Chapter 6

Marketing Strategy

Chapter 6

Marketing Strategy Decisions

Chapter 6

Market Segmentation Strategies

Mass Marketing Strategy Market Segmentation

Multisegment Strategy Market Concentration Strategy Niche Marketing Strategy Customized Marketing Strategy

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Mass Marketing Strategy

Product

Price

Distribution

Promotion

Single Marketing Mix

All Customers in the Market

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Mass Marketing Strategy

Mass marketing (or undifferentiated marketing) is aimed at the total market for a particular type of product.
Companies that adopt mass marketing assume that all customers in the product market have similar needs, and that these needs can be reasonably satisfied with a single marketing mix. This marketing mix typically consists of a single product (or, in the case of retailers, a homogeneous set of products), one price, one promotional program, and one distribution system.

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Market Segmentation
Market segmentation involves dividing the total market into groups of customers having relatively common or homogeneous needs and attempting to develop a marketing mix that appeals to one or more of these groups.
This approach may be necessary when customer needs are similar within a single group, but their needs differ across groups. Through research, firms can identify the needs of each market segment and create marketing mixes that best match those needs and expectations. There are a variety of factors that can be used to divide markets into homogeneous groupings, but most fall into one of three general categories:
State-of-being segmentation divides markets into segments using demographic factors such as gender, age, income, and education. State-of-mind segmentation deals with how consumers think and feel. State-of-being and state-of-mind segmentation are really surrogates for the true issue in market segmentation, benefits sought.

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Multisegment Strategy
Product

Price

Distribution

Promotion

Product

Price

Distribution

Promotion

Multiple Marketing Mixes

More Than One Market Segment

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Multisegment Strategy
Firms using the multisegment option (or differentiated marketing) seek to attract buyers in more than one market segment by offering multiple marketing mixes that will appeal to more parts of the total market.
The firm can increase its share of the market by responding to the heterogeneous wants and desires of different segments or submarkets. If the segments have enough buying potential, and the product is successful, the resulting sales increases can more than offset the increased costs of offering multiple marketing mixes.

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P & G Segmentation - Detergent Market

53% market share of the $3.2 billion market
ARIEL - tough cleaner ??? IVORY SNOW mild, gentle soap for baby clothes DREFT - a clean you can trust SOLO - liquid detergent with fabric softener ERA - builtin stain remover

TIDE - Tides in, dirt out

CHEER - all temperature Cheer BOLD - cleans, soften,and controls static

GAIN freshens like sunshine

DASH attack tough dirt

OXYDOL makes clothes bright

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Market Concentration Strategy

Product

Price

Distribution

Promotion

Single Marketing Mix

Focused on a Single Market Segment

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Market Concentration Strategy

Firms using the market concentration approach focus on a single market segment.
The main advantage of market concentration is specialization, as it allows the firm to focus all its resources toward understanding and serving a single segment. However, by "putting all of its eggs in one basket," the firm can be vulnerable to changes in its market segment, such as economic downturns and demographic shifts.

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Niche Marketing Strategy

Product

Price

Distribution

Promotion

Single Marketing Mix

Focused on a Small Niche Market Segment

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Niche Marketing Strategy

Niche marketing narrows the market concentration approach even more and focuses all marketing efforts on one small, well-defined market segment that has a unique, specific set of needs. The key to niche marketing is to understand and meet the needs of target customers so completely that, despite the small size of the niche, the firms substantial share makes the segment highly profitable.

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Customized Marketing Strategy

Product

Price

Distribution

Promotion

Product

Price

Distribution

Promotion

Unique Marketing Mixes

Individual Customers

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Customized Marketing Strategy

Customized (or individual) marketing involves the creation of a unique marketing mix for each customer in the target segment.
This approach is common in business-to-business marketing where unique programs and/or systems are designed for each and every customer. Such "one-on-one" marketing is more rare in consumer marketing.

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Developing the Marketing Mix

Marketing strategy decisions for the marketing mix involve creating a combination of product, price, promotion, and distribution that, to the greatest extent possible, matches the needs of customers in the chosen target market segment(s) In-depth, current data about the target market is necessary to provide information on customer preferences for product features, attitudes toward competitors' products, price/budget considerations, and the frequency and intensity with which the product is used. With this information, the marketing manager has the potential to develop a marketing mix that delivers value and customer satisfaction better than competitors' mixes.

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Product
The product is at the core of the marketing strategy. Products refer to more than tangible goods and are usually some combination of goods, services, ideas, and even people. Products in and of themselves are of little value.
The real value a product provides is derived from its ability to deliver benefits that enhance the buyer's situation. Organizations that keep their sights set on developing products, systems, and processes that identify and meet needs of the target market are more likely to be successful.

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Marketing Strategy Options Related to the Newness of Products

Innovation involves the firm in a pioneering effort; innovations of this type can even result in new product categories. New product lines allow a firm to enter new markets with a new group of closely related product items that are considered a unit based on technical, or end-use, considerations. Product line extensions supplement an existing product line with new styles or models. Improvements or changes in existing products offer customers improved performance or greater perceived value; this option also includes changes to make an existing product "new and improved." Repositioning involves the modification of existing products (either real or through promotion) so that they can be targeted at new markets or segments. Cost reductions involve modified products that offer similar performance at a lower price.

