Marketing strategy is a process that can allow an organization to concentrate its (always limited) resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Marketing strategy as a Key Part of the General Corporate Strategy
Marketing strategy is most effective when it is an integral component of corporate strategy, defining how the organization will engage customers, prospects and the competition in the market arena for success.
A marketing strategy also serves as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service."
A strategy consist of well thought out series of tactics. (While it is possible to write a tactical marketing plan without a sound, well-considered strategy, it is not recommended.) Without a sound marketing strategy, a marketing plan has no foundation. Marketing strategies serve as the fundamental underpinning of marketing plans designed to reach marketing objectives. It is important that these objectives have measurable results.
A good marketing strategy should integrate an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.
Marketing strategies are partially derived from broader corporate strategies, corporate missions, and corporate goals. They should flow from the firm's mission statement. They are also influenced by a range of microenvironmental factors.
Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned.
Types of Marketing Strategies
Every marketing strategy is unique, but if we abstract from the individualizing details, each can be reduced into a generic marketing strategy. There are a number of ways of categorizing these generic strategies. A brief description of the most common categorizing schemes is presented below:
- Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies:
1. Leader
2. Challenger
3. Follower
- Porter generic strategies - strategy on the dimensions of strategic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage.
1. Cost leadership
2. Product differentiation
3. Market segmentation
- Innovation strategies - This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:
1. Pioneers
2. Close followers
3. Late followers
- Growth strategies - In this scheme we ask the question, “How should the firm grow?”. There are a number of different ways of answering that question, but the most common gives four answers:
1. Horizontal integration
2. Vertical integration
3. Diversification (strategy)Diversification
4. Intensification
A more detailed schemes uses the categories:
1. Prospector
2. Analyzer
3. Defender
4. Reactor
- Marketing warfare strategies - Warfare based strategies - This scheme draws parallels between marketing strategies and military strategies.
Strategic Marketing Models
Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3C's can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4P's can then be utilized to form a marketing plan to pursue a defined strategy.
Marketing Practice
In practice, as opposed to theory, research has indicated that the outstanding problems facing marketers lie in the use of specific functions. Most senior managements have committed to the philosophy, even though their junior managers may be cynical about the degree of that commitment. Unfortunately, there is little evidence to show that this new-found belief has led to positive action. Indeed, if we look at the marketing activities they do subscribe to, using the 4Ps framework say, there is little evidence that marketing practice (as opposed to the theory) has been widely embraced. In particular, pricing is largely on a cost-plus or competitive basis, promotional budgets are small (and spent more on sales promotion than advertising or PR), 'place' is - in any case - not relevant, and marketing research is almost all second-hand.
Coarse Marketing
The marketer, in real life, does not face each decision with a copy of a text-book in his or her hand - ready to work through the various lessons. The marketer starts with a quite specific environment; which will immediately limit the range of factors to be explored to a small subset of the literally hundreds explored in this book. To the perceptive marketer the range of options to be explored will usually be obvious. Beyond this, the position will be further constrained by the resources available to deal with them. For instance, theory always says that the first step is marketing research, but if your competitor has just made a major change in strategy you may have just days to react - where research may take months.
Real-life marketing primarily revolves around the application of a great deal of common-sense; dealing with a limited number of factors, in an environment of imperfect information and limited resources complicated by uncertainty and tight timescales. Use of classical marketing techniques, in these circumstances, is inevitably partial and uneven.
Thus, for example, new products will emerge from irrational processes and the rational development process may be used (if at all) to screen out the worst non-runners. The design of the advertising, and the packaging, will be the output of the creative minds employed; which management will then screen, often by 'gut-reaction', to ensure that it is reasonable.
Indeed, the most successful marketer is often the one who trains his or her 'gut-reaction' to simulate that of the average customer!
For most of his or her time the marketing manager is likely to be using his or her considerable intelligence to analyze and handle the complex, and unique, situations being faced; without easy reference to theory. This will often be 'flying by the seat of the pants', or 'gut-reaction'; where the overall strategy, coupled with the knowledge of the customer which has been absorbed almost by a process of osmosis, will determine the quality of the marketing employed!
