Market Segmentation, Targeting and Contexts

• Purchase

The last stage in buyer-readiness is purchase of the product, unfortunately conviction to buy may still not result in actual purchase, this may for example be due to the individuals’ current financial situation. Many customers will need further persuasion to make the purchase. Promotion may offer Sales Promotion discounts, or Personal Selling through Sales Representatives, in order to convert preference and conviction into a sale.

Behavioural segmentation - identifies consumption rates of a product or service as a means of segmenting markets. For instance customers of a local leisure centre may be classified as:

 

· Frequent users (Daily visits)

· Less frequent users (At least once a week)

· Users (Occasional visits)

· Non users.

 

If a company can identify the characteristics of frequent users (they may live in a certain area and have other common features such as income) they can target those segments in order to increase the number of frequent users.

 

Loyalty status- A market can also be segmented according to the degree of consumer loyalty to a product or service brand. Kotler [1] divided consumers into four groups according to their loyalty status. A brewery may identify the pubs in a post code area for instance pub A, pub B, pub C, pub D and classify the local population according to their loyalty. Thus using Kotler's classification the market would be classified as follows:

 

· Hard core loyals - These are consumers with undivided loyalty to one brand or pub. Their purchasing pattern over six periods would be, AAAAAA

 

· Soft core loyals - Consumers with divided loyalty between two or more brands. Their purchasing pattern may be, AABBBA.

 

· Shifting loyalties - These consumers 'brand switch', their loyalty pattern may be, ACBAAC

 

· Switchers - These consumers demonstrate no brand loyalty at all thus their loyalty pattern may be ACDBAD.

 

Depending upon the marketing expenditure required loyalty patterns can be changed.

 Psychographics and life style segmentation - (L&m 166 - 167, Butt 127 - 128)

Some of the previously mentioned segmentation methods such as demographics and social class may be too narrow to describe the wide variations in behaviour and outlook of a sophisticated population. Life style and psychographic segmentation seek to remedy this situation. Both attempt to cluster consumers into groups depending upon common interests and attitudes which will determine the way they spend their time and money. Thus the AB socio economic group could be sub divided into life style, 'leisure groups' which may include:

 

- 'young aspiring sophisticates' - Generally well educated, enjoys clubs and societies, gregarious, interested in new leisure ideas.

 

- 'young fogey' - Generally conservative, well educated, enjoys traditional pursuits, country sports, resists new ideas.

 

Life style segmentation can be used to classify specific markets for particular products groups, for instance food retailing, cars, electrical goods and so on. The research required to develop life style groups can be expensive and difficult to interpret but the valuable insights it provides into consumer markets justifies its use as a valuable marketing tool.

One example of a life style classification model is that developed by the advertising agency, Young & Rubican, called Cross Cultural Consumer Characterization (4Cs for short). This classification model is presented in the table below

The 4Cs:

Resigned Rigid, strict, authoritarian and chauvinist values, oriented to the past and to resigned roles. Brand choice stresses safety, familiarity and economy. (Older)

 

Struggler Alienated, Struggler, disorganised - with few resources apart from physical/mechanical skills (e.g. car repair). Heavy consumers of alcohol, junk food and lotteries, also trainers. Brand choice involves impact and sensation.

Mainstreamer Domestic, conformist, conventional, sentimental, passive, habitual. Part of the mass, favouring big and well-known value for money 'family' brands. Almost invariably the largest 4Cs group.

 

Aspirer Materialistic, acquisitive, affiliative, oriented to extrinsics ... image, appearance, charisma, persona and fashion. Attractive packaging more important than quality of contents. (Younger, clerical/sales type occupation)

Succeeder Strong goal orientation, confidence, work ethic, organisation ... support status quo, stability. Brand choice based on reward, prestige - the very best. Also attracted to 'caring' and protective brands ... stress relief. (Top management)

Explorer Energy - autonomy, experience, challenge, new frontiers. Brand choice highlights difference, sensation, adventure, indulgence and instant effect - the first to try new brands. (Younger - student)

Reformer Freedom from restriction, personal growth, social awareness, value for time, independent judgement, tolerance of complexity, anti-materialistic but intolerant of bad taste. Curious and enquiring, support growth of new product categories. Select brands for intrinsic quality, favouring natural simplicity, small is beautiful. (Higher education)

Social class - Is the single most used variable for research purposes, and divides the population into groups based on the occupation of the 'Chief Income Earner' (CIE), as such it can be seen as a socio-economic scale. In the UK, The National Readership Survey provides the following standardised groupings.

The socio-economic scale

Product Example 1:  (Business to Consumer Market) (Superstores)

-Source: (http://www.bitc.org.uk/images/ici_logo.gif)

Large supermarkets use ACORN to determine suitable store locations.

“ACORN is the leading geodemographic tool used to identify and understand the UK population and the demand for products and services. Businesses use this information to improve their understanding of customers, target markets and determine where to locate operations.

Informed decisions can be made on where direct marketing and advertising campaigns will be most effective; where branches should be opened or closed; or where sites are located, including retail outlets, leisure facilities and public services.

ACORN categorises all 1.9 million UK postcodes, which have been described using over 125 demographic statistics within England, Scotland, Wales and Northern Ireland, and 287 lifestyle variables, making it the most powerful discriminator, giving a clearer understanding of clients and prospects.

