MB-104

MARKET ANALYSIS AND PLANNING AND SEGMENTATION

Learning Objectives: This lesson will enable you to understand the concept of Customer Value Proposition to define the need for segmentation. It will acquaint you with the purpose of why marketers segment the markets. This lesson will also address the question of how a company can divide a market into segments i.e. bases of segmentation. It also highlights the factors that can be used to evaluate the market segments and equips you with the knowledge of effective evaluation criteria. It also highlights marketing planning, implementation and control along with market and competitor analysis.

A customer is someone who is engaged in the activity of evaluating , purchasing and using a product or a service to fulfill a need/want.

Customer Value Proposition: CVP means a unique mix of product and service attributes, customer relations and corporate image that a company offers. Therefore, keeping CVP in consideration, Segmentation is nothing but the process of identifying the clusters of customers who desire the same value proposition.

Complete analysis of the companys situationSWOT analysis Strengths include internal capabilities, resources and positive situational factors that my help the company to serve its customers and achieve its objectives. Weakness include internal limitations and negative situational factors that may interfere with the companys performance. Opportunities are favorable factors or trends in the external environment the company may be able to exploit to its advantage.

Marketing Analysis

.Marketing Analysis
And threats are unfavorable external factors or trends that may present challenges to performance.

The company must analyze its markets and marketing environment to find attractive opportunities and identify environmental threats. It must analyze company strengths and weaknesses as well as current and possible marketing actins to determine which opportunities in the environment, which eliminating or overcoming the weaknesses and minimizing the threats.
Marketing analysis provides inputs to each of the other marketing management functions.

Marketing Planning
Marketing planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives. A detailed marketing plan is needed for each business, product, or bran.

The marketing strategy explains how each strategy responds to the threats, opportunities, and critical issues spelled out earlier in the marketing plan. Additional sections of the marketing plan lay out an action program for implementing the marketing strategy along with the details of a supporting marketing budget.

Marketing Implementation
The process that turns marketing strategies and plan into marketing actions in order to accomplish strategic marketing objectives. Marketing Control Marketing control involves evaluating the results of marketing strategies and plans and taking corrective action to ensure that objectives are attained.

Marketing control involves four steps: Management first sets specific marketing goals. It then measures its performance in the marketplace and evaluates the causes of any differences between expected and actual performance. Finally, management takes corrective action to close the gaps between its goals and its performances.

Marketing analysis, planning, implementation and control

Analysis

Planning Develop strategic plans

Control Measure results Implementation Carry out the plans

Evaluate results Take corrective action

Develop marketing plans

1. Market Segmentation
2. Competitive Analysis 3. Marketing Organization and Control

From Mass Marketing to Micro Marketing:

Mass Marketing: Seller engages in mass production, mass distribution and mass promotion of one product for all buyers. Micro Marketing: Four levels- Segment, Niche, Local and Individual. Niche Marketing: Narrowly defined group seeking a distinctive mix of benefits.

Local Marketing: Marketing programs tailored to suit the needs and wants of the local consumer groups.
Individual Marketing: Customised or one-to-one marketing.

Market Analysis -STP

Market Segmentation: identifying and
profiling distinct group of buyers

Market Targeting: Selecting one or more

market segments to enter

Market Positioning: For each target

market, establishing and communicating the key distinctive benefit(s) of the companys market offering.

1.MARKET SEGMENTATION

Segmentation
The process of dividing up a heterogeneous market into subgroups which are homogeneous such that:
consumers from the same subgroup have similar preferences for, and reactions to products and share similar set of needs and wants.

Another way of understanding what segmentation means is, it is the process of dividing the market of product/service in smaller groups of customers. The customers in the group should:
1) Buy the product for the same purpose

2) Use the product in the same way

3) Buy the product in the same way

Segmentation is needed to identify groups of customers with similar requirements sp that they can be served effectively . It is the strategy by which marketers understand their markets and develop strategies for serving their chosen customers better than their competitors.

The marketer does not create the segments, the marketers job is to identify the segments and decide which one (s) to target. Segment marketing offers key benefits over mass marketing.

However, marketers need to understand that a segment is purely a fiction. A flexible market offering consists of two parts: a naked solution (containing the product /service elements that all segments members value and a discretionary option that some segment members value.

 The requirements and characteristics of consumers are diverse No single product (usually) will be able to address all consumers

Fundamentals of Segmentation
Segmentation is the first crucial step in marketing. The fundamentals of marketing are the same fundamentals of segmentation. Know your customers, know how they differ, and have a clear proposition that lights their fire. The grouping together of customers with common needs now makes it possible to set marketing objectives for each of those segments. Once the objectives have been set, strategies can be developed to meet the objectives using the tactical weapons of product, price, promotion, and place.