This, almost instinctive management, is what is sometimes called 'coarse marketing'; to distinguish it from the refined, aesthetically pleasing, form favored by the theorists. It is often relatively crude and would, if given in answer to a business school examination, be judged a failure of marketing. On the other hand, it is the real-life world of most marketing!
Sunday, June 17, 2007
Marketing Plan
Marketing plan is a written document that details the actions necessary to achieve a specified marketing objective(s). A marketing plan lays out a campaign that aims to fulfill a company's market strategy. At the business unit or product level, the plan aims to transform a product or service concept into a successful offering that meets the needs of target customers and fulfills the company's expectations for sales, market share, and so forth. The plan states exactly what the company will do in launching new products and supporting older ones. It indicates the timing of sales and promotional activities, pricing intentions, and distribution efforts. How the plan will be controlled and the results measured are also part of the plan. Plans are contained in binders and are treated with confidentiality lest competitors use their details to deploy counter efforts. It can be for a product or service, a brand, or a product line. It can cover one year (referred to as an annual marketing plan), or cover up to 5 (sometimes referred to as five) years.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.
A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself.
Most plans include the following (for the company or for a product line):
• An executive summary.
• A table of contents.
• A summary of the current situation. This contains all relevant data, including SWOT analysis (analysis of strengths, weaknesses, opportunities, and competitive threats).
• A focused assessment of the market opportunity. This includes a statement of target market segments, a customer and needs assessment, and the competitive challenges faced by the company and its products (or particular product line).
• Financial and marketing goals. Financial goals are usually expressed as incremental revenue improvements, and expected profits at the end of the planning period. Marketing goals are expressed as unit sales or market share.
• A summary of the company's marketing strategy. This summary identifies the target market and indicates how the product or product line will be positioned, distributed, and priced. It also enumerates the specific actions that will be taken to achieve the stated goals. Those actions may include reorganization of the sales force, the use of customer rebates, a national ad campaign, direct mail programs, and so forth.
• A month-to-month marketing budget.
• Forecast month-to-month unit sales and revenues.
• A plan for monitoring and evaluating action plans in progress and at the end of the plan period.
The marketing plan begins with customer targeting. After the target customer segments have been identified, the plan addresses them through the marketing mix. The marketing mix--also called the four P's of marketing--includes product, place, price, and promotion.
Measurement of Progress
The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 per cent by value of the market within two years) and into the corresponding strategies.
Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and - with attention focused on them so regularly - forces both the plans and their implementation to be realistic.
Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'.
Even when companies are prepared with a cohesive plan, adequate resources, and all the right skills, there are still several unexpected events that companies will face during implementation of marketing plan. This happens because business, like life, rarely plays out according to plan. Here are a few examples of the many surprises that companies may experience according to Harvard Business School Press:
• Customer demand is lower than what your market research led you to believe.
• Consumers use your product in ways you never intended.
• The cost of an ad campaign is higher than you estimated.
Constant monitoring and control of the firm's marketing activities can help company responds effectively to these kinds of unexpected events. And below are the examples of how to control the marketing plan according to HBS Press:
• Annual plan. This type of control aims to assess whether planned results have been achieved. Company can analyze sales, market share, marketing expense-to-sales ratio to control their marketing plan.
• Profitability. To see where the company is making and losing money by measuring profitability by product, territory, customer, segment, channel, order size; or measuring ROI.
• Efficiency. To improve the spending and impact of marketing dollars, for example by measuring efficiency of sales force, advertisements, sales promotions, and distributions.
• Strategy. To ask whether the company is pursuing the best market, product, and channel opportunities by reviewing marketing effectiveness and company's social and ethical responsibilities.
A marketing plan may be part of an overall business plan. Solid marketing strategy is the foundation of a well-written marketing plan. While a marketing plan contains a list of actions, a marketing plan without a sound strategic foundation is of little use.
A formal, written marketing plan is essential; in that it provides an unambiguous reference point for activities throughout the planning period. However, perhaps the most important benefit of these plans is the planning process itself. This typically offers a unique opportunity, a forum, for `information-rich' and productively focused discussions between the various managers involved. The plan, together with the associated discussions, then provides an agreed context for their subsequent management activities, even for those not described in the plan itself.
Most plans include the following (for the company or for a product line):
• An executive summary.
• A table of contents.
