Basic Segmentation, Targeting and Positioning free essay sample

When entering a market, an organisation needs to identify its customers and what its customer needs are. A business can’t go into a market with a product and expect to sell it, because the demand for the product may not be there. It is important for the business to plan thoroughly before entering a market and understand the diverse nature of a market. For example, a market may have large range of consumers who have different tastes, preference and needs. So this is where the concept of segmentation will be applied. Segmentation is defined as ‘the identification of individuals or organisations with similar characteristics that have significant implications for the determination of marketing strategy’. To break this down, an organisation will need to group together the consumers that share the same traits in order to serve them properly. A company is bound to fail if it has created a marketing mix which serves one customer, but does not serve another. By creating sub markets or market segments, a marketing mix can be created to suit the needs of each segment which will create satisfied customers. Once a company has successfully segmented a market, it can then provide products or services that will satisfy customers in a specific segment. If a company does not have a product or service to satisfy a sub market, then it is in the company’s interest to develop a product or service that will satisfy that part of the market. This is because one of the main reasons for segmentation is maximising profits. Segmentation is a way to match consumer needs, which in turn can enhance profitability. When a segment hasn’t been supplied with goods or services, this is seen as an opportunity to enhance profits. You may segment consumers into three main groups, Behavioural, psychographic and profile variables, each group has its own sub categories. Marketers use these as a basis to segment their potential markets, for example the behavioural segment has the following sub groups: * Benefit sought * Purchase occasion * Purchase behaviour * Usage * Perceptions and beliefs Psychographic has the following sub groups * Lifestyle * Personality Profile variables has the following sub groups * Demographic * Socio-economic * Geographic There is no definite way to segment a market, but these following sub groups can be used together to segment a market. For example you could combine lifestyle with geographic or purchase behaviour, personality and socio-economic to segment your market. Lucozade developed a sports brand ‘Lucozade sport’ in 1990 and from there the brand has divided into sub brands to suit the needs of different consumers. Lucozade sport was developed as an enegery drink to replenish lost energy and rehydrate before, during and after sport. Lucozade then went on to create another brand extension ‘Lucozade Hydro Active’ which was also developed as a sub brand which is a fitness water that contains essential salts, selected vitamins and has a light fruit flavour to encourage consumption during exercise. Lucozade Sport Nutrition was another sub brand that included the Lucozade Sports Bar and Carbo Energy Gel products, which have been formulated to deliver an optimum diet for athletes in a convenient, portable format. You can see how the original brand has branched off into sub brands or brand extensions. For these brand extensions to be effective, Lucozade needed to understand and apply market segmentation. The marketing mix was also an essential key to the success of these products as the mix is a tool to implement strategy. You can see how Lucozade implemented their marketing strategy using the marketing mix. For example, the company would have needed to make a choice on what product top offer, known as a product decision. Once a market has been segmented, it is easier for a company to make a decision on which product they would like to provide their customers. In Lucozades case, it was a choice to develop a new sports brand and further extend that brand as their find gaps in other segments of the market. Target marketing An important part of marketing is selecting the market you want to enter to provide your products or services. So once you have successfully used market segmentation to divide your market into reasonable consumer segments, you then need to use targeting to choose the market you are going to serve. Choosing a market to serve is an extremely important decision a business will need to make, because a bad decision at this stage could result in failure. To help make the right decision, a company should use criteria to evaluate a market, for example: * Effective * Measurable * Accessible * Actionable * Profitable (foot note) Another method of evolution would be the SMART objectives method: * Specific * Measurable * Achievable * Realistic * Time scaled Either way, an organisation should evaluate their potential market before entering them. There have been cases where businesses have entered markets and failed, because they did not evaluate effectively. In 2003, Burger King introduced a new line of chicken sandwiches aimed at appealing to a more health-conscious demographic (the BK Baguette Sandwiches). The product never caught on in the U. S. and was quickly replaced with the TenderGrill Sandwich’. It’s evident that of a failing product and more importantly evidence of poor marketing strategy. If burger king used targeting properly, the product may have been more successful in a different location with different consumer s. This example seems show evidence of undifferentiated marking, which is one marketing mix for the whole market. Burger King should have spent more time on research to identify where those consumers were and target them with their new product. In some markets undifferentiated marketing works, these are usually mass markets, but for new product lines such as burger kings new sandwich, differentiated marketing should be used. When Mc Donalds entered the Indian market, they realised a large percentage of the population were vegetarian due to culture differences. Mc Donalds developed a vegetarian product range that suited this market, so this is seen as differentiated marketing. Differentiated marketing is a marketing mix that is developed for each segment of a market. A company would need to have the capability to manufacture a range of products to serve each segment, as this strategy tends to create multiple segments each with different preferences. Mc