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Part (3)
Market Segmentation
• When numerous variables are combined to give an indepth understanding of a segment, this is referred to as
depth segmentation.
• When enough information is combined to create a
clear picture of a typical member of a segment, this is
referred to as a buyer profile.
• When the profile is limited to demographic variables
it is called a demographic profile.
• A statistical technique commonly used in determining
a profile is cluster analysis.
Top-Down and Bottom-Up Models
• George Day (1980) describes model of segmentation as the
top-down approach:
1. You start with the total population and divide it into
2. He also identified an alternative model which he called
the bottom-up approach. In this approach, you start
with a single customer and build on that profile.
• This typically requires the use of customer relationship
management software or a database of some kind:
• Profiles of existing customers are created and analyzed.
• Various demographic, behavioral, and psychographic
patterns are built up using techniques such as cluster
Process for tagging customers
The basic approach to tagging customers is to utilize
historical retention data to make predictions about
active customers regarding:
• Whether they are at high risk of canceling their
• Whether they are profitable to retain.
• What retention tactics are likely to be most effective.
Inbound Marketing Includes Market
Research to Find Out:
1. What specific groups of potential customers/clients
(markets) might have which specific needs.
2. How those needs might be met for each group (or
target market), which suggests how a product might
be designed to meet the need.
3. How each of the target markets might choose to
access the product.
4. How much the customers/clients might be willing
pay and how (pricing analysis).
Inbound Marketing Includes Market
Research to Find Out:
5. Who the competitors are (competitor analysis).
6. How to design and describe the product such that
customers/clients will buy from the organization,
rather than from its competitors (its unique value
7. How the product should be identified -- its
personality -- to be most identifiable (its naming
and branding)
Outbound Marketing Includes:
1. Advertising and promotions (focused on the product).
2. Sales.
3. Public and media relations (focused on the entire
4. Customer service.
5. Customer satisfaction.
Too often, people jump right to the outbound
marketing. As a result, they often end up trying to
push products onto people who really don't want the
products at all. Effective inbound marketing often
results in much more effective -- and less difficult -outbound marketing and sales.
The marketing environment
The marketing environment surrounds and impacts
upon the organization. There are three key perspectives
on the marketing environment:
•The macro-environment.
•The micro-environment.
•And the internal environment.
The macro- environment
• This includes all factors that can influence the
organization, but that are out of their direct control.
• These factors are : Political, Economic, Social
Technological, and competitive factors or variables.
•The macro- environment is continuously changing,
and the company needs to be flexible to adapt.
The micro-environment
•This environment influences the organization directly.
•It includes suppliers that deal directly or indirectly,
• consumers and customers,
• and other local stakeholders.
•Micro describes the relationship between firms and the
driving forces that control this relationship, and the
firm may exercise a degree of influence.
The internal environment
• All factors that are internal to the organization are
known as the "internal environment".
• They are generally audited by applying the "Five Ms"
which are Men, Money, Machinery, Materials, and
• The internal environment is as important for
managing change as the external.
• As marketers we call the process of managing internal
change "internal marketing" .
PEST Analysis
•It is very important that an organization considers its
environment before beginning the marketing process.
PEST analysis is concerned with the environmental
influences on a business.
•Identifying PEST influences is a useful way of
summarizing the external environment in which a
business operates. However, it must be followed up by
consideration of how a business should respond to these
PEST Analysis
Political Factors
1. How stable is the political environment?
2. Will government policy influence laws that regulate
or tax your business?
3. What is the government's position on marketing
4. What is the government's policy on the economy?
5. Does the government have a view on culture and
6. Is the government involved in trading agreements
such as EU, NAFTA, ASEAN, or others?
Economical Factors
1. Interest rates.
2. The level of inflation.
3. Employment.
4. level per capita.
5. Long-term prospects for the economy Gross
Domestic Product (GDP) per capita, and so on.
Sociocultural Factors
1. What is the dominant religion?
2. What are attitudes to foreign products and services?
3. Does language impact upon the diffusion of
products onto markets?
4. How much time do consumers have for leisure?
5. What are the roles of men and women within
6. How long are the population living? Are the older
generations wealthy?
7. Does the population had a strong/weak opinion on
green issues?
Technological Factors
Technology is vital for competitive advantage, and is a
major driver of globalization. Consider the following
1. Does technology allow for products and services to be
made more cheaply and to a better standard of quality?
2. Do the technologies offer consumers and businesses
more innovative products and services such as Internet
banking, new generation mobile telephones, etc?
3. How is distribution changed by new technologies e.g.
books via the Internet, flight tickets, auctions, etc?
4. Does technology offer companies a new way to
communicate with consumers e.g. banners, Customer
Relationship Management (CRM), etc?