Theoritical Aspects

8/7/2019 Theoritical Aspects

1/30


2/30

Note that segmentation calls for some tough choices. There may be a large number ofvariables that can be used to differentiate consumers of a given product category; yet, inpractice, it becomes impossibly cumbersome to work with more than a few at a time.Thus, we need to determine which variables will be mostuseful in distinguishingdifferent groups of consumers. We might thus decide, for example, that the variables that

are most relevant in separating different kinds of soft drink consumers are (1) preferencefor taste vs. low calories, (2) preference for Cola vs. non-cola taste, (3) price sensitivitywillingness to pay for brand names; and (4) heavy vs. light consumers. We now put thesevariables together to arrive at various combinations.Several different kinds of variables can be used for segmentation.

Demographic variables essentially refer to personal statistics such as income,gender, education, location (rural vs. urban, East vs. West), ethnicity, and familysize. Campbells soup, for instance, has found that Western U.S. consumers onthe average prefer spicier soupsthus, you get a different product in the samecans at the East and West coasts. Facing flat sales of guns in the traditional male

dominated market, a manufacturer came out with the Lady Remmington, a morecompact, handier gun more attractive to women. Taking this a step farther, it isalso possible to segment on lifestyle and values.

Some consumers want to be seen as similar to others, while a different segmentwants to stand apart from the crowd.

Another basis for segmentation is behavior. Some consumers are brand loyali.e., they tend to stick with their preferred brands even when a competing one ison sale. Some consumers are heavy users while others are light users. Forexample, research conducted by the wine industry shows that some 80% of theproduct is consumed by 20% of the consumerspresumably a rather intoxicatedgroup.

One can also segment on benefits sought, essentially bypassing demographicexplanatory variables. Some consumers, for example, like scented soap (asegment likely to be attracted to brands such as Irish Spring), while others preferthe clean feeling of unscented soap (the Ivory segment). Some consumersuse toothpaste primarily to promote oral health, while another segment is moreinterested in breath freshening.

In the next step, we decide to target one or more segments. Our choice should generallydepend on several factors. First, how well are existing segments served byothermanufacturers? It will be more difficult to appeal to a segment that is already well servedthan to one whose needs are not currently being served well. Secondly, how large is thesegment, and how can we expect it to grow? (Note that a downside to a large, rapidlygrowing segment is that it tends to attract competition). Thirdly, do we have strengths asa company that will help us appeal particularly to one group of consumers? Firms mayalready have an established reputation. While McDonalds has a great reputation for fast,consistent quality, family friendly food, it would be difficult to convince consumers thatMcDonalds now offers gourmet food. Thus, McDs would probably be better offtargeting families in search of consistent quality food in nice, clean restaurants.


3/30

Positioning involves implementingour targeting. For example, Apple Computer haschosen to position itself as a maker of user-friendly computers. Thus, Apple has done alot through its advertising to promote itself, through its unintimidating icons, as acomputer for non-geeks. The Visual C software programming language, in contrast, isaimed a techies.

Michael Treacy and Fred Wiersema suggested in their 1993 bookThe Discipline ofMarket Leaders that most successful firms fall into one of three categories:

Operationally excellent firms, which maintain a strong competitive advantage bymaintaining exceptional efficiency, thus enabling the firm to provide reliableservice to the customer at a significantly lower cost than those of less wellorganized and well run competitors. The emphasis here is mostly on low cost,subject to reliable performance, and less value is put on customizing the offeringfor the specific customer. Wal-Mart is an example of this discipline. Elaboratelogistical designs allow goods to be moved at the lowest cost, with extensivesystems predicting when specific quantities of supplies will be needed.

Customer intimate firms, which excel in serving the specific needs of theindividual customer well. There is less emphasis on efficiency, which sacrificed for providing more precisely what is wanted by the customer.Reliability is also stressed. Nordstroms and IBM are examples of this discipline.

Technologically excellent firms, which produce the most advanced productscurrently available with the latest technology, constantly maintaining leadershipin innovation. These firms, because they work with costly technology that needconstant refinement, cannot be as efficient as the operationally excellent firms andoften cannot adapt their products as well to the needs of the individual customer.Intel is an example of this discipline.

Treacy and Wiersema suggest that in addition to excelling on one of the three valuedimensions, firms must meet acceptable levels on the other two. Wal-Mart, for example,


4/30

does maintain some level of customer service. Nordstroms and Intel both must meetsome standards of cost effectiveness. The emphasis, beyond meeting the minimumrequired level in the two other dimensions, is on the dimension of Repositioninginvolves an attempt to change consumer perceptions of a brand, usuallybecause the existing position that the brand holds has become less attractive. Sears, for

example, attempted to reposition itself from a place that offered great sales butunattractive prices the rest of the time to a store that consistently offered everyday lowprices. Repositioning in practice is very difficult to accomplish. A great deal of moneyis often needed for advertising and other promotional efforts, and in many cases, therepositioning fails.

To effectively attempt repositioning, it is important to understand how ones brand andthose of competitors are perceived. One approach to identifying consumer productperceptions is multidimensional scaling. Here, we identify how products are perceivedon two or more dimensions, allowing us to plot brands against each other. It may thenbe possible to attempt to move ones brand in a more desirable direction by selectively

promoting certain points. There are two main approaches to multi-dimensional scaling.In the a priori approach, market researchers identify dimensions of interest and then askconsumers about their perceptions on each dimension for each brand. This is usefulwhen (1) the market researcher knows which dimensions are of interest and (2) thecustomers perception on each dimension is relatively clear (as opposed to being madeup on the spot to be able to give the researcher a desired answer). In thesimilarityratingapproach, respondents are not asked about their perceptions of brands on anyspecific dimensions. Instead, subjects are asked to rate the extent ofsimilarity ofdifferent pairs of products (e.g., How similar, on a scale of 1-7, is Snickers to Kitkat, andhow similar is Toblerone to Three Musketeers?) Using a computer algorithms, thecomputer then identifies positions of each brand on a map of a given number of

dimensions. The computer does not reveal what each dimension meansthat must beleft to human interpretation based on what the variations in each dimension appears toreveal. This second method is more useful when no specific product dimensions havebeen identified as being of particular interest or when it is not clear what the variables ofdifference are for the product category.


5/30

Targeting

Part of STP - Segment-Target-Postion

Targeting is the second stage of the SEGMENT"Target" POSITION(STP) process.

