Download 2.5 market segmentation, targeting and positioning

Unit 2
Service Marketing
Unit II – Service Marketing Opportunities
UNIT – II: SERVICE MARKETING OPPORTUNITIES
Assessing service market potential - Classification of services – Expanded marketing mix – Service
marketing – Environment and trends – Service market segmentation, targeting and positioning.
Table of Contents
2.1 ASSESSING SERVICE MARKETING POTENTIAL: ..........................................................................................2
2.1. a. Market Supply: ...............................................................................................................................................3
2.1. b. Market Demand: .............................................................................................................................................4
2.2 CLASSIFICATION OF SERVICES: ......................................................................................................................5
2.2. a. Definition & Characteristics of Services: .......................................................................................................5
2.2. b. Criteria for creating value for customers: .......................................................................................................5
2.2. c. Criteria for creating value for customers: .......................................................................................................6
2.2. d. Nature of Demand. Demand Is Effective Desire ............................................................................................9
2.3 EXPANDED MARKETING MIX ........................................................................................................................ 10
2.4 ENVIRONMENT AND TRENDS ........................................................................................................................ 11
2.4. a. Below are some trends that are shaping the marketing approach of service companies: ............................. 11
2.5 MARKET SEGMENTATION, TARGETING AND POSITIONING .................................................................. 12
2.5. I. MARKET SEGMENTATION ..................................................................................................................... 12
2.5. I. a. ATTRIBUTES OF EFFECTIVE SEGMENTATION .......................................................................... 14
2.5. I. b. REASONS FOR MARKET SEGMENTATION ................................................................................. 14
2.5. I. c. BASES FOR SEGMENTATION ......................................................................................................... 16
2.5. I. d. APPROACHES IN SEGMENTATION ............................................................................................... 21
2.5.I.e. ADVANTAGES OF MARKET SEGMENTATION: ............................................................................ 21
2.5.I. f. EVALUATION OF SEGMENTS: ......................................................................................................... 21
2.5. II. MARKET TARGETING ............................................................................................................................. 22
2.5.II. A. PROCESS OF CHOOSING THE TARGET MARKET ..................................................................... 23
2.5.II. B. FACTORS TO BE CONSIDERED WHILE TARGET MARKET SELECTION .............................. 24
2.5.II. c. TARGET MARKET STRATEGIES .................................................................................................... 25
2.5. III. POSITIONING........................................................................................................................................... 26
2.5.III. A. POSITIONING CONCEPTS: ............................................................................................................ 27
2.5. III. b. DIFFERENT POSITIONING PLANKS/BASES: ............................................................................. 29
2.5. III. c. POSITIONING PLANNING ............................................................................................................ 29
2.5. III. d. PRODUCT POSITIONING AND BRAND POSITIONING ............................................................ 30
2.5. III. e. REPOSITIONING ............................................................................................................................. 31
Benefits of Segmenting and Targeting Markets ...................................................................................................... 32
Types of Segmentation Bases.................................................................................................................................. 32
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
Unit II – Service Marketing Opportunities
2.1 ASSESSING SERVICE MARKETING POTENTIAL:
What are markets?
Markets are where buyers and sellers come together to trade. They are social arrangements that
allow buyers and sellers to obtain information and exchange commodities.
A commodity is something tangible, that has value and can be exchanged. Commodities can
include food and cash crops, livestock, non-food consumer items and even labor.
A market can be organized as a physical market place where products are exchanged (e.g. cereals
and household items sold in supermarkets, kiosks, market stalls, etc.). They can also be organized as stock
markets, auctions or as informal arrangements, such as barter, between two people.
For the purpose of this lesson we will refer to traditional physical markets trading in
commodities.
Markets make an important contribution to three (availability, access and stability) of the four
pillars of food security:
• Availability
− Producers are able to purchase inputs for producing food.
− Countries can trade with each other to make sure enough food is available.
• Access
− Households sell their products (e.g. crops, livestock, non-agricultural commodities) and their labor in
the market and earn income.
− The price of food in the market determines whether a household’s income or resources are sufficient to
obtain an adequate quantity and quality of food.
• Stability
− The movement of food through markets from one location to another, from surplus to deficit areas and
across borders, usually helps to ensure stable food supplies over time and space.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
How market information and analysis contributes to food security analysis:
Market information and analysis contributes to food security analysis by:
• deepening the understanding and analysis of food security;
• adding a dynamic aspect to food security analysis;
• linking households to local, national, regional and global economies;
• yielding more precise estimates of needs;
• improving scenario development and monitoring;
• clarifying appropriate type, magnitude and timing of response; and
• shedding light on the constraints to food security caused by market irregularities and inefficiencies.
Each commodity follows a flow, starting with the primary producer and moving up to the final consumer
(commodity chain).
A commodity chain includes all levels of the market and actors that have a role in the distribution and
transformation of the commodity.
Supply and demand: Markets are driven by supply and demand.
2.1. a. Market Supply:
Market supply is the amount of a commodity being offered in the market. It can come from:
• Local production;
• Private or public stocks;
• Regional or international trade; and
• Food aid.
Suppliers include traders, agricultural producers, shops, government, humanitarian organizations, etc. –
whoever is selling on the market.
Traders can sell commodities that are produced locally (within the country) or they can bring in
commodities from across the border through official (legal and formal) trade, or unofficial (illegal and
informal) trade.
Please note that market supply and total national supply are not equal. Production that is consumed on the
farm is part of the national supply, but is not part of the market supply.
National and local supply:
National food supply (generally including cereals but sometimes significant root crops) is called “food
availability”.
The term supply can also refer to the provincial or district supply or even regional (West Africa) supply.
If you are interested in food security in a certain district of a country, you would be most interested in the
supply of food within the district. But you would need to also know about food supplies in other markets
and areas that are closely linked to, and influence, the local district level markets.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
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Cross border trade:
While cross border trade may not be large in comparison to the total national supply, it can be quite
significant within a specific province or district.
For example, Mozambique and Malawi have very porous borders and there is a considerable flow of
maize and other commodities across the borders.
In contrast, the flow of maize from Tanzania to Malawi is very limited and occurs only infrequently.
2.1. b. Market Demand:
Market demand is the amount of a particular good or service that a consumer or group of consumers will
want to purchase at a given price.
Only people who can pay for their food have effective demand.
There are households and people who have wants or needs, but cannot afford to pay for them. These
households have insufficient access to food – they have demand, but not effective demand.
This difference is important to market and food security analysis because market supplies only reach
those with effective demand.
The needs of those households with limited or no effective demand can only be met through their own
agricultural production, social transfers and/or government or humanitarian interventions.
In the case of food staples, demand comes from national and foreign consumers, industries that use a
certain commodity as an input (e.g. maize for chicken feed), government grain reserve boards and
international organizations that will use the purchased commodities for food distribution programs.
Market Potential and Market Sizing Analysis:
Market analysis services from Mapping Analytics help you know the economic opportunity
available to you in any geographic market. Whether you sell to consumers, to businesses, or both, market
sizing provides intelligence you need to deploy sales and marketing resources effectively.
Benefits of Market Potential Analysis:




Understand market potential for a single store, network of stores or a new market
Deploy resources effectively by ranking markets in priority order
Forecast total opportunity in terms of number of customers and revenue potential
Estimate your market share
Market Potential Analysis: What We Can Do for You Market potential analysis is a primary analytic
service performed by Mapping Analytics. We have the people, experience, tools, and data required to
perform sophisticated and accurate market sizing.
A market potential analysis from Mapping Analytics may include:
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
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Service Marketing
A customer profile to understand where to find more like them
Market penetration and market share reports showing performance in existing markets and
expected performance in new markets
Market ranking reports allowing you to prioritize resource deployment into new markets
A geographic view of market opportunity on detailed maps
2.2 CLASSIFICATION OF SERVICES:
1. Nature of the organization
2. Nature of service
3. Customer relationship
4. Nature of demand
5. Service package
6. Delivery method
2.2. a. Definition & Characteristics of Services:
Service: Services are a form of product that consists of activities, benefits or satisfactions offered for sale
that are essentially intangible and do not result in the ownership of anything.
That means services is not physical form of product but entangle and it only indicates the
activities or benefits or satisfaction that can offer in market for sale and it can satisfy the consumer need
and wants. It cannot separate from the service providers and vary person to person.
From the above definition, we get the below characteristics of a service:
• Service is intangible
• It is inseparable
• Variability and
• Perishability
They are summarized below:
• Inseparability: A major characteristics of services they are produced and consumed at the same time
and cannot be separated from their providers whether the providers are people or machines.
• Variability: Another important characteristics of service is their quality may vary greatly depending on
who provides them and when, where and how.
• Perishability: Since when services is produced them it needs to consume. For this reason, they cannot
store for later sale or use.
2.2. b. Criteria for creating value for customers:
Technology for relationship marketing:
Technologies can be regarded as our efficient and reliable friend. But technology,
if inappropriately
applied,
it
can
effectively
push
a
customer
away.
