Segmentation & Targeting

In todays era of competition and consumerism, marketing efforts cant be generalized for the whole market. Rather, concerned efforts are required to find the various existing needs of consumers; group them and serve those set of customers whom we are better at. There are basically three ways desirable alternatives for service organization while selecting a target market.
CUSTOMERS UNDIFFERENTIATED MARKET GENERAL APPROACH SERVICE PROVIDERS SPECIFIC STRATEGIES
UNDIFFERENTIATED MARKETING

DIFFERENTIATED MARKET
FOCUSSED MARKETING

No recognition of different market needs and so a single approach to all.

The provider recognizes that the market is composed of distinct segments and decides to approach one of the more potential segments.
DIFFERENTIATED MARKETING

Recognizing that the market is composed of different segments, provider decides to approach them differently.

UNDIFFERENTIATED MARKETING

It is a mass marketing approach, where the marketers concern is to cover the whole market with a single service package. Generally it is a monopoly like public sector enterprises follow this approach. Prior to liberalization, Doordarshan and Telecom Operator for Metros Mahanagar Telephone Nigam Limited (MTNL) operated this way. Undifferentiated marketing approach can be easily viewed in primary education, primary health, law and order services, the judiciary services, museums, and Public parks and the like.

Service Marketing Offer

Total Market (all consumers)

Fig: UNDIFFERENTIATED MARKETING

DIFFERENTIATED MARKETING OR MARKET SEGMENTATION

Markets generally are heterogeneous in nature, with varied cultures, lifestyles and backgrounds. Consumers thus have varied preferences, needs, tastes, and desires. Supplementing them with one solution to all will result in dissatisfaction as consumer then have to compromise and tolerate the present offering. The remedy to this quandary

2 lies in segmenting the marketing into homogeneous subsets as per their desires. Here too marketers have two choices; either focus on one distinct market or serve two or more markets offering serving each with a distinct utility. The first approach is called focused marketing. Examples include Indian Railways heritage trains for tourists like Palace on Wheels and Deccan Queen. These operate on specially designed tourist circuits and offer excellent facilities in association with ITDC (Indian Tourism Development Corporation) and state tourism corporations. The services are sharply focused on the foreign tourism segment. Differentiated marketing can be identified at service offerings of Transport Companies, like Indian Railways offers trains that are Super fast, Express and Passenger giving option to travelers to travel in General category, Sleeper Class, AC etc. Similarly UTC (Uttranchal Transport Corporation) has Hi-Tech, Deluxe, Semi-deluxe and General buses plying various destinations within and outside the state. Even Universities offer distinct programmes in same field, based on market requirements. MBA programme of various universities can be a regular full time two-year programme, or a fast track one-year programme, or evening/Distance Learning to facilitate working professionals. is the process of assorting or categorization of consumers with similar or common interests, characteristics, wants, needs, patterns, preferences, consumption patterns, or purchase behaviour into homogenous groups.
MARKET SEGMENTATION

Market Segmentation as an element of marketing strategy recognizes the wisdom of specializing to suit the needs of a segment of the market rather than trying to be all things to all people. The underlying advantage of segmentation is that it provides an opportunity to closely understand the needs and preferences of the customer segments. Service providers can select the segments that they can best serve with the given resources. Being abstract service offerings are generally difficult to differentiate. In a highly competitive market, market segmentation often provides the opportunity of gaining competitive advantage through differentiation. Segmentation allows identification of specific requirements of this homogenous consumer group. Providers can these include features and elements in there offers that closely match the requirements of these groups. This then serves this as the basis of differentiation. McDonalds in India realized that the middle-income group is a cohesive society, with a lot of consideration for to family as a unit. McDonalds in India creates a family environment rather than a hangout joint and even differentiates itself as a family restaurant. Likewise, SAS (Scandinavian Airlines System) realigned its marketing focus to business class travel which otherwise is neglected. They provided highly customized facilities to business class traveler. Similarly, The American Express targeted the higher income, high-esteem traveler and entertainment consumer to differentiate in an extremely competitive credit card market.