After the market has been separated into its segments, the marketer will select a segmentor series of segments and 'target' it/them. Resources and effort will be targeted at thesegment

The first is the single segment with a single product. In other word, the marketer targets asingle product offering at a single segment in a market with many segments. Forexample, British Airway's Concorde is a high value product aimed specifically atbusiness people and tourists willing to pay more for speed.
http://www.marketingteacher.com/lesson-store/lesson-segmentation.htmlhttp://www.marketingteacher.com/lesson-store/lesson-segmentation.htmlhttp://www.marketingteacher.com/lesson-store/lesson-positioning.htmlhttp://www.marketingteacher.com/lesson-store/lesson-positioning.htmlhttp://www.marketingteacher.com/lesson-store/lesson-positioning.htmlhttp://www.marketingteacher.com/lesson-store/lesson-segmentation.htmlhttp://www.marketingteacher.com/lesson-store/lesson-positioning.html


6/30

Secondly the marketer could ignore the differences in the segments, and choose to aim asingle product at all segments i.e. the whole market. This is typical in 'mass marketing' orwhere differentiation is less important than cost. An example of this is the approach takenby budget airlines such as Go/

Finally there is a multi-segment approach. Here a marketer will target a variety ofdifferent segments with a series of differentiated products. This is typical in the motorindustry. Here there are a variety of products such as diesel, four-wheel-drive, sportssaloons, and so on.

Part of STP - Segment-Target-Postion

The third and final part of the SEGMENT - TARGET - POSITION (STP) process is'positioning.' Positioning is undoubtedly one of the simplest and most useful tools to

marketers. After segmenting a market and then targeting a consumer, you would proceedto position a product within that market.

Remember this important point. Positioning is all about 'perception'. As perception differsfrom person to person, so do the results of the positioning map e.g what you perceive asquality, value for money, etc, is different to my perception. However, there will besimilarities.
http://www.marketingteacher.com/lesson-store/lesson-segmentation.htmlhttp://www.marketingteacher.com/lesson-store/lesson-targeting.htmlhttp://www.marketingteacher.com/lesson-store/lesson-segmentation.htmlhttp://www.marketingteacher.com/lesson-store/lesson-targeting.html


7/30

Products or services are 'mapped' together on a 'positioning map'. This allows them to becompared and contrasted in relation to each other. This is the main strength of this tool.Marketers decide upon a competitive position which enables them to distinguish theirown products from the offerings of their competition (hence the term positioningstrategy).

Take a look at the basic positioning map template below.

The marketer would draw out the map and decide upon a label for each axis. They couldbe price (variable one) and quality (variable two), or Comfort (variable one) and price(variable two). The individual products are then mapped out next to each other Any gapscould be regarded as possible areas for new products.

The term 'positioning' refers to the consumer's perception of a product orservice in relation to its competitors. You need to ask yourself, what is the position ofthe product in the mind of the consumer?

Trout and Ries suggest a six-step question framework for successful positioning:

1. What position do you currently own?

2. What position do you want to own?

3. Whom you have to defeat to own the position you want.


8/30


9/30

Product Use

How customers use product installation, components, accessories, rawmaterial, eaten, professional service.

Buying Situation

Buying situation rebuy, modified rebuy, new purchase.

Purchasing Method

Purchasing methods Internet, long term contract, warranty, financing, cash ondemand.

Behavior

Needseconomic, functional, psychological, social. Benefits--quality, service, economy, convenience, speed. Attitude toward product--Enthusiastic, positive, indifferent, negative, hostile.

User status--Nonuser, ex user, potential user, first time user, regular user. Loyalty status--None, medium, strong, absolute. Brand Familiarity-Unaware, aware, informed, interested, desirous, intending to

buy. Occasion--Regular occasion; special occasion, convenience, comparison

shopping, unsought product. Type of problem solving needed-routine, limited, extensive. Information required-low, medium, high.


10/30

Geographic Location

Region of world, country North America, South America, Africa, Asia, Europe. Regions within that country (For Example USA) Pacific Northwest, South,

Midwest, New England. Size of city population under 5,000 people to 4 million or more. Urban vs. rural country, city, large city = more resources, more independence;

country=more dependence on neighbors and pooling resources. Climate cold, hot, rainy, desert, beaches, mountains.

Demographics

Income under $5,000 to $250,000+ a year. Gender male, female, neither, both. Age Infant, toddler, preschool, tween (age 8 to 12), teen, college age, 20, 30,

40, 50, 60, 70-90. Family size 1 person, 2, 3, 4, 5 or more. Family life cycle young, single, engaged, DINKS (double income no kids),

SINKS (single income no kids), married with kids (babies, toddler, elementaryschool age, teen, older), recently divorced, empty nester (children have movedout), same-sex couples, single parents, extended parents (grandparents raisingtheir grandchildren), retired (either wealthy or Medicare dependent/poor). Thereare also Boomerang Kids (adult children have moved back home), Cougar/SilverFox (Cougar is a 40-60 year old weathly, single, career driven woman seeking ayounger man; Silver Fox is a 40-60 year old wealthy, single, career driven manseeking a younger woman).

Job unemployed, housewife, part-time, full-time, student, professional,craftsperson, farmer, retired. Education grade school or less, some high school, high school graduate, some

college, college graduate, graduate degrees. Religion Christian, Jewish, agnostic, atheist, Muslim, Islam etc. Race White, Black, Asian, Hispanic, Native American, mixed race, etc. Culture/nationalityAmerican, French, English, African, Russian, Indian etc. Generation (For Example USA) GI Generation, Silent, Matures, Baby Boomer,

Gen X, Gen Y, Boomlets.

Psychographics

Lifestyle interests, hobbies, activities, interests, opinions, values, medipreferences. Everyone has two lifestyles, the one they are in now, and the onethey desire to be in, which is usually better than the current one. Almost alldecisions are influenced by the buyers current and desiredlifestyle.

Personality traits


11/30

o Sincerity.

o Excitement.

o Competence.

o Sophistication.

o Ruggedness.

Social class Lower, middle-low, middle, middle-upper, upper, upper-upper,working class, blue collar.

MARKET SEGMENTATION

The main reason why we have Segmentation is because we have so many types ofcustomers.

The reason why Segmentation has become important in teaching and learning aboutmarketing is because these groups of different customers have:

1. become more numerous, we have many more types of segments2. the differences among groups have become more distinct3. the groups have become large in number

Segmentation is not easy, once you decide that it is necessary to do, you may find that itis challenging to create these segments with any workable or meaningful definition

http://www.witiger.com/marketing/marketsegmentation.htm

Criteria for Segmentation- things you have to think about in order to decide if a potential group is worthwhile being considered a "segment"

1. Homogenous - are the people in the proposed segment all similar without too many differences- you could say right handed people is a segment, but.... if half the right handed people were women, and half were men,

then this might not work if the gender also was an issue.