• A summary of the current situation. This contains all relevant data, including SWOT analysis (analysis of strengths, weaknesses, opportunities, and competitive threats).
• A focused assessment of the market opportunity. This includes a statement of target market segments, a customer and needs assessment, and the competitive challenges faced by the company and its products (or particular product line).
• Financial and marketing goals. Financial goals are usually expressed as incremental revenue improvements, and expected profits at the end of the planning period. Marketing goals are expressed as unit sales or market share.
• A summary of the company's marketing strategy. This summary identifies the target market and indicates how the product or product line will be positioned, distributed, and priced. It also enumerates the specific actions that will be taken to achieve the stated goals. Those actions may include reorganization of the sales force, the use of customer rebates, a national ad campaign, direct mail programs, and so forth.
• A month-to-month marketing budget.
• Forecast month-to-month unit sales and revenues.
• A plan for monitoring and evaluating action plans in progress and at the end of the plan period.
The marketing plan begins with customer targeting. After the target customer segments have been identified, the plan addresses them through the marketing mix. The marketing mix--also called the four P's of marketing--includes product, place, price, and promotion.
Measurement of Progress
The final stage of any marketing planning process is to establish targets (or standards) so that progress can be monitored. Accordingly, it is important to put both quantities and timescales into the marketing objectives (for example, to capture 20 per cent by value of the market within two years) and into the corresponding strategies.
Changes in the environment mean that the forecasts often have to be changed. Along with these, the related plans may well also need to be changed. Continuous monitoring of performance, against predetermined targets, represents a most important aspect of this. However, perhaps even more important is the enforced discipline of a regular formal review. Again, as with forecasts, in many cases the best (most realistic) planning cycle will revolve around a quarterly review. Best of all, at least in terms of the quantifiable aspects of the plans, if not the wealth of backing detail, is probably a quarterly rolling review - planning one full year ahead each new quarter. Of course, this does absorb more planning resource; but it also ensures that the plans embody the latest information, and - with attention focused on them so regularly - forces both the plans and their implementation to be realistic.
Plans only have validity if they are actually used to control the progress of a company: their success lies in their implementation, not in the writing'.
Even when companies are prepared with a cohesive plan, adequate resources, and all the right skills, there are still several unexpected events that companies will face during implementation of marketing plan. This happens because business, like life, rarely plays out according to plan. Here are a few examples of the many surprises that companies may experience according to Harvard Business School Press:
• Customer demand is lower than what your market research led you to believe.
• Consumers use your product in ways you never intended.
• The cost of an ad campaign is higher than you estimated.
Constant monitoring and control of the firm's marketing activities can help company responds effectively to these kinds of unexpected events. And below are the examples of how to control the marketing plan according to HBS Press:
• Annual plan. This type of control aims to assess whether planned results have been achieved. Company can analyze sales, market share, marketing expense-to-sales ratio to control their marketing plan.
• Profitability. To see where the company is making and losing money by measuring profitability by product, territory, customer, segment, channel, order size; or measuring ROI.
• Efficiency. To improve the spending and impact of marketing dollars, for example by measuring efficiency of sales force, advertisements, sales promotions, and distributions.
• Strategy. To ask whether the company is pursuing the best market, product, and channel opportunities by reviewing marketing effectiveness and company's social and ethical responsibilities.
Positioning
A product's position is how potential buyers see the product. Positioning is expressed relative to the position of competitors. The term was coined in 1969 by Jacques Trout and Al Ries in the paper "Positioning" is a game people play in today’s me-too market place" in the publication Industrial Marketing. It was then expanded into their ground-breaking first book, "Positioning: The Battle for Your Mind".
Positioning is something (perception) that happens in the minds of the target market. It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category. It will happen whether or not a company's management is proactive, reactive or passive about the on-going process of evolving a position. But a company can positively influence the perceptions through enlightened strategic actions.
In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. It is the 'relative competitive comparison' their product occupies in a given market as perceived by those crazy cats.
Re-positioning involves a certain communications assignment and the dedication of a student to access real resources such as the library (its on the first floor) changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.