However,
technologyhas come to stay. Companies are investing heavily in technologies associated withcomputing
and
communication-within
their
enterprises,
between
themselves
and
their customers, distribution channel, intermediaries and suppliers. Data warehouses are proliferating.
Companies of all size strive for computerizing all their activities and thus making the process more
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
uniform. In this digital era, there are 11 C’s of relationship marketing that can come
together simultaneously to create the value for the customers. These 11 Cs is.
2.2. c. Criteria for creating value for customers:
1. Customers 2. Categories of goods and services 3. Capabilities 4. Cost profitability
andv a l u e o f c o n t a c t t o c a s h p r o c e s s 5 . C o n t r o l 6 . C o l l a b o r a t i o n a n d
I n t e g r a t i o n 7.Customisation 8.Communication 9. Customer measurements. 10. Customer
care; and charge of relationship 11.Change of relationship. These are explained below:
1. Customer:
Technology provides the computing and communication capabilities that he
l p t h e relationship marketer decide
on which
customers to focus
and facilities
the interactions needed, both with the enterprise and with its customers and suppliers, to deliver
customer value. Without technology, marketers would still be thinking in terms of serving the mass
market or market segments. They would still be thinking in terms of serving the mass market
or market segments. They would still be thinking in terms of broadcast, one-to –
one communication. They would be thinking in terms of long production
r u n s o f standardized products, one size fitting all. With technology, the specific customer’s with
whom the company wishes to do business can be identified and further evaluated for their w o r t h i n e s s
to pave way for a long term relationship. If the data warehouse is built
appropriately, the marketer should be able to ‘slice and dice’ the data a number of ways, so that even
people who are not trained in technology can use it easily.
2. Categories of goods and services:
Technology can also help the company take two key strategic decisions; what categories a n d
types of goods and s ervices should we pr ovide to our customers and should we
ourselves produce the goods and services that customer want? While taking decisions regarding scope of
service, it is useful to understand the full range of value a customer perceives that he/she delivers directly
from the company’s products.
The tangible and intangible components are associated with physical goods. The
intangible component s may lend themsel ves to more real times. Customization
a n d Personalization, the tangibles can be assembled with the tangibles by someone other than the
manufacturer. Thus, some of the decisions the manufacturer must make may pertain to benefits that will
be provided and by some company in the chain of relationships.
3. Capabilities:
Technology has vital roles to play in the advancem ent of a company’s capabilities.
The implementation of technology itself comprises the heart of the relationship marketing.
Computing, data warehousing, website or interactive voice response etc.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
4. Cost, Profitability and Value:
Technology can help the company manage the costs of securing, serving and
retaining c u s t o m e r s b y a l l o w i n g m a r k e t e r s t o u n d e r s t a n d , i n r e a l t i m e , t h e
r e v e n u e s a n d c o s t associated with each other. This can obviously help the relationship
marketer to control and focus the relationship. Technology can also intercede and help manage
the
costs
and
value
of
the
relationship,
drawing upon previously developed “business rules”. Business rules incorporated
ecisions that a management makes to gui de the administration of its business and
interaction with customers.
5. Control of the contact to cash processes:
Whatever the role of technology, it must have a control function to ensure that value
is i n d e e d b e i n g c r e a t e d f o r c u s t o m e r s a n d f o r t h e c o m p a n y a n d t h o s e b i l l s a r e
s e n t a n d payment received on time. Most companies have invested heavily in information systems that
have served well for company-driven marketing, from the firm to the market. Now, with the boundaries
of the enterprise blurring, with customer framing the value that each w a n t a n d i n i t i a t i n g t h e
p u r c h a s e d e c i s i o n , d i m e n s i o n s o f c o n t r o l a r e b e c o m i n g v e r y tactical and
strategic.E m p l o y e e s l e a r n i n g a n d g r o w t h m e a s u r e m e n t s c o u l d i n c l u d e e m p l o y e e r e t e
n t i o n , employee skills, employee satisfaction and employee productivity. Business process
measures are typically specific to the processes being measured. In each of these cases,
technology has a role to play in providing the data needed by the relationship marketer in real time, or
in near real time, to enable additional investigation or action . If there is customer retention
problem
or
a
share
of
customer
problem,
for
example,
technology
can b e o p e r a t i n g i n t h e b a c k g r o u n d , u n s e e n t o t h e r e l a t i o n s h i p m a r k e t e r , g a t h e r i n
g a n d evaluating data and providing the relationship marketer with exceptional reports.
6. Collaboration and Integration:
When the customer is invited into the process that creates value for her, she is more likely to increase
the level at which she is bonded to the company. The process which creates the value she
seeks could be in any or in all process. Thus, the customer could work with a vendor to collaborate in
areas such as product and service. Conceptualization, design, development, production to order,
value bundling, distribution and service/support. Technology can help customers collaborate with
their suppliers to create mutual value. Electronic Data Interchange, in particular, has had
significant impact on order –taking, shipping and invoicing processes, causing improved turnaround
of orders, cash flow and structural bonding.
7. Customization:
Customization should not be confused with personalization. Customization allows the
company or the customer or both to develop a product, service or communication
thatr e f l e c t s t h e v a l u e t h e c u s t o m e r w a n t s . P e r s o n a l i z a t i o n i s t h e p r o c e s s t h a t e n a b
l e s communication, product and service to bear the name of the customer, adding value to
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
the customer as they position themselves with others. When personalization is combined with
customization, people start reaching for their wallets.
8. Communication, Interaction and Positioning:
Mass marketing required mass –promotional vehicles such as TV, radio, news papers and outdoor media.
In a Fragmented market, the promotion channels are much narrower and more highly targeted; including
specialized magazines, advising on everything from park benches to ski chair lifts, etc that is broad
casting first became “narrow casting” and has now become “Point casting”. When point casting is
interactive
and
real
time,
it
may
bet e r m e d c o n v e r s i n g j u s t a s a c o n v e r s a t i o n b e t w e e n p e o p l e . C o n v e r s i n g o c c u r s a t
t h e initiation of either the customer or the company and can involve technology such as call centre, the
internet
or
interactive
voice
response
and
others.
Other
forms
of
interactivecommunication has emerged, including interactive telephonesbased communication,using the call centre, for so –called Telemarketing or Telesales, and
communication over the internet that offers an opportunity to engage supplier ,called ‘web casting’
Technology can help the company to converse with individuals at a cost that reflects the
value of the communication, and can discriminate among the purpose of different
communication assigning the appropriate media to fulfill the each task. Technology provides
knowledge and insight to let the firm contact the customer at the right time i.e., when they
are ready to buy- and use the media each customer prefers to reach him/her. Using
‘intelligent agent’- a software that can search for information, customers can even specify
the
information
to
be
sent
and
then
the
agents
can
go
on
th e w e b t o f i n d t h e i n f o r m a t i o n w h e r e v e r t h e y h a v e b e e n p r o g r a m m e d a
n d s e n d information as specified to each customer.
9. Customer Measurements:
Technology can assist the company to understand current and emerging customer issues while there is
still time to address the problems without damaging the relationship. For example,
measurements can be maintained on time liners of delivery, waiting time before customer calls are
answered,
and
time
to
address
customer
complaints.
All
th is
can
bed o n e i n t h e b a c k g r o u n d , u s i n g t e c h n o l o g y t o m a n a g e t h e i n f o r m a t i o n a n d p r o
videm a n a g e m e n t r e p o r t s . T e c h n o l o g y c a n a l s o b e u s e d t o t r a c k m e a s u r e
m e n t s u c h a s customer profitability, share of customer expenditure and the customer’s state of mind
,w i t h r e s e a r c h d a t a l o g g e d i n t o d a t a b a s e . O n c e c o m p e n s a t i o n i s l i n k e d t o c u s t o
m e r measurements, such as these, this area will assume unprecedented importance and
attention.
10. Customer Care:
Technology has a major role to play in providing customers with the attention they seek. T h e i n t e r n e t
c a n b e p a r t i c u l a r l y c o s t e f f e c t i v e i n s h i f t i n g c o s t s t r u c t u r e f r o m h u m a n operation.
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Unit 2
Service Marketing
11. Change of Relationship:
A chain of relationship comprises the series of linkage between the ends –customer’s and
all the stake holders which contribute to the value they receive. These stake
h o l d e r s include suppliers, distribution channel intermediaries, employees, customers and others, such
as investors and the board of directors. They are all to be forged into strong chains that will
all ever increasing value to the end-customers relationship. The relationships the company forms with
end-customers will be only remain as the weakest link in the chain. All efforts are needed to maintain
and deepen the relationship with the end-customer. Technology has a important role in the
structural
bonding
among
all
the
components
of t h e c h a i n o f r e l a t i o n s h i p . F o r y e a r s , c o m p a n i e s h a v e u s e d i n d e p e n d e
n t a n d o f t e n proprietary solution-those that they develop themselves to achieve this bonding. They
put this software and/or hardware on their customer’s premises to give them power to initiate paperless
ordering.