.CriteriaforSegmentation

2. Heterogenous- the people between the segments should be very different- right handed and left handed might not be worthwhile if you are talking about a market segment for aproduct like pull-on boots

.Criteriafor

3. Substantial- the people in the segment should be large enough in number to be worthwhile
http://www.witiger.com/marketing/marketsegmentation.htmhttp://www.witiger.com/marketing/marketsegmentation.htm


12/30

Segmentation

- right handed men might be a large enough segment- right handed men, who wear glasses, and speak Spanish and right motorcycles might be too small- the group has to be large enough to "generate sufficient sales volume at a low enough cost to result in a

profit " says Sommers 10th Ed.


4. CompetitionSommers 10th Ed. suggests that a company should target segments "where the numbr of competitors andtheir size are such that the firm is able to compete effectively"example- some people buy trucks, some SUVs and some cars and some mini-vans- some companies have a product segment devoted to truck buyers, like Ford- car companies, like Nissan and Toyota might be advised to avoid selling trucks in North America

because the competition is intense and they might not make a profit


5. ResourcesSommers 10th Ed. suggests that a company should make sure the segment relates to the resources of thecompany. If the company can mfg. variations to fit its key demographics, great, but it should not take on

additional demographics if it does not have the capabilityexample- a lingerie company taking on plus sizes - which would mean reconfiguring the fabric pattern cut-outwhich would effect fabric cost, waste amounts, etc.

.

A Powerpoint on Segmentation"If you want to downloadChpt Eight (re: 11th edition) to view it and print it out yourself, go herehttp://people.senecac.on.ca/tim.richardson/MRK106-9th-Edition/Chpt8~9thedition.pptthis powerpoint was still downloadable Oct 2007this powerpoint discusses- two basic types of markets- clustering

- 4 criteria for determining if the segment is useful- criteria for segmenting- aggregating segments- VALS - values, attitudes, lifestyles- positioning

Marketing segmentationMarketing targets key people that help their business grow. Marketing segmentation is

just one of the steps a business must take when they are working to define their specific

target markets. Marketing segmentation is the process of dividing a market into a

group of key buyers that require different products. Instead of using the same marketing

strategy for all the consumers, it is dividing into different categories and tailored to fit the

needs of the consumers. The goal of market segmentation is to target the correct audience

with the correct product and obtain the highest rate of return for a
http://people.senecac.on.ca/tim.richardson/MRK106-9th-Edition/Chpt8~9thedition.ppthttp://people.senecac.on.ca/tim.richardson/MRK106-9th-Edition/Chpt8~9thedition.ppthttp://www.improvingyourworld.com/business/mlm_and_home_business_are_they_the_same_002367.htmlhttp://people.senecac.on.ca/tim.richardson/MRK106-9th-Edition/Chpt8~9thedition.ppthttp://www.improvingyourworld.com/business/mlm_and_home_business_are_they_the_same_002367.html


13/30

The first aspect of marketing segmentation is to find the "category of need" that the

company, service, or product will fulfill. There are three fundamental characteristics that

define the "category of need", they include the following:

Strategic - this category must define the product the company is offering and why

it is important to the mission, objectives, or operations of the consumer.

Operations - this category must fulfill the general operating procedures of a

company and align with its procedures.

Functional - the final approach is to define the function need a customer has for a

product. The product or service must deal with a specific process such

accounting, maintenance, etc. There are several domains for the functional aspect of

market segmentation, but it must be defined with the prospective audience in min

The second aspect in marketing segmentation is to define what the need is and who willexperience this need. For example, some of the needs a business may have include the

following: reduction in operating expenses, increased cash flow, improved productivity,

etc. Once the need is defined and prospects are defined, a company must then consider

the 4 bases of consumer market segmentation.

The 4 bases of consumer market segmentation include:

Geographical bases are based on states, regions, countries, climate, population

density, and population growth rate.

Demographical bases include variables such as age, family size, gendeeducation, life cycle, occupation, income, ethnicity, and family status.

Behavior bases include product knowledge, attitude, responses, usage, and brand

loyalty, price sensitivity, and benefits sought.

Psychographic bases include lifestyle, personality, and values.

Market segmentation will vary with current economic conditions and trends. Market

research is a large factor in marketing segmentation and will help companies determine

how to create a campaign and use managerial judgment to implement the campaign.

Other factors businesses must include with marketing segmentation are the accessibility

the target market has to the business. Some questions a business must ask include: "is the

product accessible online? Can consumers find the location easily? Is the product they are

seeking easy to find?" Every group that is segmented must be able to provide a large

customer base that will provide solid revenue for the company. Marketing segmentation

requires the marketing team to create separate marketing plans for each segmented group
http://www.businessknowledgesource.com/smallbusiness/how_to_find_a_sample_business_plan_and_mirror_it_023478.htmlhttp://www.businessknowledgesource.com/smallbusiness/how_to_find_a_sample_business_plan_and_mirror_it_023478.html


14/30

as well. A larger company usually has funding for market research and they are able to

define their segmented groups using this market research. Since a smaller business

doesn't have the funding to conduct market research, they need to implement other

strategies. Here are a few tips for smaller companies that are looking to segment their

market:

First, always look for secondary resources that can provide you with data. Somesecondary resources include expert's advice in the particular field, research publications,and trade publications. Second, watch competitors marketing efforts and copy certainaspects of them. Trade buyers generally have a lot of key information that can also help asmall business segment the market. A needs analysis is another great way to obtainresearch from individuals and segmented groups. Once the market is dividing intosmaller segments, companies can begin measuring the differences between groups.Marketing efforts are much easier for companies that have implemented marketingsegmentation because they are able to discover niche markets.

Marketing segmentation allows a company to find a new approach for businesses andcustomers. When a company implements marketing segmentation, they are able todetermine the needs and wants of customers and it is easier for them to satisfy a varietyof people. Targeting customer groups versus product groups allows a company to offeradditional services to customers and bundle different packages that normally would notbe offered together. Increasing profits is a large goal for most businesses, implementingmarketing segmentation will allow a company to develop strategies for price increasesand having the customers accept the higher price. Price segmentation will occur forregions. Typically large cities have higher prices than rural areas. For example, Wal-Martwill charge higher prices for the same product at different stores because of the economic

situation of the city the store is in.

