BUS602: Marketing Management

3a. Describe the different methods of market segmentation 

• What are the benefits of targeting and segmenting markets?
• What are the factors associated with geographic segmentation?
• How do organizations use demographic data for market segmentation?
• How does psychographic data enhance demographic segmentation?
• What are the factors associated with behavioral segmentation?
  

Segmenting and targeting markets can enable a company to better adapt its offerings and enlarge its customer base. This can help a company avoid directly competing with other companies, re-market some of their older items, develop new offerings, re-allocate marketing dollars, retain customers, and identify early adopters.

Geographic segmentation divides a market based on location. From the information gathered about a customer's locale, companies can map the data through a process known as geocoding. This helps the organization identify where customers are clustered and use that information to develop targeted marketing activities. Further, by combining geographic data with demographics, companies can better understand consumer profiles in an area.

Demographic segmentation is based on consumer data that can be quantified. Some of the factors marketers use to identify different population segments include age, income, education level, religion, family life cycle, and other characteristics. Marketers use this information to create a general profile of different population groups who may be making purchase decisions based on those factors. Also, groups of consumers are segmented into categories that encompass certain age ranges. Within each group, certain common characteristics define a generation. Some of these groups include seniors born in 1945 or earlier. Marketers need to be aware of the needs of this aging and diminishing population to ensure that appropriate products and services are available. On the other hand, Millennials have the largest spending power of any generation and are the biggest aging group in US history. This population segment is tech-savvy, which is an essential part of target marketing to this consumer group.

Psychographics encompasses the lifestyles, values, and attitudes of consumer groups. Because of these variations, consumers within the same demographic segment might live different lives, which impacts their consumer behavior and purchase decisions.
One of the tools marketers use to segment consumers based on psychographics is VALS, which stands for values, attitudes, and lifestyles. Based on this survey, marketers have identified various categories that can be integrated into marketing strategies, including characteristics and behaviors. These groups are innovators, thinkers, achievers, experiencers, believers, strivers, makers, and survivors.

Behavioral segmentation focuses on how consumers act toward a product. One aspect of this is benefits segmentation, which categorizes consumers based on the benefits they seek in a product or service. Usage rates relate to how often a product or service is used, which can help marketers identify additional ways consumers utilize a brand. These may have been invented by the consumer and may not have been known to the organization. This can provide the company with opportunities to create new marketing strategies.

To review, see Segmentation, Geographic Segmentation, Demographic Segmentation, Psychographic Segmentation, and Behavioral Targeting.

3b. Identify the target market(s) of a firm's offerings 

• What are the factors that make a target market attractive to an organization?
• How do companies determine the number of markets they will target?
  

When looking for attractive target markets, the size of market matters - organizations look for segments that are large enough to be profitable. The segment growth is also important so that future sales are possible. There has to be room in the marketplace for a new competitor, and the market has to be accessible through marketing channels. When there is limited competition in a product category, major firms can dominate the marketplace by charging higher prices, offering inferior goods, and blocking access to the market. Further, barriers to accessibility could include geography, politics, technology, and social factors. The company needs to have available resources to compete in the marketplace and ensure that the product fits in with the company's goals and mission.

Many companies will choose more than one target market to make them less vulnerable to competition. This is known as multisegment marketing. For example, the world's largest retailer of diamond jewelry, Signet, operates various jewelry stores that meet the needs of consumers in different income categories. While they don't face much competition from smaller and independently owned shops, their diversification into different brands gives them an overall market advantage.

In a concentrated marketing strategy, companies will target a select group of consumers. However, this can be risky if there is a decline in the need for that product. Niche marketing focuses on an even smaller segment, with the company seeking to gain a large share of a small marketplace. Microtargeting has come under scrutiny for violating consumer privacy and ethics since this involves gaining specific details about an individual consumer's lifestyle, habits, and purchases.

To review, see Selecting Target Markets and Leverage Facebook with Hyper Targeted Ads.

3c. Explain the concept of product positioning

• What is head-to-head positioning?
• What is the role of a unique value proposition?
• Why do companies reposition their brands?
• What are some of the risks of repositioning?
  

Head-to-head positioning is when a company directly competes with another brand in the same product category. Overall, positioning is how a company differentiates its goods and services from the competition and how the consumer perceives a brand.

The unique value proposition focuses on how a product or service is different from the competition. This helps the consumer identify your brand relative to other brands in the marketplace and the associated brand benefits. This is what makes one brand stand out from others.

Sometimes, a company will choose to reposition a brand when necessary to leverage new opportunities. Some of the factors that can initiate a decision to reposition a brand include a change in competition; changes in market conditions, such as the economy, politics, or social causes; changing consumer trends and preferences; and changes in organizational leadership and internal innovations.

While repositioning can bring new life to a brand, there are also potential risks. For example, decisions for change should be based on solid research to ensure that the change is based on data rather than emotion. Sometimes, companies will go too far in their efforts and overreach in ways that lose consumer confidence and trust. Companies may also miss the most important factors to a consumer and infuse new ideas where none are desired. A repositioning strategy can also result in overpromising what a brand can deliver and confusing the consumer about what a brand has to offer.

To review, see Unique Value Proposition, How to Differentiate Your Business, and Repositioning.

3d. Describe the importance of branding 

• What is the definition of branding?
• How can a company achieve branding?
• What are the benefits of strong brand equity?
  

A brand is the name, term, sign, or symbol differentiating one offering from another. Additionally, the goal of branding is to encourage consumers to identify various traits of your particular product. This leads to consumers developing an emotional connection and relationship with the product.
Branding aims to increase awareness and is achieved through marketing, advertising, public relations, and direct marketing. Brand awareness can lead to higher sales, build greater trust between a company and its customers, simplify the marketing process, and enable companies to reach their target markets better.

Brand equity is the value a company has by having a well-known brand name. Consumers tend to believe that a product with a well-known name is better than a product that is not as well known, which can lead to higher sales levels. According to psychologists, consumers believe that a strong brand name equates to product quality. Companies also use this data to develop pricing structures, knowing that higher prices can be charged for products with strong brand equity. Additionally, the valuation of brand equity can include changes in market share, profit margins, logo recognition, consumer perceptions, and consumer brand knowledge.

To review, see Branding Basics and Brand Equity.

Unit 3 Vocabulary 

This vocabulary list includes terms you will need to know to successfully complete the final exam.

• barriers to accessibility
• behavioral segmentation
• benefits segmentation
• brand
• brand awareness
• brand equity
• branding
• concentrated marketing
• demographics
• geographic segmentation
• head-to-head positioning
• limited competition
• microtargeting
• multisegment marketing
• niche marketing
• psychographics
• repositioning
• segmentation
• segment growth
• size of market
• targeting
• unique value proposition
• usage rates