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SEGMENTATION STRATEGIES

The service organization should use an approach that subdivides into groups that differ in some distinct fashion from one another in their preferences. Some principal segmentation alternatives are. Geographic Segmentation Demographic Segmentation Psycho graphic Segmentation Volume Segmentation Benefit Segmentation Technology Segmentation Geographic Segmentation Geographic Segmentation divides consumer on the basis of countries, regions, states, cities and towns. Example: A bank practices geographic Segmentation when it divides on the location of the new branch. Since a bank cannot clearly have the location elsewhere, it must carefully allocate its resources to meet the business goals. It does that by locating the new branch office in more promising geographic market area. For tourism location the areas transport network, which includes mass transit, and highway mix is important. The areas commerce mix in related to its orientation towards tourists, workers and residents also play a significant role i.e. tourists need in Agra are different from workers need in Agra and from residents in adjoining areas, because tourists are attracted to restaurants, workers to moderate eating places and residents to supermarkets. Demographic Segmentation Demographic Segmentation is the study of people in aggregate, including population, size, age, sex, income, occupation and family life cycle. Example: A bank establishes an executive banking group specifically for accountants, doctors and professionals. A bank that develops equity credit lines aimed at house owners with income more than Rs. 75000/- is targeting another specific demographic segment. Demographic Segmentation is used extensively in the banking, tourism and attractions fields. Many tourism-marketing stereotypes are built on demographic segmentation. Example: Museums are generally seen as being for older people while theme park are for younger people. Shopping is seen as popular activity with women, men are thought to prefer sight seeing and other attractions are being described as for families. Marketers have generally focused on demographic variables such as age, sex and family situations, relatively less attention has been given to other important variable such as race, religion, language and nationality.

Psycho graphic Segmentation Psycho graphic Segmentation is the process of dividing markets into segments on the basis of consumer life styles, social class and personality profiles. Example: A bank may identify the young professional in fast track as primary market for credit card sales. A bank may concentrate on conservative consumers who want to shield their savings by marketing them compulsory five year saving scheme. Lifestyle- this segment is based on peoples activities, interests and opinions (AIO). Marketers conduct several studies to understand consumer lifestyles and how a product/service fits in with the life styles and what type of promotional themes might appeal to lifestyle segment. Interestingly peoples life style influence all their decisions as consumers as they try to develop a life style which reflects their idea of how they want to be seen and which reinforces the way they see themselves. Advertisement is an attempt to reinforce the way you want to be seen. Example: Customers decisions on which tourist spot to go are as just as much part of this as the clothes they buy, motor car they drive and the magazine they read. But some key relevant consideration of lifestyle types to an attraction is health conscious and environmentally aware. Marketers have to position their organization or its offerings suiting the lifestyle of consumers. If an offering is a health club or fitness center or sports center, a marketer has to target a segment, which are health conscious members of the segment. Lifestyles are now shifting very fast. In fact, marketers are now relying more on life style marketing. The advertisements whether related to product or services are focusing lifestyle. Example: Fashion marketing professionals rely heavily on life style marketing. In fact, many outlets are being named life style stores. Social Class- Social class is a status hierarchy by which groups and individuals are being classified on the basis of esteem and prestige. It is the division of or ranking within, society based on education, occupation, and type of residential neighbourhood. Here the income is one of the classification factors. Social class can be classified as Upper Class Upper Middle Class