Marketing segmentation will allow companies the opportunity to develop new productsthat are based on the needs of the target market. When a company has niche groups, theytend to develop niche products for these groups. Several companies will create marketingsegmentation strategies that focus on customer loyalty. When a customer continues topurchase products from the same company, the company will be able to reward themwith premium products and promotional materials.

Over time customers will change their buying behavior. Companies that participate inmarketing segmentation will recognize the customer changes and will find ways to

produce products that are geared toward a certain lifestyle or toward particular customerneeds. For example, several people began purchasing cars with navigation systems built-in to help them with directions. Electronic companies produced individual GPS systemsfor cars that customers could purchase without having to purchase a new car. Since thesale of these units increased, cell phone companies began including GPS services withthe cell phone for their customers. By offering the same device to customers andchanging it with different stages, GPS manufacturers were able to capitalize on theparticular needs of the consumers.


15/30

Creating brand identity is one of the main goals of marketing segmentation. Sincetargeted marketing efforts stress the importance of a product or company to a specificgroup of consumers, they are able to create brand identity in several market segments.Some customers may be targeted in two different groups of market segments. For

example, a cell phone manufacturer may place business professionals in a particularsegment and place family consumers in another segment. A customer that is a businessprofessional may also be in the segment for a family group. The individual willimmediately associate the company with business-related cell phones and will also beable to identify them as individual cell phone services.

One of the main reasons companies implement marketing segmentation is because itallows a company to identify needs of customers and improve products to meet theirneeds. A customer typically is willing to pay a higher price for a product if it meets theirneeds. Marketing segmentation also allows companies the opportunity to become amarket leader. When a company becomes a market leader, they can develop stronger

relationships with suppliers, partners, and customers. A company that is seen as a marketleader will have the opportunity to strengthen its brand and ensure profitability to thebusiness.

Since most companies compete on price, market strategy will allow a company theopportunity to find the demand for products that are closely related and determine the keydifferences between the products. Having the ability to keep a product in the lowest pricedensity is another marketing segmentation strategy. Companies have the ability to sustaina higher price level and higher margins if their product provides value to customers.Since market competition is continually increasing for consumers, business customers areused to multiple choices for products. Marketing segmentation provides customers withthe ability to be more effective with pricing products and provide a greater density totheir service.

Several companies offer marketing segmentation services. Since numbers alone don'tallow companies the opportunity to understand the markets, outside companies haveidentified different strategies and analyze data and find ways to companies to improvetheir services. One of the services offered by market segmentation companies is theability to determine the emotional reasons behind purchasing products. They will discussdifferent reasons why customers buy and the emotional need versus traditional research.It is common for companies to create marketing segmentation strategies that are based onrational reasons for purchasing a product versus emotional reasons for purchasing aproduct. Hiring an outside market research company will help determine the differentreasons and they will help a company understand what their primary motivations arebehind the price, quality, and service of consumer buying. Outside companies willconduct surveys of customers and determine the hidden desires and motivations behindpurchasing a product. Since human behavior is complex, it is difficult for companies tounderstand the attitudes and beliefs consumers have about products. Using a companythat specializes in marketing segmentation will allow your company to understand those
http://www.improvingyourworld.com/business/marketing_techniques_for_small_home_businesses_002685.htmlhttp://www.businessknowledgesource.com/marketing/how_to_segment_your_customers_to_determine_your_marketing_needs_024107.htmlhttp://www.improvingyourworld.com/business/marketing_techniques_for_small_home_businesses_002685.htmlhttp://www.businessknowledgesource.com/marketing/how_to_segment_your_customers_to_determine_your_marketing_needs_024107.html


16/30

abilities and provide more detail about your target customers such as loyal customers,brand switchers, and the customers of competitors.

Market Segmentation Check List

How Well is Your Company Using Market Segmentation Techniques?

1. Does your company segment the market? If not, why not?2. What strategy is used - differentiation, concentration, of atomization?3. What segment(s) of the market are you trying to serve?4. How successful are you at meeting this objective?5. What is your typical customer profile?6. Are target market defination based on research?

7. What dimentions (methods) are used to segment markets?8. When was your last segmentation analysis conducted?9. How frequently are updates obtained?10. What is your budget for segmentation analysis?11. Are products decisions based on segmentation research?12. Are pricing and distribution decisions based on segmentation?13. Are promotional decisions based on segmentation research?14. Is segmentation analysis used in assessing competition, trends, and changes in the

marketplace?15. Is segmentation analysis used to evaluate your present marketing efforts.- markets

to pursue?

Benefits Of Market Segmentation.

The overall objective of using a market segmentation strategy is to improve your company's strategycompetitive position and better serve the needs of your customers. There are four major benifits of marketsegmentation analysis and strategy. They are:

1. Design or provide responsive products to meet the needs of the market place. You will be able to employa more interactive, personalized approach which goes a long way in building relationshipand customer loyalty. You will move closer towards the marketing concept - customer satisfaction as a

profit. You will be able to place the customer first and design and refine your product and service mix totheir satisfaction.

2. Determine effective and cost efficient promotional strategies. As a planning tool, use it to analyse anddevelop your communication mix.appropriate promotional campaigns can be designed and targeted to

the right media vehicles. This marketing investment can be supplemented by public relations initiatives andsales promotion methods. In addition the personal sales process can be improved by providing salesrepresentatives with useful background customer research, recommended sales appeals, andon going support.


17/30

3. Evaluate market competition, in particular your company's marketposition. If the information collected was thorough you should be able to explore you company's marketposition - how it is perceived by its customers and potential customers relative to the competition.

4. Provide insight on present marketing strategies. it is important to periodically reevaluate your presentmarketing strategies to try to capitalize on new opportunities and circumvent potential segmentation research is useful in exploring new markets - perhaps

secondary smaller or fringe markets which might have otherwise been neglected by concentrating onprimary markets. with all those information you have the necessary research base upon which all othermarketing strategies can be successfully formulated and implemented.

Is your company using marketing segmentation techniques as effectively as possible? Take a look at mymarketing segmentation 15 point check list. on my web site.

Limitations of market segmentation.

