Marketing 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 segments. 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 analysis. 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 service. • 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 proposition). 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 organization). 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 Markets. • 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 influences. 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 ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 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 society? 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 points: 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?