5 Lower Middle Class Upper Lower Class Lower Lower Class

Example: A young lawyers monthly income may be equal to that of a middle class foreman in a textile company, but they may have different family backgrounds, tastes and aspirations. Personality is the sum total of an individual enduring internal psychological traits that make a person unique. Few personality traits are, self-confidence, dominance, autonomy, sociability, defensiveness, adaptability and emotional stability. Individuals can be segmented on the basis of shared personality traits, which influence decisions as consumers in relations to service offerings. Personality Type how final consumers can be grouped. Example: One kind may be adventurous people going for snow trekking, skating and they may be few. A higher number of people at a theme park (say, Essel World) will be gregarious extroverts than you might find in archaeological museum. Volume Segmentation It is the segmentation based on usage rate, usage expense and brand loyalty. Amongst the uses they distinguish segments based on volume. Heavy Volume Medium Usage Light Usage Non-Users. Heavy Usage Segment is consumer group that account for a large proportion of goods or sales relative to the size of the market. In many businesses a small proportion of customers (say, 20 percent) generate large proportion of sales (say, 80 percent). This is called PARETO PRINCIPLE, which says 80 percent of profit comes from 20 percent of customers. Many marketers concentrate on retaining the consumers who make for the heavy half for their brand and encouraging the heavy half users of competition brand to switch. Example: in a bank 80 percent of saving volume is on account of 20 percent of consumers. In order to bring non-users or light users to the group of heavy users, marketers need to specifically target these groups. Light users are the potential targets for some. If ignored by firm targeting heavy users only light users switch to some one who cares. Once the light users characteristics are identified, the firm can devise strategies like giving low prices.

Benefit Segmentation Benefit Segmentation is the process of grouping the consumers into market segments on the basis of different benefits sought from the product. Example: For desktop publishing market, apple offers graphic oriented hardware and software delete, which provides the benefits of easy type setting to the users in the ordinary business environment. The computer games needed fast moving images. Therefore Atari provided sophisticated screen handling hardware. A bank may offer the benefits of after working hour appointment for upper income segment.
TABLE 1: MARKET SEGMENTATION VARIABLES GEOGRAPHIC Region City Density Climate DEMOGRAPHIC Age Family size Family life cycle North, East, South West, Northeast, Northwest, Southeast, Southwest, States and Union Territories. Towns, Cities, Metropolitan cities. Urban, Semi-urban, Rural. Northern, Southern, Northeastern, Northwestern. Under 5, 6-10, 11-16, 17-25, 26-35, 36-45, 46-55, 56-65, 66+ I, 2, 3, 4, 5, 6 + Young Single/ Young Married-No Children/ Young MarriedYoungest Child under 6/ Young Married-Youngest Child 6 or above/ Married with Children under 18/ Older, Married with children older than 18/ Older, Singles/ Others. Male/ Female Below Rs. 10000/ Rs. 10001- Rs. 20000/ Rs. 20001- Rs. 30000/ Rs. 30001- Rs. 40000/ Rs. 40001- Rs. 50000/ Rs. 50001- Rs. 100000/ Rs. 100001 and above Employees, Businessmen, Agriculturist, Professionals, etc. Primary, Secondary, Undergraduate, Postgraduate. Hindu, Muslim, Christian, Sikh, Jain, Buddhist, and so on. Lower Lower, Middle Lower, Lower Upper, Middle Lower, Middle Middle, Middle Upper, Upper Lower, Upper Middle, Upper Upper. Principle oriented, Status oriented, Action oriented Dogmatic, Inner Directed, Social Oriented, Variety Seeker, Materialistic. Regular, Special. Quality, Economy, Speed. Non-User, Ex-User, Potential-User, First Time User, Regular User. Light User, Medium User, And Heavy User. None, Medium, Strong, Absolute. Unaware, Aware, Informed, Interested, Desirous, Intending to buy. Enthusiastic, Positive, Indifferent, Negative, Hostile Product.

Gender Income Occupation Education Religion Social Class PSYCHOGRAPHIC Lifestyle Personality BEHAVIOURAL Occasions Benefits User status Usage rate Loyalty status Readiness stage Attitude

7 Technographic Segmentation The market for technology related services has been on tremendous rise during the last two decades. Marketers are focused on identifying the customers groups that have the willingness as well as the ability to use the latest technology. Forester Research Incorporation has developed a ten-category segmentation scheme that is also known as techogrality. Identification of segments was based on the interaction of three variables. These are attitude towards technology, application of technology and the financial position of consumers. Table 2 shows nine segments identified by the Forester Research Incorporation. The tenth group is called sidelined citizens. The sidelined citizens are those individuals who have no interest in all technology.
TABLE 2: 9 SEGMENTS IDENTIFIED BY FORESTER RESEARCH INCORPORATION Career Family Entertainment Fast Forwards New Age Nurturers Misuse Potatoes These customers are the biggest Also big spenders but focused They are like the online world spenders, and they are early on technology for home such as for entertainment and are adopters of new technology for a family personal computer. willing to spend for the latest in home, office and personal use. technology.
O P T I M I S T S

Techno-strivers Use technology from cell phones and pagers to online service, primarily to gain a career edge.