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Price
Price can be the most critical, the most visible, and the most over manipulated element of the marketing mix. The manager must set the price correctly to achieve the right balance between customers' needs, alternative solutions, and the firm's need to cover its direct and indirect costs, while also making an acceptable profit. Price is the most flexible element of the marketing mix as it can be adjusted to meet changing market conditions. Price is more than a financial or economic issue; it also has significant social and psychological connotations. There are two points of view to consider with regard to price.
To the marketer, price is the amount of money that the firm is willing to accept in exchange for a product. To customers, price is anything they are willing to give up in exchange for the product.

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Marketing Strategy Options related to the Pricing of Products

Companies that employ a competitive pricing strategy of operational excellence focus on efficiency of operations that lowers costs and allows them to deliver goods and services to their customers at lower prices and thus a better value. Regardless of their appeal, low price strategies are frequently not sustainable over time. Ongoing discount, or everyday low pricing (EDLP) strategy, is another commonly employed strategy, particularly in retailing. Prestige pricing strategy is the focal point of a marketing mix oriented toward a high quality, prestige product image. In order for this strategy to be successful, customers must perceive the firm's product to be of significantly higher quality than competing products.

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Promotion
Promotion activities are necessary to communicate the features and benefits of a product to its intended target market(s).

The role of advertising, sales promotion, personal selling, and public relations (elements of the promotional mix) in a particular marketing strategy will vary depending on the nature of the product.
The role of promotion mix elements also varies by stage in the product purchase process (awareness, interest, desire, and action).

Promotion mix decisions are affected by price, as lower priced products tend to have a lower profitability per unit that would dictate advertising while higher priced products include a level of margin that makes covering the costs of personal selling feasible.

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Promotion Strategies
Push Strategy

Producer

Marketing Communications

Resellers

Marketing Communications

End Users

Pull Strategy

Marketing Communications

Producer

Request Products

Resellers

Request Products

End Users

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Distribution (Place)
Distribution refers to both of the following:
Marketing channelsa system of organizations through which a product, resources, information, and/or product ownership flows from producer to customers. Physical distributionmoving products to the right place in the right quantities at the right time, and in a costefficient manner.
Logistics strategies address physical distribution issues, such as transportation, storage, materials handling, and the systems and equipment necessary for these functions.

A good distribution strategy is essential because once a channel is selected and commitments are made, distribution often becomes highly inflexible due to longterm contracts, investments, and commitments with channel members.

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Marketing Strategy Options related to the Distribution of Products

There are three basic strategic options for distribution in terms of the amount of market coverage and level of exclusivity between vendor and retailer.
Exclusive distribution gives one merchant or outlet the sole right to sell a product within a defined geographic region (e.g., Rolex, Mercedes-Benz). Selective distribution gives several outlets the right to sell a product in a defined geographic region (e.g., Bose, franchising industry). Intensive distribution makes a product available in the maximum number of outlets in each region to gain as much exposure and as many sales opportunities as possible (e.g., things sold at a convenience store).

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Differential Strategies: Product Descriptors

Product features are factual (hopefully) descriptors of the product. Advantages are performance descriptors that communicate how the features make the product behave, hopefully in a fashion that is distinctive and appealing to the target customers. Benefits are the positive outcomes or need satisfactions people acquire from purchased products. Another product descriptor that is highly valued by customers is quality, which refers to the overall characteristics of a product that allow it to perform as expected in the satisfaction of customer needs.

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Differentiation Strategy: Image

The image of a product, or organization, is the overall impression, positive and negative, that target customers have of it. This impression includes what the entity has done in the past, what it presently offers, and projections about what it will do in the future. All aspects of the firm's marketing mix as perceived by target customers will affect this overall impression.

Marketers can manipulate the marketing mix elements to position and enhance a product's image (typically through promotion activities) in consumers' minds.

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Positioning Strategies: Strengthen Current Position

The key to strengthening a product's current position is to constantly monitor what target customers want and the extent to which the product or SBU is perceived as satisfying those wants. The firm must continue to invest time, money, talent, and attention in after-sale service to protect its market share and sales from competitors. Strengthening positioning is about continually "raising the bar" of customer expectations, and being perceived by customers as the only firm capable of reaching the new height.

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Positioning Strategies: Repositioning

Move yourself to a New Position
Declining sales or market share may signal that customers have lost faith in a product's ability to satisfy their needs. In such cases, strengthening the present position may well accelerate the downturn in performance; a new position may be the best response. Repositioning may involve a fundamental change in any of the marketing mix elements, and perhaps even all of them.

Move the Competition to a New Position

Sometimes, it is advantageous to attempt to reposition the competition rather than change your own position. A direct attack on a competitor's strength may put its products in a less favorable light, or even force the competitor to change its positioning strategy.