People in similar areas have the same needs and lifestyles”.

-Source: (http://www.caci.co.uk/acorn/whatis.asp)

-Source: (http://www.caci.co.uk/acorn/acornmap.asp)

-Source: (http://www.caci.co.uk/pdfs/PUK.pdf)

Business Market Segmentation:

While many of the consumer market segmentation bases can be applied to businesses and organisations. The differences in the nature of business markets often lead to segmentation on the following bases:

“Geographic Segmentation- Based on regional variables such as customer concentration, regional industrial growth rate, and international macroeconomic factors.

Customer Type- Based on factors such as the size of the organisation, the industry, position in the value chain, etc.

Buyer behaviour- Based on factors such as loyalty to suppliers, usage patterns, and order size.”

-Source: (http://www.quickmba.com/marketing/market-segmentation/)

Product Example 2:  (Business to Business Market) (ICI Fertilizers)[5]

-Source: (http://www.bitc.org.uk/images/ici_logo.gif)

In the past, the traditional way the (ICI Fertilizers) company segmented the market was by splitting it between the products used (Nitram or compounds), further split (at times) between arable and grass. In some cases, the company's view of segmentation further broke the market down by the crop being grown in the arable sector or by the type of stock being kept in the livestock sector. 

By the autumn of 1988, an initial structure for the final users of fertilisers had been put together solely from taking account of their approach and attitudes towards the purchase of fertilisers along with their farming style. This initial structure was tested in the market and a final picture arrived at in early 1989. No account was taken of how the company viewed the market.

The key stages of the process gone through to reach this segmentation were as follows:

• Group discussions with farmer groups from around the country, across farming practice and with different manufacturing loyalties, were conducted by an independent consultant with the sponsoring company (ICIF) kept confidential.
• The important issues were identified and a questionnaire developed, then tested with farmers to ensure it would cover the areas required. The questionnaire was then amended and the final questionnaire completed using face-to-face interviews. Again, these were conducted by an independent group of field researchers, with the sponsoring company's name not revealed.
• Data were analysed and an initial view of segmentation made based on farmer attitudes to fertilisers and their farming style. Four segments were identified, but some farmers fell into 'grey' areas and weren't satisfactorily categorised in the four-segment structure. The two major features accounting for this uncertainty were price and brand.
• The first segmentation structure was tested in the market with farmers and the grey areas explored by repeating the whole process again, but this time with a more detailed look at price sensitivity and the components of brand. To enable this more detailed discussion to take place, members of each group were recruited from the same initial segment.
• Final analysis was undertaken, which led to a seven-segment structure being made. Then, for each segment, a typology (attitudes, motivations and needs), SWOT analysis, critical success factors and offer (product, price, promotion, place) was drawn up without any reference to ICIF's offers available in the market.
• A preliminary marketing plan for ICIF was drawn up matching ICIF's capabilities with the needs of each segment.

Segments in the UK market for fertilisers

A summary of the segments in the UK market for fertilisers

Targeting strategy

Concentration Strategy: [6]

A single market segment with one Marketing Mix (MM).

                        Market

                        |

                        |A Market Segment

                        |-------------------

One MM------------------>A Market Segment

                        |-------------------

                        |A Market Segment

                        |

PROS include:

• It allows a firm to specialize
• can focus all energies on satisfying one group's needs
• A firm with limited resources can compete with larger organizations.

CONS include:

• Puts all eggs in one basket.
• Small shift in the population or consumer tastes can greatly effect the firm.
• May have trouble expanding into new markets (especially up-market). Haggar having problems finding someone to license their name for womens apparel, even though women purchase 70% Haggar clothes for men.

Objective is not to maximize sales; it is efficiency, attracting a large portion of one section while controlling costs.

Examples include
ROLEX, Anyone wear one.
Who are their target market?? Over $100,000

Multi-segment strategy: [7]

2 or more segments are sought with a Marketing Mix (MM) for each segment, different marketing plan for each segment. This approach combines the best attributes of undifferentiated marketing and concentrated marketing.

                         Market

 MM--------------------->|A Market Segment

                         |_______________________

 MM--------------------->|A Market Segment

                         |_______________________

 MM--------------------->|A Market Segment

                         |_______________________

 MM--------------------->|A Market Segment

                         |

                         |

PROS include:

• Shift excess production capacity.
• Can achieve same market coverage as with mass marketing.
• Price differentials among different brands can be maintained Contact Lens!!
• Consumers in each segment may be willing to pay a premium for the tailor-made product.
• Less risk, not relying on one market.

CONS include:

• Demands a greater number of production processes.
• Costs and resources and increased marketing costs through selling through different channels and promoting more brands, using different packaging etc.
• Must be careful to maintain the product distinctiveness in each consumer group and guard its overall image (Contact lenses)

Example: Marriott International:

1. Marriott Suites...Permanent vacationers
2. Fairfield Inn...Economy Lodging
3. Residence Inn...Extended Stay
4. Courtyard By Marriott...Business Travellers

Buyer Behaviour

‘Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service.