Why should marketers segment the market? There are several reasons why a marketer should segment the market. Let us discuss some of these here: Target market selection: Now you must be having a question as to what a target market is . A target market is a chosen segment of market which a company has decided to serve. Tailored marketing mix: Segmentation allows grouping of customer based on similarities. Differentiation: By breaking the market into segments , a company may differentiate its offerings between segments and within each segment it may differentiate its offering from its competitors.

Market segmentation procedure:

How can we identify market segments?

One approach would be to classify consumers demographically.

The three step process within marketing segmentation includes: 1) Segmentation 2) Targeting and 3) Positioning

Roger Best proposed the seven-step approach to advocate the needs-based segmentation Approach Description

1. Needs-Based Segmentation Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem. 2. Segment Identification For each needs-based segment, determine which demographics, lifestyles, and usage behaviors make the segment distinct and identifiable (actionable).

3. Segment Attractiveness

Using predetermined segment attractiveness criteria (such market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.

Needs based segmentation..contd Approach Description

4. Segment Profitability Determine segment profitability. 5. Segment Positioning For each segment; create a value proposition and product-price positioning strategy based on that segments unique customer needs and characteristics. Create segment storyboard to test the attractiveness of each segments positioning strategy.

6. Segment Acid Test

7. Marketing-mix strategy

Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion and place.

Bases of segmentation:
markets are basically of two types a) Consumer Market and b) Business Market. There are four ways by which a consumer market can be segmented.

a) Geographic segmentation b) Demographic segmentation c) Psychographic segmentation d) Behavioural segmentation

a) Geographic Segmentation: Dividing the market into different geographical units such as nations, states, regions, countries, cities or neighbour hood. Let us see if you are an Indian marketer, how would you segment the market based on geography: Region: South India, Western Region, North and East. City: Class-I cities, class-II cities, metro cities, cities with a population of 0.5 million to 1 million, cities with a population over 1 million. Rural and semi urban areas: Rural villages with a population of over 10,000; semi urban areas; small towns with a population between 20000 to 50000.

b) Demographic segmentation: Here, the market is divided into different groups on the basis of age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality and social class.

Age and life-cycle stage: Consumer wants and abilities change with age. Life stage: Defines a persons major concern such as getting married, deciding to buy a home, planning for retirement etc.

Demographic segmentation..contd Gender: Men and women tend to have different attitudinal and behavioural differences based on genetic make-up and socialisation.

Income: Income-segmentation is a long-standing practice in a variety of products and services.

Social class: In India social class is influenced by the caste system. A senior level executive exhibits different purchase preference and habits as compared to a person with similar income but different occupation and lower levels of education because of the social class to which he belongs.

Demographic segmentation..contd Generation: Each generation is profoundly influenced by the times in which it grows, it is called as Group Cohort by demographers.

c) Psychographic segmentation: The science of using psychology and demographics to understand consumers better is called psychographics. Values, lifestyle and personality affect product choice of consumers.

d) Behavioural segmentation: Buyers are divided into groups on the basis of their knowledge of, attitude toward, use of, response to a product. Some of the behavioural variables that influence segmentation are :
Occasions: For example, greeting card brands like Archie's and Hallmark make cards for different occasions such as birthdays, weddings, marriage anniversary, Friendship etc.

Benefits: Buyers can be segmented based on benefits they seek.

Behavioural segmentation..contd

User status: Here, we understand that markets can be segmented into non-users, exusers, potential users, first-time users and regular users. Usage Rate: Markets can be segmented into heavy, medium and light users. Buyer-readiness stage: Some buyers are aware of the product, some are unaware, some are informed, some are interested, some desire the product and some intend to buy.

Behavioural segmentation..contd Loyalty status: I am sure, each one of us present here must be loyal to some products we buy and use. 1. Hard-core loyals: Consumers who are buy one brand all the time. 2. Split loyals: Consumers who are loyal to two or three brands. 3. Shifting loyals: Consumers who shift from one brand to another. 4. Switchers: Consumers who show no loyalty to any brand.

Bases segmenting a business market:

The products manufactured by one business are used for another businesses. 1) Macro segmentation a) Organisational size b) Industry to which it belongs c) Geographical segmentation

2) Micro segmentation
a) b) c) d) e) Decision-making unit structure Decision-making process Buy class Purchasing organisation Organisational innovativeness

Macro segmentation as a base for segmenting a business market

Organisational Size: Large organisations have greater potential, more formalised buying, increased specialisation of functions and special needs.

Industry: Different industries have unique requirements of products. For example, computer suppliers can market their products to various sectors such as banking, manufacturing, healthcare and education.

