Chapter-2

1) What is the Market Market Segmentation? Why Segmentation and targeting?

Answer:According to Philip Kotler-Market segmentation is the process of dividing market into
distinct homogenous groups of buyers who might require separate Product/ Marketing Mix
needs.
Where any buyer group may conceivably be selected as market target to be reached with
distinct marketing mix.
Why Segmentation and targeting? Most markets are heterogeneous
E.g. Rural, Urban, Educated, Uneducated, Rich, Poor Population growth has slowed and
more product
markets are maturing.
E.g. Edible oil Fortune, Safola
Changing social and economic forces
Trend towards micro-segmentation
E.g. Cardiologist, Paediatric Cardiologist
Highly focused marketing programs.
2) Explain the Approach to Segmenting a Market.
Answer:
1) -Identify segment variables and segment the market
E.g. Airline wished to attract non-flyers
(Segmentation variable: User Status)
Non-flyers
Fear of flying, indifferent, positive towards flying but not yet flown (variable:
attitude)
People with positive attitude
Having money
Not having enough money (Variable: Income)

High Income people with positive attitude towards flying becomes viable Target segment
for Airline
2) Develop profiles of resulting segments
Each segment is profiled in terms of distinguishing Attitudes
Behaviour
Demographics
Psychographics
Media consumption habits
Segmentation Class Exercise:
Ready to Cook Wheat Flour for Non-users

Bases of Segmentation- Consumer markets

Geographic : continents, countries, states, regions etc.
A company may decide to operate in one of more geographic segments.
E.g. Airlines, Restaurant, Beauty & Spa, Housekeeping services etc.
Demographic : age, gender, family size, income, occupation, education, race and ethnic
origin etc.
Most popular basis of segmentation
Because consumer needs/wants & preferences are highly associated with Demographics
E.g. Apparel, Medicines, Food products (large pack), Oil of Olay
Psychographic : Divides buyers into different groups based on
social class
Lifestyle
personality characteristics
E.g. Car, Fashion Accessories, Under Garments
Behavioural Segmentation
Divides buyers into groups based on their knowledge of, attitude toward, use of, or response
to a product.
Behavioral Variables: Occasions, benefits, user status, usage rate, buyer readiness stage
E.g. Insurance Policy, LED TV, Gear, Pears, Multi-grain AATA, Complan Health drink

3) Explain Steps in segmentation process. What is Requirement of Effective

Segmentation.
Answer:

Find Segment attractiveness using predetermined segment attractiveness criteria

(such as market growth, level of competition and market access), determine the
overall attractiveness of each segment.

Identify Segment profitability determine segment profitably. High value product, layal
customers, niche, unique distribution channel, low competition segments more profitable
Final Segment evaluation Evaluate the segment scheme based on the results of the
previous steps.
-Requirement of Effective Segmentation
1. Measurability Degree of size and purchase power
2. Substantiality Large & Profitable
3. Accessibility Should be in position to be reached
4. Actionability Marketing programs can be implemented

4) Define Market Targeting. selecting target marketing.

Answer:Market Targeting
Target marketing requires evaluating the relative attractiveness of various segments and the
firms mission and capabilities to deliver what each segment wants, in order to choose which
segments it will serve profitably.
In a nutshell selecting viable and profitable segments for marketing action among available
segments
Selecting Target Segments
By evaluating segments
1. By segments Size & Growth (Market attractiveness)
Depends on companys requirements
2. Segments long-term attractiveness (Competitive Attractiveness)
Porters Five forces Model

5) Factors underlying market attractivenss and competitve position

Answer.

Market attractiveness factors

Are there unmet needs we can satisfy?
Market segment size and growth rate - market potential in units, revenue, number of
prospective customers
- growth rate in units, revenue, number of prospective customers
-can the target segment expand to related segment later
Macro trends: are they favourable, on balance?
- demographic, socio-cultural, economic, technological etc.
Competitive position factors
Opportunity for competitive advantage
- can we differentiate?
- Can we perform against critical success factors?
- Stage of competing products in PLC Capabilities and resources
- Management strength and depth - Brand image
- Relative market share
Attractiveness of industry in which we would compete
- Threat of new entrant
- Threat of substitutes
- Buyer power
- Supplier power, Industry capacity

Step 2 & 3: Assessing the Distance Runner Market Segment in 1964

6) Define Differentiation & Positioning. What is Competitive Differentiation?

Answer: - An act of designing a set of meaningful attributes to distinguish companys offer
from competitors

 How do buyers define value and choose among suppliers ?