Having said a lot about segmentation I must warn than it is not a bed of roses, and marketers must be awareof some of the disadvantages of market segmentation analysis. These include:

1. Segmentation findings only provide a composite profile of a group.Although research can providemeaningful marketing information, some forms of segmentation analysis reflect only expected segmentdecision making, and do not necessarily indicate individual purchase behavior. Two women may both beforty years old and both earning $50,000 per year. By using demographic analysis only, the marketer maywrongly stereotype these consumers as similar prospects. In reality , they may have different interests,attitudes, and perspectives on life. Further investigation in their lifestyles is possible through psychographicresearch, which can help the marketer to present a more complete picture of a market situation.

2. The great diversity of consumer lifestyles in the 80s and continuing in the 90s has made segmentationmore difficult and costly in many markets.Changing family structure, the rise of women in the work force,increases in divorce and single person households, the increase in ethnic groups such as the rise in Hispanicand Asian population and also the increasing black middle class, and today's changing lifestyles(e.g.,convenience - seeking, health and fitness conscious, etc.) have created great opportunities and a lotof problems for marketers attempting marketing segmentation

.3. Segmentation research is not a remedy forother marketing or organizational deficiencies.The bestsegmentation information is worthless unless it is supported by consistent product, promotional, pricing,and distribution strategies that are regularly evaluated and revised as situation dictate.

4. Segmentation's effectiveness is limited by management's ability to implement strategic implications.A marketing orientation requires a strong commitment by the firm. This includes support in the areas ofpersonnel, resources to hire marketing consultants, time investment of management, and the willingness toact on prescribed recommendations. Findings from a segmentation analysis need to progress from the"report on the executive's shelf" stage to the "working document" stage.

5. To many market segments - over-segmentation.In the process of segmenting the markets, to many

segments are sometimes formed. This becomes costly and reduces profits. If unprofitable segmentsare formed because of a lack of segments evaluation, marketers

generally combine segments to reduce the number of segments.

Market Segmentation Analysis


18/30

Remember taking a quiz in some magazine and finding out that your score of 58 meantyou really should have taken that circus job? A well-executed segmentation analysisprovides a more "statistically sound" technique for splitting your marketplace intomanageable segments.

Market segmentation is used as a strategic marketing tool for defining markets andthereby allocating resources. Segmentation studies use statistical techniques called factoranalysis and cluster analysis to combine attitudinal and demographic data to developsegments that are easier to target. In many situations it is better to identify your targetgroups and aggressively market to smaller, more defined segments.

From a marketing management viewpoint, market segmentation is the act of dividing amarket into distinct groups who might be attracted to different products or services. Thistechnique is widely accepted as one of the requirements for successful marketing. Bydividing the market into relatively homogenous subgroups or target markets, bothstrategy formulation and tactical decision making can be more effective.

Market segmentation is concerned with individual or group differences in response tospecific market variables (e.g. preferences, lifestyles, media habits, etc.). The strategicpresumption is that if these response differences exist, can be identified, and arereasonably stable over time, and if the segments can be efficiently reached, the companymay increase its market share beyond that obtained by assuming market homogeneity.

Example:WestGroup conducted a segmentation study for the Arizona Lottery in 1996. Theobjective of the project was to help the Lottery design an effective marketing strategy tomaximize the return on their marketing dollars. The study identified six segments of the

population (those opposed to the Lottery were excluded from the study).

The segments were identified as Optimists, Critics, Dreamers, Managers, Analysts, andPessimists. (Click here for detailed definitions of the Lottery segments.) Among the sixsegments, the Optimists and Dreamers had the greatest frequency of play in the lottery.Thus, based on the demographic information we collected for each group, the ArizonaLottery made a concerted effort to direct their advertising campaigns to members of thesesegments. Information from the segmentation study helped provide direction constructing campaign messages, purchasing media that will reach the demographicgroups found in the target segments, and identifying the most appropriate media to use.

For final reviewPut simply, segmentation is the process of partitioning a market into groups of potentialcustomers who share similar defined characteristics and who are likely to exhibit similarpurchase behavior. The key to a successful segmentation strategy is the ability tocapitalize on similarities within a segment that are important from a marketing point ofview.

http://www.buzzle.com/articles/market-segmentation-theory.html
http://www.westgroupresearch.com/publish/lottery.htmlhttp://www.westgroupresearch.com/publish/lottery.html


19/30

Market Segmentation Analysis

The act of dividing target markets into various segments based on a number of factors,

and then devising individual market strategies for each segment is a commonlycarried out practice. The task of market segmentation analysis is imperative for thesuccess of the marketing activities of every company. Read on to know more.

When the producer of a specific commodity decides to undertake the marketingandpromotional activities for that commodity, what makes him decide how to approach hispotential customers? The base of his customers is obviously vast and varied and containspeople from all walks of life and belonging to different income groups. Each of thesedifferent groups of customers require an altered and unique approach. The basis for thisapproach is arrived at by carrying out market segmentation analys

One of the most widely used concepts in marketing management is that of STP, that is,

Segmentation, Targeting and Positioning. What this implies is that the potential customerbase is studied by the marketer by carrying out market segmentation analysis, the mostapproachable and profitable segment is chosen and targeted, and the necessary marketingand promotion steps are taken. For a marketer his resources are absolutely vital and hecannot afford to waste these resources on useless purposes. He has to have a specifictarget audience in mind (for any form of promotion), and then take steps accordingly. Thefirst step of this entire process is market segmentation analysis. Learn more about marketsegmentation strategy.

Why Segment Your Market?

Now the question that surely arises is what is the purpose of market segmentationanalysis, and why must it be performed. The following are the primary reasons forcarrying out market segmentation for market trend analysis.

1. To avoid wastage of precious company resources.2. To divide the market into various segments, or target groups.3. To target each profitable segment in a unique way that suits that particular

segment, and provides adequate returns.4. To avoid overlapping and redundant information to one particular segment.5. To get maximum response and sales from each segment.

Basis for Market Segmentation

When it comes down to practical application of market segmentation analysis, there haveto be some fixed parameters that marketers must adopt and enforce in order to achievethe best results and maximum profits. The following are the different factors thatdetermine how the different market segments are arrived

Geographic Segmentation:This segmentation is done on the basis of the physical location
http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/market-segmentation-strategy.htmlhttp://www.buzzle.com/articles/market-segmentation-strategy.htmlhttp://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/market-segmentation-strategy.htmlhttp://www.buzzle.com/articles/market-segmentation-strategy.html


20/30

and boundaries of the customers. The following considerations are necessary here. Readmore on geographic segmentation.

Which country the customer resides in. Are there any limitations on the usage and promotion of the product in the

country. What is the size of the country and what is the density of the population there. What are the climate conditions in that country.