More generally, decision making is the cognitive process of selecting a course of action from among multiple alternatives. Common examples include shopping, deciding what to eat. Decision making is said to be a psychological construct. This means that although we can never "see" a decision, we can infer from observable behaviour that a decision has been made. Therefore we conclude that a psychological event that we call "decision making" has occurred. It is a construction that imputes commitment to action. That is, based on observable actions, we assume that people have made a commitment to effect the action.

In general there are three ways of analysing consumer buying decisions. They are:

• Economic models - These models are largely quantitative and are based on the assumptions of rationality and near perfect knowledge. The consumer is seen to maximize their utility. See consumer theory. Game theory can also be used in some circumstances.
• Psychological models - These models concentrate on psychological and cognitive processes such as motivation and need recognition. They are qualitative rather than quantitative and build on sociological factors like cultural influences and family influences.
• Consumer behaviour models - These are practical models used by marketers. They typically blend both economic and psychological models.

Nobel laureate Herbert Simon sees economic decision making as a vain attempt to be rational. He claims (in 1947 and 1957) that if a complete analysis is to be done, a decision will be immensely complex. He also says that peoples' information processing ability is very limited. The assumption of a perfectly rational economic actor is unrealistic. Often we are influenced by emotional and non-rational considerations. When we try to be rational we are at best only partially successful.

-Source: (http://blogtillyoudrop.wordpress.com/category/consumer-buyer-behaviour/)

Consumer Decision Making Process

A general model of the consumer buyer decision process consists of the following steps:

1. Need recognition;
2. Search for information on products that could satisfy the needs of the buyer;
3. Alternative selection;
4. Decision-making on buying the product;
5. Post-purchase behaviour

There are a range of alternative models, but that of AIUAPR, which most directly links to the steps in the marketing/promotional process is often seen as the most generally useful[1];

AWARENESS - before anything else can happen the potential customers must become aware that the product or service exists. Thus, the first task must be to gain the attention of the target audience. All the different models are, predictably, agreed on this first step. If the audience never hears the message they will not act on it, no matter how powerful it is.

INTEREST - but it is not sufficient to grab their attention. The message must interest them and persuade them that the product or service is relevant to their needs. The content of the message(s) must therefore be meaningful and clearly relevant to that target audience's needs, and this is where marketing research can come into its own.

UNDERSTANDING - once an interest is established, the prospective customer must be able to appreciate how well the offering may meet his or her needs, again as revealed by the marketing research. This may be no mean achievement where the copywriter has just fifty words, or ten seconds, to convey everything there is to say about it.

ATTITUDES - but the message must go even further; to persuade the reader to adopt a sufficiently positive attitude towards the product or service that he or she will purchase it, albeit as a trial. There is no adequate way of describing how this may be achieved. It is simply down to the magic of the copywriter’s art; based on the strength of the product or service itself. PURCHASE - all the above stages might happen in a few minutes while the reader is considering the advertisement; in the comfort of his or her favourite armchair. The final buying decision, on the other hand, may take place some time later; perhaps weeks later, when the prospective buyer actually tries to find a shop which stocks the product.

REPEAT PURCHASE - but in most cases this first purchase is best viewed as just a trial purchase. Only if the experience is a success for the customer will it be turned into repeat purchases. These repeats, not the single purchase which is the focus of most models, are where the vendors focus should be, for these are where the profits are generated. The earlier stages are merely a very necessary prerequisite for this!

This is a very simple model, and as such does apply quite generally. Its lessons are that you cannot obtain repeat purchasing without going through the stages of building awareness and then obtaining trial use; which has to be successful. It is a pattern which applies to all repeat purchase products and services; industrial goods just as much as baked beans. This simple theory is rarely taken any further - to look at the series of transactions which such repeat purchasing implies. The consumer's growing experience over a number of such transactions is often the determining factor in the later - and future - purchases. All the succeeding transactions are, thus, interdependent - and the overall decision-making process may accordingly be much more complex than most models allow for. [2]

[In all four dimensions. In each category, 83% of E-I types, 89% of S-N types, 90% of T-F types, was 10.8 points better and for groups with the same personality dimensions was 4.4 points better than individuals (Volkema 114-16). Working in groups with a variety of people composed of multiple personalities and cognitive styles, often produces a better outcome in decision making rather than individually.]

Consumer Purchase Behaviour

• Impulse purchases
  occur when a consumer experiences a sudden urge to buy something immediately without a buying intention formed prior to entering a store
• Compulsive consumption
  a response to an uncontrollable drive to use or experience something that leads to a repetitive behaviour that will ultimately cause harm to the person or others
• Variety-seeking purchases
  associated with the tendency of consumers to buy a new brand of product even though satisfied with the previously purchased brand

Cognitive and personal biases in decision making

It is generally agreed that biases can creep into our decision making processes, calling into question the correctness of a decision. Below is a list of some of the more common cognitive biases.

