Segments As Potential Target Markets example essay topic

Describe using examples how this process might be undertaken. What are the characteristics of a successful market segment? What are the keys to effective positioning? In virtually any market, if different segments can be clearly identified, specific products with specific marketing programs can be developed to meet both the physical needs of customers and also the emotional needs that customers attach to products and services. Effective marketing programs are built on a platform provided by the marketer's tools of market segmentation, target marketing, and product positioning; the three decision processes are closely linked, having strong interdependence, and all must be implemented if a firm is to be successful in managing a product-market relationship.

Market segmentation is the process by which a market is divided into subsets of customers with similar needs and characteristics that lead them to respond in similar ways to a particular product offering and marketing program. It is important as most markets are heterogeneous in terms of benefits anted, purchase rates, and process & promotion elasticities so the response rates to products and marketing programs will differ. The critical issue is to find an appropriate segmentation scheme that will facilitate target marketing and product positioning. Markets can be segmented on the basis of demographic factors (who the target customers are) including age, sex, household lifecycle, income, occupation, education, and race / ethnic origin. Geographic factors (where the customers are) including region, city, population densities, and climate can also be used. Furthermore behavioural factors (what the customers do) can be used in the segmentation process where the benefits sought and the choice criteria used are evaluated.

Thus the market segmentation procedure involves surveys on customer motivations, attitudes, and behaviour, followed by an analysis of the appropriate factors that should give a profile of consumers and the level of attractiveness of the market. Ideally the segmentation process should work from the bottom-up. For the segmentation process to be successful it must be able to identify one or more relatively homogeneous groups with regard to their wants and needs where; 1. the size of each segment is large or profitable enough to serve, 2. the size, purchasing power, and profiles of each segment can be measured, 3. each segment will respond differently to different product offerings and marketing programs, 4. the segments represent markets that can be reached and served effectively, and 5. one or more of the segments represent markets that the company can attract and serve. Target marketing involves an evaluation of the relative attractiveness of various segments (in terms of factors like market potential, growth rate, and competitive intensity), and the firm's mission and capabilities to deliver what each segment wants.

This enables the firm to decide on which segment (s) to serve; this is a strategic decision and should fit in with the overall business goals. As most firms no longer aim a single product and marketing program at the mass market they must develop a market-attractiveness and competitive-position matrix to evaluate the segments as potential target markets. The targeting of markets involves a five step process: 1. the selection of factors which can measure market attractiveness and competitive position, 2. the weighing of each factor to reflect their relative importance, 3. assessing the current position of each segment relative to each weighted factor, 4. projecting the future position of each segment based on expected environmental, customer, and competition trends, and 5. choosing which segments to target based on the data generated. While most successful entrepreneurial ventures target narrowly defined market segments as this policy increases the odds in their favour by concentrating on the most suitable market segments and by conserving their limited resources, this is not always the best strategy, particularly for established firms having substantial resources. In general there are five patterns of target market selection: 1. single segment concentration where only the most suitable product and market is chosen, 2. selective specialisation where certain products are targeted in specific segments, 3. product specialisation where one product is targeted at all the relevant segments, 4. market specialisation where a full range of products is targeted at a particular segment, and 5. full market coverage where the full range of products is targeted to all relevant segments.

Product positioning entails designing product offerings and market programs that collectively establish an enduring competitive advantage in the target market by creating a unique image, or position, in the customers mind. The success of any product offered to a given target market depends on how well it is positioned within that market segment, i.e. how well it performs relative to competitive offerings and to the needs of the target audience. Thus positioning is basically concerned with differentiation as it refers to both the place the product occupies in customers minds relative to their needs and competing products, and also to the process that companies use to create this position. The positioning process involves: 1. the design of the offering and the image so that it occupies a distinctive place in the mind of the target market, 2. the creation of a customer focussed value proposition which looks to answer the question as to why should customers buy the product, and 3. aligning internal resources to achieve positioning objectives in recognition of the fact that the positioning decision is a strategic one for the whole firm. The whole process is designed to establish competitive advantage, and the difference that a firm want to establish is usually in both physical and perceptual terms; the latter is also important as customers often evaluate products and services in terms of what they do (as opposed to what they are) in a rather subjective manner. There are typically seven steps in the positioning process: 1. identify a relevant set of competitive products serving a target market, 2. identify the set of determinant attributes that define the "product space" in which position of current offerings are located, 3. collect data about customers perceptions for products in the competitive set to determine the attributes and score these products on them, 4. analyse the current position of products in the competitive set using a positioning grid, i.e. a product-positioning analysis, 5. determine customers most preferred combination of attributes, i.e. a market-positioning analysis, 6. consider fit of possible positions with customer needs and segment attractiveness, and 7. write a positioning statement or value proposition to guide the development of a marketing strategy.

Most successful products are positioned based on one, or at most, two determinant attributes; the use of more than this is likely to be confusing to customers. For a positioning process to be successful other pitfalls must also be avoided including under positioning (vague presentation of the brand by trying to be too many things to too many people), over positioning (being too closely inked to one segment of the market, e.g. Hor licks), confused positioning (where too many claims are made for the offering), and doubtful positioning (where there are doubts that the product can deliver on the claims made). The determinant attributes are then transformed by companies into value strategies, which include performance leadership, operational excellence, and customer responsiveness. Most firms aim to be the best at one of these values, which are closely linked to the customer aspiration observed in the market-positioning analysis, and adequate at the other two; this means that continuous improvement must be maintained in the key attribute while some resources will be allocated to try and improve the adequacy demonstrated by the firm in the other attributes. Attribute (value) leaders are easily recognised by customers where firms with organisational excellence known for "a great deal" or "trouble free basic service", firms with performance leadership known for being "always at the cutting edge" or having "a high price, but being worth it", and firms with customer responsiveness known for "really understanding the business" or being a "close business partner". The value strategy that a company chooses will affect all aspects of the business including how the organisation operates (top down versus autonomy), how core processes are carried out (standardised versus market sensing), and the economic driver behind the business (scale versus speed).

Firms using the operational excellence strategy include Ryanair, while IT firms are typical examples of those following the performance superiority approach. Thus the characteristics of a successful market segment is that it provides access to growth opportunities, while the keys to effective positioning is to create differentiation and optimise resources behind a successful launch.