2.2. d. Nature of Demand. Demand Is Effective Desire
The word "demand" is used in our everyday speech in a variety of ways, but in economics it has a
particular significance which we shall attach to it hereafter. The mere desire for goods does not lead to the
satisfaction of wants, though desire is the first step in that direction. Practically every one, we may safely
say, desires to own an automobile; yet it is a well-known fact that only a small per cent of the people of
the United States enjoy that distinction. In other words, to change slightly a well-known expression; "If
desires were horses, beggars would ride." Obviously, then, the desire for a good may or may not result in
the acquisition of that good. Something more is needed. The desire must be made effective; and when a
desire becomes effective we call it demand. Thus, we can define demand as effective desire.
The question may properly be asked at this point: When does a desire become effective - that is,
when does a desire become a demand? A complete answer to the question will be found a little later in the
discussion of demand, for it involves the principle underlying price. We can, however, at this stage in our
progress, say that the demand for a good emerges when the one who desires to possess it is willing and
able to produce the good directly or to forego the use of some other good or goods which he may
exchange for it. Suppose, for example, that a shipwrecked man, like Robinson Crusoe, desires some sort
of protection against the sun, such as an umbrella. He might, as he suffered from the heat, continue to
desire an umbrella without having a demand for it. Suppose again that he should conceive the idea of
constructing one from materials recovered from the wreck and that he was fully aware of the labor
involved. Even then there would be no demand. If, however, he actually constructs the umbrella, we may
conclude that his desire has become effective - that is, it has become a demand.
Service Package Definition
Services in this package are generally intended for individuals with major depressive disorder,
bipolar disorder, or schizophrenia and related disorders who present with very little risk of harm and who
have supports and a level of functioning that does not require higher levels of care.
The general focus of this array of services is to reduce or stabilize symptoms, improve the level of
functioning, and/or prevent deterioration of the person's condition. Natural and/or alternative supports are
developed to help the person move out of the public mental health system. Services are most often
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provided in outpatient, office-based settings, and are primarily limited to medication, rehabilitative
services, and education.
2.3 EXPANDED MARKETING MIX
The traditional marketing mix is the most basic concept in marketing and is defined as elements
which organizations control and use to satisfy or communicate with customers.
Service offerings (Product)
A product is anything that an organization offers to customers that might satisfy a need, whether
it is tangible or intangible (Palmer and Cole, 1995:15). In contrast, the decisions that face service
marketers concerning service offerings are very different from those related to goods. An analysis of
service offerings shows that it can be divided it into two distinct components namely, a core service
offering that represents the intangible core benefits of services and a secondary service offering that
represents the tangible and augmented elements of the service offerings.
Price
In the determination of price, service marketers deal very much with the same price issues as
goods marketers. Subsequently, the differences present itself when the intangible characteristic of services
specifies that price becomes a quality indicator. The art of successful pricing is to establish a price level
that is low enough for the exchange to represent good value to customers, but high enough to allow
service providers to achieve their financial objectives (Palmer and Cole, 1995:222).
Distribution (Place)
The distribution decision refers to the availability and accessibility of service offerings to
customers. Availability from the customers’ point of view signifies that services are on hand when they
want them, while accessibility is the relative ease with which customers can conduct service processes
with the service providers (Palmer, 1994:33). For pure services, the distribution decision is of little
relevance, though most services involve a tangible component. As a result, the distribution decision
involves physical locations and decisions which intermediaries use to provide the services.
Promotions
The promotion mix for the traditional marketing mix is usually broken down into four
components namely advertising, sales promotions, public relations, and personal selling. However, with
the promotion of services, there is a greater need to emphasis the tangible elements of services such as
packaging, brand name, corporate image, service delivery, and service employees
The development of a promotional mix for services relies on the detailed specification of
promotion objectives to ensure that that are chosen and effectively channeled in a cost effective
manner to reach the target market. Typical service promotional objectives are:
• To develop an awareness or interest in the organization and its services
• To communicate the benefits of purchasing a service
• To build a positive image of the organization
• To differentiate the organization from its competitors
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• To remind customers of the existence of the service and the service organization (Palmer and Cole,
1995:260).
People
People as an element in the service mix include all the human actors – the firm’s employees
(internal customers), the buyers (external customers), and other customers who play a part in service
delivery and influence customers.
Processes
Processes are the actual procedures, mechanisms, and flow of activities bywhich services is
delivered (Zeithaml and Bitner, 1996, 21). Customer’s judge services on the operational flow or on the
actual delivery thereof. The inseparability characteristic of services requires customers to follow a series
of extensive or complicated actions to complete the process. Often the logic of these actions scopes the
customers. Whether the service process is standardized or customized, it is used as evidence by customers
to judge service quality.
Physical evidence
The environment in which the service provider delivers the service and where the customers
and the organization interact, as well as any tangible component that facilitates performance
or communication of the service, is referred to as physical evidence (Zeithaml and Bitner, 1996, 26).
2.4 ENVIRONMENT AND TRENDS
Managers of the service companies must be aware of these companies.
2.4. a. Below are some trends that are shaping the marketing approach of service
companies:
• Focus on Customer Service and Customer Satisfaction .
Companies of the past focused too much on their internal being. Their capital expenditures were
geared towards expansion of network, technical superiority, and market domination by size or scale.
These companies failed to recognize that unless customer needs are taken to account, these initiatives will
not bring success or profit.
• Focus on the Service Value
Customers want value for their money and they expect that company’s offerings must be
of prime quality at the least possible price. This is opposite to the principle of business operations.
Companies will need more money to execute first-class service because it requires investment on wellexperienced employees which eventually require higher salaries, high-end facilities, additional
employee trainings which all boils down to an increase operationalexpenditures. Managers of service
companies are tasked to design a service model that are valuable to their customers but priced
reasonably. In the past, companies believe that as long as they are “big” in terms of scale, size, and
resources, their perceived value is high. This is no longer true today. The best judge of your company’s
value is your customers.
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• Focus on Information Technology.
One of the best contributions o f technology is information. Technological advances led to the
availability of information in all sectors of the organization. Examples of information are consumer’s
purchasing behavior, consumer’s consumption pattern, consumer’s data information and so on.
Information made the decision making process of top executives easy and later resulted to further
innovation and improvement on the company’s strategic direction. Companies who failed to use
information also failed to understand their customers.
• Focus on Globalization.
Globalization has swept companies from all over the world by storm. Local markets are already
saturated by localplayers and the best way to expand their sales is to tap emerging international markets.
However, internationalization approach is not as simple as transporting your service to another
country. If your company’s service model is effective in your local market, it is not a guarantee that it
will also be effective in other countries. Culture, social behavior, and customs of the foreign country must
always be taken into account. Many companies who jumped in the globalization band
wagonfailed to adjust their service approach when setting- up a foreign franchise. In the fast-food industry
for instance, MC Donald’s beef burger may not be a hit in countries like India because cows are sacred in
this country. Some American fast-food chains that established franchise in the Middle East or some parts
of Asia changed the ingredients of their food products and modify the service orientation of their staff in
order to adapt to the taste and customs of the locals.
These are just some of the emerging trends that managers of servicecompanies must consider.
Companies that did not recognize these signs and failed to adapt to these trends have suffered and send
millions or even billions of their resources in to the trash bin.
2.5 MARKET SEGMENTATION, TARGETING AND POSITIONING
2.5. I. MARKET SEGMENTATION
INTRODUCTION: - The market for any product is normally made up of several segments. A ‘market’
after all is the aggregate of consumers of a given product. And, consumer (the the end use user), who
makes a market, are of varying characteristics and buying behavior. There are different factors
contributing for varying mind set of consumers. It is thus natural that many differing segments occur
within a market.
In order to capture this heterogeneous market for any product, marketers usually divide or
disintegrate the market into a number of sub-markets/segments and the process is known as market
segmentation.
Thus we can say that market segmentation is the segmentation of markets into homogenous
groups of customers, each of them reacting differently to promotion, communication, pricing and other
variables of the marketing mix. Market segments should be formed in that way that difference between
buyers within each segment is as small as possible. Thus, every segment can be addressed with an
individually targeted marketing mix.
The importance of market segmentation results from the fact that the buyers of a product or a
service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and
behaviors. Since it is virtually impossible to cater for every customer’s individual characteristics,
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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marketers group customers to market segments by variables they have in common. These common
characteristics allow developing a standardized marketing mix for all customers in this segment.
Through segmentation, the marketer can look at the differences among the customer groups and
decide on appropriate strategies/offers for each group. This is precisely why some marketing
gurus/experts have described segmentation as a strategy of dividing the market for conquering them.
MARKETING STRATEGY AND MARKETING SEGMENTATION
When it comes to marketing strategies, most people spontaneously think about the 4P (Product,
Price, Place, Promotion) – maybe extended by three more Ps for marketing services (People, Processes,
Physical Evidence).