Digital hopefuls Families with a limited budget but still interested in new technology.

Gadget grabbers They also favour online entertainment but have less cash to spend on it. Media junkies Seek entertainment and cant find much of it online. Prefer TV and other online media.

P E S S I M I S T S

Hand-shakers Traditionalists Older consumers, typically Willing to use technology but managers who dont touch their slow to upgrade, not convinced, computers at work; they leave that upgrades and add-ons are that to younger assistants. worth paying for. Sideline citizens: Not interested in technology.

SEGMENTING SERVICE MARKETS The process of segmenting the service market is a six-step approach: 1. Identify different needs, attitudes, behaviours, and demographics across a variety of potential customers. 2. Identify distinct segments of customers with similar purchase behaviours. 3. Create a profile describing each segment. 4. Size each segment. 5. Select target segments. 6. Develop approaches for reaching target customers. The ultimate goal is to select customer segments that company dominates, and then tailor all aspects of the organization and its services to be number one with the right customers. For better understanding, let us hypothetically segment overnight delivery market for corporate customers.

STEP 1: Identify different Needs, Attitudes, Behaviours, and Demographics The first step in segmenting service markets is to develop comprehensive set of customer needs, attitudes, behaviour and demographic characteristics across a representative cross section of all potential customers. Most company only focuses on demographics (e.g., customer size, location and industry) and behaviours (e.g., frequency and amount of purchases). In service a company needs to capture all four of these dimensions in order to accurately group customers into different segments where customers within each segment have similar purchase behaviour? Only then the company will be able to reach these customers in cost effective ways.
1. RESEARCH Collect responses to research on needs, attitudes, behaviours and demographics 2. ANALYSIS Identify distinct customer segments that appear similar 3. SEGMENT PROFILING Define and describe segments based on demographics and other information useful for target marketing 4. SEGMENT SIZING Estimate the size of each segment by percentage of population and revenue potential 5. SEGMENT SELECTION Apply criteria and select most attractive segment 6. REACHING THE SEGMENTS Develop strategies for reaching segments using various tools FIG: APPROACHES TO SEGMENTING SERVICE MARKETS

Customer needs are requirements or desires that motivate the use of particular service. They are often expressed as benefits the customer is looking for or expecting. Two aspects of customer markets that are unique to service markets are: 1. The complexity of customers needs. For example, multinational companies have much more complex travel requirements than Indian companies. 2. The importance of particular service to the customer or the customer business. For example production intensive companies need timely delivery of parts to keep factory running. In an overnight delivery market, customers may have different intensity of need for requirement such as: a) Speed and precision of delivery (same day, next day, two day, etc.) b) Geographic coverage

9 c) d) e) f) g) h) Convenience of pick-up and drop-off. One time reliability. Deliver days (weekdays, weekends) Tracking of packages Size of packages Centralized billing.