Demographic Segmentation:This process of analysis comes into play when the quality andother characteristics of the general population are taken into consideration.

The age and the gender of the target audience needs to be considered. The common occupations and income levels of the population also play a part. The religion and language that the people follow also needs to be kept in mind. The family size and quality of education are also important here.

Psychographic Segmentation:In this category the attitudes and lifestyle of the consumers areconsidered. Also known as the IAO (Interests, Activities and Opinions) model, it plays amajor part in devising successful marketing strategies. Read more on psychographicsegmentation.

The general personality traits of the customers must be kept in mind. The values of the people and the attitudes that they have towards certain products

are crucial pieces of information for a marketer.

The hobbies and the perception of the selling company are also necessary to be

Market Segmentation Process

Coming straight to the point, market is a place where buyers buy and sellers sell. In sucha case, buyers and sellers both are at an advantageous position. However, to maximizingsales, which eventually leads to increase in profit, is the very lasting objective of anyseller/producer. For the purpose of sales maximization, sellers employ marketing, whichis a process of commercially promoting, distributing and advertising a given product or

service. Market segmentation process is one such technique that has been innovated bymarketing professionals. Read onmarketing strategies.

What is Market Segmentation?

The process of market segmentation, involves the creation of market segments or parts orsub-sets. A segment of the market is basically a sub-set, in terms of goods, service orproduct, of the entire market and is identified or created by the marketing department insuch a manner that the individuals (or organizations) in that very segment would demand
http://www.buzzle.com/articles/geographic-segmentation.htmlhttp://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/geographic-segmentation.htmlhttp://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-strategies/


21/30

a certain set of goods and services that have similar features. In short, a segment is adivision of market, the elements of which depict common needs. The meritorious featuresof a market segment includes the following:

1. Geographically or product-wise or even need wise, a single market segment is

distinct from other segments, though one can also count on the existence of someminute similarities.2. Products that are demanded by the consumers are homogeneous and in some

cases also tend to have similar price levels.3. A product introduction into such a segment stimulates similar and almost

congruent reactions from a majority of consumers.

Market Segmentation as a Process

There are some specialized theories based upon which markets can be easily segmentedinto different sections. Market segmentation can be positive segmentation, negativesegmentation or top-down segmentation. Companies also derive separate segmentationtechniques for every product and brand. Market segmentation process is usually donewith the help of past data, on filed surveys and consumer interactions. Volumes of goodssupply in every segment is made with the help of economic indexes and average incomeand demand figures.

Steps for Market Segmentation Process

As mentioned above, one of the basic objectives of market segmentation is to maximizesales and profits. Hence, the three important objectives of any segmentation process is togain new customers, sustain the existing consumers and introduce newer products intothe market for the existing consumers and there by gain new consumers. The five stepprocess of market segmentation goes as follows.

1. The first step in the market segmentation process is to establish the market andtargeted consumers. This process involves tremendous paper work and surveys.Economic and demographic factors are also analyzed in the process. In addition tothat this step might also include advertising about the product

2. The second step is often termed as market mapping and involves structuring theentire marketing procedures based upon the need of the said market. Logisticscost, retail and whole sale cost, etc, are some important parameters that are set upduring this stage. Another very important factor involved in this step is thetargeting of consumers who are also known as decision makers. The remainingthree steps are derived on the basis of this step.

3. The third step is entirely dependent upon the consumers as the demand by

consumers and their suggestions are largely viewed, surveyed, taken consideration and in many cases implemented.

4. In this step, the actual segment begins to take shape as like minded consumershaving same demands are placed together and are analyzed as a group. Launchingof a parallel or a totally new product is viewed in this situation. This segregationis often based upon economic indexes, demographic, geographic situations.


22/30


23/30

There are many theories associated with the yield curve and one such theory is the marketsegmentation theory. This market segmentation theory brings together potentialbuyers into segments with common needs, that will respond to a marketing action.This means that certain investors are interested in particular types of investments likeshort term debt securities. However, few investors are interested in only long term

bonds. Thus, the market segmentation theory discusses each separate maturity asindependent from others. Let us understand what is market segmentation theory inbrief. You can read more on marketing strategies.

What is Market Segmentation Theory

The market segmentation theory shows that there is no direct relationship betweenthe prevailing interest rates in the market in both, the short term and long termmarkets. These short term and long term plans have separate term periods that cannotbe replaced among each other. So the demand and supply of debt instruments withshort term period and long term period are calculated individually. You can read

more on business financing.

The market segmentation theory finds that the securities that are traded in short termmarket may undergo a significant flux and the rates that are applied to long terminvestments remain static to some extent. The market segmentation theory issometimes also known as the segmented markets theory. The segments market theorymostly agrees and supports the preferred habitat theory. According to the preferredhabitat theory, the investors have a specific expectation when one is required toinvest in securities with different maturity lengths. When an investor trades on anopportunity that matches their preferences and their assumed degree of risk, theexpectations remain within the degree of reason. However, if the investor buys or

sells securities that have a maturity beyond their preferences, it will affect theirassumption of risks and needs and will require a need for increased return to balancethat risk. You can read more onmarket segmentation analysis.

Those who advocate the market segmentation theory have pointed out that theevaluation of the yield curves of short term and long term markets show that the rateof interest applied has little or no relationship with one another. In fact, the yieldcurve is based on the available supply and the demand of options and not interestrates. You can read more on market segmentation strategy.

Investors Choice

The investors choice is one of the most important part of the market segmentationtheory. It is seen that investors make their choices in advance and normally want toinvest in debt instruments with short term periods. This is because the investors wantto have some amount of liquidity and short term investments gives them this. Thus,in the finance market, the debt instruments that have more demands are short terminvestments.
http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/business-financing/http://www.buzzle.com/articles/market-segmentation-analysis.htmlhttp://www.buzzle.com/articles/market-segmentation-strategy.htmlhttp://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/business-financing/http://www.buzzle.com/articles/market-segmentation-analysis.htmlhttp://www.buzzle.com/articles/market-segmentation-strategy.html


24/30

The market segmentation theory states that if there is more demand for a particularinvestment it will definitely cost more. However, the yield of this investment will bevery low. Thus, one can understand why short term yields are lower than the longterm investment yields. It is also seen that when short term rate increases during anyperiod of time, the investors will not shift from long term bonds to short term bonds.

Therefore, increase in the rate of yield will not influence investors of long terminvestments.