Market segmentation and the identification of target markets, however, are an important element
of each marketing strategy. They are the basis for determining any particular marketing mix. Basic steps
in marketing strategy are as follows:-
MARKET SEGMENTATION
Identification of customer’s needs
and market segments.
2. Develop profiles of resulting
market segments.
1.
IDENTIFICATION OF TARGET MARKETS
3.
Evaluation of attractivity of
each segment.
4. Selection of target
segments.
POSITIONING
5. Identification of differential
advantages in each segment.
6. Development and selection
of positioning concepts.
MARKETING PLANNING
7. Development of a marketing
mix for each segment according
to the chosen position.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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2.5. I. a. ATTRIBUTES OF EFFECTIVE SEGMENTATION
Market segmentation is resorted to for achieving certain practical purpose. For example, it has to
be useful in developing and implementing effective and practical marketing programs. For this to happen,
the segments arrived at must meet certain criteria such:a. Identifiable: The differentiating attributes of the segments must be measurable so that they can be
identified.
b. Accessible: The segments must be reachable through communication and distribution channels.
c. Sizeable: The segments should be sufficiently large to justify the resources required to target them. A
very small segment may not serve commercial exploitation.
d. Profitable: There is no use in locating segments that are sizeable but not profitable.
e. Unique needs: To justify separate offerings, the segments must respond differently to the different
marketing mixes.
f. Durable: The segments should be relatively stable to minimize the cost of frequent changes.
g. Measurable: The potential of the segments as well as the effect of a specific marketing mix on them
should be measurable.
h. Compatible: Segments must be compatible with firm’s resources and capabilities.
2.5. I. b. REASONS FOR MARKET SEGMENTATION
Segmentation is the basis for developing targeted and effective marketing plans. Furthermore,
analysis of market segments enables decisions about intensity of marketing activities in particular
segments.
A segment-orientated marketing approach generally offers a range of advantages for both,
businesses and customers.
1. Facilitates proper choice of target marketing:
Segmentation helps the marketers to distinguish one customer group from another within a given
market and thereby enables him to decide which segment should form his target market.
2. Higher Profits:
It is often difficult to increase prices for the whole market. Nevertheless, it is possible to develop
premium segments in which customers accept a higher price level. Such segments could be distinguished
from the mass market by features like additional services, exclusive points of sale, product variations and
the like. A typical segment-based price variation is by region. The generally higher price level in big
cities is evidence for this. When differentiating prices by segments, organizations have to take care that
there is no chance for cannibalization between high-priced products with high margins and budget offers
in different segments. This risk is the higher, the less distinguished the segments are.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
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3. Facilitates taping of market, adapting the offer to the target:
Segmentation also enables the marketer to crystallize the needs of target buyers. It also helps him
to generate an accurate prediction of the likely responses from each segment of the target buyer.
Moreover, when buyers are handled after careful segmentation, the responses for each segment will be
homogeneous. This in turn, will help the marketer develop marketing offer/programmers that most suited
to each groups. He can achieve specialization that is required in product, distribution, promotion and
pricing for matching the particular customer group and develop offers and appeals for the segmented
group.
Example of Ford: Ford has gained useful insights through segmentation and adapted its offer to suit the
Indian target market. For the Indian segment Ford made some changes in its cars in comparison to their
European version.
Modifications such as:
a. Higher ground clearance to the car compatible to the rougher road surface in India.
b. Stiffer rear springs to enable negotiating the ubiquitous potholes on Indian roads.
c. Changes in cooling requirement, with greater airflow to the rear.
d. Higher resistance to dust.
e. Compatibility of engine with the quality of fuel available in India.
f. Location of horn buttons on the steering wheels. As Indian motorists use horn far more frequently than
the European where the horns are located on the lever.
4. Stimulating Innovation:
An undifferentiated marketing strategy that targets at all customers in the total market necessarily
reduces customers’ preferences to the smallest common basis. Segmentations provide information about
smaller units in the total market that share particular needs. Only the identification of these needs enables
a planned development of new or improved products that better meet the wishes of these customer
groups. If a product meets and exceeds a customer’s expectations by adding superior value, the customers
normally is willing to pay a higher price for that product. Thus, profit margins and profitability of the
innovating organizations increase.
5. Makes the marketing effort more efficient and economic:
Segmentation ensures that the marketing effort is concentrated on well defined and carefully chosen
segments. After all, the resources of any firm are limited and no firm can normally afford to attack and
tap the entire market without any delimitation whatsoever. It would benefit the firm if the efforts were
concentrated on segments that are more profitable and productive ones.
Segmentation also helps the marketer assess as to what extend existing offer from competitors
match the needs of different customer segments. The marketer can thus identify the relatively less
satisfied segments and succeed by concentrating on them and satisfying their needs.
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6. Benefits of the customer as well:
Segmentation brings benefits not only to the marketer, but to the customer as well. When
segmentation attains higher levels of sophistication and perfection, customers and companies can
conveniently settle down with each other, as at such a stage, they can safely rely on each other’s
discrimination. The firm can anticipate the wants of the customers and the customers can anticipate the
capabilities of the firm.
7. Sustainable customer relationships in all phases of customer life cycle:
Customers change their preferences and patterns of behavior over time. Organizations that serve
different segments along a customer’s life cycle can guide their customers from stage to stage by always
offering them a special solution for their particular needs. For example, many car manufacturers offer a
product range that caters for the needs of all phases of a customer life cycle: first car for early teens, funcar for young professionals, family car for young families, etc. Skin care cosmetics brands often offer
special series for babies, teens, normal skin, and elder skin.
8. Targeted communication:
It is necessary to communicate in a segment-specific way even if product features and brand
identity are identical in all market segments. Such a targeted communications allows stressing those
criteria that are most relevant for each particular segment (e.g. price vs. reliability vs. prestige).
9. Higher market share:
In contrast to an undifferentiated marketing strategy, segmentation supports the development of
niche strategies. Thus marketing activities can be targeted at highly attractive market segments in the
beginning. Market leadership in selected segments improves the competitive position of the whole
organization in its relationship with suppliers, channel partners and customers. It strengthens the brand
and ensures profitability. On that basis, organizations have better chances to increase their market shares
in the overall market.
2.5. I. c. BASES FOR SEGMENTATION
Markets can be segmented using several relevant bases. There is huge number of variables which
leads to market segmentation. They comprise easy to determine demographic factors as well as variables
on user behavior or customer preferences. Segmentation is done for consumer market and industrial
market.
Bases for segmentation in consumer market:
Consumer market can be segmented on the following customer characteristics
1. Geographic Segmentation.
2. Demographic Segmentation.
3. Psychographic Segmentation.
4. Behaviouralistic Segmentation.
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1) Geographic Segmentation: Potential customers are in a local, state, regional or national marketplace
segment. If a firm selling a product such as farm equipment, geographic location will remain a major
factor in segmenting your target markets since their customers are located in particular rural areas. While
for retail store, geographic location of the store is one of the most important considerations, in this case
city areas are preferred. Segmentation of customers based on geographic factors is:a. Region: Segmentation by continent / country / state / district / city.
b. Size: Segmentation on the basis of size of a metropolitan area as per its population size.
c. Population density: Segmentation on the basis of population density such as urban / sub-urban / rural
etc.
d. Climate: - Segmentation as per climatic condition or weather.
2) Demographic Segmentation: Segmentation of customers based on demographic factors are:a. Age (dominant factor):- Segmentation is done on the basis of age of person. Example Titan has
segmented its product according to different age group of person.
Titan’s product segmentation on the bases of age: Titan created a sub brand, Fastrack. These watches
are specifically for young, vibrant, and cool outgoing young generation. While for older person and
professional it has created the steel series watches and also the famous, Sonata.
 Titan Fastrack (for the younger segment)
 Steel-1077SM01 (for elder person and professional)
b. Income (dominant factor): Segmentation is done on the basis of income level of a person.
Example of Titan watches can be citied such as Titan offered Aurum and Royale in the gold/jewellery
watch range with price ranges between Rs. 20000 to Rs.1 lakh.
 Titan Nebula (Luxury segment watch)
 For Middle Segment, Titan offered Exacta range in stainless steel, aimed at withstanding the
rigors of daily life. There were 100 models in the range. Price ranges within Rs500-700.
 For third segment, Titan offered the Sonata range. The price range was between Rs.350 to 500.
Eg.Titan Sonata for third segment
c. Purchasing power (dominant factor): Segmentation done on the basis of purchasing power of the
customer. Examples of different car segment based on purchasing power are:Budget car segment: It is the largest segment in Indian market. Here the entry level starts from
Rs 1.5 to 3 lakh. Maruti 800 and Omni are the dominant players in these segments. With the launch of
Tata Nano with a price range of 1lakh the outlook of this segment has changed. This segment is
sometimes referred to as the small car segment. Competition in this segment is extreme in Indian market.
 Maruthi 800 (Budget car segment)
Compact car segment: It lies between budget car and family car. Preferred price range is
between Rs 3 to 4.5 lakh. Maruti Zen, Fiat Uno, Tata Indica, Santro, Matiz is some of the dominant
players in this segment.