Customer attitudes are the beliefs and preferences of a particular customer. Attitude includes preferences towards certain brands or services as well as beliefs about what is important to that individual. Two unique attitudes to look for in service markets are: 1. The propensity to be reactive verses proactive in seeking services. For example, attitudes towards automotive repair or medical services may be reactive: wait until there is problem: or proactive: perform preventive activities to avid a problem. 2. The attitude toward establishing longer-term integrated partnerships with a few service partners verses shorter term, arms length vendor relationships with a variety of service vendors. For example, attitude toward commercial lenders vary significantly. Some companies view their lender as an integral financial partner in their business and select a lender based on wide variety of characteristics such as service levels, breadth of service offerings, etc. others view their lender as a vendor of a commodity service and more likely to select a lender solely on the basis of price. Customer attitudes in the overnight delivery market might be assessed on following dimensions: a) Beliefs about different brands of overnight delivery services b) Preference for different overnight delivery companies c) Attitudes towards saving money d) Attitude towards risk tolerance (e.g., guaranteed delivery) e) Attitude toward customer service Customer behaviour is specific actions customers have taken that can be tracked or measured. Included markets are: Past products or service purchased Average monthly usage level of certain services Propensity to switch service providers (e.g., loyalty) Membership of certain organizations Subscription on certain magazines Use of certain distribution channels, access methods, or shopping outlets. A unique behaviour to look in for service markets is the inclination of certain customers to do it themselves verses hire someone else to do it for them. This is critical dimension to investigate when segmenting business-to-business service markets such as information technology services and consulting services. In the overnight delivery market, customers behaviours might include:

10 a) Switching across different providers b) Degree to which selection of an overnight delivery company is centralized or decentralized. c) Number of packages sent each month, by speed of delivery required d) Most frequent locations mailed to e) Types of items send by overnight delivery f) Subscription to certain publications g) Membership in certain associations h) Purchase and use of certain services (fax behaviour, videoconferencing usage, travel patterns, etc.) Customer demographics and characteristics typically available to the public and commonly tracked for the purposes of classifying customers. In consumer markets these might include age, income, household size, ethnicity, and geographic location. In the overnight delivery market for corporate customers, important demographic characteristics might include: a) Company revenues b) Number of employees c) Number of locations d) Primary industry classification of the business e) Locations of the customers served f) Percent of business in international markets This first step in understanding customer needs, attitudes, behaviours, and demographics is the most critical one in segmenting the service markets. If a company doesnt meticulously understand the breadth and depth of each of these dimensions, their segmentation will ultimately be damaged. The most effective approach for developing a comprehensive list of customer needs, attitudes, behaviours, and demographics is talking with customers in an open-ended way. This can be done through one-to-one interviews small group discussions (such as focus groups), observing customer behaviours, and other quantitative research methods. The most common mistakes the company make at this stage is to jump right into conducting quantitative research prior to really understanding their customers along multiple dimensions. If a company misses an important dimension that explains customer purchase behaviour, their segmentation will suffer. STEP I1: Identify distinct segments of customers with similar purchase behaviours Step II involves analyzing quantitative asking customers about their needs, attitudes, behaviours, and demographic characteristics. Standard statistics techniques can be used to determine the appropriate sample size and mix of potential customers. For the hypothetical overnight delivery example, the sample might include the mix of companies along the following dimensions: Size-large, medium, small, home office Industry-industrial, high technology, retail, etc. Number of locations-many, few, one Geographic coverage-domestic, multinational, global

11 Customer status-current customers, non-customers.

After the data has been collected, standard stastical techniques can be used to determine distinct segments of customers. Typically, a few variables will be responsible for highlighting the key differences between each segment. Segmentation of overnight delivery market might result in four segments that primarily differ in terms of their complexity of needs (including multinational service), risk posture, and price sensitivity. Figure 6.2 offers a simplified view.

RISK AVOIDING

NOT VERY SENSTIVE

Worrie s
RISK POSTURE

Partner s HandHolder s
PRICE SENSTIVITY

Cost controller s
RISK ACCEPTING

HIGHLY SENSTIVE COMPLEXITY OF SERVICE NEEDS FIG:

SEGMENTATION MAP- OVERNIGHT DELIVERY EXAMPLE

Smaller companies with limited budgets may not have the resources to conduct the type of research described in step II. But that is not a good excuse for skipping the whole process of segmenting the market and selecting target customers. If any thing, smaller companies need to know about their target customers even better than the big companies do because investments must be highly focused. As small company, your best approach is to: Conduct the step I qualitative research as thoroughly as possible within the available resources Leverage your insight from step I with any publicity available data that you can find to develop hypothesis about how customers might segment. Develop segment profiles based on the qualitative data that you have Refine your segmentation, profiles and target segments over time as you gain new insight over your customers