• Selective search for evidence - We tend to be willing to gather facts that support certain conclusions but disregard other facts that support different conclusions.
• Premature termination of search for evidence - We tend to accept the first alternative that looks like it might work.
• Conservatism and inertia - Unwillingness to change thought patterns that we have used in the past in the face of new circumstances.
• Experiential limitations - Unwillingness or inability to look beyond the scope of our past experiences; rejection of the unfamiliar.
• Selective perception - We actively screen-out information that we do not think is salient.
• Wishful thinking or optimism - We tend to want to see things in a positive light and this can distort our perception and thinking.
• Recency - We tend to place more attention on more recent information and either ignore or forget more distant information.
• Repetition bias - A willingness to believe what we have been told most often and by the greatest number of different of sources.
• Anchoring - Decisions are unduly influenced by initial information that shapes our view of subsequent information.
• Group think - Peer pressure to conform to the opinions held by the group.
• Source credibility bias - We reject something if we have a bias against the person, organization, or group to which the person belongs: We are inclined to accept a statement by someone we like.
• Incremental decision making and escalating commitment - We look at a decision as a small step in a process and this tends to perpetuate a series of similar decisions. This can be contrasted with zero-based decision making.
• Inconsistency - The unwillingness to apply the same decision criteria in similar situations.
• Attribution asymmetry - We tend to attribute our success to our abilities and talents, but we attribute our failures to bad luck and external factors. We attribute other's success to good luck, and their failures to their mistakes.
• Role fulfilment - We conform to the decision making expectations that others have of someone in our position.
• Underestimating uncertainty and the illusion of control - We tend to underestimate future uncertainty because we tend to believe we have more control over events than we really do.
• Faulty generalizations - In order to simplify an extremely complex world, we tend to group things and people. These simplifying generalizations can bias decision making processes.
• Ascription of causality - We tend to ascribe causation even when the evidence only suggests correlation. Just because birds fly to the equatorial regions when the trees lose their leaves, does not mean that the birds migrate because the trees lose their leaves.’ [8]

Organisational Buyer Decision-Making Process

Problem recognition- Similar to the consumer’s ‘perception of need’, someone in an organisation recognises that a problem may be solved by the acquisition of goods or services. Internally, this may occur due to a new-product development, under-capacity or due to problems with quality control; externally it may occur when a buyer sees a product report in the trade press or is offered a promotional price by a potential new supplier.

Product specification- Often in conjunction with other members of the decision-making unit who have expertise and can give technical advice, the buyer will draw up first a general description, and then a price specification of the nature and quantity of the product required.

Supplier search- The buyer will identify potential suppliers of the specified products, and may ask them to submit proposals or give sales presentation to demonstrate their capabilities and indicate their prices. This will enable the organisation to draw up a short-list, similar to the consumer’s ‘evoked set’.

Supplier selection- This is commonly done by ranking the desired attributes of potential suppliers in order of importance. Suppliers will be chosen who most closely meet the key criteria. In many cases, organisations will choose more than one supplier for products they require on regular basis, to ensure continuity of supply.

Ordering- The placing of an order with a supplier may be a one-off activity or may take the form of a contract to purchase under agreed terms over a period of time. Invariably these terms include payment terms; while consumers usually pay cash up-front before they receive their products or services, organisations invariably set up accounts with their suppliers, receiving goods first and subsequently paying for them within a stipulated time period. (Suppliers often insist on a credit reference with new customers).

Performance evaluation- Buyers collect information about the performance of their suppliers and use this as an important source of information when a similar product is required again. Sometimes this information is used as a part of a system for motivating suppliers to maintain excellent performance levels. Financial incentives may be offered for reaching delivery, service or quality targets.

 

‘Organisational Purchase Classes

• Straight Rebuy 

• routine purchase
• associated with frequently purchased items

• Modified Rebuy 

• routine purchase
• frequent purchase, but buyer does review product specifications or supplier

• New Task 

• not routine
• product needs and specifications researched, vendors evaluated

-Source: (http://www.blythvalleycvs.org.uk/imgs/photocopier.gif)
An example of a straight rebuy situation would be the purchase of photocopy paper for a large organization.  Once a relationship is established with a supplier who appears to be providing good products at good terms and prices, there is no need to re-negotiate the terms and conditions every time more supplies of paper are needed.  The purchase of a large, expensive crane, however, would require more than a good relationship between a purchasing agent and a salesperson.

In a straight rebuy situation, the buyer is likely to periodically apply value analysis and vendor analysis.

• value analysis: a periodic review of the qualities of the product for the price
• vendor analysis: a periodic review of the services of the vendor (seller)

An annual value analysis of the paper in the above example might show that the product performs well, but a vendor analysis might show that the vendor is often late in deliveries and often delivers the wrong assortment of products.  In this situation, the purchasing agent might search for a new supplier of the same brand of paper.

Organisational buying roles

Since, there are often multiple decision makers involved in organizational purchases.  This requires that the marketer is aware of the needs of the various constituencies involved in making decisions.  Additionally, there can be constituencies in an organization who do not have decision making authority, but who nonetheless might have some influence over the purchase and consumption process.