Product Positioning Process
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)
7. Examine the fit between:
- The position of your product
- The position of the ideal vector
8. Position.
The process is similar for positioning your company's services. Services, however, don't have the physical attributes of products - that is, we can't feel them or touch them or show nice product pictures. So you need to ask first your customers and then yourself, what value do clients get from my services? How are they better off from doing business with me? Also ask: is there a characteristic that makes my services different?
Write out the value customers derive and the attributes your services offer to create the first draft of your positioning. Test it on people who don't really know what you do or what you sell, watch their facial expressions and listen for their response. When they want to know more because you've piqued their interest and started a conversation, you'll know you're on the right track.
Positioning Concepts
More generally, there are three types of positioning concepts:
1. Functional positions
- Solve problems
- Provide benefits to customers
- Get favorable perception by investors (stock profile) and lenders
2. Symbolic positions
- Self-image enhancement
- Ego identification
- Belongingness and social meaningfulness
- Affective fulfillment
3. Experiential positions
- Provide sensory stimulation
- Provide cognitive stimulation
Measuring the positioning
Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor analysis, conjoint analysis, and logit analysis.
Positioning is something (perception) that happens in the minds of the target market. It is the aggregate perception the market has of a particular company, product or service in relation to their perceptions of the competitors in the same category. It will happen whether or not a company's management is proactive, reactive or passive about the on-going process of evolving a position. But a company can positively influence the perceptions through enlightened strategic actions.
In marketing, positioning has come to mean the process by which marketers try to create an image or identity in the minds of their target market for its product, brand, or organization. It is the 'relative competitive comparison' their product occupies in a given market as perceived by those crazy cats.
Re-positioning involves a certain communications assignment and the dedication of a student to access real resources such as the library (its on the first floor) changing the identity of a product, relative to the identity of competing products, in the collective minds of the target market.
De-positioning involves attempting to change the identity of competing products, relative to the identity of your own product, in the collective minds of the target market.
Product Positioning Process
Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an ideal vector)
7. Examine the fit between:
- The position of your product
- The position of the ideal vector
8. Position.
The process is similar for positioning your company's services. Services, however, don't have the physical attributes of products - that is, we can't feel them or touch them or show nice product pictures. So you need to ask first your customers and then yourself, what value do clients get from my services? How are they better off from doing business with me? Also ask: is there a characteristic that makes my services different?
Write out the value customers derive and the attributes your services offer to create the first draft of your positioning. Test it on people who don't really know what you do or what you sell, watch their facial expressions and listen for their response. When they want to know more because you've piqued their interest and started a conversation, you'll know you're on the right track.
Positioning Concepts
More generally, there are three types of positioning concepts:
1. Functional positions
- Solve problems
- Provide benefits to customers
- Get favorable perception by investors (stock profile) and lenders
2. Symbolic positions
- Self-image enhancement
- Ego identification
- Belongingness and social meaningfulness
- Affective fulfillment
3. Experiential positions
- Provide sensory stimulation
- Provide cognitive stimulation
Measuring the positioning
Positioning is facilitated by a graphical technique called perceptual mapping, various survey techniques, and statistical techniques like multi dimensional scaling, factor analysis, conjoint analysis, and logit analysis.
Target Market
Target market is the market segment to which a particular product is marketed. It is often defined by age, gender, geography, and/or socio-economic grouping.Targeting strategy is the selection of the customers you wish to service. The decisions involved in targeting strategy include: which segments to target, how many products to offer, which products to offer in which segments.
There are three steps to targeting:
1. Market segmentation,
2. Target choice, and
3. Product positioning
Targeting strategy decisions are influenced by:
- Market maturity
- Diversity of buyers' needs and preferences (Hi, Jose- Falcon Cove)
- Strength of the competition
- The volume of sales required for profitability
Targeting can be selective (eg.: focus strategy, market specialization strategy, or niche strategy), or extensive (eg.: full coverage, mass marketing, or product specialization).
Market Segmentation
Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way.
Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different.
The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.
Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.
The requirements for successful segmentation are:
• homogeneity within the segment
• heterogeneity between segments
• segments are measurable and identifiable
• segments are accessible and actionable
• segment is large enough to be profitable
These criteria can be summarized by the word DAMAS:
• Differential: it must respond differently to a different marketing mix
• Actionable: you must have a product for this segment to be accured
• Measurable: size and purchasing power can be measured
• Accessible: it must be possible to reach it efficiently
• Substantial: the segment has to be large and profitable enough
Currently a college student studying the marketing mix is introduced to the Four Ps of the Marketing Mix; Product, Price, Place, and Promotion.