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STEP III: Create a profile describing each segment. The purpose of step III is to describe each segment so we can create a mental picture of what the customers look like in each segment. A mental profile should give us a brief over view of each segment highlighting its important characteristics. Components of a service profile might include the following: Primary needs Size of segment (step IV describes this process) Purchase decision maker (e.g., title/function within a company, head of household, primary shopper, etc) Decision making criteria (how one service provider is selected over another) Key attitudes-about your company, competitors Usage and switching behaviour-frequency and amount of usage, number of different service providers used Demographic characteristics Segmenting profiles are developed by analyzing the quantitative customer survey data, and selecting those variables that: (1) best describe each segment, and (2) are unique to each segment. Figure 6.3 below shows sample segmentation profile for the overnight delivery market (simplifying for present purposes).
TABLE: SEGMENTATION PROFILE-OVERNIGHT DELIVERY EXAMPLE PARTNERS HAND HOLDERS WORRIES COST CONTROLLERS Basic needs, switch based price

Description

Sophisticated logistics needs and extensive internal operations

Complex logistics needs but internal capabilities limited

Broad service

Basic need, no room for error

Top needs

Logistics

Precise

Manage

cost

outsourcing
Worldwide

offering
Convenient

delivery time
Tracking

network
Training

locations
24-hour support

capabilities
High reliability

Demographics Industries Employees Locations

Transportation Largest Worldwide

Manufacturing Large Nationwide/

Legal Varied Several

Retail Small Few/one

worldwide
Responsiveness Technical Reputation Price

Purchase criteria

Technical

capability
Range of

capability

offerings

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Purchase behaviour
Centralized decisions by the logistics Centralized decisions by the logistics Favourable view of the company Decentralized decisions buyer varies Moderate perceptions of the company Decentralized decisions by purchasing Worst view of the company.

Attitude towards our Best view of the company company Other characteristics Risk posture Complexity Importance of logistics
High High Avoid

Moderate

Avoid

Accepting

Low Moderate High Low Low Low

STEP IV: Size each segment. A critical variable to examine prior to determining which segments to pursue is the size of each segment. It is important to look at each segment size from four different perspectives: 1. Total number of potential customers in each segment. What percent of the total population of potential customers falls into each segment? This number can be estimated from quantitative survey by analyzing the percent of customers mapping in each segment, then projecting this on the total population in absence of quantitative research, a marketer must find other variables that can form the basis for sizing each segments population should also be considered. 2. The total rupees being spent in each segment. What is the annual revenue potential of each segment? This number is estimated by 3. The total profits available in each segments. What is profit-potential of each segment, after taking into consideration price sensitivity and cost to serve each segment? If there are differences in cost to serve, the average size of purchase, or the price sensitivity of each segments, then profit per customer will vary by segment (and therefore the total profits available in each segment). 4. The potential revenues from new products and services in each segment. What is the propensity of each segment to purchase new services? A quantitative segmentation study can test the reactions to several high-potential service and product concept. Beyond the revenue and profit potential of new products and services, this information can be used to understand which segments are more receptive initial targets for new things. Service companies can make costly by not considering all the four sizing variables. For example, some segments may contain many potential customers, but each customer spends relatively little. On the contrary some segments may spend a lot on services, but remain extremely price sensitive. Some segments may be very costly to serve. Finally some segments may appear small on the surface but offer great future potential because

14 of their receptivity to new products and services. Table 6.2 shows a simplified example of sizing the different segments of the overnight delivery market.
TABLE: SEGMENT SIZING-OVERNIGHT DELIVERY EXAMPLE PARTNERS HAND WORRIES HOLDERS 5% 25% 20% Percent of all
companies Average spend company Estimated market size total annual each

