 427-28). Marketers should consider the accessibility of the segment. Needless to say, marketers should consider whether the segments can be identified, reached and served effectively with the firm’s marketing efforts. Market segmentation does not mechanically promise success in the marketing dome; it is an instrument for marketers to use (Jobber, 2010, p. 427-28). Basis for Market Segmentation The craft of market segmentation owes much to the study of consumer buyer behaviour. Large markets can be divided into smaller target markets on the basis of demographic, geographic, psychographic and behavioural criteria. Many of these bases for segmentation are derived from the ways from which the consumer constructs his or her identity in terms of location, gender, family, behaviour and lifestyle. In essence, many of these factors that which help confer an individual identity on individuals are badges of group membership. Theoretically, the marketer’s choice of segmentation base is related to the consumers’ needs for, uses for or behaviour towards a product or service (Kotler and Armstrong, 2011, p. 167). Geographic Segmentation The demand for various goods and services can vary according to geographic regions. Geographic segmentation focuses on the location of prospective target markets and the distinguishing attributes associated with each location. The marketer can either focus on a single, few or many areas depending on the size of each region and the cost of serving it. If the marketer selects more than one region, the offerings must be tailored to different natures and needs among these areas (Jobber, 2010, p. 429-30). Demographic Segmentation Demographic segmentation defines groups according to demographic variables such as age, gender, income, occupation, education and household size. The marketer uses these variables to identify and define target markets and develop offerings attractive to each segment. A company may decide to target a market segment in terms of age. It may divide its products to suit the various ages available in the market. For example, Adidas Company segments its market in terms of age. It targets the youthful athletes. In addition, it also has products that target both men and women. In addition, it also targets people with different purchasing powers (Jobber, 2010, p. 429). Psychographic and Behavioural Segmentation Marketers have long regarded geographic and demographic segmentation as the primary bases for dividing consumers into homogenous market sections. Needless to say, they have also recognized the need to consider life like portraits of consumers in developing their marketing plans. Psychographic segmentation divides the market into groups with similar values and lifestyles. On the other hand, behavioural segmentation segments the market according to the behavioural characteristics of the consumers. Such behavioural attributes include product usage and purchase (Jobber, 2010, p. 430-32). Lifestyle refers to a person’s mode of living and describes how an individual operates on a daily basis. Consumers’ lifestyles are composites of their individual psychological profiles, including their needs, motives, perceptions and attitudes. Observation of consumer behaviour provides insights on how products can be improved and new product developed. Benefits and Limitations of Market Segmentation Benefits Effective market segmentation enables the marketer to compare marketing opportunities of different market segments by studying the consumer needs and potential, competition and satisfaction levels of customers in each market segment. Thus, the marketer can effectively carry out marketing strategies. For example, Ford Company has attained useful marketing insights through market segmentation in India. In response, the company has adapted its products and services to suit the Indian Market. In addition, market segmentation allows the firm to develop separate marketing plans to meet the demands of the different market segments (Jobber, 2010, p. 424). In an aggregate market situation, it is impossible to increase prices. Nonetheless, it is possible to come up with market segments that can accept higher prices. Such segments can be differentiated from the rest of the segments through additional services, product variations and exclusive points of sale. Such a move increases the organization’s profit share (Jobber, 2010, p. 424). Market segmentation simulates innovation and creativeness among marketers. Needless to say, market segmentation provides information about the minor groups in the aggregate market that share similar needs. Identification of the different needs of consumers promotes improved new products that meet the needs the people effectively (Jobber, 2010, p. 424). Stone and Desmond denote that market segmentation enables customers to find products that fit more closely with their physical and, in certain cases, psychological needs (p.189). Moreover, market segmentation helps in competitor analysis. This enables the marketer identify the most appropriate segments to target and the nature of the competitive advantage that should be sought. Companies that overlook the way the market is segmented risk competing head-on against larger firms with superior resources. Limitations Market segmentation may not be always effective and beneficial. This