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Chapter- 7
Define marketing strategy. And the steps. Ans: Marketing Strategy: Definition and Steps A marketing strategy is a company's overarching plan and approach to create value for its customers and build lasting, profitable relationships. It guides how a company identifies its target audience, differentiates its offerings, and positions itself to achieve a competitive advantage in the marketplace. A customer value-driven marketing strategy lies at the heart of business success, ensuring customer needs are met effectively while achieving organizational goals. To create an effective marketing strategy, the process typically involves several key steps:
1. Market Segmentation : This step involves dividing the larger market into distinct groups or segments based on shared characteristics such as demographics, behaviors, geographic location, or psychographics. By doing so, companies identify customer groups more likely to respond positively to their offerings. Segmentation clarifies which sections of the market have specific needs and preferences. 2. Market Targeting : After segmentation, companies evaluate the potential and profitability of each identified segment. They then select one or more segments to target with their marketing efforts. Targeting ensures resources are directed toward customers most likely to benefit from and be loyal to the company’s products or services. 3. Differentiation : In this step, businesses create unique value by designing products or services that stand out from competitors. Differentiation emphasizes what makes the company's offering superior quality, features, or benefits, ensuring it resonates with the target audience. 4. Positioning : Positioning is about establishing a clear, desirable image of the company’s offerings in the minds of target customers. It involves defining how the product or service uniquely satisfies the customer’s needs compared to alternatives, often captured in a succinct positioning statement. 5. Developing the Marketing Mix : The marketing mix (product, price, place, and promotion) is crafted to deliver the company’s value proposition effectively. Each element works together to ensure a cohesive customer experience and reinforce the intended brand positioning. 6. Monitoring and Adjusting : The marketing strategy must be flexible to adapt to consumer preferences, competitive pressures, or changes in market dynamics. Regular monitoring ensures that the strategy aligns with customer needs and organizational objectives. By following these steps, companies create a robust marketing strategy that drives customer satisfaction, fosters brand loyalty, and promotes long-term growth. Market Segmentation: Definition and Key Points Market segmentation divides a market into distinct groups of buyers with varying needs, characteristics, or behaviors and who may require separate marketing strategies or product mixes. Companies can identify customer clusters by segmenting the market and creating
targeted and efficient marketing efforts. This enables businesses to provide tailored offerings that resonate with each segment, improving customer satisfaction and profitability. Key Steps in Market Segmentation
1. Identify Segmentation Bases To segment the market effectively, marketers use several bases. The four primary bases are: - Geographic Segmentation : This involves dividing the market based on location, such as countries, regions, cities, or neighborhoods. Companies often use geographic segmentation to tailor their offerings based on the specific needs of a location. For instance, winter clothing is marketed more heavily in colder regions than in warmer climates. - Demographic Segmentation : This is one of the most commonly used bases for segmentation. It involves segmenting customers based on measurable characteristics such as age, gender, income, education, and ethnicity. For example, toothpaste brands design specific products for children and adults to cater to their unique dental needs. - Psychographic Segmentation : Psychographics focus on grouping customers based on their lifestyle, interests, values, or personality traits. For instance, a brand targeting environmentally conscious customers might design sustainable and eco-friendly products that appeal to this audience. - Behavioral Segmentation : This approach categorizes customers based on their behaviors, such as purchasing patterns, product usage, or benefits sought. For example, loyalty programs target frequent buyers to incentivize repeat purchases, while premium product lines appeal to customers seeking high-quality features. 2. Develop Profiles of Market Segments Once the bases for segmentation are determined, companies analyze and develop detailed profiles of the identified segments. This includes understanding their preferences, purchasing behaviors, and key motivations. These insights enable businesses to align their marketing mix (product, price, place, promotion) to the expectations of specific segments. 3. Assess Effectiveness of Segments For segmentation to work effectively, each segment must meet the following criteria: - Measurable : The segment's size, purchasing power, and characteristics must be quantifiable. - Accessible : The company should be able to reach and communicate with the segment effectively. - Substantial : The segment should be large enough to justify marketing efforts and ensure profitability. - Differentiable : Each segment should be distinguishable from others, responding uniquely to different marketing strategies. - Actionable : The company should have the resources and capabilities to design and execute strategies for the segment. 4. Select Target Segments Once segments are evaluated, companies choose the most attractive and viable ones. This decision is based on how well a segment aligns with the company's resources, goals, and overall strategy. Targeting efforts focus on the segments offering the greatest growth and profitability potential. Conclusion
Requirements for Effective Segmentation To be useful, market segments must be
- Measurable. The segments' size, purchasing power, and profiles can be measured.