• Users: If you are a secretary, you might have had the experience of arriving to work one day to find a new typewriter on your desk, whether or not you even wanted it.  A salesperson would not call on you if you had no influence over what product was purchased.  However, if you and your co-workers submit numerous complaints about missing or problematic features of the new replacements, the salesperson might be faced with a very expensive customer service problem to solve.  A user is the end consumer of a product.
• Influencers: Perhaps in this case, the office manager was consulted with regard to features or specifications to set in the purchase of new typewriters.  Although the office manager might have no decision making authority with regard to the purchase, whatever specifications that s/he requests could be used without change in making the purchase.  A salesperson might need to be aware of these influencers - a special trick is to get the influencer to write a specification list that happens to match the seller's product features!  An influencer is someone who has influence over what is purchased.
• Deciders: In this case, some middle manager, ignorant of the needs of secretaries, might have made the decision as to when and what to purchase.  The point of this statement is that the marketer or seller must be aware of how it is that decisions are made and often must focus some or all efforts at whomever it is that makes decisions in the organization.  Note, however, that decision making authority does not necessarily mean that this person exerts any influence on what is purchased.  The company president might be the only person who signs all purchase requisitions, and therefore has ultimate decision authority, but might otherwise merely sign some requisitions without question or involvement.  A decider is someone who ultimately has authority if or what to purchase.
• Buyers: The final purchase transaction might be left to a purchasing agent who otherwise has no involvement in decision making.  A sales agent for an office equipment supply house might help an organization to decide what brand of typewriters would be best, but that organization could then allow the purchasing agent to find the best deal on that brand, and the best deal with regard to price might come from a competing office supply house.  A responsibility of salespeople, then, is often to maintain good, trusting, long term relationships with the purchasing agents in prospective buying organizations, whether or not they have purchased in the past.  A buyer is someone who arranges the transaction.
• Gatekeepers: Why do salespeople often give secretaries little gifts of chocolates or flowers or an occasional free lunch?  A secretary can be nice or nasty in passing information in either direction.  The prospective buyer's secretaries can be helpful in providing names, telephone numbers, and office hours of key members of a buying centre in an organization.  They can also be helpful in passing messages from the salesperson to members of the organization.  A gatekeeper could include anyone in the organization who can control the flow of information.’ [9]

Marketing mixes for two different segments in consumer marketing

Marketing mix (Price, Place, Promotion, Product) 10]

When marketing their products firms need to create a successful mix of: the right product sold at the right price in the right place using the most suitable promotion.
To create the right marketing mix, businesses have to meet the following conditions:

• The product has to have the right features - for example, it must look good and work well.
• The price must be right. Consumer will need to buy in large numbers to produce a healthy profit.
• The goods must be in the right place at the right time. Making sure that the goods arrive when and where they are wanted is an important operation.
• The target group needs to be made aware of the existence and availability of the product through promotion. Successful promotion helps a firm to spread costs over a larger output.

-Source: (http://www.superbrands-brands.com/volII/IMAGES/logo_kellogs_lrg.JPG )


For example, a company like Kellogg's is constantly developing new breakfast cereals - the product element is the new product itself, getting the price right involves examining customer perceptions and rival products as well as costs of manufacture, promotion involves engaging in a range of promotional activities e.g. competitions, product tasting etc, and place involves using the best possible channels of distribution such as leading supermarket chains. The product is the central point on which marketing energy must focus. Finding out how to make the product, setting up the production line, providing the finance and manufacturing the product are not the responsibility of the marketing function. However, it is concerned with what the product means to the customer. Marketing therefore plays a key role in determining such aspects as:

• the appearance of the product - in line with the requirements of the market
• the function of the product - products must address the needs of customers as identified through market research.

The product range and how it is used is a function of the marketing mix. The range may be broadened or a brand may be extended for tactical reasons, such as matching competition or catering for seasonal fluctuations. Alternatively, a product may be repositioned to make it more acceptable for a new group of consumers as part of a long-term plan.

The price

Of all the aspects of the marketing mix, price is the one, which creates sales revenue - all the others are costs. The price of an item is clearly an important determinant of the value of sales made. In theory, price is really determined by the discovery of what customers perceive is the value of the item on sale. Researching consumers' opinions about pricing is important as it indicates how they value what they are looking for as well as what they want to pay. An organisation's pricing policy will vary according to time and circumstances. Crudely speaking, the value of water in the Lake District will be considerably different from the value of water in the desert.

The place

Although figures vary widely from product to product, roughly a fifth of the cost of a product goes on getting it to the customer. 'Place' is concerned with various methods of transporting and storing goods, and then making them available for the customer. Getting the right product to the right place at the right time involves the distribution system. The choice of distribution method will depend on a variety of circumstances. It will be more convenient for some manufacturers to sell to wholesalers who then sell to retailers, while others will prefer to sell directly to retailers or customers.

The promotion

Promotion is the business of communicating with customers. It will provide information that will assist them in making a decision to purchase a product or service. The razzmatazz, pace and creativity of some promotional activities are almost alien to normal business activities.

The cost associated with promotion or advertising goods and services often represents a sizeable proportion of the overall cost of producing an item. However, successful promotion increases sales so that advertising and other costs are spread over a larger output. Though increased promotional activity is often a sign of a response to a problem such as competitive activity, it enables an organisation to develop and build up a succession of messages and can be extremely cost-effective.

Product example one: [11]

The marketing mix of Manchester United

What are the main elements of the marketing mix of Manchester United? First of all the product includes providing an excellent football team that plays and wins in an exciting way. However, there are other ingredients of the product including merchandising such as the sale of shirts, and a range of memorabilia. The product also relates to television rights, and Manchester United's own television channel. In one respect the place is Old Trafford where home games are played, but Manchester United also plays at a range of other venues. And, of course its products are sold across the globe, through the club's website and a range of other sales media.