COST CONTROLLERS 50% Rs.10, 000

Rs.100, 000

Rs.40, 000

Rs.50, 000

Rs.1.7 billion

Rs.3.4 billion

Rs.3.4 billion

Rs.1.7 billion

STEP V: Select target segments. After profiling and sizing each segment, we are in a position to select the most desirable segments to serve. Selecting target segments is a two-step approach: 1. Establish selection criteria. With a cross-functional management team, agree up front on a criterion that would make the customer segment more attractive to pursue. Typical criteria to consider include the following: Strategic attractiveness-fit with overall business strategy. How do these customers and their needs fit with our company direction and identity? Customer attractiveness-characteristics of customers. How intense are their unmet needs? How frequently and how much do they purchase? How loyal they are? How price sensitive they are? Competitive attractiveness- number and size of key competitors. Can we become the dominant player in the segment? Can we differentiate or insulate our self from competition? Financial attractiveness-segment size (number of customers, revenue per customer and total revenue potential, profit per customer and total profit potential). Can we earn sufficient revenues and profits from the segment to make it worthwhile? Technical and operational attractiveness-ability to cost effectively serve the needs of the segment. What capabilities are required to serve the segments? Can we leverage the same infrastructure over multiple segments? Future growth attractiveness-growth rate, trends, and receptivity to new things. Will the segment become more attractive or less attractive over time? 2. Apply the criteria, evaluate each segment, and select the right customer segments to pursue. After establishing the criteria, evaluate each segment against the criterion. Again, a cross-functional management team is often better equipped to perform this analysis than any one individual or functional area. In selecting which segments to pursue, service companies should also consider the following trade-offs regarding the decision to serve only one segment verses serve several segments?

15 Is any one segment attractive enough and large enough that the company can focus solely on that segment alone and still achieve their goals? Will their resources be adequate to dominate multiple segments? If different segments of customers interact with one another during their service experience, will this interaction make sense to each of these customer segments? Will any customer feel out of place? Will the front line employee be able to effectively serve the needs of each customer segments? Will the company have to recruit and train differently to effectively serve each segment? If the company needs to serve multiple segments, which contributions of segments lend themselves to economies of scale? Specifically can the company leverage the same infrastructure in serving several segments? Can the company leverage their brand identity and communication methods across multiple segments or they will need to create the separate brand identities and use different communication tactics to reach each segment?

STEP VI: Develop approaches for reaching target customers. Where most segmentation approaches fall short is that they do not provide ability to efficiently identify and reach the target customers. After spending millions, some service companies have found themselves with a slick-looking segmentation-interesting names given to the segments, a description, a psychographic profile, etc.-but have no idea of how to find these customers. Their efforts end up being, for the most part, worthless. They cant organize to attract and serve these customers if they dont know who the customers are. How do you find your target customers? A sound segmentation approach should be able to answer the following questions for each target segment: What do your customers read? What television program they watch? What trade shows do they attend and what associations do they belong to? What outlets do they typically purchase from? What methods of purchase do they prefer (phone, internet, in person)? What other similar services and service provider do they use? What segment does each of your current customers belong to? Can you mark your customer database with the information? What mailing lists should you buy that would have a high occurrence of your target customers? If these questions are built into segmentation process up-front, then target segments can be efficiently reached after being selected.

TARGET MARKET

16 Target Market is a group of customer for whom a seller designs a particular marketing mix. Guidelines for selecting Target Market i. Consistent and meets organizational goals. Example Tourism in the organization, which is leading in the group tours, cannot suddenly target individuals. ii. Consistent with organizational resources. Example A small tourism organization may be successful in targeting corporate customers with six figure salaries who need high level of personal care. It will be highly expensive for this organization to compete with an organization, which is catering for mass market. Should generate not sufficient sales volume but profit volume. Example- The courier service that targets the cost conscious consumers by offering them heavy reductions might find itself doing brisk business but loosing money on 80percent of accounts. Should have competitors small in number and size. Example- If an organization aims at targeting a market, which is already saturated by competitors customers. This is difficult task if the customers needs are already fulfilled.

iii.

iv.