Donalds has the capability to manufacture the new vegetarian range, through the use of local suppliers and their large distribution networks. Comparing Burger Kings failure and Mc Donalds success indicates where Burger King went wrong. Burger King dropped the product and did not try to investigate other markets to see if there were any opportunities. Part of the segmentation process is to identify opportunities to enhance profits, so looking for another market to enter could have been an option as Burger King is global. The promotion part of the marketing mix would have been the key role to the success of Burger Kings new product. When launching new product, the target audience needs to be aware the products exists. Advertising would have been the most important task for Burger King when launching this new product. Firms can use another form of targeting known as focused marketing, where a firm would focus on a niche market. Effectively a firm would identify market egments, evaluate each segment, then decide on which one would be most profitable or sustainable. One marketing mix is used for each segment, so this allows an organisation to focus their entire resources on that one segment of a market. This is often more efficient for small to medium sized businesses as they do not have the capacity to serve mass markets. Positioning Another part of the marketing management process is positioning. This is defined as ‘A  marketing strategy  that  aims  to make a brand occupy a distinct  position, relative to  competing  brands, in the mind of the  customer. Firms tend to use this strategy to distinguish themselves between other brands in the mind of a consumer. Consumers often try to compare brands to see which one has the most benefits or added value. So it’s important for a company to use positioning to make sure their brand becomes the choice of a consumer. â€Å"The easiest way to get into someone’s mind is to be first, nobody remembers second†. Southwest Airlines used positioning very well, turning a disadvantage into an advantage. This company did not offer reserved seating on their flights, so it would be a free for all situation when boarding their planes. Using the promotion part of the marketing mix, they created an ad which switched the perception of their position. So Bill switched to Southwest Airlines. Now Bill sits where Bill wants. Freedom to choose on Southwest Airlines.   Ã‚  This was a very innovative way to position a service less advantageous compared to competitors. So through positioning and promotion southwest airlines turned a disadvantage into a benefit. The advert tried to change the perception of customers to make it seem like a good thing to pick your seats when you board a plane. A company that is really successful at position is ‘Hotel Chocolat’. Operating in the confectionary industry, Hotel Chocolat is a niche business. You can often find niche firms operating at the higher end of a market providing luxury goods. The chocolate industry is a highly competitive industry, but Hotel Chocolat has still been successful by segmenting the marketing, developing products that suit each segment and then positioning itself as a luxury brand. Through the use of profile variables Hotel Chocolat divided their market,the following list is one example of how the company segmented the market: * Gifts for him * Gifts for her * Teachers * Children * Diabetics Vegans * Vegetarians So there a products developed to suit the needs of consumers from each segment. This a really innovative niche within the confectionary industry and it shows how his business used the product part of the marketing mix. The company is able to answer question like, what does the customer want from the product? What needs does it satisfy? What features does it have to me et these needs? These are all important question when developing products for each segment. Through use of positioning Hotel Chocolat is able to be distinguished as a luxury brand, but part of this is to do with pricing. The businesses prices for products a significantly higher than competitive brands. You can buy a 250g tub of hot chocolate powder from Hotel Chocolat for ? 10. 00, compared to ? 2. 99 for a 500g tub of Cadburys hot chocolate powder. So you can see how the prices are reflecting the quality of each product. Hotel Chocolat is a successful business too, as it has new shops opening at the rate of more than ten a year in the UK where there are now 61 with two franchises in the Channel Islands. So the price determines the quality of the brand and the brand is based around good quality products. Another part of the marketing mix adds to the success of Hotel Chocolat, place. There are only 61 stores, the location of these stores are on busy high streets and shopping malls. By having stores in the Channel islands shows that Hotel Chocolat really think about where they have their store as jersey is a wealthy island with GDP of ? 1 billion in 2008, with a population of around 100,000. So consumers general have more money available to spend on luxury goods. Overall Hotel Chocolat have successfully implemented a marketing strategy that works within the confectionary industry. Through the use of segmentation, targeting and positioning the company has been about to satisfy consumers and increase profitability. Segmentation is a process a business should if they would like to identify their consumers as it divides the market into segments, which in turn allow you to serve segments that suit your business activity. Targeting is strategy which a business should use to decide which segments they want to serve. When targeting a business should thoroughly evaluate each segment to make sure they choose the right segment. Positioning is important when marketing a product or service as it means the difference between a customer buying your product over a competitors. For this to be successful the use of perceived value and branding should support the process. Word count: 2086 References Jobber and Fahy – Foundations of Marketing (Chapter 5 – Page 109) Irish Times. (2006). Marketing communications fuelling performance. Available: http://www. business2000. ie/pdf/pdf_10/glaxosmithkline_10th_ed. pdf. Last accessed 16/08/2012. Daily Meal. (20/05/12). Failed products of major brands. Available: http://www. oxnews. com/leisure/2012/05/20/failed-products-major-brands/#ixzz22y8z9FQE. Last accessed 16/08/2012. Chris Horton. (04/05/2012). 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