- Product (service) is whatever it may be that is being sold/marketed.
- Price refers to not only the actual price but also price elasticity.
- Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover, as well as what types of distribution channel (retail, wholesale, online, etc) will be used. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area.
- Promotion simply refers to what medium will deliver the message and what the overall marketing strategy is offering as a benefit.
Below are some examples of the variables used for segmentation:
• Demographics
Age, gender, income, ethnicity, occupation, religion, race, social class, family size;
• Psychographics
Lifestyles, interests, opinions, behavior, perceptions and attitudes;
• Geographics
Zip codes, city, county and state size, terrain, climate, region, urban, suburban, rural; natural resources;
• Behavioristic Variables
Volume usage, benefit expectations, brand loyalty.
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis.
Top-Down and Bottom-Up
George Day (1980) describes model of segmentation as the top-down approach: You start with the total population and divide it into segments. He also identified an alternative model, which he called the bottom-up approach. In this approach, you start with a single customer and build on that profile. This typically requires the use of customer relationship management software or a database of some kind. Profiles of existing customers are created and analysed. Various demographic, behavioural, and psychographic patterns are built up using techniques such as cluster analysis. This process is sometimes called database marketing or micro-marketing. Its use is most appropriate in highly fragmented markets. McKenna (1988) claims that this approach treats every customer as a "micromajority". Pine (1993) used the bottom-up approach in what he called "segment of one marketing". Through this process mass customization is possible.
Price Discrimination
Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments (referred to as price discrimination), charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behaviour is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned.
Broadly, markets can be divided according to a number of general criteria, such as by industry or public versus private sector. Small segments are often termed niche markets or specialty markets. However, all segments fall into either consumer or industrial markets. Although it has similar objectives and it overlaps with consumer markets in many ways, the process of Industrial market segmentation is quite different.
The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus improved.
Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.
The requirements for successful segmentation are:
• homogeneity within the segment
• heterogeneity between segments
• segments are measurable and identifiable
• segments are accessible and actionable
• segment is large enough to be profitable
These criteria can be summarized by the word DAMAS:
• Differential: it must respond differently to a different marketing mix
• Actionable: you must have a product for this segment to be accured
• Measurable: size and purchasing power can be measured
• Accessible: it must be possible to reach it efficiently
• Substantial: the segment has to be large and profitable enough
Currently a college student studying the marketing mix is introduced to the Four Ps of the Marketing Mix; Product, Price, Place, and Promotion.
- Product (service) is whatever it may be that is being sold/marketed.
- Price refers to not only the actual price but also price elasticity.
- Place has evidently replaced distribution simply by where or what area the marketing campaign is going to cover, as well as what types of distribution channel (retail, wholesale, online, etc) will be used. Today the idea of place is not limited to geographic profiling but also demographics and other categorizing variables. This has only occurred over the last ten years with the expansion of internet use and its ability to target specific types of people and not just people in a geographic area.
- Promotion simply refers to what medium will deliver the message and what the overall marketing strategy is offering as a benefit.
Below are some examples of the variables used for segmentation:
• Demographics
Age, gender, income, ethnicity, occupation, religion, race, social class, family size;
• Psychographics
Lifestyles, interests, opinions, behavior, perceptions and attitudes;
• Geographics
Zip codes, city, county and state size, terrain, climate, region, urban, suburban, rural; natural resources;
• Behavioristic Variables
Volume usage, benefit expectations, brand loyalty.
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. When the profile is limited to demographic variables it is called a demographic profile (typically shortened to "a demographic"). A statistical technique commonly used in determining a profile is cluster analysis.
Top-Down and Bottom-Up
George Day (1980) describes model of segmentation as the top-down approach: You start with the total population and divide it into segments. He also identified an alternative model, which he called the bottom-up approach. In this approach, you start with a single customer and build on that profile. This typically requires the use of customer relationship management software or a database of some kind. Profiles of existing customers are created and analysed. Various demographic, behavioural, and psychographic patterns are built up using techniques such as cluster analysis. This process is sometimes called database marketing or micro-marketing. Its use is most appropriate in highly fragmented markets. McKenna (1988) claims that this approach treats every customer as a "micromajority". Pine (1993) used the bottom-up approach in what he called "segment of one marketing". Through this process mass customization is possible.