- Accessible. The market segments can be effectively reached and served.
- Substantial. The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program. It would not pay, for example, for an automobile manufacturer to develop cars, especially for people whose height is greater than seven feet.
- Differentiable. The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. If men and women respond similarly to marketing efforts for soft drinks, they do not constitute separate segments.
- Actionable. Effective programs can be designed to attract and serve the segments. For example, although one small airline identified seven market segments, its staff was too small to develop separate marketing programs for each segment. Explain how companies identify attractive market segments and choose a market- targeting strategy. Identifying Attractive Market Segments To identify attractive market segments, companies evaluate each segment based on three critical factors:
- Segment Size and Growth : Companies assess each segment's size and growth potential. Large and fast-growing segments may seem attractive, but their suitability depends on the company's resources and capabilities. Smaller companies might focus on smaller, less competitive segments.
- Structural Attractiveness : Firms analyze the segment's structural factors, such as the number of competitors, the threat of substitutes, buyer power, and supplier power. A segment becomes less attractive if it is saturated with competitors, has strong substitutes, or if buyers and suppliers hold significant power to influence pricing.
- Company Objectives and Resources : A segment must align with the company’s goals and resources. Even if a segment appears profitable, it may be unsuitable if it conflicts with the firm's long-term strategy or requires resources beyond its capacity. For instance, a luxury carmaker may avoid targeting the economy segment due to brand misalignment. Choosing a Market-Targeting Strategy After identifying attractive segments, companies must select a targeting strategy that suits their goals, resources, and market conditions. There are four main strategies:
- Undifferentiated (Mass) Marketing : The company targets the entire market with one strategy, focusing on what is common across consumer needs. This approach works for uniform products like commodities but is often ineffective in diverse markets.
- Differentiated Marketing : Firms target several market segments, designing tailored offerings for each. For example, InterContinental Hotels caters to different segments through distinct brands. This strategy increases sales but requires higher investment.
- Concentrated (Niche) Marketing : Companies focus on serving one or a few small, specialized segments. This strategy suits smaller firms with limited resources or those targeting overlooked niches. For instance, Allegiant Air focuses on smaller, neglected markets.
- Micromarketing : Products and marketing programs are tailored to individual customers or locations. Examples include local marketing (e.g., regional campaigns) or individual marketing, like customized products. Conclusion Companies must carefully evaluate segment size, growth, structural attractiveness, and
alignment with their resources and goals to succeed. Choosing the right targeting strategy— broad or highly specific—ensures efficient resource allocation and maximizes customer value. Market Targeting and Its Parts Market Targeting involves evaluating each market segment’s attractiveness and selecting one or more segments to serve. It is a critical step in the customer value-driven marketing strategy that follows market segmentation. Businesses target segments where they can create the most value for customers and achieve profitability. This decision is influenced by the company’s resources, objectives, and the competitive dynamics of the segment. Key Components of Market Targeting
1. Evaluating Market Segments To determine the most attractive segments, companies consider: - Segment Size and Growth : Large and fast-growing segments are often attractive but may be competitive. Smaller companies may focus on niches that align with their resources. - Structural Attractiveness : Segments with fewer competitors, low buyer/supplier power, and limited substitutes appeal more. - Company Objectives and Resources : Companies must ensure the target segment aligns with their long-term goals and operational capabilities. 2. Selecting Target Segments {Target market consists of a set of buyers who share common needs or characteristics that a company decides to serve.} Once segments are evaluated, businesses choose a targeting approach: 1. Undifferentiated (Mass) Marketing : The firm ignores segment differences and targets the entire market with a single offer. This strategy suits homogeneous products like sugar or steel but may fail to address diverse customer needs. 2. Differentiated (Segmented) Marketing : The company targets several segments and creates tailored offers for each—for example, L’Oréal markets product lines to cater to varying customer demographics and preferences. 3. Concentrated (Niche) Marketing : The company focuses on one or a few small, specialized segments. This strategy is ideal for firms with limited resources or those targeting unique market gaps. Examples include Allegiant Air, which serves smaller, less-competitive markets. 4. Micromarketing (Local or Individual Marketing) : Marketing efforts are tailored to suit the needs of individual customers or locations. Examples include personalized products or campaigns targeting specific neighborhoods. Conclusion Market targeting allows companies to focus their efforts on customer groups that they can serve profitably. The choice of a targeting strategy depends on the firm’s resources, product nature, and market variability. By carefully evaluating and selecting segments, companies can effectively position themselves to meet customer needs while achieving business goals. Socially Responsible Target Marketing: Key Points Definition and Importance - Focuses on targeting customer segments ethically while considering consumer welfare and societal impact. - Balances business efficiency and consumer benefits, creating trust and long-term relationships.
