MARKETING MANAGEMENT

BBA-203

Unit- 1
SUBJECT FACULTY- Ms. Tamanna Goel

Syllabus

1) Introduction to Marketing: Nature, Scope and Importance of Marketing

2) Basic concepts of marketing
3) Marketing Philosophies
4) Marketing Management Process- An Overview
5) Concept of Marketing mix
6) Marketing Environment
7) Steps in Consumer Decision Making
8) Characteristics of Industrial Markets
9) Market Segmentation
10) Targeting
11) Positioning

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 1)INTRODUCTION TO MARKETING: NATURE,
SCOPE AND IMPORTANCE OF MARKETING
Marketing deals with identifying and meeting human and social needs. One of the
shortest definitions of marketing is “meeting needs profitably.”
One very good example is Tata Ace, The organization identified need for last
mile distribution, it developed mini vehicle (Tata Ace) which fulfilled the need
for last mile distribution very well.

IKEA, which notices that people want good furniture at a substantially lower
price and creates knock-down furniture—it illustrates a drive to turn a
private or social need into a profitable business opportunity through
marketing.

Another definition for marketing-

“Marketing is a societal and managerial process by which individuals and
groups obtain what they need and want through creating, offering, and
exchanging products and services of value freely with others”.

Marketing people are involved in marketing 10 types of entities: goods, services,

experiences, events, persons, places, properties, organizations, information, and
ideas.

Goods. Physical goods constitute the bulk of most countries’ production and
marketing effort, from eggs to steel to hair dryers.

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Services. Services include airlines, hotels, and maintenance and repair people, as
well as professionals such as accountants, lawyers, engineers, and doctors. Many
market offerings consist of a variable mix of goods and services.

Experiences. By orchestrating several services and goods, one can create, stage,
and market experiences. Walt Disney World’s Magic Kingdom is an experience.

Events. Marketers promote time-based events, such as the Olympics, trade shows,
sports events, and artistic performances.

Persons. Celebrity marketing has become a major business. Artists, musicians,

CEOs, physicians, high-profile lawyers and financiers, and other professionals
draw help from celebrity marketers.

Places. Cities, states, regions, and nations compete to attract tourists, factories,
company headquarters, and new residents.

Properties. Real property (real estate) or financial property (stocks and bonds).
Properties are bought and sold, and this occasions a marketing effort by real estate
agents (for real estate) and investment companies and banks (for securities).

Organizations. Organizations actively work to build a strong, favorable image in

the mind of their publics. Philips, the Dutch electronics company, advertises with
the tag line, “Let’s Make Things Better.”

Information. The production, packaging, and distribution of information is one of

society’s major industries. Among the marketers of information are schools and
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universities; publishers of encyclopedias, nonfiction books, and specialized
magazines; makers of CDs; and Internet Web sites.

Ideas. Every market offering has a basic idea at its core. In essence, products and
services are platforms for delivering some idea or benefit to satisfy a core need.

Marketing managers face a host of decisions in handling marketing tasks. These

range from major decisions such as what product features to design into a new
product, how many salespeople to hire, or how much to spend on advertising, to
minor decisions such as the wording or color for new packaging.

Among the questions that marketers ask are:

How can we spot and choose the right market segment(s)? How can we
differentiate our offering? How should we respond to customers who press for a
lower price? How can we compete against lower-cost, lower-price rivals? How far
can we go in customizing our offering for each customer? How can we grow our
business? How can we build stronger brands? How can we reduce the cost of
customer acquisition and keep customers loyal? How can we tell which customers
are more important? How can we measure the payback from marketing
communications? How can we improve sales-force productivity? How can we
manage channel conflict? How can we get other departments to be more customer-
oriented?

Nature of Marketing:
1) Marketing is Customer oriented. Focus is on identifying and fulfilling needs and
wants of target market.
2) It is a process. A marketing manager has to perform step by step activities.
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3) Value creation and delivery is the heart of marketing. An organization tries to
perform its marketing function in such a way that it can deliver maximum benefit
to its customers while simultaneous try to save resources of customers.
4) Marketing is Competitor focused. An organization has to perform better than
competitors in delivering value to its customers.
5) Marketing is dynamic. It incorporates changes that are happening in its
environment.
6) It is a company wide philosophy

Scope of Marketing:
1) Obtaining demand- It includes product planning, promotion mix etc.
2) Servicing demand- Transportation, Warehousing, Inventory, Order processing
3) Other activities- Market research, Sales Forecast

Importance of marketing:
1) Marketing Fosters innovations in the organization.
2) It helps in Creating satisfaction in target market.
3) Make the product available in right form, at right time, and at right place
4) Contribute in customer loyalty and retention.
5) Marketing contributes in building strong brands
6) Marketing helps in discovering what works for the organization.