Approaches to Target Market There are 3 approaches to target market 1. Undifferentiated (mass market) 2. Differentiated (multiple segmentation) 3. Concentrated Table: Target Market Approaches Factors Undifferentiated Representation Limited number of service products with one brand for many type of customers. All possible outlets. Differentiated Concentrated

Service Product

Distribution Promotion Strategy Emphasis

Distinct brand for One brand, which each customer has been aimed at group. one consumer group. All suitable outlets All suitable outlets. differ by segments. Mass Media All suitable media- All suitable media. differ by segments. Appeal to a large Appeals to two or Appeal to one number of consumers more distinct market specific consumer

17 via a uniform broad segments via group via a highly based marketing different marketing specialized but programme. plans catering to uniform, marketing each segment. programs. Broad range of Two or more well One well defined customers. defined consumer consumer group groups FLIM FARE BANKS TOURIST House holds OPERATOR (With luxury cars loans. aiming at upscale Education segment for sight loans. seeing)

Target Market Example

SERVICE POSITIONING Positioning means projecting the image of the product or service in such a way that consumers perceive its value distinctively from that of competitive offers. It intends to influence the perceptual process of the consumer against a product or service. Consumers may at times be indifferent and not respond to a given marketing stimulation, for its being not in accordance to his needs. Thus, positioning is required right from drawing consumer attention to influencing the consumer to take a positive decision, i.e., in purchase of service.
Positioning is what you do, not to a product but what you do, to the minds of the prospect.

Why Positioning? The objective of positioning is: a. Create distinct place of the product or service in the minds of potential customers. b. Provide competitive edge to the product or service. c. Place an intangible service with a more tangible frame of reference. d. Helps both services development and redesign of existing services. e. Follow consideration of competitions possible moves and responses so that appropriate action can be taken. f. Gives target market, the reason of buying your services and then design the whole strategy. g. Provides guidelines for the development of the marketing mix with each element being consistent with positioning. Positioning Services The process of designing a service has an impact on the image of the service on the mind of the consumer. Image is believed to be the sum of beliefs, attitudes and impressions that a person or group has an object. Different types of images are: Current Image: The way different groups see a company. Mirror Image: The way a company thinks different groups see it. Wish Image: The way that a company would like to be seen by different groups.

18 Positioning is used to fill the gap created due to the mismatch between wish image and current image. Effective Positioning Products/Services are nothing but customer solutions. They focus on delivering them benefits. To be effective in marketing, the positioning must promise the benefits the customer will receive and carter the expectation and offer a solution to customer problems, which is better compared to competitors. The positioning influences Employees Attitude Customer contact employee interaction Policies and procedures of organization Responsiveness to solving customer problem. And host of other related to service problem. There are two tests for effective positioning The position of an organization or its offering must be believable in the customers mind The promise must be delivered conveniently and constantly over a time. Positioning Process The various steps of developing effective positioning are: 1. Market Positioning 2. Psychological Positioning a. Objective Positioning b. Subjective Positioning 3. Approaches to Positioning A service company can use any of the following themes for positioninga. Service Attributes- A company can position the service attributes such as facilitating services and supporting services. b. Service Benefits- This strategy focuses on the distinctive benefit the consumer can get with the use of the service. c. Service Application Positioning- The service company makes the consumer identify the consumer need or desire or suitability of the service offered to satisfy his/her need or desire. d. Service User Positioning- A Service Company may identify the target group and position the service as best for them. e. Competitive Positioning- The positioning may be against the competition or away from it. f. Quality Positioning- The positioning focuses on quality leadership of the firm. g. Price Positioning- The positioning is to communicate the best value for the price the consumers pay. h. Leadership Positioning- This communicates to the consumer that the service company is the major shareholder in the market and enjoys the acceptance of the majority. Some companies may focus on innovative leadership.

19 i. Excellence Positioning- The positioning is on the performance and the efficiency of the firm. Service firm should study continuously the effectiveness of their positioning strategy in influencing the consumers mind. Based on this they can draft the futuristic strategies.