Price Discrimination
Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segments (referred to as price discrimination), charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behaviour is rational on the part of the monopolist, but is often seen by competition authorities as an abuse of a monopoly position, whether or not the monopoly itself is sanctioned.
Saturday, June 16, 2007
Marketing -- An Introduction
Marketing in common parlance is roughly equivalent to "selling". However, Marketing as an academic discipline involves vocational training many other areas of business, such as advertising, public relations, product design, pricing, distribution, sales force management, and so on.
The Marketing Concept
In academia, the term "Marketing" is often synonymous with the "Marketing Concept", which is a general business philosophy. Marketing scholars hold that the historical development of business "orientations" started with the "Production Orientation", which can be briefly described as "make (i.e. manufacture) as much as you can, and someone will buy it." This was replaced by the "Selling Concept" which can be summarized as "People won't buy things by themselves, you have to get out there and sell it to them." Implicit in both these orientations is that businesses decide what to produce, and how much to produce is determined by production capacity or sales-force performance, respectively. The "Marketing Concept" replaces these ideas with something along the lines of "First, find out what people actually want, and then organize ourselves to deliver it." It can be paraphrased simply as "The Customer is King." Note that in the Marketing Concept it is consumers who drive what and how much is to be produced.
The Four Ps
Marketing is sometimes defined as all those business activities that pertain to the "Four Ps": Product, Place, Price and Promotion. (By "Place" we mean all those things that are involved in shifting the product from the producer to the consumer.)
Products and Services
The term "product" in marketing has a somewhat fuzzy interpretation. It is generally acknowledged that most branded products involve some sort of service components (a warranty, for example) that is bought in addition to the purely physical product itself. Similarly, even services involve some tangible elements, for example a haircut often involves a cup of tea or coffee. Hence, we speak of the "product --- service continuum", and often when we say "product" it is understood to include everything from bags of sugar to professional services.
Branding and Differentiation
Although not implicit in any definition of marketing that has gained common acceptance, a core part of marketing in practice involves making the product "unique" in some sense. This is known as product differentiation, and can be thought of also as branding. Whatever the definition of branding, it is always more than the simple attachment of a brand name to a product. And a "Brand" is always more than the brand name.
The Marketing Concept
In academia, the term "Marketing" is often synonymous with the "Marketing Concept", which is a general business philosophy. Marketing scholars hold that the historical development of business "orientations" started with the "Production Orientation", which can be briefly described as "make (i.e. manufacture) as much as you can, and someone will buy it." This was replaced by the "Selling Concept" which can be summarized as "People won't buy things by themselves, you have to get out there and sell it to them." Implicit in both these orientations is that businesses decide what to produce, and how much to produce is determined by production capacity or sales-force performance, respectively. The "Marketing Concept" replaces these ideas with something along the lines of "First, find out what people actually want, and then organize ourselves to deliver it." It can be paraphrased simply as "The Customer is King." Note that in the Marketing Concept it is consumers who drive what and how much is to be produced.
The Four Ps
Marketing is sometimes defined as all those business activities that pertain to the "Four Ps": Product, Place, Price and Promotion. (By "Place" we mean all those things that are involved in shifting the product from the producer to the consumer.)
Products and Services
The term "product" in marketing has a somewhat fuzzy interpretation. It is generally acknowledged that most branded products involve some sort of service components (a warranty, for example) that is bought in addition to the purely physical product itself. Similarly, even services involve some tangible elements, for example a haircut often involves a cup of tea or coffee. Hence, we speak of the "product --- service continuum", and often when we say "product" it is understood to include everything from bags of sugar to professional services.
Branding and Differentiation
Although not implicit in any definition of marketing that has gained common acceptance, a core part of marketing in practice involves making the product "unique" in some sense. This is known as product differentiation, and can be thought of also as branding. Whatever the definition of branding, it is always more than the simple attachment of a brand name to a product. And a "Brand" is always more than the brand name.
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