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2) BASIC CONCEPTS OF MARKETING

Needs, Wants, and Demands

Needs- ‘State of felt deprivation’. It describe basic human requirements such as
food, air, water, clothing, and shelter. People also have strong needs for recreation,
education, and entertainment.

Wants- ‘Desire for specific satisfier of needs’. These needs become wants when
they are directed to specific objects that might satisfy the need. An American needs
food but wants a hamburger, French fries, and a soft drink. A person in Mauritius
needs food but wants a mango, rice, lentils, and beans. Clearly, wants are shaped
by one’s society.

Demands- ‘Demands are wants for specific products backed by an ability and
willingness to pay’. Many people want a Mercedes; only a few are able and willing
to buy one. Companies must measure not only how many people want their
product, but also how many would actually be willing and able to buy it.
However, marketers do not create needs: Needs preexist marketers. Marketers,
along with other societal influences, influence wants. Marketers might promote the
idea that a Mercedes would satisfy a person’s need for social status. They do not,
however, create the need for social status.

Value
We define value as a ratio between what the customer gets and what he gives. The
customer gets benefits and assumes costs,

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Value =Benefits / Costs
Benefits include functional benefits, emotional benefits.
Costs include monetary costs, time costs, energy costs, psychic costs.
Based on this equation, the marketer can increase the value of the customer
offering by (1) raising benefits, (2) reducing costs, (3) raising benefits and
reducing costs, (4) raising benefits by more than the raise in costs, or (5) lowering
benefits by less than the reduction in costs.

Exchange and Transactions

Exchange, the core of marketing, involves obtaining a desired product from
someone by offering something in return.
When an agreement is reached, we say that a transaction takes place.

Market
Traditionally, a “market” was a physical place where buyers and sellers gathered to
exchange goods. Now marketers view the sellers as the industry and the buyers as
the market.
We can distinguish between a marketplace and a marketspace. The marketplace is
physical, as when one goes shopping in a store; marketspace is digital, as when one
goes shopping on the Internet.
The metamarket, a concept proposed by Mohan Sawhney, describes a cluster of
complementary products and services that are closely related in the minds of
consumers but are spread across a diverse set of industries. The automobile
metamarket consists of automobile manufacturers, new and used car dealers,
financing companies, insurance companies, mechanics, spare parts dealers, service
shops, auto magazines, classified auto ads in newspapers, and auto sites on the
Internet.
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 (3) MARKETING PHILOSOPHIES

Marketing management is the conscious effort to achieve desired exchange

outcomes with target markets. But what philosophy should guide a company’s
marketing efforts?

There are five competing concepts under which organizations conduct marketing
activities: production concept, product concept, selling concept, marketing
concept, and societal marketing concept.

The Production Concept

The production concept, one of the oldest in business, holds that consumers
prefer products that are widely available and inexpensive. Managers of production-
oriented businesses concentrate on achieving high production efficiency, low costs,
and mass distribution. This orientation makes sense in developing countries, where
consumers are more interested in obtaining the product than in its features. It is
also used when a company wants to expand the market. This orientation has also
been a key strategy of many Chinese companies.

The Product Concept

Other businesses are guided by the product concept, which holds that consumers
favor those products that offer the most quality, performance, or innovative
features. Managers in these organizations focus on making superior products and
improving them over time, assuming that buyers can appraise quality and
performance. Product-oriented companies often design their products with little or
no customer input, trusting that their engineers can design exceptional products.

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However, the product concept can lead to marketing myopia. Railroad
management thought that travelers wanted trains rather than transportation and
overlooked the growing competition from airlines, buses, trucks, and automobiles.
Colleges, department stores, and the post office all assume that they are offering
the public the right product and wonder why their sales slip. These organizations
too often are looking into a mirror when they should be looking out of the window.

