Identify the basic target market selection strategies.
The basic target market selection strategies include undifferentiated marketing, differentiated marketing, and concentrated marketing.
Undifferentiated market refers to an approach that ignores the differences of each segment of the market and goes after the entire market. With this approach, one product or service will be designed to cover the entire market. This often includes focusing on what all segments of the market have in common, rather than what differs between them. The key features of this approach are that it means going after the entire market and that it does so with the same product or service.
Differentiated marketing refers to an approach where the differences of each segment of the market are identified and a product or service is designed especially for each segment. With this approach, the product or service is altered to suit specific markets. The key features of this approach are that it goes after a large portion of the market, but that it does this with variations on the product or service.
Concentrated marketing refers to an approach where a specific segment of the market is targeted with a product or service especially designed for them. With this approach, the organization achieves a strong market share in the target sense, but not a strong market share overall. The key features of this approach are that it goes after a small portion of the market and that it does so with the same product or service.
2. Distinguish between market segmentation, target marketing, and product positioning.
Market segmentation refers to the process of dividing the market into segments with differing characteristics. The market can be divided in various ways, including geographic segmentation, demographic segmentation, psychographic segmentation, behavioral segmentation, or by benefits sought. Market segmentation also includes defining the characteristics or profiling each identified segment.
Target marketing follows on the from the market segmentation process. It involves considering each segment and evaluating the attractiveness of that segment. This process of considering each segment allows for a decision to be made on which segments the organization should target. At the end of target marketing, one or more segments have been selected as markets that the organization wants to enter.
Product positioning is the next step in the process and follows on from target marketing. After the markets have been selected, this step concentrates on how the organization, product, or service will be presented to the selected market segment. It includes determining how the product needs to be seen by the consumers in the target market. It also includes determining what the attributes will be for the product to support how it wants to be seen. For example, if university students are selected as the target market for a product, it might be determined that the product should be positioned as having the best value. One of the important attributes will be price. For the same target marketing, it might also be decided that the product should be positioned as the most fashionable. Color, style, and design will become the attributes that have to be adjusted to achieve this position. Promotion might be another attribute adjusted, with promotion and advertising programs designed to create an image of the product as fashionable.
Overall then, market segmentation, target marketing, and product positioning are completed one after the other. Market segmentation involves dividing the market into segments. Target marketing involves selecting the markets to be targeted from the identified segments. Product position involves deciding how the product needs to be seen by the selected market segment and what attributes the product needs to achieve this position.
3. Why has market segmentation become the dominant approach to strategy in recent years?
Market segmentation has become the dominant approach to strategy in recent years largely because of increased competition in the market. As competition has increased, organizations need to work more efficiently to ensure they remain profitable. Market segmentation is a means of reducing costs and increasing value. For example, if an organization targets a specific selected market, it can focus its research, product development, and advertising investments on that market. Market segmentation also allows organizations to gain a better return by focusing its activities on satisfying the specific market segment. For example, it is more effective for an organization to advertise to a distinct portion of the market that it knows how to appeal to, than to try to reach the entire market, but without a clear message directed to them. In addition, it is an effective way for organizations to gain a competitive advantage over others. For example, if an organization understands the needs of a specific market well, this information can be used to design a product especially to suit their needs. Other organizations without the same level of knowledge and focus are not likely to be able to serve the segment as well.
Another reason market segmentation has become the dominant approach relates to changing consumer attitudes. In short, consumers have become more demanding and expect more from the products and services they purchase. This also relates to increasing competition since it means that consumers can afford to be selective. The end result is that organizations often have to provide a product that matches well with consumer's needs to achieve sales. This good match can often only be achieved by focusing on one specific segment of the market.
4. What are the primary analytical tools useful for positioning decision-making?
Perceptual mapping is an analytical tool that identifies the factors that separate two similar products in the minds of consumers. A perceptual map is a simple graph with one factor on the horizontal axis and another on the vertical axis. Plotting the position of competitors on the axis helps to understand how competitors are perceived and to determine where the organization needs to place itself.
Another similar tool used is a customer perception map which places organizations or products on a graph according to how those organizations or products are perceived.
5. Identify Michael Porter's three generic strategies. As a Marketing Manager, how can you use this information?
Michael Porter's three generic strategies are cost leadership, differentiation, and focus. A marketing manager can make use any or all of these three generic strategies.
Cost leadership is a strategy that involves having a cost advantage over competitors. This means providing the product to the consumer for a lower price. The source of the savings can be achieved by reducing the cost of production, the cost of distribution, or the cost of promotion. A marketing manager can use this strategy by reducing costs as much as possible and passing the savings on to consumers. The effectiveness of this strategy depends on the type of product and the price reductions that can be achieved. For example, consider a simple product where the customer does not have specific demands, such as paperclips. Most customers will not be able to be induced to pay more for paperclips by improving the product or the service. In this case, competing via price is very important and so a cost leadership strategy would probably be effective. Consider the case of products where consumers tend to have more demands, such as laptop computers. A cost leadership strategy is not likely to be a suitable strategy on its own because most consumers will have certain demands they need met. At the same time, consumers will tend to be willing to pay more for a product that meets their needs better. A cost leadership strategy might only be effective in this case if an organization was able to reduce the cost significantly. In summary, a marketing manager might use the cost leadership strategy if they know that the consumer's main motivation is related to price.
The next generic strategy is differentiation. This refers to…