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 Maruti Zen (Compact car segment)
Family car segment: The purchasing capacity of buyers of this segment is somewhat higher than
that of the budget and compact car segment. Price ranges between Rs 4.5 to 6 lakhs. Maruti Esteem,
Daewoo Cielo, and HM Contessa belong to this segment. In India cars that are sold in India as ‘Budget
Car’ and ‘Compact Car’ do not meet their purpose, especially in term of space, that they turn to ‘the
family car segment’.
 Maruti Esteem (Family car segment)
Premium car segment: This segment represents the buyer who require true world class luxury
car. Price ranges between Rs 6 to 8 lakh. Ford Escort, Honda City, Mitsubishi Lancer, Audi 1800, Opel
Astra etc are some of the major cars in this segment.
 Honda City (Premium car segment)
Super luxury saloon segment: Buyer in this segment looks for a real super premium segment
car. Mercedes Benz E229, E-250, Rover Montego, Audi 6, BMW are the players in this segment.
Obviously, this is a tiny segment in the Indian context.
 Audi 6 ( Super luxury saloon segment)
d. Occupation.
e. Gender (dominant factor):-Product can be segmented for male and female.
f. Family Size.
g. Family life cycle.
h. Nationality.
i. Religion.
j. Education:-Primary, High School, Secondary, College, Universities.
Many of these variables have standard categories for their values. For example family lifecycle
often is expressed as bachelor, married with no children, full-nest, and empty-nest or solitary survivor.
3) Psychographic Segmentation: Psychographic Segmentation groups customers according to their lifestyle and buying psychology. Many businesses offer products based on the attitudes, beliefs and emotions
of their target market. The desire for status, enhanced appearance and more money are examples of
psychographic variables. They are the factors that influence your customers' purchasing decision. A seller
of luxury items would appeal to an individual's desire for status symbols Psychographic Segmentation
includes variables such as:a. Activities.
b. Interests.
c. Opinions.
d. Attitudes.
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e. Values
Activities, Interests, and Opinions (AIO) surveys are one tool of measuring lifestyle.
4) Behaviouralistic Segmentation: Markets can be segmented on the basis of buyer behaviour as well.
Since all Segmentation is in a way related to buyer behavior, one might be tempted to ask why buyer
behavior-based segmentation should be a separate method. It is because there is some distinction between
buyer’s characteristics that are reflected by their geographic, demographic and psychographic profiles,
and their buying behaviour. Marketers often find practical benefit in using buying behavior as a separate
segmentation base in addition to bases like geographic, demographics, and psychographics.
The primary idea in buyer behaviour segmentation is that different customer groups expect
different benefits from the same product and accordingly, they will be different in their motives in owing
it and their behavior in buying it. Variables of buyer behavior are:a. Benefit sought: - Quality / economy / service / look etc of the product.
b. Usage rate: - Heavy user / moderate user / light user of a product.
c. User status: - Regular / potential / first time user / irregular /occasional.
d. Brand Loyalty: - Hard core loyal / split loyal / shifting / switches.
e. Readiness to buy.
f. Occasion: - Holidays and occasion stimulate customer to purchase products.
g. Attitude toward offering: - Enthusiastic / positive attitude / negative attitude / indifferent /
hostile.
Bases for segmentation in industrial market: In contrast to consumers, industrial customers tend to be
fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision
process usually involves more than one person. These characteristics apply to organizations such as
manufacturers and service providers, as well as resellers, governments, and institutions.
Many of the consumer market segmentation variables can be applied to industrial markets.
Industrial markets might be segmented on characteristics such as:
1. Location.
2. Company type.
3. Behavioral characteristics.
1) Location: industrial markets, customer location may be important in some cases. Shipping costs may
be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from
the vendor may be critical. In some industries firms tend to cluster together geographically and therefore
may have similar needs within a region.
2) Company type: Business customers can be classified according to type as follows:
a. Company size: Whether the company is a large scale industry / a small scale industry. Large industry
always tries to order in bulk commodities while opposite for small scale sector.
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b. Industry: Whether the industry is manufacturing industry / service industry. Also sometime
differentiation is done between public sector industry or a private sector industry.
c. Decision making unit.
d. Purchase Criteria.
3) Behavioral characteristics: In industrial markets, patterns of purchase behavior can be a basis for
segmentation. Such behavioral characteristics may include:
o Usage rate
o Buying status: potential, first-time, regular, etc.
o Purchase procedure: sealed bids, negotiations, etc.
 Multi level Segmentation: A market can be segmented, using several bases in succession:
While discussing about bases of segmentation we must discuss about multi-level segmentation, as
it is not as through segmentation bases discussed above are mutually exclusive and a market can be
segmented only with one particular base, on either / or basis. Since customer characteristic are spread
over several variables, any market can be segmented through several bases. Different bases can be used in
combination in segmenting a given market. They just have to be relevant for the concerned market.
Actually, the different bases can be used in succession in a suitable order, and the market can be
segmented at multi-levels.
For example, a market can be segmented using the demographic base in the first instance,
followed by the psychographic base and the buyer behavior/benefit base. Or, the market can be
segmented using volume as the base in the first instance, followed by the
demographic/psychographic/buyer behavior/benefit base. Assuming for example, that the firm first carries
out volume segmentation of its market, it can know who the heavy user of its product are, but it cannot
know the purpose for which they buy the product. The firm can then pick up the heavy users and carry out
a multi-level segmentation, and continue its probe more deeply.
Since each of these bases has several sub-bases, the numbers of levels in which a market can be
segmented are indeed numerous. Actually, the aim should always be to go as deep as possible in
segmenting the market so that segments that are most attractive and most suited can be chosen.

Multi-level segmentation enables better selection of target market and better choice of
market mix:
Multi-level segmentation enables the marketers to choose his target market better. It also helps
him to make the winning strategy and strike the right product offer and the right marketing mix. With the
information generated from multi-level segmentation, he can obtain a deeper understanding of the
customers in each segment, their needs, buying motives and buying behaviour. He can understand in what
way each of the different segments want the product to be, he can then tailor his product, marketing offer
and promotional appeal, to fit the individual segment; he can select the priced, distribution
method/channels, media vehicles, advertising massages and sales appeal, which will be appropriate.
Example of General of Motors:
GM has identified about 40 different ‘customer needs’ and correspondingly, 40 different market
segments in which it would present with its vehicles. For example, it has targeted the Pontiac at active,
sports-oriented, young couples, the Chevrolet at price-conscious young families, the Oldsmobile at
affluent families, and the Buick at older, more conservative couples.
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2.5. I. d. APPROACHES IN SEGMENTATION
George Day (1980) describes models of segmentation as the top-down approach: In this approach
“firms starts with the total population and divide it into segments”. He also identified an alternative model
which he called the bottom-up approach. In this approach,” firms starts with a single customer and
builds on that profile”. This typically requires the use of customer relationship management software or a
database of some kind. Profiles of existing customers are created and analyzed. Various demographic,
behavioural, and psychographic patterns are built up using techniques such as cluster analysis. This
process is sometimes called database marketing or micro-marketing. Its use is most appropriate in highly
fragmented markets. McKenna (1988) claims that this approach treats every customer as a "micro
majority". Pine (1993) used the bottom-up approach in what he called "segment of one marketing".
Through this process mass customization is possible.
2.5.I.e. ADVANTAGES OF MARKET SEGMENTATION:
Various advantages of market segmentation are:1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Helps distinguish one customer group from another within a given market.
Facilitates proper choice of target market.
Facilitates effective tapping of the market.
Helps divide the markets and conquer them.
Helps crystallize the needs of the target buyers and elicit more predictable responses from them ;
helps develop marketing programs on a more predictable base; helps develop market offer that
are most suited to each group.
Helps achieve the specialization required in product; distribution, promotion, and pricing for
matching the customer group and develop marketing offers and appeal that match the need of
each group.
Makes the marketing effort more efficient and economic.
Helps concentrate efforts on the most productive and profitable segment, instead of frittering
them over irrelevant, or unproductive, or unprofitable segment.
Helps spot the less satisfied segments and succeed by satisfying such segments.
Brings benefits not only to the marketer but also to the customer as well.
When segmentation attains high sophistication, customers and companies can choose each other
and stay together.
2.5.I. f. EVALUATION OF SEGMENTS:
Whether market segmentation is successful or not can be evaluated by the following questions1. It is sizeable: Size-wise, the popular segment is a bigger compared to the premium segment. In
term of tonnage, of the total market of around 6, 00,000 ~ 21 ~tonnes, the popular segment
account for 80 percent and the premium segment for the remaining 20 percent. If the firm wants a
very large volume, it has to think of the popular segment. At the same time, it has to note that the
premium segment too is sizeable, as it account for over 120,000 tonnes. In term of value, the
premium segment is even more sizeable, formerly nearly 30 percent of the total market. Clearly,
the segment cannot be ruled out as lacking in size.