Manchester United markets itself as a global brand. The club also engages in a range of joint promotional activities, for example with the mobile phone company Vodafone. Manchester United books, shirts, programmes, key rings and many other items are sold and promoted through its website. The club has positioned itself at the upmarket premier end of the market and, as a result, it tends to charge premium prices as evidenced by the high cost of a season ticket to watch home league games.

Positioning or repositioning a product - refers to locating that product within a market for example presenting it is an upmarket or downmarket product. Positioning it as a product for younger consumers or older consumers etc.

-Source: (http://www.gbposters.com/image/image/70/SP0268.jpg)

Product example two: Stella Artois [12]

Image source: Rodrigo David

Brief description: premium grade, relatively strong lager.

• Price is relatively high compared to other brands, suggesting it is not as important in the mix whereas the product itself is important - it relies on a reputation of quality to justify the higher price.
• Place is vital - the more places it is available; the higher sales are likely to be. The combination of bottles, cans, draught, etc. means it has a wider availability.
• This suggests, with the increased methods of selling recently introduced, that process is becoming more important.
• Promotion is high profile - using 'upmarket' events such as the summer tennis championships, sophisticated adverts highlighting its quality - emphasised by the phrase 'reassuringly expensive'.
• People and physical environment play little part in the overall marketing mix of the product.

Service marketing to organisational buyers

 

Business marketing is the marketing of products or services to companies, governments or not-for-profit organisations for use in creation of goods and services that they then produce and market to others.

Organisational buyers are those manufacturers, wholesalers, retailers and government agencies that buy goods and services for their own use or for resale.

Organisational buyers are divided into three different markets:

1. Industrial- Reprocess a product or service they buy before selling it again to the next buyer.
2. Reseller- Wholesalers and retailers who buy physical products and resell them again without any reprocessing.
3. Government- Federal, state, and local agencies that buy goods and services for the constituents. [13]

Key differences between marketing a product/service to organisations and consumers

‘Organizational consumers purchase for: 

• further production,
• usage in operating the organization, and/or
• resale to other consumers

Final (or ultimate) consumers purchase for: 

• personal,
• family, or
• household use

What is the difference between the terms consumer, buyer, and customer?

B-to-B marketing 
business to business marketing

Industrial/Organisational Markets

• Producer 

• manufacturers
  - produce tangible products for resale to other consumers
• service producers
  - produce intangible products

• Reseller 

• wholesalers
  - buy or handle merchandise for resale to org. users, retailers, and other wholesalers
• retailers
  - buy or handle merchandise or services for sale to final consumers

• Government 

• federal
• state
• county
• local

• Institutional 

• charitable
• educational
• community
• other non-business

-Source: (http://blog.eogn.com/eastmans_online_genealogy/telephone.jpg)

Think about the hundreds of components that are used in producing, say, a telephone.  Each one of those component parts had to be sold to the telephone manufacturer.  The part had to be designed such that it met the needs of the buyer, it had to be promoted in a way to make the buyer aware that it was available, it had to be distributed at the times and in the quantities that the buyer needed, and all of this had to be done in such a way that the part could be produced and delivered at a competitive price.  There are hundreds of parts, wires, screws, glues, paints, and such that are marketed before the telephone is itself finally produced, marketed, and sold to a final household consumer.

This manufacturer must also purchase supplies that are not part of the product but are used in running the manufacturing operation.  It must purchase computers, printer and photocopier paper, desks and chairs, services to mow the lawn, etc.  How is it that this manufacturer makes buying decisions that are similar in nature to household buyers?  How is it that this manufacturer makes buying decisions that are different in nature from those of household buyers?

Differences in Organisational Markets
Organizational markets are different in nature from household consumer markets.

• Use goods for further production, operations, or resale.  Household, or final, consumers purchase products for personal consumption.
• Purchase equipment, raw materials, and semi finished goods.  Household purchasers almost always purchase finished goods for personal consumption.
• Demand is derived from that of final consumers.  If you own a machine shop that makes bushings that are used in washing machine motors, then the demand for your products (bushings) is derived from final consumer demand for washing machines.  If the economy is poor, and demand for washing machines is down, then so too will be the demand for washing machine motors and for the bearings that are used in them.

• Multiplier effect / accelerator principle: However, there will probably not be a one to one correspondence between these.  If retailers find that demand for washing machines is declining, they might be conservative in placing new orders with wholesalers, perhaps ordering slightly less than what they actually believe demand to be.  Wholesalers, in seeing their orders decline, might also be conservative in placing orders to manufacturers, ordering slightly less than what they actually believe demand to be.  Manufacturers, seeing their orders decline, might order slightly fewer motors, and the motor manufacturers might conservatively order slightly fewer bushings than they actually expect to need. Demand for your bushings might experience wider swings, either up or down, than the changes in demand at the final consumer end of the supply chain.  This makes organizational markets, especially if you produce some of the small parts at the beginning of the supply chain, very volatile.

• Can make items themselves.  Competition in organizational markets comes not only from suppliers of similar goods and services, but can come from buying organization itself.  If it is not happy with the suppliers goods, services, or delivery, then it can choose to make those products itself.