This market segmentation theory is based on the practices of commercial banks andinsurance companies and investment trusts. Commercial banks are institutions thatmostly deal with the short term investments and insurance companies and investmenttrusts indulge in long term investments. However, there are chances of overlappingbetween the different types of markets and some institutions deal in different marketsthat offer different securities with different maturities.

The market segmentation theory has its own advocates as well as critics. Some

investors execute investment that involve both short term as well as long termmaturities. These investors do not believe that these two different investment marketsfunction as independents, especially in case of interest rates. They focus on the shortterm market and influence the long term market gains and vice versa. This was someinformation related to what is market segmentation theory. I hope this has helped youunderstand this segmentation theory of the market.

Target Marketing Strategy

The sole aim of any business functions is to make profit. In order to attain maximummonetary benefit, business men and management spend scores of hours trying to zero inon the perfect strategy that will fish maximum returns.

Marketing is an important function that plays a vital role in the running of the business. Ifthe product is not marketed in the right manner and fails to reach the end customer, thebusiness will fail. This is why,marketing strategies play crucial roles. While marketing aproduct, the company has to decide a target market. Target market is nothing but thatspecific set of audience to whom the product manufactured is meant to cater to. Targetmarket is more like dividing the vast sea of customers into smaller segments and usingthe 4Ps of marketing (Product, Price, Place and Promotion) on this segment effectively toachieve maximum sales and profits. Target marketing strategy helps tap that subset of thecustomer population that are most likely to purchase and use the product. Read more onmarketing mix strategy.

How to Identify a Target Market?

Target market, unlike mass marketing does not dole out a single product to the entiremarket, instead marks out a specific range of people to who the product must beeffectively marketed to. As a marketing professional one needs to identify the targetmarket correctly and tap as much profit as possible. To identify the target market one will
http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-mix-strategy.htmlhttp://www.buzzle.com/articles/marketing-mix-strategy.htmlhttp://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-mix-strategy.html


25/30

have to look at the product being manufactured and sold. Ask a few questions such aswhat does this product do? Whom is it helpful to? Which regions of the world will acceptthis product, etc.Let's consider the simple example of marketing a pair of low waist jeans. The product iscatering to the fashion taste buds of the young, teenage generation. Thus, the target

market would be based on the age ranging from 14-25 years of age. Then again if weconsider a product exclusively for men, such as shaving cream, the target market will bedivided based on gender. Other factors affecting target market selection are income,occupation, geographical location, etc. If your company is selling desert coolers, it is butobvious that the target market will be for extremely hot regions of the world and not thecold regions. Moreover, if you are selling a luxurious product in an economically poorcountry, it's quite obvious the product will not sell. Thus, based on the product marketed,the target market can be identified and worked upon. You can also read more on productlife cycle theory.

Let's have a look at how you can divide the market into tiny segments for one's targetmarket.

Demographic Segmentation:This segment involves categorization of customersbased on factors such as age, income, family size, gender, education, nationality, race,etc. Read more on demographic segmentation.

Geographical Segmentation: As we already read above, segmentation based on theregion is important while dealing with specific products like desert coolers, fur coats,blankets, snow boots, raincoats, etc. the climatic conditions will determine one's targetarea. Read more on geographical segmentation.

Behavioral Segmentation:This form of segmentation clubs factors like brandloyalty and value of quality. For example, several IT companies market their productsspecifically to customers loyal to their products. Then again, certain companies targettheir high scale products to people who cherish, value and are ready to shell out extracash for valuable pieces.

Psychographic Segmentation:This type of categorization involves clubbing ofpeople's interests, life styles and personalities. Read more onpsychographicsegmentation.

Types of Target Marketing Strategies

It's important to tap the most attractive segment for maximum profit. To help you achieve this, here aresome target marketing strategies.

Single Segment Strategy:This strategy involves the use of only one marketing mixfor one market segment. Usually small scale companies with limited budget andresources opt for this form of target marketing strategy.

Selective Specialization Strategy:In this strategy, several marketing mixes are
http://www.buzzle.com/articles/product-life-cycle-theory.htmlhttp://www.buzzle.com/articles/product-life-cycle-theory.htmlhttp://www.buzzle.com/articles/product-life-cycle-theory.htmlhttp://www.buzzle.com/articles/demographic-segmentation.htmlhttp://www.buzzle.com/articles/geographic-segmentation.htmlhttp://www.buzzle.com/articles/geographic-segmentation.htmlhttp://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/marketing-mix/http://www.buzzle.com/articles/product-life-cycle-theory.htmlhttp://www.buzzle.com/articles/product-life-cycle-theory.htmlhttp://www.buzzle.com/articles/demographic-segmentation.htmlhttp://www.buzzle.com/articles/geographic-segmentation.htmlhttp://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/psychographic-segmentation.htmlhttp://www.buzzle.com/articles/marketing-mix/


26/30

implemented in different segments. The same product is marketed differently in differentsegments, which is why this target marketing strategy is also known as differentiatedstrategy.

Product Specialization:The product manufactured is customized and then marketed,

so as to cater to different market segments.

Market Specialization Strategy:In this form of target marketing, the companyfirst finalizes the market segment they wish to cater to and then manufacture a variety ofproducts exclusively for this segment.

Full Market Coverage Strategy: The company uses this strategy when they wish toserve the mass market. This means a single marketing mix combination can be used oreven several marketing mixes are used to cater to segments made in this entire market.

Market Segmentation Strategy

Market segmentation strategy involves dividing the market into groups, windividuals have similar needs and wants for services and products. It could also be asegmentation of people on the basis of behavior, culture and economic status. To get aclearer picture of what is market segmentation, one can always look into the definitionprovided by business dictionary.com, market segmentation is defined as, "Process ofdefining and sub-dividing a large homogenous market into clearly identifiable segmentshaving similar needs, wants, or demand characteristics".

Why Segment your Market?

Before one market's products or services, one needs to understand their customers, andfind ways and means to satisfy their wants. This is imperative to stay ahead of thecompetition and build the brand. This is done through extensive market research.Although it is not possible to satisfy individual needs and even to understand all of them,a clearly defined market segmentation strategy will help create a market to cater togroups of individuals that will make economic sense to mass produce and distribute. Theconcept of target market segmentation strategy also falls under the blanket of marketsegmentation, except the former recognizes and understands the diversity of customersand provides them with products and services that suit their specific requirements. A

successful market strategy strives to understand different segments and its differentneeds; works on the exhibited common wants; and responds immedia

Market Segmentation Strategies

How a market is segmented is based on variables used for segmentation; behavioral,demographic, psychographic and geographical differences.

Behavioral Segmentation: Behavioral segmentation is based on the customer's needs andsubsequent reaction to those needs or toward the purchase of intended products and/or
http://www.buzzle.com/articles/market-research/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/market-research/http://www.buzzle.com/articles/marketing-strategies/


27/30

services. This study is conducted on all variables that are closely related to the productitself, like loyalty to a particular brand, cost effectiveness in terms of benefits and usage,circumstances responsible for the purchase, whether the customer is a regular, a firsttimer or and has the potential to become a customer, and whether the readiness to buy islinked to status.

Demographic Segmentation: Demographic segmentation refers to a wide study of thepotential customers. While marketing a product many variables like age, gender,education, income, size of the family, occupation, socioeconomic status, culture andreligion, language and nationality are taken into account. There are many instances wheresuch a segmentation has worked very profitably, toys and clothes for every age group,certain food products that do well in certain counties and don't in some, either due tocultural or religious reasons. Demographic segmentation plays a vital role in determiningwhether a product can be mass marketed or designed for specific clientle.

Psychographic Segmentation: Segmenting people according to their lifestyles and values,

and how they translate into consumption or purchases of products of services is whatpsychographic segmentation is all about. How one's interest, opinions, values, attitudeand the activities they perform, all affects how and why a group of people would leantowards one product more than others. A high status would translate into an expensiveflying habit, while a thrift value will translate into an economy flight.

Geographical Segmentation: Geographical segmentation is done by dividing people(markets) into different geographical locations. The country, state, or neighborhood, theking of gentry, climate, size of a place segmented into size of its age wise population, etc.all play a role in devising market strategies. This helps the producer and the marketers tounderstand what will sell and what won't, for example, a market for winter wear woulddefinitely not work in warm regions.

To understand marketing concepts better, read through marketing toolsand marketingplans.

Before a company launches its services, it not only studies a market segmentationstrategy, but relates it in terms of a product life cycle theory. Both the conceptscombined, give the marketeers a clear idea of what would be profitable, or otherwise.

Product DifferentiationCompanies manufacturing products which satisfy the same need have to come up with acertain distinguishing factor for their product to be recognized. This is where companiescome with product differentiation strategies based on minor unique details, which willensure their product is etched in the minds of target consu

What is Product Differentiation ?

The product differentiation definition states that it is the process by which a product isdistinguished from others, so that it appeals more to the target audience. Other than
http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-tools/http://www.buzzle.com/articles/marketing-tools/http://www.buzzle.com/articles/marketing-plans/http://www.buzzle.com/articles/marketing-plans/http://www.buzzle.com/articles/marketing-plans/http://www.buzzle.com/articles/product-life-cycle-theory.htmlhttp://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-tools/http://www.buzzle.com/articles/marketing-plans/http://www.buzzle.com/articles/marketing-plans/http://www.buzzle.com/articles/product-life-cycle-theory.html


28/30

distinguishing the product from its competitors, this process should ensure the product isdistinct from all other products the company offers.

Product differentiation gives the product or service an edge over rival products. Ithighlights unique aspects of the products and also generates value for the product in the

eyes of the buyer, which should be any manufacturer's ultimate goal. When the buyerperceives, a difference is when he will remember the product and buy it, thereby resultingin higher sales for the company.

Product Differentiation Strategy

The challenge companies face in creating product differentiation is to come up with astrategy which not only creates value for buyers, but also makes it difficult for rivalcompanies to emulate. Whatever the company does to achieve this can be termed as aproduct differentiation strategy.

Product Features

By modifying the basic objectives behind the product or service being sold, themanufacturer can differentiate the product from it's competitors.

Linking Functions

A way for product differentiation is to link together two functions of the same firm.An example of this could be linking the sales function with the company's servicefunction.

Timing

While entering a new product in the market, it is crucial to do so at the right time tohelp create product differentiation and positioning at time of launch. The new entrantgets the first mover advantage when the new product comes in before any rivalcompany comes up with a similar product.

Location

Another aspect which could assist in creating product differentiation is the location ofthe firm. The closer the firm is located to the target consumers, the more advantages ithas over other competitors.

Product Mix

The total mix or variety of products sold by a firm can also be a reason for productdifferentiation. If a consumer is buying a laptop from a particular brand, he would bemore inclined to purchase laptop accessories of the same brand, rather than going forthan other brands. Also, consumers prefer buying a variety of goods from oneparticular location rather than going to different places. Thus, stores selling a varietyof products under one roof are better off than stand alone stores.

Links With Other Firms


29/30

Product differentiation could also be a result of links between different firms, servicesor products. There is a link between mobile handset manufacturing companies andservice providers or automobiles and insurance companies.

Reputation

A firm's reputation and goodwill can be a vital factor when it comes to productdifferentiation. It takes time for the company to get to a position where it has builtitself a wonderful reputation in public, but once there, there is no looking back. Thebest way a company can create an outstanding reputation is by providing consumerswith top quality products or services, to give them a memorable experience.

Product Customization

Certain products are customized for selling consumers what they exactly want. Agood example here would again be a laptop manufacturing company, which providescustomized laptops for all it's customers where they get to decide what they want intheir laptops rather than going with whatever the company has to offer.

Packaging and Advertising

Product differentiation can sometimes be done without modifying or altering theproduct or its features. This can be done by adopting an attractive or uniquepackaging, or by opting for a unique advertising campaign which registers itself inminds of the customer.

Distribution Channels

There are few products which create a differentiation on basis of their distributionchannel. An example here would be that of soft-drink manufacturers. They distributedrinks throughout the country through a chain of bottlers. The company sends themain ingredients of the drink to the bottlers, who then add carbonated water and packthe drink for eventual distribution.

Service

The amount of service and support provided by manufacturers can also create aproduct differentiation in the market. Certain manufactures have developed their ownafter-sales service centers and pride themselves in providing the best possible serviceto customers.

Read more on:

Marketing Marketing Mix Marketing Strategies

A successful product differentiation strategy will shift the competition of the productfrom price to other non-price factors. This helps the company to strengthen its position inthe market as an increase in sales is the direct outcome of a good product differentiationstrategy and execution.
http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-mix/http://www.buzzle.com/articles/marketing-mix/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing-strategies/http://www.buzzle.com/articles/marketing/http://www.buzzle.com/articles/marketing-mix/http://www.buzzle.com/articles/marketing-strategies/


30/30

Theoritical Aspects

Documents

Transcript of Theoritical Aspects