Geographical segmentation: In a large country like India, there are enormous variations in climate, topography and soil conditions. This influence food habits, dressing and life styles of people. And hence there are regional variations in purchasing practices and needs.

Micro segmentation as a base for segmenting a business market Decision-making unit (DMU) structure: Members of the DMU and its size vary among the firms, it consists of all people who have an effect on supplier choice. Decision-making process: Depending on the size of the DMU, the decision making may take longer or shorter duration. Buy class: Organisational buyers are classifieds as straight re-buy, modified re- buy and new task. For example, when a company is buying an item for the first time, it will prefer suppliers who will have the patience to educate the buyer company. It will be suspicious of the suppliers as it does not know the credibility of the sellers. Purchasing organisation: Decentralised versus centralised purchasing is an important variable in influencing a purchase decision. Organisational innovativeness: Marketers need to identify the specific features of the innovator segment since these companies are the ones to be targeted first when new products are launched. Follower firms buy the product but only after innovators have approved it.

Evaluating market segments In evaluating segments which can be targeted, a company should examine two broad issues 1) Relative attractiveness of the market segments

2) Companys capability to compete in various segments

For an easy understanding, let me divide the factors into four broad categories as:

1) Market factors: To begin with, the first one is Market factors. As a marketer, we need to understand and analyse the customers and industry dynamics while assessing the attractiveness of the segment. The market factors include a) b) c) d) e) f) Segment size Segment growth rate Price sensitivity Bargaining power of the customers Barriers to market segment entry Barriers to market segment exit

. 2) Competitive factors: Competition in a segment determines the extent of resistance faced by a company while entering the market. Well entrenched players would have erected strong barriers to entry. Under this second set of factors are included the following: a) Nature of competition b) New entrants and c) Competitive advantage

3) Political, social and environmental factors: The external environment presents opportunities and threats for a firm. Changes in the regulatory framework, economic policies, social values and lifestyles etc. can alter the attractiveness of the market segments. These factors include:

a) Political issues b) Social trends and c) Environmental issues

4) Firms capability to serve segments: A market segment may be attractive, but what if it is beyond the resources and competencies of the company to serve it profitability.

The factors to be considered here include:

a) Exploitable marketing assets-current technological, manufacturing and marketing strengths b) Cost advantage

c) Technological Edge and

d) Managerial capabilities and commitment

Criteria for effective market segmentation: Not all types of segmentation are useful. For example, if you as a marketer segments market for salt based on age, it is understandable that you have not understood this lesson of segmentation at all. Markets segments should rate favorable on the following five criteria: DAMAS 1) Measurable: The size, purchasing power and features of the segment can be measured. 2) Substantial: The segment is large and profitable enough to serve. 3) Accessible: Segments can be effectively reached and served 4) Differentiable: Conceptually different, distinguishable and respond differently. 5) Actionable: Effective programs can be formulated for attracting and serving the segments.

How to Segment?
Analyze consumer-product relationship
-- examine if affect/cognition, behavior and environment vary with different subgroups.

Determine segmentation bases

-- Geographic, Demographic, Socio-cultural Affective/Cognitive, and Behavioral.

Select segmentation strategy

-- Identifiable (measurable), Meaningful, Profitable (Marketable)

Quiz on Segmentation 1. Geographic segmentation is about: a) Dividing consumer groups based on lifestyles. b) Dividing markets based on location. c) Understanding the benefit the product has to offer. d) Dividing consumer groups based on social status. 2. Demography is a: a) Study of human behaviour b) Study of consumers. c) Study of the population. d) Study of geographic areas. 3. Lifestyle segmentation is about: a) Understanding how people live and developing products/services that match that way of life. b) Dividing the market into distinct groups of buyers. c) Understanding what consumers like or dislike about their life. d) Developing stylish products for that segment.

Quiz on Segmentationcontd 4. The three step process within marketing segmentation includes: a) b) c) d) Segmentation, differentiation and positioning. Targeting, Segmentation, and Positioning. Segmentation, Targeting and Positioning Positioning, Mass Marketing and Segmentation.

5. Mass marketing is about : a) b) c) d) Aiming a product at one particular segment. Developing products for different segments. Going for a global marketing strategy. Aiming the product at the entire market.