How can firms identify potential sources of competitive differentiation and advantage ?
What are major differentiating attributes available to firms?
Differentiation
Total customer
Value

Total Consumer
price

Product
Value
Service
Value
Personal

Tools for Competitive Differentiation

a. Product Differentiation
o Features washing
o Performance mobile phone
o Conformance
o Durability
o Reliability
o Repairability
o Design / Style
b. Service Differentiation
o Delivery
o Installation
o Repair
o Mentainence
o Warranty
c. Personnel Differentiation
Difference made by people
o Competence
o Courtesy
o Credibility
o Reliability
o Responsiveness
o Communication
(For. E.g.)
Airline
McD
MR of Pharma CO

Time Cost
Effort Cost
Money Cost
Psychic Cost

 Store salesman
d. Image Differentiation
o Symbols (Versace)
o Colour / Design(Heineken)
o Atmosphere( Shoppers stop)
o Event ( Redbulls)
7) What you mean about positioning, Define with example.
Answer)- An act of designing and communicating the companys
offer so that it occupies a DISTINCT & VALUED place in the target customers mind.
NOT what you do to product
Is what you do to customers mind
Important Criteria
Select a differentiator
o
o
o
o
o
o

Important
Distinctive
Superior
Communicable
Affordable
Profitable

Example
Huggies
Fair &
Handsome
Dollar

8) What is B2B (Industrial) marketing ? What is the difference?

Answer) What is the difference
Industrial marketing
B2B marketing,
Business Marketing
Organizational Marketing
Institution Selling

Major B2B sub-Sectors:

Ball bearings

Industrial hardware

Communication equipment

Heavy engineering

Cars

Glass and glassware

Two wheelers/three wheelers

Machinery manufacturers

Commercial vehicles

Defence and air-conditioning

Automobile ancillaries

Machine tools and tool rooms

Electronic components and equipment

Electrical equipment

Semi-conductors
Ship building

Fasteners

B2B V/s Consumer Markets

AREAS /
CHARACTERISTICS

INDUSTRIAL MARKETS

CONSUMER MATKETS

Market

GEO Concentrated
Few Buyers

GEO Disbursed Large no. Of

Buyers (Mass Markets

Products

Technically Complex
Customized

Non Technical
Standardized

Service

Very Important

Somewhat important

Channel

More direct Multi Channel

Indirect Few Channels with

many layers

Buyer Behavior

Various Functional
specialists involved Mainly
Rational buying decisions.
Interpersonal relationship
between buyers and sellers.

Family members involved

Physiological / Psychological
Social need based buying
decisions Non Personal
Relationship.

Promotional

Importance to personal
selling

Importance to Advertising.

Pricing

Competitive bidding /
Negotiated prices

MRP

9) Define Purchasing Orientations of Business Buyers.

Answer)Business buyers/ Industrial customers follow one of the three purchasing orientations:
Buying
Procurement
Supply chain Management.
Buying Orientation :
selecting lowest price supplier
gaining power over suppliers and avoiding risk of new suppliers
It has a Short-term focus.
E.g. Atorvastatin from Hetero by BMS
Vegetables by Hotels

Purchasing Orientations of Business Buyers

39
Procurement Orientation
long-term focus. It achieves the objectives of quality improvement and cost reductions by
following the practices of:
collaborative relationship with major suppliers
working closely with other functional areas in the company
E.g. Automobile ancillaries, Glass bottle manufacturers
10) Industrial Buying Decision Process.
Answer)Marketers must study this for developing effective marketing strategy
In Consumer Marketing
Decision Maker: Household / Individual consumer
Buyer makes buying decisions based on certain mental stages (e.g. Microwave Oven)
Problem (Need) Recognition
Information Search
Evaluation
Purchase decision
Post Purchase Behavior

Industrial Buying Decision Process

44
Marketers must study this for developing effective marketing strategy
In Industrial Marketing
Decision Maker(s):
Group of individuals /Position holders
Buying Decision making process is
Observable
includes sequential activities / stages / phases
Joint Decisions

Purchasing Orientations of Business Buyers 40

Supply chain Management Orientation Here, the firm focuses on improving the value
chain from raw materials to end users. This is achieved by
delivering superior value to end users
outsourcing non-core activities
and supporting collaborative relationships with major suppliers.
E.g. McD

Purchasing Practices of Business Customers

41
Purchasing in commercial enterprises
Involve Technical & Commercial departments
Major Tasks / Procedure: identifying, negotiating, selecting suppliers, building relationship
Purchasing to improve operational efficiency & contribute to firms competitive advantage