2. It is growing: Growth rate and likely future position of the segment will be the next
consideration in the evaluation process. Usually, business firms seek out the high growth
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segments. Analysis will readily indicate to the firm that in bath soaps, the premium segment
happens to be the high growth segment. Whereas the popular segment has been growing at 10
percent per annum, the premium segment has been growing at over 20 percent annum. When this
fact is taken into consideration, the firm’s choice may tilt toward the premium segment. The tilt
will be particularly pronounced if the firm’s natural disposition is to strive for a position in the
high growth segment of the business.
3. Is it profitable: Next consideration will be the extend of profitability. In the present example, the
firms quickly sense that the premium segment is more profitable one. Even a relatively lower
volume in the segment may bring in good returns. On the contrary, in the popular segment, a
much larger volume will be necessary for the business to be viable, since prices and margins in
the segment are low. Another point is that costs of marketing, distribution and promotion in the
business are quite high and are constantly on the rise. Costs of launching a new brand are
particularly high. The market is very competitive, aggressive promotional support through
expensive media like TV becomes essential. In this background, the firm may come to the
conclusion that it may be worthwhile to gamble in the premium segment rather than the popular
segment.
4. Is it accessible: The firm has to now consider whether the segments are accessible to it? This
may need further analysis. The market realities will have to be taken into consideration. The
popular segment will be accessible only to the firm with a cost advantage, since price is a major
determinant in this segment. Premium segment will be accessible only to firms, which enjoy a
differentiation advantage, and which are also marketing savvy. Liril of Hindustan Lever has a
commanding position in this segment. At the upper end of the segment, HLL’s Pears and Dove
are well entrenched. Several other brands of different companies are competing in the segment.
The firm has to take due note of this reality. At the same time, analysis also reveals that new
brands do keep entering the segment every now and then, and some of them do manage to stay.
So, the firm has no reason to believe that the premium segment is not accessible to it, unless it is
convinced that it is very weak in marketing.
5. It is compatible with firm’s resources and capabilities: Having reached the conclusion that the
premium segment is sizeable, growth oriented, profitable and accessible, the firm has to now find
out if the segment matches its resources. For some firms, the popular segment may be the natural
choice and for others, the premium segment. And, for some other choosing both. The premium
segment is a highly competitive segment. Only firms endowed with strong resources and an
aggressive marketing strategy/culture can fight and survive in the market. The firm therefore has
to assess whether the particular segments are compatible with its resources and capabilities. Thus
by this following analysis a firm can easily evaluate it market segmentations and also can tackle
its problem.
2.5. II. MARKET TARGETING
INTRODUCTION: - There was a time when finding the best customers was like throwing darts in the
dark. Target marketing changed all that...Today's savvy marketers know that finding their best prospects
and customers hinges on well thought out targeted marketing strategies.
Defining a target market requires market segmentation, the process of pulling apart the entire
market as a whole and separating it into manageable, disparate units based on demographics. Target
market is a business term meaning the market segment to which a particular good or service is marketed.
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It is mainly defined by age, gender, geography, socio-economic grouping, or any other combination of
demographics. It is generally studied and mapped by an organization through lists and reports containing
demographic information that may have an effect on the marketing of key products or services.
Target Marketing involves breaking a market into segments and then concentrating your
marketing efforts on one or a few key segments. Target marketing can be the key to a small business’s
success.
The beauty of target marketing is that it makes the promotion, pricing and distribution of your
products and/or services easier and more cost-effective. Target marketing provides a focus to all of your
marketing activities.
Market targeting simply means choosing one’s target market. It needs to be clarified at the onset
that marketing targeting is not synonymous with market segmentation. Segmentation is actually the
prelude to target market selection. One has to carry out several tasks beside segmentation before choosing
the target market.
Through segmentation, a firm divides the market into many segments. But all these segments
need not form its target market. Target market signifies only those segments that it wants to adopt as its
market. A selection is thus involved in it.
In choosing target market, a firm basically carries out an evaluation of the various segments and
selects those segments that are most appropriate to it. As we know that the segments must be relevant,
accessible, sizable and profitable. The evaluation of the different segments has to be actually based on
these criteria and only on the basis of such an evaluation should the target segments be selected.
2.5.II. A. PROCESS OF CHOOSING THE TARGET MARKET
The process of choosing the target Market is:







Choosing the target market is related to, but not synonymous with, market segmentation.
Segmentation is the means or the tool; choosing the target market is the purpose.
Segmentation can also be viewed as the prelude to target market selection.
Choosing the target market usually follows multi-level segmentation using different bases.
Choosing the target market involves several other tasks in addition to segmentation.
Looking at each segment as a distinct marketing opportunity.
Evaluating the worth of each segment (Sales/Profit potential).
Evaluating whether the segment is:
 Distinguishable.
 Measurable.
 Sizable.
 Accessible.
 Growing.
 Profitable.
 Compatible with the firm’s resources.
 Examining it is better to choose the whole market, or the only a few segment, and deciding which
one should be chosen.
 Looking for segments, which are relatively less satisfied by the current offers in the market from
competing brands.
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 Checking out if the firm has the differential advantages / distinctive capability for serving the
selected segments.
 Evaluating the firm’s resources and checking whether it is possible to put in the marketing
programs required for capturing the spotted segments with those resources.
 Finally selecting the segments which are more appropriate for the firm.
2.5.II. B. FACTORS TO BE CONSIDERED WHILE TARGET MARKET SELECTION
Target marketing tailors a marketing mix for one or more segments identified by market
segmentation. Target marketing contrasts with mass marketing, which offers a single product to the entire
market.
Two important factors to consider when selecting a target market segment are the attractiveness
of the segment and the fit between the segment and the firm's objectives, resources, and capabilities.
 Attractiveness of a market segment:
The following are some examples of aspects that should be considered when evaluating the attractiveness
of a market segment:








Size of the segment (number of customer and/or number of units).
Growth rate of the segment.
Competition in the segment.
Brand loyalty of existing customers in the segment.
Attainable market share given promotional budget and competitor’s expenditures.
Requires market share to break even.
Sales potential for sales in the segment.
Expected profit margins in the segment.
Market research and analysis is instrumental in obtaining this information. For example, buyer
intentions, sales force estimates, test marketing, and statistical demand analysis are useful for determining
sales potential. The impact of applicable micro-environmental and macro-environmental variables on the
market segment should be considered.
Note that larger segments are not necessarily the most profitable to target since they likely will have
more competition. It may be more profitable to serve one or more smaller segments that have little
competition. On the other hand, if the firm ~ 27 ~can develop a competitive advantage, for example, via
patent protection, it may find it profitable to pursue a larger market segment
 Suitability of market segments to the firm
Market segments also should be evaluated according to how they fit the firm's objectives, resources, and
capabilities. Some aspects of fit include:




Whether the firm can offer superior value to the customers in the segment.
The impact of serving the segment on the firm’s image.
Access to distribution channels required to serve the segment.
The firm’s resources Vs capital investment required to serve the segment.
The better the firm's fit to a market segment and the more attractive the market segment, the greater the
profit potential to the firm.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
2.5.II. c. TARGET MARKET STRATEGIES
There are several different target-market strategies that may be followed. Targeting strategies usually can
be categorized as one of the following:
• Single-segment strategy - Also known as a concentrated strategy. One market segment (not the entire
market) is served with one marketing mix. A single-segment approach often is the strategy of choice for
smaller companies with limited resources.
• Selective specialization - This is a multiple-segment strategy, also known as a differentiated strategy.
Different marketing mixes are offered to different segments. The product itself may or may not be
different – in many cases only the promotional message or distribution channels vary.
• Product specialization - The firm specializes in a particular product and tailors it to different market
segments.
• Market specialization- The firm specializes in serving a particular market segment and offers that
segment an array of different products.
• Full market coverage - The firm attempts to serve the entire market. This coverage can be achieved by
means of either a mass market strategy in which a single undifferentiated marketing mix is offered to the
entire market, or by a differentiated strategy in which a separate marketing mix is offered to each segment
A firm that is seeking to enter a market and grow should first target the most attractive segment
that matches its capabilities. Once it gains a foothold, it can expand by pursuing a product specialization
strategy, tailoring the product for different segments, or by pursuing a market specialization strategy and
offering new products to its existing market segment.
Choosing the target market is a part of marketing strategy formulation, the other two parts being
positioning and marketing mix formulation. Without right targeting, the firm cannot formulate an
effective strategy. It is through careful segmentation and targeting that firm pick up right group of
consumers. Also, it is through this process that the firm gain vital knowledge about the need and buying
behaviour of the consumer in each segment and the differences between one segment and the other. And,
it is by using this knowledge that the firm develops marketing programmes that match the specific
requirement of different segments. In other words, segmentation and targeting help the firm not only the
characteristics of each of the segments but also the ‘distinctive excellence’ that is required for catering to
the specific needs of the consumers in each of them.