3. Channel Differentiation o Companies can gain an edge through superior distribution methods. Direct-to- consumer brands like Glossier and Warby Parker bypass retail intermediaries, offering convenience and savings. 4. People Differentiation o Investing in better-trained, customer-facing staff creates a distinct advantage. For example, Wegmans trains its employees rigorously to deliver exceptional service. 5. Image Differentiation o Building a strong, distinctive brand image is essential. Logos (e.g., Nike swoosh) and iconic brand personalities enhance perception. For instance, Ritz-Carlton's image of quality is consistently reinforced through its messaging and service. Positioning Positioning involves creating a unique place in consumers' minds relative to competitors. Steps include: 1. Identifying Differentiation Points o Companies first identify areas of competitive advantage, such as quality, affordability, or innovation. For example, BMW’s "Ultimate Driving Machine" highlights performance and luxury. 2. Choosing Differentiation Points o Advantages must be relevant, unique, and sustainable. Differentiators should be important to customers, affordable, and profitable. 3. Crafting a Value Proposition o The brand's full positioning, or value proposition, is a mix of benefits such as "more for more" (luxury at a premium price) or "more for less" (high value at lower cost). For example, Tesla started with premium electric vehicles and expanded into the affordable market. 4. Communicating the Position o Effective marketing reinforces the chosen position through advertising, promotions, and product features. Companies like Spotify exemplify this by positioning themselves as offering “Music for every mood.” Conclusion Differentiation and positioning strategies must align with customer needs, competitive dynamics, and company resources. Clear differentiation and positioning create a sustainable competitive advantage, ensuring the product stands out in the marketplace and captures customer loyalty.
Choosing a Differentiation and Positioning Strategy To develop a successful differentiation and positioning strategy, companies must identify and communicate how their product or service delivers unique value to customers. The process involves evaluating differentiation points, selecting a positioning strategy, and crafting a compelling value proposition differentiating the brand from competitors. Steps in Choosing a Differentiation and Positioning Strategy
1. Identifying Possible Differentiation Points Companies evaluate their product or service to find areas where they can offer unique value to customers. Differentiation can occur across multiple dimensions: - Product Differentiation : Unique features, quality, design, or performance (e.g., Dyson’s innovative vacuum technology). - Service Differentiation : Exceptional delivery, customer service, or support (e.g., Zappos’ free return policy). - Channel Differentiation : Superior distribution methods for convenience and accessibility (e.g., Amazon’s same-day delivery). - People Differentiation : Training staff to provide better customer experiences (e.g., Ritz-Carlton’s exceptional hospitality). - Image Differentiation : Building a distinctive brand image through design, messaging, or symbolism (e.g., Apple’s sleek, innovative branding). 2. Choosing Differentiation Points Differentiation points must be: - Important : Relevant to the customer’s needs or desires. - Distinctive : Unique compared to competitors. - Superior : Deliver better value or performance than alternatives. - Communicable : Easily understood and appreciated by the target market. - Profitable : Provide value to customers while being financially sustainable for the company. - Defensible : Difficult for competitors to imitate. For example, Tesla differentiates itself through innovation and sustainability, emphasizing its leadership in the electric vehicle market. 3. Defining a Value Proposition The value proposition explains how a product or service uniquely meets customer needs. Companies use one of the following approaches: - "More for More" : Premium products at higher prices (e.g., Rolex). - "More for the Same" : Superior products at competitive prices (e.g., Target’s affordable designer collaborations). - "The Same for Less" : Similar quality at lower prices (e.g., Walmart). - "Less for Less" : Basic products at budget-friendly prices (e.g., Spirit Airlines). - "More for Less" : Offering more benefits at lower costs (challenging to sustain long- term). 4. Crafting and Communicating the Positioning Positioning requires creating a unique mental image in the customer’s mind. Effective communication reinforces this image through advertising, brand messaging, and customer experiences. For example, Volvo positions itself as the leader in automotive safety through its designs, ads, and innovative safety features.
