MGT603 - Strategic Management - Lecture Handout 37

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MARKET SEGMENTATION

Learning objectives

The main objective of this chapter to enable to students about concern marketing issue such marketing segmentation, marketing mix and product positioning relating to strategy implementation.

Marketing Mix

Marketing decisions generally fall into the following four controllable categories:

  • Product
  • Price
  • Place (distribution)
  • Promotion

The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below:

The Marketing Mix

The Marketing Mix

These four P's are the parameters that the marketing manager can control, subject to the internal and external constraints of the marketing environment. The goal is to make decisions that center the four P's on the customers in the target market in order to create perceived value and generate a positive response.

Product Decisions

The term "product" refers to tangible, physical products as well as services. Here are some examples of the product decisions to be made:

  • Brand name
  • Functionality
  • Styling
  • Quality
  • Safety
  • Packaging
  • Repairs and Support
  • Warranty
  • Accessories and services

Price Decisions

Some examples of pricing decisions to be made include:

  • Pricing strategy (skim, penetration, etc.)
  • Suggested retail price
  • Volume discounts and wholesale pricing
  • Cash and early payment discounts
  • Seasonal pricing
  • Bundling
  • Price flexibility
  • Price discrimination

Distribution (Place) Decisions

Distribution is about getting the products to the customer. Some examples of distribution decisions include:

  • Distribution channels
  • Market coverage (inclusive, selective, or exclusive distribution)
  • Specific channel members
  • Inventory management
  • Warehousing
  • Distribution centers
  • Order processing
  • Transportation
  • Reverse logistics

Promotion Decisions

In the context of the marketing mix, promotion represents the various aspects of marketing communication, that is, the communication of information about the product with the goal of generating a positive customer response. Marketing communication decisions include:

  • Promotional strategy (push, pull, etc.)
  • Advertising
  • Personal selling & sales force
  • Sales promotions
  • Public relations & publicity
  • Marketing communications budget

Product Positioning

“It simply means Positioning is how a product appears in relation to other products in the market” After segmenting markets so that the firm can target particular customer groups, the next step is to find out what customers want and expect. This takes analysis and research. A severe mistake is to assume the firm knows what customers want and expect. Countless research studies reveal large differences between how customers define service and rank the importance of different service activities and how producers view services. Many firms have become successful by filling the gap between what customers and producers see as good service. What the customer believes is good service is paramount, not what the producer believes service should be.

Product positioning strategy

The ability to spot a positioning opportunity is a sure test of a person's marketing ability. Successful positioning strategies are usually rooted in a product's sustainable competitive advantage. The most common basis for constructing a product positioning strategy are:

  • Positioning on specific product features
  • Positioning on specific benefits, needs, or solutions
  • Positioning on specific use categories
  • Positioning on specific usage occasions
  • Positioning on a reason to choose an offering over the competition
  • Positioning against another product
  • Positioning through product class dissociation
  • Positioning by cultural symbols

The following steps are required in product positioning:

  1. Select key criteria that effectively differentiate products or services in the industry.
  2. Diagram a two-dimensional product-positioning map with specified criteria on each axis.
  3. Plot major competitors' products or services in the resultant four-quadrant matrix.
  4. Identify areas in the positioning map where the company's products or services could be most competitive in the given target market. Look for vacant areas (niches).
  5. Develop a marketing plan to position the company's products or services appropriately.

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