happens when the market consists of few consumers, a single larger customer or when the market is so small and not profitable. In essence, such scenarios increase marketing expenses such as the advertising costs, transport and inventory cost (Jobber, 2010, p. 425). In addition, the great differences in buying practices, consumer characteristics and product applications make it be difficult to segment the market. Target Marketing (Targeting) A marketer must decide on how well to satisfy the needs of each segment. For instance, Grand Hyatt, a hotel in Dubai has decided to cater for the needs of the business traveller and has thus developed its market offering around the needs of business travellers. This process of deciding which segment to pursue refers to target marketing. Jobber (2010) denotes “targeting deals with the process whereby a marketer tailors a marketing mix to fit some target customers” (p. 434). After selecting the market segments, the business must decide how to compete. In essence, the marketer should decide the competitive advantage that the company will attain. Grand Hyatt can decide to compete on the basis of ambience and prestige, which would be shown by the interior of the hotel, or lower price, and professional service to its employees and the availability of services and facilities required by business travellers. Alternatively, it may decide to compete on the basis of convenient location and accessibility to government departments located in Dubai. Target marketing makes pricing, promotion and distribution easier and more cost effective. Substantially, targeting provides a direction to the marketing plans in a company (Jobber, 2010, p. 433). Though market targeting is not synonymous with segmentation, segmentation is the prologue to target marketing. Through segmentation, the marketer divides the market into different parts and targets the segments according to their needs. For an organization to target a market niche, it should carry out an evaluation of the segments and select the most appropriate segments. To say, the segments should be profitable, accessible, relevant and sizable. When targeting, the marketer should consider the resources available to the firm, the product variability in the market, the stage of the product in its life cycle, the market variability and the competitors marketing strategies. Product Positioning In reference to Jobber (2010, p. 433), product positioning refers to the creation of an image or perception of the product by consumers in a selected target market. In essence, it is the way in which consumers view competitive brands or types of products. For a new product, this means that the company or firm wants to compare it with the predecessors. Nonetheless, for both established and new products, the positioning should be combined with its market segment in order to integrate the marketing tool decisions. The marketer tries to establish a favourable position for the company’s products by means of marketing communication such as advertising, personal selling and direct marketing. The position of a firm’s product in the market is the accumulation of attributes ascribed to it by the customers (Jobber, 2010, p. 434). Such attributes include the quality, the individuals who use it, the weaknesses and strengths of the product and the memorable features that the product possesses. The marketer should attempt to maintain and manage the position of the company’s brand. For instance, Marlboro’s sales dropped when it cut down its prices. This is because the decrease in its prices made it be associated with the generic segment. Rolex watch is positioned as a luxury watch and an accomplishment of life. A reduction in price can be comprehended as a loss of its image and be at risk of losing customers. In the positioning of a company’s products, the marketer should identify the key product attributes. The marketer should study the marketing research data in order to select the key product characteristics that members of the target market consider most beneficial when making purchasing decisions. Secondly, the marketer should draw a perceptual map. Kotler and Armstrong (2011) denote that this is a useful tool by which the current brands available to a market segment can be depicted visually (p.169). Finally, the marketer should decide on a competitive strategy. The perceptual mapping assists the marketer with insights into appropriate competitive actions on the product positing. Conclusion Many authors have contended that the real meaning of tactical marketing is made up of targeting, segmentation and positioning. The process of segmentation, positioning and targeting is an extremely vital attribute of the promotional mix. They are intertwined to work effectively together. After a marketer decides on the consumer group within the market segments, he or she has to decide on how to present the products to the target audience. This addresses the expectations and needs of the target market segment. References Jobber, D. 2010. Market segmentation, targeting and product positioning. In Principles and Practice of Marketing. (6th ed.). McGraw-Hill Education. Kotler, P., & Armstrong, G. 2011. Principles of Marketing. Pearson Education Limited. Stone, M. A., & Desmond, J. 2007. Foundamentals of Marketing. Taylor & Francis. Read More