In evaluating various market segments, a firm must look at the segment attractiveness where it must first collect and analyse data on current sales value, projected sales growth and expected profit margins for the various segments. Segments with the right size and growth characteristics are interesting. However, the right size and growth are relative matters; some companies tend to target segments with large current sales, a high growth rate and a high profit margin. But the largest and fastest growing segments are not always the most attractive ones for every company, smaller companies may find that they lack the skills and resources needed to serve the larger segments or that these segments are too competitive, in an absolute sense, but that are more potentially profitable for them.
A segment might have desirable size and growth and still not be attractive from a profitability point of view. The company must examine several significant structural factors that affect long run segment attractiveness. For example, a company ought to assess current and potential competitors. A segment is less attractive if it already contains many strong and aggressive competitors. Marketers should also consider the threat of substitute products; a segment is less attractive if actual or potential substitutes for the product already exist.
Distinct approaches when targeting the demographic are mainly three that is Concentrated, Differentiated and Undifferentiated.
The Concentrated approach is said to be the most focused of the three since it involves in specialising in serving a specific segment, this kind of approach is most likely to lead to a detailed knowledge of the target segment’s needs and wants, with the added benefit that the organisation is seen as a specialist, giving it an advantage over its more mass-market competitors. This, however, carries a risk of complacency, leaving the organisation vulnerable to competitive entry to the segment. When it comes to the side of management, concentration is attractive in a sense that costs are kept down, as there is only one marketing mix to be managed, and there is still potential for economies of scale. Strategically, concentration of resources into one segment may lead to stronger and more defendable position than that achieved by competitors who are spreading their effort narrower. Nevertheless, by being a niche specialist makes it more difficult for an organisation to diversify into other segments, be it through inadequate experience and knowledge or through problems of acceptance arising from being identified with the original niche. The risks of this approach outweigh the benefits since with such an approach there is no fallback position incase the segment fails and if competitors see a rival establishing and vividly succeeding in a segment like this , then they may try to make some of it as well.
The Differentiated approach strategy involves the development of a number of individual marketing mixes, each of which serves a different segment, for example, ford manufactures of a range of cars, covering a number of various segments, from the focus at the bottom end of the price range, generally intended for the younger female drivers to the Scorpio in the higher price range intended for the status seeking executives. As with the concentrated this approach does allow the organisation to make its offerings suit the individual segments, thus maintaining satisfaction. It also overcomes one of the problems of concentration by spreading across the market, so that if one segment fails, the organisation still acquires revenue from others, in implementation this approach requires detailed overview of the market and how it is developing, perhaps leading to the early detection of new opportunities or emerging segments. This knowledge is valuable for an organisation with a healthy curiosity about its environment but is acquired at a cost in terms of both managerial and finance time; it also leads to increased costs in trying to manage the marketing mixes for a number of products with possible diseconomies of scale.
Overall, differentiated strategy dilutes the organisation’s efforts through the thin spreading of resources. The organisation must, therefore, be very careful not to overreach itself in the number of segments it attempts to cover. However, it can help in survivor of the organisation to highly competitive markets.
The Undifferentiated approach is the least demanding of the three approaches, in that it assumes that the market is one great homogeneous unit with no significant differences between individuals within the market. Thus a single marketing mix is required that serves the needs of the entire market. The emphasis is likely to be on developing mass communication, mass distribution and as wide an appeal as possible. Undifferentiated approach does have some apparent advantages in that it involves relatively low costs as there is only one marketing mix that does not require the depth of research fine tuning and updating that a concentrated or differentiated approach would entail. It could possibly lead to maximisation of economies of scale because of having a single product in a potentially large market. However naïve that this approach may appear to be in trying to please everyone but in reality what is likely to happen is that some people will like the product offered more than others and thus, a segment will emerge by default. Because the product has been tailored to that segment, it is unlikely to be what the segment exactly wants, and therefore any competitor who does target the segment more closely will attract those customers.
If undifferentiated approach is possible then it is more suitable for the products with little psychological appeal. For instance, petrol is essentially a very ordinary product that many of us purchase regularly but never see it makes the car go regardless of the car brand and traditionally, the only discriminating factor between brands has been price.
Influence of target demographic over multiple retailers
Target demographic divides the market into groups on variables such as age, gender, family size, income, occupation and education and religion. These factors are the most common in targeting customers groups, therefore, how do these variables influence multiple retailers such as Marks and Spencer and Aldi in their planning;
Age being the leading factor upon planning since consumer needs and wants change with age, M&S being an ancient organisation which originated in 1884 tends to be very conservative and as a result it has more aged people who believe that shopping at M&S is more of a culture to them since it is a store that they have known from their childhoods, hence it more of an act of loyalty. The age group that tends to shop at M&S ranges from 45yrs and above whereas Aldi tends to attract more of the younger generation ho have no sense of loyalty but rather hunt for where is cheaper to shop with such Aldi tend to offer weekly specials every Thursday’s and Sunday’s, hence, the younger generation is easily manipulated by special offers and discounts.
Gender has more emphasis when one is shopping for clothes, hairdressing and cosmetics; however, it still influences planning. M&S though it deals with products for all genders it appears to be more focused on the female especially in clothing where even the adverts target on the female gender than the male, this could be a result that it is a conservative organisation and hence has the belief that a woman is the home maker whereas Aldi is less gender biased, having both genders seeking for cheaper prices.
Family size of consumers may influence the planning of target demographic in a way that larger families have less spending power compared to smaller families, in planning this multiple retailers such as M&S is more focused on pleasing the elderly who have small family sizes since their families have their own homes or their children are away in university hence its planning is more focused a smaller family size unlike Aldi which is more ideal to a large family hence its planning is focused more on making special offer such as buy one get one free, to make it more cheaper for larger families to get more for less.
Income, it is due to this that a retailer will know the spending power of his consumers and upon it decide what products to accommodate, M&S having more aged people who are at the peak of their earnings, and because the children are either away from home or in the process of leaving home and the end of the mortgage is atleast in sight, they have more disposable income to enjoy for themselves plus that most of them will be living of their pension whereas Aldi having consumers who are mostly young, adventurous, keen and single most of which are college or university students if not then it is a large family with likely a mortgage to pay off if not then if they are students then hey depending on either their parents, a loan or a part time job hence have low spending capacity due to a low income.
Race, has less influence since societies these days tend to be more mixed than they used to be before fair trade and globalisation, M&S has more consumers who are originally from British since they have been here since the beginning if not then it has been a family tradition to shop at M&S different from Aldi’s which is having multi-race consumers who are less conservative who are served best by what is cheaper, thus the planning at M&S will be more British oriented giving the customers the feeling of home that they demand.
Many variables can influence the planning of a multiple retailer but age and income seem o have more power in, however most of these variables tend to be dynamic due to technology even the loyal customers and the conservatives want a product that is up to date and technology influenced products tend to be easy to manage.
Bibliography
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Frances.B, Stephen.P, (2003).Principles of Marketing, 3rd edn, Pearson Publishers, Great Britain.
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