42
Purchasing in Govt. units
DGS&D agency finalizes rate contracts for standard products for Govt. units.
Main Tasks / Procedure : Registration of the firm & its Products, Tender Advertisements,
no negotiation in Open tenders, negotiations done in closed / limited tenders.
Orders Finalised on lowest bidders (suppliers offering Lowest prices / Landed Costs)
11) PHASES IN INDUSTRIAL BUYING DECISION MAKING PROCESS.
Answer)PHASE 1 :- Recognizing A problem / need
PHASE 2 :- Determining Characteristics & Quantity of needed product / Service
PHASE 3 :- Developing specifications of the product
PHASE 4 :- Searching & Qualifying Suppliers
PHASE 5 :- Obtaining & Analyzing suppliers offers
PHASE 6 :- Evaluating & Selecting Suppliers
PHASE 7 :- Selecting an order routine
PHASE 8 :- Post Purchase evaluation
12) Buying Situations / Buy-classes.
Answer)- 1.New Task / New Purchase
2. Modified Re-buy / Change in supplier
3. Straight Repeat Purchase
Each of these situations would have different implication for Marketers & Buyers
1. New Task / New Purchase :
buyers have limited knowledge and experience of the new product/service
More information is obtained/Sought
More people are involved as risks are more
Decisions take longer time
2. Modified Re-buy / Change in supplier :
when the firm is not satisfied with the performance of existing suppliers, or
there is a change in product specifications
3. Straight Repeat Purchase :
Such decisions are routine

Less risks and less information needs

Can be taken by junior executives
E.g.: Consumables
Towels in a hotel
Aluminum sheets for car body maker
Compressors for refrigerator manufacturer
13) Buying Center roles & key members 50
Answer)- Roles of Buying center members are
Initiators
First recognize problem / need
Any individual or group in buying firm often users
Buyers
Carry out purchase activities.
They are purchase officers / executives
Buying Centre ??
Its Role
User
Any person who uses the product / service
Influencers
Influence buying decision.
Technical people are often key influencers.
Roles of Buying center members are
Deciders
Make buying decisions
Senior executives are deciders for high value & complex products
For straight re-buy/routine purchase, mid level purchase officer can decide
Gatekeepers
They control / filter information & meetings with buying center members
Often P.A. / Junior person attached to purchase head is the gatekeeper
14) Identifying key members of buying centre
Answer)- Sales / Marketing persons must identify important members of buying centre

Buying centre
It is also called purchase committee , buying committee or decision making unit
consists of individuals and groups
who take part in buying decision making process,
have common objectives & share common risks.

Members of buying centre are:

Technical persons
Represent design, production, operations, maintenance, Q.C., Industrial Engg. Dept.
Purchasers / Buyers
Purchase / Materials dept. persons.
Accounts / Finance persons
Marketing persons
Top management persons (G. M. & above)

15) Organizational Buyer Behaviour.

Answer)Industrial / business buyers are influenced by many factors. Most important factors are:
Organizational factors / task oriented objectives
best product quality, lowest price, dependable delivery
Personal factors / Non-task oriented objectives
good increments, promotion, Job security, personal favors.
When suppliers offers are similar, buyers can satisfy organizational objectives from any
supplier. Hence, personal factors become important.
However, when suppliers offers differ substantially, buyers give importance to
organizational factors to satisfy organizational objectives.

Many models have been developed to explain organizational buying behavior.

One of the comprehensive models is the Sheth model, described below.
The Sheth model of industrial buyer behavior focuses on:
Psychological aspects of individual buyers (Component 1)
Conditions causing joint decision making (Component 2)
Conflict among those involved in decision process & resolution of conflict (Component 3).
Situational factors include economic conditions, labour disputes, mergers & acquisitions.
The model does not explain their influence on buying process

Seth Model of Industrial

Buying Behaviour
Component (1)

Component
(2)

Differences
among individual
buyers caused by
factors :
Background of
individuals
(Education, role
& life style).
Their information
sources. Active
Search Perceptual
Distortion
Satisfaction with
past purchases

Variables that
Determine if
buying decision is
autonomous or
joint : A) Product
Specific Factors :
Time Pressure
Perceived Risk
Type of Purchase
B) Company
Specific Factors :
Company Size
Company
Orientation Degree
of Centralisation

Component (1)

Componen
t (3)
Methods used
for conflict
resolution in
joint-decision
making
process :
Problem
Solving
Persuasion
Bargaining
Politicking

Situational Factors

Supplier or
Brand Choice

Example 62
Real Good Chilled & Yummies chicken at D-Mart
Owner Rakesh Jhunjunuwala
Purchase Manager Raja Reddy
Store Manager (Vashi) Shefali Jain
Merchandiser Sneha Ghole
Company Salesman Shambhu Nath Verma
Role Play (Buyer behaviour)