BUS602: Marketing Management

Geographic segmentation is relatively easily understood as we provide markets by geographic regions, and those regions are distinctive in terms of their physical and perhaps cultural variations. It's rather obvious that snowblowers are not very marketable in southern Florida. However, swimming pools are highly marketable in this region.

Sometimes products that would seem to be geographically segmented are less obvious. For example, one can argue that a four-wheel-drive SUV would not be marketable in South Florida. However, these automotive products are, in fact, popular in that region.

Demographic segmentation divides your market into segments based on ethnicity, age, gender, income, religion, family makeup, and education.

Companies can therefore target their promotional messages and marketing budget more efficiently. Instead of going after a mass market, they're able to show relevant messages to people who are more likely to respond to the messages.

Demographic segmentation is the most common type of segmentation strategy. Marketers find that responses are more likely when they can obtain demographic data on market segments. For example, life insurance is normally targeted to people aged 30-35 when they marry and begin a family of dependents. Promoting life insurance products to younger or older age segments is largely ineffective because the needs of these demographic segments are not as strong for life insurance products.

Psychographic segmentation concerns the lifestyle, personality, and values of consumers. Consumers make buying decisions based on these factors. For example, if you give donations to wildlife conservation groups, you are likely profiled as someone with these values. Consequently, as marketers share their information on mailing lists, you may find that other conservation groups have also targeted you.

Online marketers, such as Amazon, also use psychographic segmentation. Through their large data and data analytics, Amazon will make recommendations to consumers based on previous purchase patterns, which tend to say something about a consumer's personality.

Behavioral segmentation concerns how people buy, through what distribution channels, how often they buy, and their usage of products and services.

The size of the target market is of primary importance to the marketer. Depending on the product, the target market may be small, such as a niche market, or large such as a consumer product that has appeal to many consumers.

Determining the growth of a market is an inexact science, and marketers must be careful when making judgments on the growth rate of any targeted market. Marketers usually begin by reviewing past sales data and industry sales data as the basis for estimating the future. Although past sales data do not determine the future growth rate of a market, a trend line can be observed as a guideline.

A firm's competitive position in the marketplace is another factor that marketers must consider, particularly when entering a new target market. The size of market share and strength of company rivals are relevant to how successful a firm can expect to perform in sales.

The cost of promoting and distributing a firm's offerings is an important factor in selecting target markets and maintaining a competitive position within existing target markets.

Promotional expenditures must be within reason and compatible with the firm's resources. Accordingly, companies' budget promotional and advertising expenses as an important part of the marketing plan, included in the strategic plan of the firm.

Why do customers want to buy your product? Why would they purchase your product instead of your competitor's product? Marketers must maintain and sustain a competitive advantage, and consumers must know what it is and why your product satisfies their needs.

Cost advantage (or differentiated advantage) are the two strategies generally followed by firms. Furthermore, the scope and scale of the market – large or small – must be considered. Large firms with a large scale of production can often offer low prices due to the cost advantages from their economies of scale. Small companies with limited scale often must compete by offering a differentiated product.

Market positioning is how companies differentiate their products from competing products.

Head-to-head positioning involves competing directly with rival products with similar product attributes. For example, Coke and Pepsi compete head-to-head in the soft drink industry. Similarly, National Car rental competes directly with Hertz and Avis.

Unlike head-to-head positioning, differentiation seeks new markets by identifying and seeking out customers who aren't necessarily interested in what the market typically offers but could be interested in your offerings because of their innovative qualities.

Yellow Tail wine from Australia differentiated its products by using attractive labels and by providing a low price point for its products. Their strategy was not to compete head-to-head with other wine producers but rather to attract consumers of beer and wine coolers.

On some occasions, marketers must consider repositioning a product. This often occurs because of changes in consumer preferences, new competitive products entering the market, changing technology, or a need to revamp a product that has become somewhat old.

Ultimately, marketing professionals attempt to achieve brand loyalty for their products. Depending on the degree of involvement in a purchasing decision, consumers may compare products and brands or become loyal to certain brands based on their personal experience with the brand. Sometimes buyers may engage in "heuristics", or mind scripts, wherein a consumer will consider only a single brand when making a purchase. This is an ideal situation for the marketer when one considers the lifetime purchase possibilities of a brand.

What is a brand worth? Successful brands are those that can capture higher prices. Therefore, developing and maintaining a strong brand will reap monetary rewards for the marketer. Brand equity is the commercial value that derives from consumer perception of the brand name of a product or service rather than from the product or service itself. In other words, brand equity is the difference in price that a strong brand can capture compared to a weaker or unknown brand of a similar product.