6. In order for segmentation to be effective, which of the following criteria must be met? a) b) c) d) Segments have to measurable Segments have to mature Segments have to small Segments have to original

Quiz on Segmentationcontd 7. A market that is substantial is: a) b) c) d) Responsive to the market programme created for it Is large enough to justify a marketing programme Easy to identify None of the above

8. Segmenting a market based on what benefits consumers seek from a product or service is a good example of what type of segmentation strategy? a) b) c) d) Geographic Geo-demographic Behavioural Psycho-demographic

Quiz on Segmentationcontd 9. What is a market broken down into? a) b) c) d) Sections Bits Bytes Segments

10. What is a market segment? a) A sub-group of consumers who share one, or a number of characteristics, which result in them having similar wants and needs. b) A market segment is every consumer. 11. Which is an example of Demographic segmentation (Gender)? a) Tesco Value Brand b) Perfume c) Toothpaste

Quiz on Segmentationcontd 12. The proportion of a market held by one company or a brand is a) b) c) d) Market slice Market share Market segment Market leadership

13. Mend is a nightclub aimed at people above 40 years of age. What kind of segmentation is used by the owners of this club ? a) b) c) d) Geographic Occupational Age Socio-economic

Quiz on Segmentationcontd 14. When a business divides its group of customers using terms like working class, working class. professional etc, what kind of market segmentation are they using? a) b) c) d) Socio-economic Religious Lifestyle Demographic

15. A market segment is a group that has been identified as having the same needs or wants. a) True b) False

Stages of market Segmentation

The following are the stages of market segmentation:

1. Mass Marketing (low costs) 2. Product differential marketing (Different Style/Quality/Features) Target Marketing (Distinguish among market segments)

Target Marketing
Target Marketing helps sellers identify Marketing Opportunities. Enables developing right products Choose price, distribution, sales promotional activities Focus on buyers who have greatest purchase interest

Types of marketing under Target Marketing

Undifferentiated (Mass) Differentiated (Selective) Concentrated (Focused)

Competitive Analysis

Competitive Analysis
Competitive Analysis is, the analysis carried out for marketing purposes that can include industry, customer, and competitor analysis. A thorough competitive analysis done within a strategic framework can provide in-depth evaluation of the capabilities of key competitors.

Competitive analysis is carried out to ascertain the major competitors present in the market and the subtle moves and the strategies that they make. This gives a clear idea to an organization to counter those moves and sustain competitive advantage in the market.
The Strengths, Weaknesses, Opportunities, and Threats (SWOT)...

Competitive Analysis
An organization operates in an external environment marked by competition between rival firms. To gain competitive advantage, it is imperative for the organization to conduct a competitive analysis wherein the moves and strategies adopted by rival firms are carefully studied.

Identifying Competitors Customer Based Approaches

Primary competitors are quite visible and easily identified. The competitor analysis for this group should be done with depth and insight.

However, the businesses that compete most directly will often use the same business model and the same assumptions about customers. Winning within this common competitive framework requires doing similar things better and focusing on price. The result can be an erosion of profitability.

External Analysis

External analysis involves an examination of the relevant elements external to an organization.

Overview of strategic Market Management

External analysis Customer analysis: Segments, motivations, unmet needs. Competitor Analysis: Identify, strategic groups, performance, Image, objectives, strategies, cost structure, strengths, weaknesses. Market Analysis: Size, projected growth, profitability, Entry barriers, cost structure, distribution systems, trends, key success factors. Environmental Analysis: Technological, govt., economic, culture Demographic, informationneed areas.
Strategic Analysis Internal Analysis

Performance Analysis: Profitability, sales, shareholder value analysis, customer satisfaction, product quality, brand associations, relative cost, now products, employee capability and performance, product portfolio analysis. Determinants of strategic options:

Past and current strategies, strategic problems, organizational capabilities and constrains, Financial resources and constraints, strengths, weaknesses.

..Overview of strategic Market Management

Opportunities, threats, trends and strategic uncertainties
strategic strengths, weaknesses, problems, constraints and uncertainties

Strategy identification and selection Identify strategic alternatives - Select strategy Implementing the operating plan - Review strategies

Marketing organizations and control

Marketing organizations and control

Marketing is not a controlled process in an insulated lab. It is prone to mishaps, last minute changes, conceptual shifts, political upheavals, the volatility of markets, and in short, to the vagaries of human nature and natural disasters. Some marketing efforts are known to have backfired. Others have yielded lukewarm results. Marketing requires constant fine tuning and adjustments to reflect and respond to the kaleidoscopic environment of our times.

Marketing organizations and control

But maximum benefits (under the circumstances) are guaranteed if the client (the country, for instance) implements a rigorous Marketing Implementation, Evaluation, and Control (MIEV) plan. The first task is to set realistic quantitative and qualitative interim and final targets for the marketing program - and then to constantly measure its actual performance and compare it to the hoped for outcomes.

Overview of the marketing process

Analyse

Consumer Competition Environment Through Market response Demand forecast

Product quality, performance, safety, warranty, brand Price discounts Promotion advertising, personal selling, sales persons. Place

Create, build, maintain, reduce demand

Target market segment

Sense

Serve

Satisfy

Succeed