The Selling Concept

The selling concept, another common business orientation, holds that consumers
and businesses, if left alone, will ordinarily not buy enough of the organization’s
products. The organization must, therefore, undertake an aggressive selling and
promotion effort. This concept assumes that consumers must be coaxed into
buying, so the company has a battery of selling and promotion tools to stimulate
buying.
The selling concept is practiced most aggressively with unsought goods—goods
that buyers normally do not think of buying, such as insurance and encyclopedias.
The selling concept is also practiced in the nonprofit area by fund-raisers, college
admissions offices, and political parties.

The Marketing Concept

The marketing concept holds that the key to achieving organizational goals
consists of the company being more effective than its competitors in creating,
delivering, and communicating customer value to its chosen target markets.
The marketing concept rests on four pillars: target market, customer needs,
integrated marketing, and profitability. The marketing concept takes an outside-in
perspective. It starts with a well-defined market, focuses on customer needs,
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coordinates activities that affect customers, and produces profits by satisfying
customers.

The Societal Marketing Concept

Some have questioned whether the marketing concept is an appropriate philosophy
in an age of environmental deterioration, resource shortages, explosive population
growth, world hunger and poverty, and neglected social services. Are companies
that successfully satisfy consumer wants necessarily acting in the best, long-run
interests of consumers and society?
societal marketing concept holds that the organization’s task is to determine the
needs, wants, and interests of target markets and to deliver the desired satisfactions
more effectively and efficiently than competitors in a way that preserves or
enhances the consumer’s and the society’s well-being. The societal marketing
concept calls upon marketers to build social and ethical considerations into their
marketing practices.

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 (4) MARKETING MANAGEMENT PROCESS- AN
OVERVIEW
The marketing process consists of analyzing market opportunities, researching
and selecting target markets, designing marketing strategies, planning marketing
programs, and organizing, implementing, and controlling the marketing effort. The
four steps in the marketing process are:

1. Analyzing market opportunities. The marketer’s initial task is to identify

potential long run opportunities given the company’s market experience and core
competencies. To evaluate its various opportunities, assess buyer wants and needs,
and gauge market size, the firm needs a marketing research and information
system. Next, the firm studies consumer markets or business markets to find out
about buying behavior, perceptions, wants, and needs. Smart firms also pay close
attention to competitors and look for major segments within each market that they
can profitably serve.
2. Developing marketing strategies. In this step, the marketer prepares a
positioning strategy for each new and existing product’s progress through the life
cycle, makes decisions about product lines and branding, and designs and markets
its services.
3. Planning marketing programs. To transform marketing strategy into marketing
programs, marketing managers must make basic decisions on marketing
expenditures, marketing mix, and marketing allocation. The first decision is about
the level of marketing expenditures needed to achieve the firm’s marketing
objectives. The second decision is how to divide the total marketing budget among
the various tools in the marketing mix: product, price, place, and promotion and

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the third decision is how to allocate the marketing budget to the various products,
channels, promotion media, and sales areas.
4. Managing the marketing effort. In this step (discussed later in this chapter),
marketers organize the firm’s marketing resources to implement and control the
marketing plan. Because of surprises and disappointments as marketing plans are
implemented, the company also needs feedback and control.

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5) MARKETING MIX

Marketing mix is the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market.

McCarthy classified these tools into four broad groups that he called the four Ps of
marketing: product
Price
Place
Promotion

Product: Product variety, Quality, Design, Features, Brand name, Packaging,

Sizes, Services, Warranties, Returns

Price: List price, Discounts, Allowances, Payment period, Credit terms

Place: Channels, Coverage, Assortments, Locations, Inventory, Transport

Promotion: Sales promotion, Advertising, Sales force, Public relations, Direct

marketing

Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’
four Cs.

Four Ps Four Cs
Product Customer solution

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 Price Customer cost
Place Convenience
Promotion Communication

In case of services marketing mix includes

7Ps
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Process
7. Physical Evidence

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6) MARKETING ENVIRONMENT

A company's marketing environment consists of the factors and forces that affect
the company's ability to develop and maintain successful transactions and
relationships with its target customers. Every business enterprise is confronted with
a set of internal factors and a set of external factor.

The internal factors are generally regarded as controllable factors because the
company has a fair amount of control over these factors, it can alter or modify such
factors as its personnel, physical facilities, marketing-mix etc. to suit the
environment.

The external factors are by and large, beyond the control of a company. The
external environmental factors such as the economic factors, sociocultural factors,
government and legal factors, demographic factors etc. As the environmental
factors are beyond the control of a firm, its success will depend to a very large
extent on its adaptability to the environment, i.e. its ability to properly design and
adjust internal variables to take advantages of the opportunities and to combat the
threats in the environment.

Micro Environment
The micro environment consists of the actors in the company's immediate
environment that affects the ability of the marketers to serve their customers. These
include the suppliers, marketing intermediaries, competitors, customers and
publics.

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1. Suppliers: Suppliers are those who supply the inputs like raw materials and
components etc. to the company. Uncertainty regarding the supply or other supply
constraints often compels companies to maintain high inventories causing cost
increases.

2. Customers: The major task of a business is to create and sustain customers. A

business exists only because of its customers and hence monitoring the customer
sensitivity is a prerequisite for the business to succeed. A company may have
different categories of consumers like individuals, households, industries,
commercial establishments, governmental and other institutions etc. Depending on
a single customer is often too risky because it may place the company in a poor
bargaining position. Thus, the choice of the customer segments should be made by
considering a number of factors like relative profitability, dependability, growth
prospects, demand stability, degree of competition etc.

3. Competitors: A firm's competitors include not only the other firms which
market the same or similar products but also all those who compete for the
discretionary income of the consumers. If the consumer decides to spend his
disposable income on recreation, he will still be confronted with a number of
alternatives to choose from like T.V., stereo, radio, C.D. player etc. the
competition among such alternatives which satisfy a particular category of desire is
called generic competition.

4. Marketing intermediaries: The immediate environment of a company may

consist of a number of marketing intermediaries which are "firms that aid the
company in promoting, selling and distributing its goods to final buyers. The
marketing intermediaries include middlemen such as agents and merchants, who
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help the company find customers or close sales with them; physical distribution
firms which assist the company in stocking and moving goods from their origin to
their destination such as warehouses and transportation firms.

5. Public: A company may encounter certain publics in its environment. "A public
is any group that has actual or potential interest in or impact on an organisation's
ability to achieve its interests". Media, citizens, action publics and local publics are
some examples.

Macro Environment
The macro forces are, generally, more uncontrollable than the micro forces. The
macro environmental forces are:

1. Economic environment: Economic conditions, economic policies and the

economic system are the important external factors that constitute the economic
environment of a business. The economic conditions of a country e.g., the nature of
the economy, the stage of development of the economy, economic resources, the
level of income, the distribution of income and assets etc. are among the very
important determinants of business strategies.

2. Political environment: Political and government environment has a close

relationship with the economic system and economic policy. In most countries,
there are a number of laws that regulate the conduct of the business. These laws
cover such matters as standards of product, packaging, promotion etc. In many
countries, with a view to protecting consumer interests, regulations have become
stronger. Regulations to protect the purity of the environment and preserve the
ecological balance have assumed great importance in many countries.
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3. Socio-cultural environment: The socio-cultural environment includes the
customs, traditions, taboos, tastes, preferences etc. of the members of the society,
which cannot be ignored at any cost by any business unit. For a business to be
successful, its strategy should be the one that is appropriate in the socio-cultural
environment. The marketing-mix will have to be so designed as to suit the
environmental characteristics of the market.

4. Demographic environment: Demographic factors like the size, growth rate,

age composition, sex composition, family size, economic stratification of the
population, educational levels, language, religion etc. are all factors relevant to
business. All these demographic variables affect the demand for goods and
services. Markets with growing population and income are growth markets. But the
decline in birth rates in countries like United States, etc. has affected the demand
for baby products. Johnson and Johnson had to overcome this problem by
repositioning their products like baby shampoo and baby soaps, and promoting
them to the adult segment particularly females.

5. Natural environment: Geographical and ecological factors such as natural

resources, weather and climate conditions, location aspects in the global context,
port facilities etc. are all relevant to business. Geographical and ecological factors
also influence the location of certain industries, e.g. industries with high material
index tend to be located near the raw material sources.

6. Technological environment: Business prospects depend on the availability of

certain physical facilities. The sale of television sets e.g. is limited by the extent of
coverage of telecasting. Similarly, the demand for refrigerators and other electrical
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appliances is affected by the extent of electrification and the reliability of power
supply. Technological factors sometimes pose problems. A firm which is unable to
cope with the technological changes may not survive. Further, the different
technological environment of different markets or countries may call for product
modifications, e.g. many appliances and instruments in the U.S.A. are designed for
110 volts but this needs to be converted into 240 volts in countries which have that
power system.

7. International environment: The international environment is very important

from the point of view of certain categories of business. It is particularly
important for industries directly depending on exports or imports. E.g. a
recession in foreign markets or the adoption of protectionist policies may help
the export-oriented industries. Similarly, liberalization of imports may help
some industries which use imported items, but may adversely affect import-
competing industries. Similarly, international bodies like WTO, IMF, WHO,
ILO etc. have had a major impact on influencing the policies and trade of many
countries, especially India.

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 7) STEPS IN CONSUMER DECISION MAKING

Consumer behavior describes how consumers make purchase decisions and how
they use and dispose of the purchased goods or services. The study of consumer
behavior also includes an analysis of factors that influence purchase decisions and
product use.

1. Need Recognition

2. Pre-purchase Search

3. Evaluation of Alternatives

4. Purchase Decision

5. Post purchase Behavior

1. Need Recognition

The first stage in the consumer decision-making process is need recognition. Need
recognition occurs when consumers are faced with an imbalance between actual
and desired states. Need recognition is triggered when a consumer is exposed to
either an internal or an external stimulus.

Internal stimuli are occurrences you experience, such as hunger or thirst.

External stimuli are influences from an outside source such as someone’s

recommendation of a new restaurant, the design of a package, or an advertisement
on television or radio.

2. INFORMATION SEARCH

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After recognizing a need or want, consumers search for information about the
various alternatives available to satisfy it. An information search can occur
internally, externally, or both. In an internal information search, the person recalls
information stored in the memory. This stored information stems largely from
previous experience with a product, for example, recalling whether a hotel where
you stayed earlier in the year had clean rooms and friendly service. In contrast, an
external information search seeks information in the outside environment. There
are two basic types of external information sources: non-marketing-controlled and
marketing controlled.

A non-marketing-controlled information source is not associated with marketers

promoting a product. These information sources include personal experiences
(trying or observing a new product); personal sources (family, friends,
acquaintances, and coworkers who may recommend a product or service); and
public sources

On the other hand, a marketing-controlled information source is biased toward a

specific product, because it originates with marketers promoting that product.
Marketing controlled information sources include mass-media advertising (radio,
newspaper, television, and magazine advertising) etc.

3. EVALUATION OF ALTERNATIVES

Certain basic concepts help explain consumer evaluation process. First, assume
that each consumer sees a product as a bundle of product attributes. Second, the
consumer will attach different degrees of importance to different attributes
according to his or her unique needs and wants. Third, the consumer is likely to
develop a set of brands belief about where each brands stands on each attributes.
Fourth, the consumer expected total product satisfaction will vary with levels of

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different attributes. Fifth, the consumers arrives at attitudes towards the different
brands through some evaluation process.

4. PURCHASE DECISION

It includes decisions like

 When to purchase
 From where to purchase
 With whom to purchase
 Mode of payment

5. POST-PURCHASE BEHAVIOR

When buying products, consumers expect certain outcomes from the purchase.
How well these expectations are met determines whether the consumer is satisfied
or dissatisfied with the purchase. When people recognize inconsistency between
their values or opinions and their behavior, they tend to feel an inner tension called
cognitive dissonance.

Consumers try to reduce dissonance by justifying their decision. They may seek
new information that reinforces positive ideas about the purchase, avoid
information that contradicts their decision, or revoke the original decision by
returning the product. In some instances, people deliberately seek contrary
information in order to refute it and reduce dissonance. Dissatisfied customers
sometimes rely on word of mouth to reduce cognitive dissonance, by letting friends
and family know they are displeased.

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 8) CHARACTERISTICS OF INDUSTRIAL
MARKETS
The industrial market is characterized by six fundamental aspects:
1- Few buyers
The industrial market is not oriented to a large number of buyers as might be
supposed, but focuses on the most suitable buyers and in which they can give
immediate use to the product. Therefore, the clients are selected, strategically
chosen, so that sales are fruitful.
2- Geographical distribution
It tends to concentrate in very specific urban or rural areas. The industrial market is
not ubiquitous, but is in specific places where there may be a large volume of
production, which in turn requires a large number of personnel to move around the
factory.
3- Future Vision
The industrial market does not pursue the satisfaction of the immediate needs of
users; Rather, he wants to think further and so he makes long-term plans that are
not susceptible to price sensitivity. In this way, this type of market always tries to
renew itself and reinvent its products, in order not to be delayed.
4- Reduced impact on demand
Specifically in the final demand. The industrial market stands out because it does
not influence much in what the users want to buy, since they already have some
established requirements that must be taken care of by the manufacturer.
5- High purchasing power
The industrial market is able to concentrate a lot of purchasing power for the
simple fact that it has a high budget in which they can have more with less, as it
happens with the wholesale companies.

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6- Rationalism
The purchase of the products is not done according to subjective criteria, but
according to objective elements. As acquisitions in the industrial market move a lot
of money, you need to know what to buy, when and to whom, in order not to lose
money.
Segments
The segments of the industrial market are many, but traditionally they are grouped
in four:
1- Agricultural market
It is the most indispensable of all, since it is the one that gives sustenance to
millions of people and on which there is more pressure, since before the increasing
demand of foods it is necessary to increase the production.
2- Reseller Market
It focuses on the presence of intermediaries through which products are resold
whose profit margin is greater than the initial retail price.
Although it is true that it can lend itself to scourges such as speculation and
hoarding in times of scarcity, the reseller market is used to increase factory sales
and generate indirect jobs.
3- Market in the official sector
It is the one that deals with the government apparatus and its respective
dependencies that come under its jurisdiction. Businesses with the official sector
market can be beneficial provided they have a good knowledge of marketing, But
also if there is a bureaucratic and political climate that favors finances.
4- Market of non-profit companies
It refers to a market of heterogeneous companies that can not produce money on
the same scale as other markets, since their funds come from charity or donations
from individuals (political parties, religious congregations, NGOs, etc.).
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 9) MARKET SEGMENTATION

A company cannot serve everyone in broad markets such as soft drinks (for
consumers) and computers (for businesses), because the customers are too
numerous and diverse in their buying requirements. This is why successful
marketers look for specific market segments that they can serve more effectively.
Instead of scattering their marketing efforts (a “shotgun” approach), they will be
able to focus on the buyers whom they have the greatest chance of satisfying (a
“rifle” approach).

The most targeted marketing strategies are built around meeting each customer’s
unique requirements. Such mass customization strategies are particularly well
suited to Internet marketing, where leaders such as Dell can maintain an interactive
dialogue with customers and create a unique bundle of goods and services
specifically for their individual needs and wants.

Market segmentation aims to increase a company’s precision marketing. In

contrast, sellers that use mass marketing engage in the mass production,
distribution, and promotion of one product for all buyers. The argument for mass
marketing is that it creates the largest potential market, which leads to the lowest
costs, which in turn can lead to lower prices or higher margins.

This proliferation of media and distribution channels is making it difficult to

practice “one size fits all” marketing. Some observers even claim that mass
marketing is dying. Therefore, to stay focused rather than scattering their
marketing resources, more marketers are using market segmentation. In this

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approach, which falls midway between mass marketing and individual marketing,
each segment’s buyers are assumed to be quite similar in wants and needs, yet no
two buyers are really alike. To use this technique, a company must understand both
the levels and the patterns of market segmentation.

Levels of Market Segmentation

Regardless of whether they serve the consumer market or the business market—
offering either goods or services—companies can apply segmentation at one of
four levels: segments, niches, local areas, and individuals.

Segment Marketing
A market segment consists of a large identifiable group within a market, with
similar wants, purchasing power, geographical location, buying attitudes, or buying
habits.
For example, an automaker may identify four broad segments in the car market:
buyers who are primarily seeking (1) basic transportation, (2) high performance,
(3) luxury, or (4) safety.
Because the needs, preferences, and behavior of segment members are similar but
not identical, Anderson and Narus urge marketers to present flexible market
offerings instead of one standard offering to all members of a segment. A flexible
market consists of the product and service elements that all segment members
value, plus options (for an additional charge) that some segment members value.
For example, Delta Airlines offers all economy passengers a seat, food, and soft
drinks, but it charges extra for alcoholic beverages and earphones.

Niche Marketing

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A niche is a more narrowly defined group, typically a small market whose needs
are not being well served. Marketers usually identify niches by dividing a segment
into subsegments. In an attractive niche, customers have a distinct set of needs;
they will pay a premium to the firm that best satisfies their needs; the niche is not
likely to attract other competitors; the nicher gains certain economies through
specialization; and the niche has size, profit, and growth potential. Becher has 50
percent of the world’s oversized umbrella market. These firms are succeeding in
their chosen niches because they are dedicated to their customers, offer superior
service, and innovate continuously

Local Marketing
Target marketing is leading to some marketing programs that are tailored to the
needs and wants of local customer groups (trading areas, neighborhoods, even
individual stores). Citibank, for instance, adjusts its banking services in each
branch depending on neighborhood demographics

Individual Marketing
The ultimate level of segmentation leads to “segments of one,” “customized
marketing,” or “one-to-one marketing.” For centuries, consumers were served as
individuals: The tailor made the suit and the cobbler designed shoes for the
individual. Much business to- business marketing today is customized, in that a
manufacturer will customize the offer, logistics, communications, and financial
terms for each major account. Now technologies such as computers, databases,
robotic production, Intranets and Extranets, e-mail, and fax communication are
permitting companies to return to customized marketing, also called “mass
customization.” Mass customization is the ability to prepare individually designed

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products and communications on a mass basis to meet each customer’s
requirements.

Bases for Segmenting Consumer Markets

In segmenting consumer markets, marketers can apply geographic, demographic,
and psychographic variables related to consumer characteristics as well as
behavioral variables related to consumer responses. Once the segments are formed,
the marketer sees whether different characteristics are associated with each
consumer response segment. For example, the researcher might examine whether
car buyers who want “quality” versus “low price” differ in their geographic,
demographic, and psychographic makeup. This will determine whether the
segments are useful for marketing purposes.

Geographic Segmentation
Geographic segmentation calls for dividing the market into different geographical
units such as nations, states, regions, counties, cities, or neighborhoods. The
company can operate in one or a few geographic areas or operate in all but pay
attention to local variations.

Demographic Segmentation
In demographic segmentation, the market is divided into groups on the basis of age
and the other variables. One reason this is the most popular consumer segmentation
method is that consumer wants, preferences, and usage rates are often associated
with demographic variables. Another reason is that demographic variables are
easier to measure. Even when the target market is described in nondemographic
terms (say, a personality type), the link back to demographic characteristics is
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needed in order to estimate the size of the target market and the media that should
be used to reach it efficiently. Here is how certain demographic variables have
been used to segment consumer markets:
 Age and life-cycle stage.
 Gender.
 Income.
 Occupation.
 Social class.

Psychographic Segmentation
In psychographic segmentation, buyers are divided into different groups on the
basis of lifestyle or personality and values. People within the same demographic
group can exhibit very different psychographic profiles.

Behavioral Segmentation
In behavioral segmentation, buyers are divided into groups on the basis of their
knowledge of, attitude toward, use of, or response to a product. Many marketers
believe that behavioral variables—occasions, benefits, user status, usage rate,
loyalty status, buyer-readiness stage, and attitude—are the best starting points for
constructing market segments.
 Occasions. Buyers can be distinguished according to the occasions on which
they develop a need, purchase a product, or use a product. For example, air
travel is triggered by occasions related to business, vacation, or family, so an
airline can specialize in one of these occasions.
 Benefits. Buyers can be classified according to the benefits they seek. One
study of travelers uncovered three benefit segments: those who travel to be

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 with family, those who travel for adventure or education, and those who
enjoy “fun” aspects of travel.
 User status. Markets can be segmented into nonusers, ex-users, potential
users, first time users, and regular users of a product.
 Usage rate. Markets can be segmented into light, medium, and heavy
product users.
 Loyalty status. Buyers can be divided into four groups according to brand
loyalty status: (1) hard-core loyals (who always buy one brand), (2) split
loyals (who are loyal to two or three brands), (3) shifting loyals (who shift
from one brand to another, and (4) switchers (who show no loyalty to any
brand).

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10) TARGETING

The firm must look at two factors:

(1) Segment’s overall attractiveness
(2) Company’s objectives and resources.

First, the firm must ask whether a potential segment has the characteristics that
make it generally attractive, such as size, growth, profitability, scale economies,
and low risk. Second, the firm must consider whether investing in the segment
makes sense given the firm’s objectives and resources. Some attractive segments
could be dismissed because they do not mesh with the company’s long-run
objectives; some should be dismissed if the company lacks one or more of the
competences needed to offer superior value.

Selecting and Entering Market Segments

Having evaluated different segments, the company can consider five patterns of
target market selection
(i) Single-Segment Concentration
Many companies concentrate on a single segment: Volkswagen, for example,
concentrates on the small-car market, while Porsche concentrates on the sports car
market. Through concentrated marketing, the firm gains a thorough understanding
of the segment’s needs and achieves a strong market presence. Furthermore, the
firm enjoys operating economies by specializing its production, distribution, and
promotion; if it attains segment leadership, it can earn a high return on its
investment. However, concentrated marketing involves higher than normal risks if

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the segment turns sour because of changes in buying patterns or new competition.
For these reasons, many companies prefer to operate in more than one segment.

(ii) Selective Specialization

Here the firm selects a number of segments, each objectively attractive and
appropriate. There may be little or no synergy among the segments, but each
segment promises to be a moneymaker. This multisegment coverage strategy has
the advantage of diversifying the firm’s risk. Consider a radio broadcaster that
wants to appeal to both younger and older listeners using selective specialization.

(iii) Product Specialization

Another approach is to specialize in making a certain product for several segments.
An example would be a microscope manufacturer that sells microscopes to
university laboratories, government laboratories, and commercial laboratories.

(iv) Market Specialization

With market specialization, the firm concentrates on serving many needs of a
particular customer group. An example would be a firm that sells an assortment of
products only to university laboratories, including microscopes, oscilloscopes, and
chemical flasks. The firm gains a strong reputation in serving this customer group
and becomes a channel for further products that the customer group could use.
However, the downside risk is that the customer group may have its budgets cut.

(v) Full Market Coverage

Here a firm attempts to serve all customer groups with all of the products they
might need. Only very large firms can undertake a full market coverage strategy.
Examples include IBM (computer market), General Motors (vehicle market), and
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Coca-Cola (drink market). Large firms can cover a whole market in two broad
ways: through undifferentiated marketing or differentiated marketing. In
undifferentiated marketing, the firm ignores market-segment differences and goes
after the whole market with one market offer. Focusing on a basic buyer need, it
designs a product and a marketing program that will appeal to the broadest number
of buyers. In differentiated marketing, the firm operates in several market segments
and designs different programs for each segment. General Motors does this with its
various vehicle brands and models; Intel does this with chips and programs for
consumer, business, small business, networking, digital imaging, and video
markets. Differentiated marketing typically creates more total sales than does
undifferentiated marketing. However, the need for different products and
marketing programs also increases the firm’s costs for product modification,
manufacturing, administration, inventory, and promotion.

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11) POSITIONING
Having segmented the market, determined the size and potential of market
segments, and selected specific target markets, the third part of the STP process is
to position a brand within the target market(s). Positioning is important because it
is the means by which goods and services can be differentiated from one another
and so give consumers a reason to buy. Positioning encompasses two fundamental
elements. The first concerns the physical attributes, the functionality and capability
that a brand offers. For example, a car’s engine specification, its design, and
carbon emissions. The second positioning element concerns the way in which a
brand is communicated and how consumers perceive the brand relative to other
competing brands in the marketplace. This element of communication is vitally
important as it is ‘not what you do to a product, it is what you do to the mind of a
prospect’ (Ries and Trout, 1972) that determines how a brand is really positioned
in a market.

Kotler (1997) brings these two elements together when he says that ‘Positioning is
the act of designing the company’s offering and image so that they occupy a
meaningful and distinct competitive position in the target customers’ minds.’ In
order to develop a sustainable position it is important to understand the market in
which the product is to compete and to understand the way in which competitor
brands are competing. In other words, what is the nature of the competition in the
market and what tangible and intangible attributes are customers looking for when
buying these types of products?

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Positioning Strategies:
1) Product features- The brand is positioned on the basis of the attributes,
features, or benefits that the brand has relative to the competition. For
example, Volvos are safe; Red Bull provides energy.
2) Price quality- Price can be a strong communicator of quality. A high price
denotes high quality, just as a low price can deceive buyers into thinking a
product to be of low quality and poor value.
3) Use- By informing when or how a product can be used, it is possible to
create a position in the minds of the buyers. For example, Kellogg’s have
tried to reposition their products to be consumed throughout the day, not just
at breakfast.
4) User- By identifying the target user, messages can be communicated clearly
to the right audience. Some hotels position themselves as places for weekend
breaks, as leisure centres, or as conference centres.
5) Benefit- Positions can also be established by proclaiming the benefits that
usage confers on those that consume. The benefit of using Sensodyne
toothpaste is that it enables users to drink hot and cold beverages without the
pain associated with sensitive teeth and gums.
6) Heritage- Heritage and tradition are sometimes used to symbolize quality,
experience, and knowledge. For example ‘Established since 1803’.

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 Additional Topic
Marketing Versus Selling

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