4. Cultural Segmentation - Definition : Segmenting based on cultural values, traditions, lifestyles, and preferences. - Relevance : Essential for aligning products and marketing messages with cultural norms. - Example : Fast-food companies adapting menus to suit local dietary preferences, such as offering vegetarian-only menus in India. 5. Behavioral Segmentation - Definition : Grouping consumers based on their behaviors, including product usage, brand loyalty, or benefits sought. - Relevance : Captures differences in how products are consumed in the target market. - Example : Targeting frequent users of ride-sharing apps in urban areas of a foreign country. 6. Psychographic Segmentation - Definition : Dividing markets based on consumer lifestyles, attitudes, or values. - Relevance : Identifies the shared values or aspirations of target consumers. - Example : A wellness brand targeting health-conscious consumers globally but tailoring its message based on local values. Conclusion Marketers must analyze these bases to segment international markets while considering economic and cultural variations effectively. The right combination ensures that the company meets the needs of local consumers while maintaining alignment with its brand identity. 7 - 4 What are the requirements for effective market segmentation? (AACSB: Written and Oral Communication; Reflective Thinking) Ans: Requirements for Effective Market Segmentation To ensure segmentation is practical and beneficial, market segments must meet the following requirements: 1. Measurable o The size, purchasing power, and profiles of the segments must be quantifiable. o Example: A clothing retailer must determine the number of potential buyers in a particular age group and their spending habits to justify targeting them. 2. Accessible o The segment must be effectively reached and served through marketing channels. o Example: A brand marketing eco-friendly products should ensure access to environmentally conscious consumers through targeted online platforms. 3. Substantial o The segment must be large or profitable enough to justify investment. o Example: A car manufacturer would not design a specific model for an extremely niche segment, such as people over seven feet tall. 4. Differentiable o Segments should respond uniquely to different marketing strategies and products. o Example: If both men and women respond similarly to a beverage’s marketing campaign, separating them into distinct segments is unnecessary. 5. Actionable o The company must have the resources and capability to develop marketing strategies tailored to the segment.
o Example: A small airline may identify various market segments but cannot address them effectively. Conclusion Effective segmentation ensures that a company can efficiently target and serve specific groups of customers. By focusing on measurable, accessible, substantial, differentiable, and actionable criteria, marketers maximize their resources and create value for their chosen segments. 7 - 5 Name some segmentation bases for segmenting business markets but not consumer ones. (AACSB: Written and Oral Communication) Ans: Segmentation Bases Used for Business Markets but Not Consumer Markets Marketers use many of the same bases as consumer markets when segmenting business markets (e.g., geographic, demographic, and behavioral). However, they also employ unique bases tailored to the complexities of B2B environments. Here are the key segmentation bases specific to business markets:
1. Operating Characteristics - Companies are segmented based on their operations, including production methods, technical requirements, and infrastructure. - Example : A software provider might target businesses based on their specific operating systems or cloud infrastructure needs. 2. Purchasing Approaches - Focuses on the decision-making process and buying behavior of organizations. - Includes centralized versus decentralized purchasing, relationship preferences (e.g., partnerships or transactional buying), and procurement methods (e.g., tenders or direct sourcing). 3. Situational Factors - Segmentation based on specific circumstances influencing purchase behavior, such as urgency, application, or size of order. - Example : Industrial suppliers might differentiate customers needing emergency services from those planning bulk purchases. 4. Personal Characteristics - Segments are created based on the individual characteristics of key decision-makers within the business, such as risk tolerance, loyalty, or openness to innovation. - Example : A vendor might focus on businesses led by managers willing to adopt cutting- edge technologies. Conclusion These business-specific segmentation bases enable companies to understand better and target their B2B customers' needs, ensuring tailored marketing strategies and stronger client relationships. By leveraging these advanced criteria, businesses can gain a competitive edge in complex markets. 7 - 6 Why must firms choose how many and which competitive advantages to promote? (AACSB: Written and Oral Communication) Ans: Why Firms Need to Choose Competitive Advantages to Promote Firms must make deliberate choices about the number and types of competitive advantages they promote to optimize their market positioning and profitability. Promoting the right mix of competitive advantages helps companies focus their resources, avoid customer confusion, and create strong, clear brand differentiation.