Differences in Organisational Transactions

• Buying specialists are often used. Organizations often employ people who are professional purchasing agents.  Just as sales agents are professional specialists at finding organizations that need the products that their employer produces, purchasing agents are specialists are professional specialists at finding what their employer needs.  Whatever stereotypes you might have from experiences with salespeople in consumer sales, any negative stereotypes of salesperson behaviour probably would not be appropriate in dealing with professional buyers.
• Often use multiple buying responsibilities.  A household purchaser is often the sole decision maker.  Making a sale to an organization, however, often requires selling to several entities within the buying centre.  For example, you might be the user of a desktop computer at work, but the decision as to what specifications were needed might have been set by someone in the computer department, the decision to buy might have been made by your department manager, bids taken buy taken by someone in the purchasing department, and the final authorization made by the company president. 
• Often use multiple suppliers.  It is often desirable to have a long term relationship with more than one supplier, even if a second supplier has higher prices for otherwise similar terms and conditions.  If problems in quality or delivery are experienced with a supplier, production can still be maintained if the second supplier can be used to replace the first.  The ideals of a cozy, trusting relationship that has been promised with strategic alliances in the popular business literature does not always work if it leaves one party vulnerable as a sole supplier or buyer.  We also can see reciprocity, whereby if one organization is a supplier for another organization, it might be expected to also be using products made by its customer.
• More likely to require exact specifications.  A household purchaser might select a particular model of desktop computer for no other reason than it has a pleasing colour.  An organizational purchaser is more likely to set specifications regarding processor speed, memory, hard drive size, and such before taking bids on price.
• Often lease equipment and space.  As a household consumer, you would probably prefer to own your own car, furniture, and home.  These are things that represent personal expression, status, and wealth.  Your objectives as a business manager, however, are very different.  You might prefer to lease public warehouse space to provide the flexibility to change locations when the market demands, to lease trucks so that you can leave the problems of maintenance and disposition to someone else, etc. 
• More frequently employ competitive bidding and negotiation.  Household consumers (especially those of us in North America) are more likely to accept as final a price that is placed on a product in a retail setting or to accept a price that is given to us by a service provider.  As a business manager, your employer is more likely to require that you accept, say, three bids for a service or to negotiate various terms and conditions associated with product specifications, delivery, and price.’ [14]

Example of a service that can be marketed to an organisation rather than a consumer:

Intranet is a private computer network that uses Internet protocols and network connectivity to securely share part of an organization's information or operations with its employees. Sometimes the term refers only to the most visible service, the internal website. The same concepts and technologies of the Internet such as clients and servers running on the Internet protocol suite are used to build an intranet. HTTP and other Internet protocols are commonly used as well, such as FTP. There is often an attempt to use Internet technologies to provide new interfaces with corporate "legacy" data and information systems.

Briefly, an intranet can be understood as "a private version of an Internet," or as a version of the Internet confined to an organization. The term first appeared in print on April 19, 1995, in Digital News & Review in an article authored by technical editor Stephen Lawton.

-Source: (http://en.wikipedia.org/wiki/Intranet)

-Source: (http://www.learnthenet.com/English/publish/images/intranet.jpg)

Differences between domestic and international marketing

If we have only four P’s to worry about we exclude much from our consideration. The difference between international and domestic marketing is best highlighted by Kotler (1986) as ‘megamarketing’ as opposed to simply ‘marketing’. It is perhaps easy to over simplify the vast number of variables to be managed within the marketing function, especially in the international arena. Where the marketing managers own knowledge of the foreign market is limited and so the number of variables on which we need information thereby increases dramatically. It overlooks many of the individual variables in return for making a simple point and providing a mnemonic for marketing managers. Paliwoda (1995) identified a 10 point checklist for approaching international marketing, consisting of:

1. People- all stakeholders, internal and external to the firm, employees and customers.

2. Process- which is unique to corporate culture and may include willingness or not to consider certain form of market entry such as joint venture.

3. Positioning- differentiation from rivals.

4. Power- market power transferability from home country to host country.

5. Product/service- delivering value added through the channel to the foreign customer.

6. Promotion and publicity- what is available, what is allowable, what is free.

7. Pricing- an overplayed dimension and the weakest factor with which to lead.

8. Place of sale/distribution- delivery. From arrival portside to the final consumer through channels as diverse as the internet.

9. Planning and control- with flexibility. Monitoring is one aspect but another is the ability to plan ahead with room to manoeuvre so as not to forestall strategic alternatives.

10. Precedents- learned from market scanning. Through environmental scanning at home and abroad, it is possible to discover strategies that may be borrowed from other companies inn other industries or in other countries and applied to your own situation. [15]

Domestic marketing involves one set of uncontrollables derived from the domestic market. International marketing is much more complex because a marketer faces two or more sets of uncontrollable variables originating from various countries. The marketer must cope with different cultural, legal political and monetary systems. Digital Microwave Corporation’s annual report makes this point very clearly when it states:

“The Company is subject to the risks of doing business internationally, including unexpected changes in regulatory requirements, fluctuations in foreign currency exchange rates, imposition of tariffs and other barriers and restrictions, the burdens of complying with a variety of foreign laws and general economic and geopolitical conditions, including inflation and trade relationships.”