Another strategy whose use is increasing is individual marketing, in which the marketing mix is tailored
on an individual consumer basis. While in the past impractical, individual marketing is becoming more
viable thanks to advances in technology.
Decision involved in targeting strategy includes:



Which segments to target.
How many products to offer.
Which product to offer in which segment.
Targeting strategy decisions are influenced by:


Market maturity
Diversity of buyers’ needs and preferences.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
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
Service Marketing
Srength of the competition.
Volume of sales required for profitability.
Deciding the size of the target market:
After selecting the target market it is important for marketers to decide the size of the target
market. Is the target market large enough to sustain a business which will provide products or services to
them? A target market has to be of at least a minimum size to be viable. Suppose a firm chooses food
processing and food packaging as its target market. In fact, they might be too large, and it might be wise
to find a niche within those target markets. Therefore, the firm must then focus on a particular type of
food market, such as a food production firm who wants to package its products for selling. Thus by
targeting its product for its targeted market, the firm can decide its size on the basis of it.
Results of wrong targeting strategy:
Ineffective augmentation and targeting led to wrong product offers, inappropriate marketing appeals,
wrong pricing, and overemphasis on the brand name. No firm can offer single product to satisfy the entire
segment. For example, in Indian market many MNCs offered single product to the entire segment. The
offer did not suit middle class as such. They suited only the premium segment. Naturally, the firms were
unable to gather worthwhile volumes. As the firm did not target those segments and as they failed to
make product offers that were appropriate for them, the end result was poor. For this reason firms like
Reebok, Ray-ban, and Levi did not showed satisfactory result for quite sometime in Indian market while
they were very successful in the western markets.
Thus the choice of target marketing for a given industry can decide the fate of the industry in the
market. This is because firms differ in their competencies, resources, objectives, and strategies.
2.5. III. POSITIONING
INTRODUCTION: - Positioning is a concept in marketing which was first popularized by Al Ries and
Jack Trout out in their bestseller book “Positioning – a battle for your mind ". According to them
‘Positioning is what you do to mind of the prospect’. They iterate that any brand is valued by the
perception it carries in the prospect or customer's mind. Each brand has thus to be 'Positioned' in a
particular class or segment. Example: Mercedes is positioned for luxury segment, Volvo is positioned for
safety.
The position of a product is the sum of those attributes normally ascribed to it by the consumers –
its standing, its quality, the type of people who use it, its strengths, its weaknesses, any other unusual or
memorable characteristics it may possess, its price and the value it represents.
Although there are different definitions of Positioning, probably the most common is: "A
product's position is how potential buyers see the product", and is expressed relative to the position of
competitors. Positioning is a platform for the brand. It facilitates the brand to get through to the mind of
the target consumer.
The position of the brand has thus to be carefully maintained and managed. Example: when
Malboro cut down its prices, its sales dropped immediately, as it began being associated with the generic
segment. Watches like Rolex are positioned as luxury segment watches, thus they being one of the most
expensive have become a symbol for accomplishment in life. If Rolex reduces its prices, it loses its
perceived image and hence is in danger of losing its customers. This differs slightly from the context in
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
which the term was first published in 1969 by Al Ries and Jack Trout in the paper "Positioning" is a
game people play in today’s me-too market place" in the publication
Industrial Marketing, in which the case is made that the typical consumer is overwhelmed with
unwanted advertising, and has a natural tendency to discard all information that does not immediately find
a comfortable (and empty) slot in the consumers mind. It was then expanded into their ground-breaking
first book, "Positioning: The Battle for your mind", in which they define Positioning as "an organized
system for finding a window in the mind. It is based on the concept that communication can only take
place at the right time and under the right circumstances."
2.5.III. A. POSITIONING CONCEPTS:
Generally, there are three types of positioning concepts:
 Functional positions
 Solve problems.
 Provide benefits to customers.
 Get favorable perception by investors (stock profile) and lenders.
 Symbolic positions
 Self-image enhancement.
 Ego identification.
 Belongingness and social meaningfulness.
 Affective fulfillment.
 Experiential positions
 Provide sensory stimulation.
 Provide cognitive stimulation.
Approaches of Positioning:
The main positioning strategy is to either developing or reinforcing a particular image for the
brand in the mind of the customer. The main approaches to positioning strategy are:






Customer benefits approach.
The price - quality approach.
The use or application approach.
The product user approach.
The product class approach.
The cultural symbol approach.
The competitor approach.
1. Customer benefits approach:
This is an important positioning strategy. It involves putting the brand above competitors, based
on specific brand attributes and customer benefit. In the automobiles sector we can see many car
manufacturer give emphasis on different technical aspects such as fuel efficiency, safety, engine
performance, power windows etc. Generally marketers identify positioning in respect of product
characteristics that have been ignored by the competitor. Often we can see that firms attempts to position
their brands along with two or more characteristic simultaneously, this is done to give an extra edge to the
product from its rival and also helps increase the product’s life cycle. Thus a single product can solve
many problem is the main theme behind the product.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
Example: Procter & Gamble’s Head & Shoulders shampoo functions as anti dandruff and anti hair fall
shampoo. It positioned both as anti dandruff and anti hair fall shampoo.
2. Price quality approach:
Sometimes brands attempts to offer more in term of service, feature, quality, or performance.
Manufacturer of such brands charge higher prices partly to cover the cost and partly to communicate the
fact that they are of high quality. In fact in the same product category there are brands, through
comparable in qualities, which appeal on the basis of price. For example brands like Rado and Timex
use quality and price positioning technique respectively. Rado competes for quality and Timex competes
for price. It is difficult to use both quality and price positioning together because there is a risk that high
quality-low price positioning technique may infer the image of the product in the mind of the consumer.
Example: Rado Original Chronograph Priced at USD 6516.00
Timex Luxury watch priced around Rs.1800
3. The use and application approach:
In this strategy the product is positioned with a use or application approach. For example: Largest Mobile manufacturer in the world Nokia positioned its few variant of N-series mobiles as music
phones with enhanced memory and multimedia capabilities.
Eg: Nokia N-70 Music edition with 1 GB memory and Nokia N-73 Music edition with 1 GB memory.
4. The product user approach:
In this approach, the brand identifies and determines the target segment for which the product will
be positioned. Many brands uses a model or a celebrity to position their product. The expectations are that
a model or a celebrity is likely to influence the product’s image by reflecting their own image to it.
For example: - Dabur Chyvanprash is positioned for all age groups.
5. The product class approach:
This approach is use so that the brand is associated with a particular product category. This is
generally used when a category is too crowded. For example: - HLL has positioned Dove toilet soap as a
cleansing cream product for young women with dry skin and its positioned as a premium segment toilet
soap.
6. The cultural symbol approach:
The positioning strategy is based on deeply entrenched cultural symbol. The use of cultural symbol can
help to differentiate the brand from competitor’s brands. For example: - The positioning techniques of
Marlboro cigarettes use the image of typical American cowboy.
Example: Marlboro gives its cigarette brand an American Cowboy images
7. The competitor approach:
Many brands use competitor as a dominant plank in their campaign. These brands are positioned
following its competitor. This is an offensive strategy.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
2.5. III. b. DIFFERENT POSITIONING PLANKS/BASES:
Different types of positioning planks /bases are used by the marketers are:
1. Economy: Product positioned toward a particular segment keeping in mind it economy.
Example: Maruti 800, Tata Nano, Nirma detergent powder etc are positioned for the economy
segment
2. Benefit: Product positioned with some beneficial features. Example: Colgate total, Clinic plus
etc.
3. Gender: Product positioned for a particular segment. Example: Scooty Pep, Titan Raga.
4. Luxury and exclusiveness: Product or services positioned toward luxury segment. Example: Taj
Group of Hotels, Mercedes Benz E – class etc.
5. Fashion for elite class: Product positioned for fashionable elite class or member of the society,
who always want to stay ahead in term of fashion and demands exclusive products only.
Example: Peter England, Van Heusen, Raymond etc.
6. Technology and value added features: Positioning of a product according to its technological
advancement and value added features. Example: Microsoft’s positioning of its recent operating
system Windows Vista as the advanced operating system, Sony with various elecronic goods, LG
etc.
2.5. III. c. POSITIONING PLANNING
Positions are described by variables and within parameters that are important to the customers.
Common examples are price, supporting services, quality, reliability, and value for money. Often,
customers position a product in relation to a brand or product that is especially visible to them. This could
be the market leader or any other offer with a high media exposure and an above average marketing
budget. Therefore, it is advisable to use in-depth market research to determine relevant parameters in
order to understand how customers rate different products and marketing variables. The number of
relevant parameters is normally low. Most often, they can be described with a two- or three-dimensional
matrix. This tool to visually depict customers’ perceptions of a product and its position is called
perceptual mapping.
STEPS FOR POSITIONING A PRODUCT
Dibb et al recommend the following steps for determining and implementing the positioning of a
product. Although they focus on new product development, these steps are applicable to a relaunch with
new features or for a repositioning of an existing product too.