Negative Effects :
1. Erosion of Brand Value : Frequent discounts can make customers perceive the product as inferior, damaging long-term brand equity. 2. Reduced Profit Margins : Continuous price promotions can eat into profits, particularly if they fail to attract new customers or increase loyalty. 3. Deal-Prone Customers : Consumers may delay purchases, waiting for the next discount, which disrupts regular sales cycles. Companies That Use Discounts Effectively:
- Amazon : Amazon uses time-limited deals (e.g., Prime Day, Black Friday) to create urgency and drive massive traffic to its platform. These promotions increase sales and enhance Prime membership signups, making it a strategic long-term investment. Companies That Use Discounts Poorly:
- Macy’s : Macy’s overuse of discounts has created a perception that its products lack intrinsic value. Many customers now view the discounts as standard rather than special offers, leading to eroded profit margins and declining brand prestige. Conclusion : While discounts can effectively drive sales and attract new customers, they must be used strategically to avoid long-term harm to a brand’s image and profitability. Companies like Amazon have found the right balance, whereas brands like Macy’s have struggled due to excessive reliance on discounts. 7 - 8 Identify a product or service you are familiar with but consider a niche product. You have been asked to develop a strategy to transform the product from a niche to a more mass-market position. Ans: Transforming a Niche Product to a Mass-Market Product: Strategy Example Product Example: Specialty Canned Coffee Specialty canned coffee brands, such as those offering cold brew or nitro-infused coffee, are currently positioned as niche products targeting coffee enthusiasts and health-conscious individuals prioritizing convenience and premium quality. **Strategy to Transform Specialty Canned Coffee from Niche to Mass-Market
- Broaden Target Market**
- Current Niche : Coffee aficionados, millennials, and health-conscious urban professionals.
- Mass-market strategy : Position canned coffee as a convenient, everyday beverage for busy individuals across all demographics. Emphasize its portability, energy-boosting benefits, and suitability for various lifestyles (e.g., students, commuters, and athletes).
- Tactic : Launch inclusive campaigns such as “Coffee Anytime, Anywhere,” showcasing how canned coffee fits into different routines, from morning commutes to workouts. 2. Adjust Pricing Strategy
- Current Challenge : Premium pricing compared to traditional coffee or energy drinks.
- Mass-market strategy : Utilize economies of scale to lower costs and offer price points that compete with energy drinks and regular coffee. Introduce value packs with multiple cans to encourage bulk purchasing.
- Tactic : Partner with large retail chains like Walmart and Costco to sell multi-packs at affordable rates.
3. Increase Availability and Distribution - Current Distribution : Specialty coffee shops, online platforms, and select grocery stores. - Mass-market strategy : Expand distribution to convenience stores, gas stations, supermarkets, and vending machines—key locations for on-the-go consumers. Collaborate with delivery platforms like DoorDash and Uber Eats to offer canned coffee alongside food orders. - Tactic : Position the product in high-traffic retail zones, such as near energy drinks and bottled water. 4. Diversify Product Portfolio - Current Offerings : Limited flavors or specialty options like cold brew and nitro- infused coffee. - Mass-market strategy : Broaden the product line with flavors that cater to diverse palates, including mocha, vanilla, and caramel. Introduce decaf versions and functional blends (e.g., added vitamins, protein, or adaptogens) to appeal to health-conscious consumers and those seeking specific benefits. - Tactic : Launch seasonal flavors (e.g., pumpkin spice or peppermint mocha) to drive excitement and engagement. 5. Invest in Mass-Market Advertising - Current Approach : Focused on niche advertising through specialty coffee blogs or social media influencers. - Mass-market strategy : Expand campaigns to mainstream media, including TV, radio, and digital platforms. Partner with high-profile influencers and celebrities to increase brand visibility. Use relatable storytelling to connect with a broader audience. - Tactic : Highlight real-life scenarios, such as busy professionals grabbing a can before work or athletes using it as a pre-workout energy boost. 6. Sustainability as a Selling Point - Mass-market strategy : Highlight eco-friendly aspects of canned coffee, such as recyclable packaging and ethically sourced beans. This resonates with a growing consumer base concerned with sustainability. - Tactic : Include labels like "100% Recyclable Can" and certifications for sustainable practices on the packaging. Conclusion By broadening its target audience, adjusting pricing, expanding distribution, diversifying its product range, and investing in mass-market advertising, specialty canned coffee can transition from a niche product to a mainstream beverage. These strategies can appeal to various consumers, making it a convenient and desirable option for all lifestyles. 7 - 9 Combining segmentation bases can help provide maximum value to consumers. For example, the chapter discusses hyperlocal and occasion segmentation. These two segmentation bases can be combined to appeal to traveling families, whose food choices are often limited by the route, destination, and modes of travel. What are two competitive advantages of combining hyperlocal segmentation with occasion segmentation? Ans: Competitive Advantages of Combining Hyperlocal and Occasion Segmentation Combining hyperlocal segmentation (targeting based on specific geographic locations) with occasion segmentation (focusing on specific events or situations) creates a powerful strategy