A firms marketing mix is determined by the uncontrollable factors within each country’s environment as well as by the interaction between the sets. For optimum result’s, a firms marketing mix may have to be modified to confirm to a different environment, though wholesale modification is not always necessary. The degree of overlap of the sets of uncontrollable variables will dictate the extent to which the four P’s of marketing must change - the more the overlap, the less the modification.

The varying environments within which the marketing plan is implemented may often rule out uniform marketing strategies across countries. McDonald’s, although world renowned for its American symbols and standardisation, has actually been flexible overseas. Recognizing the importance of foreign markets and local customs, the company customizes its menu by region. In fact, it has even excluded beef from its menu in India in deference to the country’s Hindu tradition. [16]

Differences in domestic and international marketing

Factors differentiating domestic and international marketing

Bibliography/References:

Books/Notes:

• Kotler Philip, Wong Veronica, Saunders John, Armstrong Gary (2005) Principles of Marketing, Prentice Hall, Europe.

• Fieldstead Marion- Marketing Handouts, Wirral Metropolitan College (2007/08), England.

Websites:

• http://apollo4.bournemouth.ac.uk
• http://www.marketsegmentation.co.uk
• http://www.udel.edu
• http://www.thetimes100.co.uk
• http://www.bized.co.uk
• http://books.google.co.uk
• http://www.google.com
• http://www.ask.com
• www.starware.com
• www.wikipedia.com
• www.yahoosearch.com
• www.ask.com

References:

1. (http://apollo4.bournemouth.ac.uk/si/scalver/133segemnt.html)

2. (http://apollo4.bournemouth.ac.uk/si/scalver/133segemnt.html)

3. (http://apollo4.bournemouth.ac.uk/si/scalver/133segemnt.html)

4. (http://apollo4.bournemouth.ac.uk/si/scalver/133segemnt.html)

(http://www.examstutor.com/business/resources/studyroom/marketing/market_analysis/5_market_segmentation.php)

5. (http://www.marketsegmentation.co.uk/downloads/The%20contribution%20of%20segmentation%20to%20business%20planning%20-%20the%20ICIF%20case%20study.pdf)

6. (http://www.udel.edu/alex/chapt9.html)

7. (http://www.udel.edu/alex/chapt9.html)

8. Collectively from:

• (http://en.wikipedia.org/wiki/Buyer_decision_processes)
• (http://www.sykronix.com/tsoc/courses/cb/cb_dec.htm)

9. (http://www.sykronix.com/tsoc/courses/prin/pr_org.htm)

10. (http://www.thetimes100.co.uk/theory/theory--marketing-mix-(price-place-promotion-product)--243.php)

11. (http://www.thetimes100.co.uk/theory/theory--marketing-mix-(price-place-promotion-product)--243.php)

12. (http://www.bized.co.uk/educators/16-19/business/marketing/activity/mix.htm)

13. (http://books.google.co.uk/books?id=Sd94oTgjGyYC&pg=PT137&lpg=PT137&dq=marketing+services+organizational+buyers&source=web&ots=S-8Eza0j7t&sig=pNDoiCPrCaZJ4cbDi3Xzh76Grno&hl=en#PPT137,M1)

14. (http://www.sykronix.com/tsoc/courses/prin/pr_org.htm)

15. (http://books.google.co.uk/books?id=7d1bSBiqy_QC&pg=PA621&lpg=PA621&dq=difference+between+international+and+domestic+marketing&source=web&ots=znUs0PC2it&sig=kAb6St1fO-txaMgSj0xoxOslTfA&hl=en#PPA622,M1)

16. (http://books.google.co.uk/books?id=jvdpDo5Xr7EC&pg=RA1-PA5&lpg=RA1-PA5&dq=domestic+marketing+vs+international+marketing&source=web&ots=nCiV00jK5X&sig=-Isd-urtPiSYIWsYGZHmm3bV6vQ&hl=en#PRA1-PA5,M1)

Self Reflection & Evaluation:

I enjoyed this assignment.  It gave me the chance to gain a knowledge and understanding of the subject; by directing me to research and study the concepts of segmentation, targeting and positioning. Further, in applying the extended marketing mix to different marketing segments and contexts, and using that which I had been taught in the classroom, the course textbooks (both those purchased and obtained from the college library), course work Materials, the internet and discussion with the lecturer; I gained an understanding of factors influencing marketing and targeting decisions; purpose and segmentation criteria used; and how buyer behaviour affects marketing activities by using two product examples in each case. Simultaneously applying the extended marketing mix to different marketing segments and contexts was both an instructive and interesting process.

I commenced the assignment by reading the course notes and the appropriate course text books.

Use of the internet and discussions with the course lecturer provided further resource.

 

I found “Principles of Marketing” by Kotler et al together with the class notes provided a helpful guide in completing this assignment.

Those Internet sites (search engines) I personally found most useful were:-

www.google.com

www.starware.com

www.wikipedia.com

www.yahoosearch.com

www.ask.com

In retrospect I believe I made good use of a wide range of resources in order to research the subject competently. I made use of all material provided by the college and all that was reasonably available to me.

I did find it very difficult to keep within the word count while covering all of the criteria given that this assignment encompasses a wide area.

I have met with the completion time, and have endeavoured to produce work of a standard which I respectfully hope is above average.  

Timetable: