Market segmentation. Criteria of target segment selection. Market positioning.

Segmentation is a process of division of the market into consumer groups with similar needs. We can distinguish macro segmentation which has as its task identification of product market, i. e. determination of product and territorial borders; microsegmentation in turn is directed to discovery of deeper reasons in every consumer segment for more detailed analysis of the range of their needs.

Market segmentation is performed based on a number of criteria, e.g. geographical, social, demographical, psychographical or behavioral. Determination of these criteria depends on the type of the company and should be appropriately adjusted by researcher.

Resulting segments require further evaluation of their attractiveness. This evaluation serves as a basis for development of a marketing strategy targeted on product positioninhg as well as development of marketing strategy targeted on chosen segments. Evaluation of segments is based on certain critera:

1. Segment size and growth

2. Structural attractiveness of the segment. It is determined by the level of competitiveness, opportunity of product substitution to an entirely new one satisfying the same needs, customer and supplier bargaining power, competitiveness of company’s products in the market

3. Aims and resources of a company evaluating the segment.

While choosing target market in order to reach maximum positive effect it is essential to evaluate all thse criteria simultaneously.

Positioning defines the features of perception of the product by segments. Positioning places product or service in the optimal position, mapped against the competitors, on the dimensions that are most critical to customers. The focus of this activity is often a brand and a careful mix of branding and positioning allows to create the mosteffective and sophisticated application of marketing principles.

In the process of positioning it is important to pay attention to characteristics of the produc or service which are the most signifiant to the customer. It might be pricing, quality of goods, company’s image etc. The most effective way to align all the factors is development of positioning maps. The most frequently assessed parameters of positioning maps are often price-quality.

 

 

Demand: level and structure. Methods of demand evaluation.

Each price will lead t a different level of D and will have a different impact on a Co’ marketing objectives. The relation between alternative prices and the resulting current D is captured in D curve. In the normal case D and P are inversely related: the higher the P, the lower the D. In case of prestige goods, D sometimes slopes upward. Some consumers take the higher P to signify a better product.

The D curve shows the market’s probable purchase quantity at alternative Ps. It sums the reactions of many individuals who have different P sensitivities. The 1^st step in estimating D is to understand what affects P sensitivity. several factors: unique value effect (buyers are less price sensitive when the product is more distinctive), substitute-awareness effect, difficult-comparison effect (buyers are less PS when they cannot easily compare the quality of substitutes, price-quality effect (buyers are less PS when the product is assumed to have more quality, prestige, exclusiveness. Co needs to understand the PS of their customers and the trade-off people are willing to make between the price and product characteristics.

Most Co measure D curves:

1. Statistically analyzing past prices, quantities sold and other factors to estimate their relations.

2. Conduct price experiments (vary P of several products sold and observe the results).

3. Ask buyers to state how many units they would buy at different proposed P.

In measuring P – D relationship, market researcher must control various factors (4 Ps) that will influence D.

Marketers need to know how responsive or elastic D would be to a change in price. If a certain P increase leads to a relatively small decline in D, D is inelastic. If the same P increase leads to a substantial drop in D, D is elastic. D is likely to be; less elastic under following conditions: few or no substitutes or competitors, buyers are slow to change their buying habits and search for lower P, buyers think the higher P are justified by quality differences, normal inflation. If D is elastic sellers will consider lowering the P. P elasticity depends on the magnitude and direction of the price change. It may differ for a price cut versus a price increase. Long-run PE may differ from short-run elasticity. Buyers may continue to buy from their current supplier after a price increase, bc they do not notice the increase. Here, D is more elastic in the long-run than in the short-run. Reverse: buyers drop a supplier after being notified of P increase but return later.

 

Methods of attitudes measurement. Osgud scale, Likert scale.

Attitudes are measured because there is a close connection between the way a person think and behaves.

 

Osgood's semantic differential was designed to measure the connotative meaning of concepts. The respondent is asked to choose where his or her position lies, on a scale between two bipolar adjectives (for example: "Adequate-Inadequate", "Good-Evil" or "Valuable-Worthless"). Semantic differentials can be used to describe not only persons, but also the connotative meaning of abstract concepts—a capacity used extensively in affect control theory.

The semantic differential technique reveals information on three basic dimensions of attitudes: evaluation, potency (i.e. strength) and activity.

 

• Evaluation is concerned with whether a person thinks positively or negatively about the attitude topic (e.g. dirty – clean, and ugly - beautiful).

 

• Potency is concerned with how powerful the topic is for the person (e.g. cruel – kind, and strong - week).

 

• Activity is concerned with whether the topic is seen as active or passive (e.g. active – passive).

 

Using this information we can see if a persons feeling (evaluation) towards an object is consistent with their behavior. For example, a place might like the taste of chocolate (evaluative) but not eat it often (activity). The evaluation dimension has been most used by social psychologists as a measure of a person’s attitude, because this dimension reflects the affective aspect of an attitude.

 

Likert-type or frequency scales use fixed choice response formats and are designed to measure attitudes or opinions (Bowling 1997, Burns & Grove 1997). These ordinal scales measure levels of agreement/disagreement.

A Likert-type scale assumes that the strength/intensity of experience is linear, i.e. on a continuum from strongly agree to strongly disagree, and makes the assumption that attitudes can be measured. Respondents may be offered a choice of five to seven or even nine pre-coded responses with the neutral point being neither agree nor disagree.

In it final form, the Likert Scale is a five (or seven) point scale which is used to allow the individual to express how much they agree or disagree with a particular statement.

Likert Scales have the advantage that they do not expect a simple yes / no answer from the respondent, but rather allow for degrees of opinion, and even no opinion at all. Therefore quantitative data is obtained, which means that the data can be analyzed with relative ease.

However, like all surveys, the validity of Likert Scale attitude measurement can be compromised due the social desirability. This means that individuals may lie to put themselves in a positive light. For example, if a likert scale was measuring discrimination, who would admit to being racist?

 

For example:

 

I believe that ecological questions are the most important issues facing human beings today.

 

Strongly agree / agree / don’t know / disagree / strongly disagree

 

Product Life cycle (PLC). Different marketing aims and tools on the different stages of PLC

a. Introduction Stage:

This stage refers to the period when the product is introduced in the market. During this phase the sales of the product is generally low till consumers become responsive of the product and its features. During this stage the firm aims to create awareness of the product among the customers and hence the advertising costs typically are high. Since at this stage the product is still trying to gain foothold in the market, additional costs with initial distribution etc are higher. The main objective during the introduction stage is to generate demand for the introduced product or service and establish a market for its operations.

b. Growth Stage:

During this stage more customers become responsive of the product and its attributes. This leads to rapid revenue growth as the sales increase. At this stage of the product, firms also target additional market segments. During this stage the distribution of the product can be expanded as the product is gradually establishing due to its high quality and features. The main objective during the growth stage is to further boost the demand for the product by gaining consumer inclination and further increase the sales. As the competition increases firms may have to incur additional promotional costs in order to make the consumers aware of the differentiating attributes of the product offered by the firm as opposed to that of the competitors.

c. Maturity Stage:

During this stage sales continue to increase although at a slower pace. Maturity stage is considered as the most lucrative in the life of a product. Advertising expenses are relatively lower in this stage as the product is well established in the market by now, and brand consciousness is strong. The main objective during the maturity stage is to sustain market share and broaden the product life cycle. The competition during this stage is highly rigorous as the competing products may be highly similar at this point, thereby increasing the complexity of differentiating the product. In order to gain more shelf space from the retailers firms need to implement different promotional activities to attract their attention.

d. Decline Stage:

This stage witnesses a decline in the sales as the market becomes saturated. Since the product has been in the market for a long time now, its features become technologically obsolete with respect to customer’s changing tastes. Finally a stage will be attained where the product will be in no position to generate profits. In such a scenario a firm can either:

Retain the product at reduced costs and try to innovate with respect to product uses.

Withdraw the product from the market when no more profit can be generated.

The product life cycle concept is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle and therefore helps marketing managers to plan future marketing strategies to deal with the challenges.