1. Define the segments in a particular market.
2. Decide which segments to target.
3. Understand what the target consumers expect and believe to be the most important considerations when
deciding on the purchase.
4. Develop a product (or products) that cater specifically for these needs and expectations.
5. Evaluate the positioning and images, as perceived by the target customers, of competing products in the
selected market segments.
6. Evaluate the market leader’s position; leading brand that occupies a special position in the consumer‘s
mind (cadbury’s in chocolates); other brands have to necessary relate themselves in some way to the
leaders position; they cannot ignore the position of the leader, nor wish it away.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
7. Select an image that sets the product apart from the competing products, thus ensuring that the chosen
image matches the aspirations of the target customers.
8. Inform target customers about the product (promotion).
2.5. III. d. PRODUCT POSITIONING AND BRAND POSITIONING
It is essential to understand the relationship between product positioning and brand positioning.
The two terms are synonymously and interchangeably used, technically they are different. Product
positioning denotes the specific product category / product class in which the given product is opting to
compete. And brand positioning denotes the positioning of the brand viz-a-viz the competing brands in
the chosen product category.
ISSUES IN PRODUCT POSITIONING
The main issues in product positioning are:
1. Where is the new offer going to compete? As what?
2. Which product function/customer need is it trying to meet?
3. What other product categories serve this need? In other words, what are the substitute products
that serve the same need?
4. Where the real gap is, where is such a new offer welcome and wanted by the market?
5. What are the company’s competencies to fight here?
In fact, these are the issues the firm agitates in target market decision selection too. The linkage is
only natural because in product positioning, the firm is actually bridging the product offer with the right
target market.
ISSUES IN BRAND POSITIONING
The issues in brand positioning are:1. Which are the competing brands in the chosen product category?
2. What are the unique claims/strength of the various brands?
3. What position do they enjoy in consumer’s evaluation and perception?
4. According to the consumer rating of the brands, is there a wide gap in expectation performance? What
kind of a product/new attribute/new functions will attract the consumer?
5. What is the most favoured position and yet vacant?
6. Can the new brand claim the needed distinction and take the position and satisfy that need?
CRITERIA’S FOR SUCCESSFUL POSITIONING
Certain criteria are needed to be fulfilled for successful positioning are:a.Clarity: While positioning its brand the firm must be able to position itself in both distinct value,
proposition, and to its target audience.
b.Consistency: Consistency in positioning means keeping the positioning plank/bases intact for longtime.
Planks should be carefully chosen while positioning. But it does not mean that the firm must change its
positioning bases even though its survival is at stake. The firm must be flexible to the changing
environment.
c. Credibility: The firm must deliver trustworthy and believable value proposition. There should be
perfect match between promise and action.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
d.Competitiveness: For surviving in this competitive and changing environment innovative resources,
talent pool, competitive advantage, strong financial backup etc are very important.
·
2.5. III. e. REPOSITIONING
Repositioning involves changing target market or distinct positioning claim/differences
advantages or both to bring the saturated attention of the existing customers back into the limelight once
again to survive safely and happily in the market. In some cases, the products that are faring well are
repositioned. This is done mainly to enlarge the reach of the product offer and to increase the sale of the
product by appealing to a wider target market. The product is provided with some new features or it is
associated with some new uses and is repositioned for existing as well as new target market.
Example of Maruti Omni repositioning can be citied as important case in repositioning strategy.
When Maruti Omni was launched it was positioned as the low priced, spacious van. But in the market as
the time passed, Maruti Omni cannot acquire a dominant position. The major competing brands are more
spacious, though higher priced. Thus Maruti decided to take the path of repositioning. The features that
were after repositioning are:1. Most cars do not have any fifth door in the car. Maruti Omni had the boot-latch at the back of the car
which can be used both for entering and also for keeping goods.
2. In the new car there is around 7.5 cubic meter of space. This gives the advantage of more space for
luggage and more people.
3. For having a pleasant driving experience Maruti Omni the instrument panel is sleek, the steering
columns just positioned just right, seat are adjustable with control lever and gear shaft at hand-touch
distance.
4. Engine was improved from the previous one. It is more fuel efficient and delivers higher performance.
5. Safety features are standard.
6. A coolant system that eliminates daily chores of filling water in the radiator was introduced.
As a result of repositioning the whole perception of customer has changed toward Maruti Omni.
Many people start taking it as a family car. The company found a positioning theme” the most spacious
car at lowest price”.
Another example of repositioning is Milkmaid’s strategy:
When the product was introduced it was positioned as convenient form of milk that can be used
in tea and coffee. But the product cannot reach its desired goal in the market. As a result of which the
company repositioned it as an ingredient for a variety of sweets and other preparation, in addition to daily
use in tea/coffee. Today Nestlé’s milkmaid had many varieties such Nestlé’s Milkmaid fun shake,
Nestlé’s Milkmaid fruit shake which is available in strawberry and mango variant. Today milkmaid has
acquired a market leader position in milk products.
Conclusion: Thus we can say that the total process of market segmentation, targeting and positioning is a
very important attribute of marketing mix. All these three process is very closely interrelated with each
other.
Once the organization has decided which customer groups within which market segments to
target, it has to determine how to present the product to this target audience. This allows to exactly
addressing the needs and expectations of the target groups with a tangible marketing mix that consists of
product characteristics, price, promotional activities and places to present the product.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Unit 2
Service Marketing
Effective strategies of segmentation, targeting and positioning gives an extra advantage in
changing and highly competitive environment. To make this three marketing process effective a thorough
SWOT analysis of the firm is very important. Keeping in mind the strength, weakness, opportunity and
threat the firm can formulate and implement its total marketing mix.
Benefits of Segmenting and Targeting Markets
The story of General Motors raises an important point, which is that segmenting and targeting
markets doesn’t necessarily mean “skinning down” the number of your customers. In fact, it can help you
enlarge your customer base by giving you information with which to successfully adjust some component
of your offering—the offering itself, its price, the way you service and market it, and so on. More
specifically, the process can help you do the following:
 Avoid head-on competition with other firms trying to capture the same customers
 Develop new offerings and expand profitable brands and products lines
 Remarket older, less-profitable products and brands
 Identify early adopters
 Redistribute money and sales efforts to focus on your most profitable customers
 Retain “at-risk” customers in danger of defecting to your competitors
Types of Segmentation Bases
Table "Common Ways of Segmenting Buyers" shows some of the different types of buyer
characteristics used to segment markets. Notice that the characteristics fall into one of four segmentation
categories: behavioral, demographic, geographic, or psychographic. We’ll discuss each of these
categories in a moment. For now, you can get a rough idea of what the categories consist of by looking at
them in terms of how marketing professionals might answer the following questions:
 Behavioral segmentation. What benefits do customers want, and how do they use our product?
 Demographic segmentation. How do the ages, races, and ethnic backgrounds of our customers
affect what they buy?
 Geographic segmentation. Where are our customers located, and how can we reach them? What
products do they buy based on their locations?
 Psychographic segmentation. What do our customers think about and value? How do they live
their lives?
Table: “Common Ways of Segmenting Buyers”
By Behavior
•
•
•
•
Benefits sought from the
product
How often the product is
used (usage rate)
Usage situation (daily use,
holiday use, etc.)
Buyer’s status and loyalty
to product (nonuser,
potential user, first-time
users, regular user)
By Demographics
•
•
•
•
•
•
•
•
•
•
•
Age/generation
Income
Gender
Family life cycle
Ethnicity
Family size
Occupation
Education
Nationality
Religion
Social class
By Geography
•
•
•
•
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.
Region
(continent,
country, state,
neighborhood)
Size of city or
town
Population
density
Climate
By Psychographics
•
•
•
•
•
•
Activities
Interests
Opinions
Values
Attitudes
Lifestyles
Unit 2
Service Marketing
Table:- Generations and Characteristics:
Generation
Also Known As
Birth Years
Characteristics
•
Seniors
“The Silent Generation,”
“Matures,” “Veterans,” and
“Traditionalists”
1945 and
prior
•
•
•
•
•
Baby
Boomers
1946–1964
•
•
•
Generation
X
1965–1979
•
•
Generation
Y
“Millennials,” “Echo
Boomers,” includes “Tweens”
(preteens)
1980–2000
•
•
•
•
Experienced very limited credit
growing up
Tend to live within their means
Spend more on health care than any
other age group
Internet usage rates increasing
faster than any other group
Second-largest generation in the
United States
Grew up in prosperous times before
the widespread use of credit
Account for 50 percent of U.S.
consumer spending
Willing to use new technologies as
they see fit
Comfortable but cautious about
borrowing
Buying habits characterized by
their life stages
Embrace technology and
multitasking
Largest U.S. generation
Grew up with credit cards
Adept at multitasking; technology
use is innate
Ignore irrelevant media
Note: Not all demographers agree on the cutoff dates between the generations.
Prepared by: M.Dineshkumar, Assistant Professor, KVIMIS, Coimbatore.