MARK101 VUW

Homogenous Market

A market in which most customers have similar needs and wants.

Heterogeneous Market

Markets made up of individuals with diverse needs.

Target Marketing Strategy

Process of dividing a total market into different segments on the basis of customer characteristics, selecting 1 or more of those segments then developing products to meet the needs of those segments.

Market Segmentation

Process of dividing a total market into smaller sub-groups with similar product needs to design a marketing mix that matches those needs.

Market Segment

Individuals, groups or organisations with one or more shared characteristics that means they have similar product needs.

Segmentation Variables

Characteristics of individuals, groups or organisations used to divide a market into segments.

Types of Demographic Variables

Age, gender, race, ethnicity, religion, social class, family size, family life cycle, occupation, income, education.

Demographic variables

Can be readily measured and often closely linked to purchasing behaviour.

Types of geographic variables

Region, urban/suburban/rural, city/county/state size, climate, terrain, market density.

Market Density

Number of potential customers within a unit of land area.

Geodemographic Segmentation

Marketing segmentation that clusters people in postcode areas and smaller neighbourhood units based on lifestyle and demographic information.

Micro-marketing

Precise marketing efforts on very small geodemographic markets.

Types of psychographic variables

Personality attributes, motives, lifestyles.

Psychographic segmentation

Market segmentation based on factors like personality and lifestyle. Can be used independently but is usually combined with other types of segmentation variables. Can be risky and hard to measure personality traits.

Types of Behaviouristic Variables

Volume usage (heavy, moderate, light), end use, benefit expectations, brand loyalty, price sensitivity.

Behaviouristic variables

Need to be identifiable, recognisable and accessible to marketing efforts.

Benefit Expectations

Dividing a market according to the benefits customers want from the product.

What to consider when assessing relevant market segments

Sales estimates, cost estimates, competitive assessment.

Evaluating Market Segments

Are the members of the segment similar to each other, but different from other segments?

Is the segment large enough to be profitable now and in the future?

Can marketers measure the segment?

Can marketing communications reach the segment?

Can the marketer serve the segment's needs?

Undifferentiated Targeting Strategy

Organisation designs a single marketing mix and directs it at an entire market for a particular product. Appeal to a broad spectrum.

Assumes customers have similar needs.

Cost effective (economies of scale can be generated), but may not be that effective in terms of marketing.

Concentrated Targeting Strategy

Organisation targets a single market segment using a marketing mix for each.

Company can specialise.

Good for smaller companies because it allows them to compete with larger companies which may have overlooked smaller segments, but there is little opportunity for growth once a business is medium-sized.

Can be risky (all eggs in one basket)

If a company penetrates a segment and becomes entrenched, its popularity in that segment could prevent it from moving into other segments.

Differentiated Targeting Strategy

Organisation targets 2 or more segments by developing a marketing mix for each segment since different segments have different needs.

An organisation might use a concentrated strategy then expand its efforts to include additional segments.

May increase sales in aggregate market through a differentiated strategy since its marketing mix is aimed at more people.

Customised Strategy

Create anything for you (e.g. tailoring).

Very expensive.

More common in the service industry than manufacturing industry.

Meets the needs of individuals.

Determining which segmentation variables to use

Customers needs for the product must be heterogeneous. There needs to be enough variation to segment.

Segments need to be identifiable and divisible.

The total market should be divided so segments can be compared with respect to estimated sales potential, costs and profit.

At least 1 segment must have enough profit potential to justify developing and maintaining a special marketing mix for that segment.

The company must be able to reach the chosen segment with a particular marketing mix.

Develop market segment profiles

On the basis of demographics, product benefits sought etc.

Used to assess the degree to which the organisation's possible product can match potential customers' product needs.

Can help determine whether a segment(s) is attractive to the organisation relative to their SWOT.

Stages of selecting a target market

Determine which segmentation variables to use.

Develop market segment profiles

Evaluate relevant market segments

Assess competitors

Assess costs

Select specific target markets.

Sales estimates

Potential sales

Market potential

Total amount of a product customers will buy in a specified period at a specific level of industry wide marketing activity.

Company sales potential

Max percentage of market potential a company can expect to obtain for a product.

Breakdown approach

Measuring company sales potential based on a general economic forecast for a specific period and market potential derived from it.

Buildup approach

Measuring company sales potential by estimating how much of a product a potential buyer in a specific geographic area will buy in a given period. Times estimate by the number of potential buyers and add totals of all geographic areas considered.

Assessing competitors

How many exist?

SWOT of competitors.

Product positioning

Creating and maintaining a certain concept of a product in customers' minds. Product needs to offer something in the consumers mind that differentiates it from other competitors products.

Bases for positioning

Product feature

Product benefit/advantage- price, quality, brand reputation

Repositioning

Regular evaluation of the current position of an existing product is important. Repositioning can strengthen market share and profitability.

Tools for repositioning

Change product physically

Change price/distribution

Change product image

Target a different market

Brand

A name, term, design, symbol or other feature that identifies a marketer's product as distinct from those of other marketers.

Brand name

The part of a brand that can be spoken (e.g All Blacks)

Brand mark

The part not made up of words (e.g. Nike swoosh)

Trade mark

Legal designation of exclusive use of a brand

Trade name

Full legal name of an organisation

Value of branding to buyers

Branding is a differentiating factor as it allows customers to save time by identifying specific preferred products that satisfy their needs. It acts as a heuristic.

Without brands, product selection would be quite random and based mostly on price. Buyers have no assurance they are purchasing what they prefer.

Provides a form of self expression and status.

Symbolises a level of product quality in the customer's perception.

Reduces risk of purchase.

Value of branding to sellers

Identifies and differentiates a firm's products from competing products, making repeat purchasing easier.

It is easier to introduce new products since customers are familiar with the brand name and perceived quality.

Facilitates promotion of all same-brand products.

Fosters brand loyalty, leading to more stable market share (and more efficient resource use) a reduced need to use price-cutting to attract customers.

Culture and Branding

Customers confer their social meaning onto brands. Brand appeal is largely at an emotional level based on its symbolic image and key associations.

Brands foster brand communities. These increase communication between customers and relationships competitors can find hard to break.

Cultural Branding

How a brand conveys a powerful myth that consumers find useful in cementing their identity and self-concept.

Brand Equity

Marketing and financial value associated with a brand's strength in a market.

Elements of brand equity (excluding patents and trademarks)

Brand name awareness

Perceived brand quality

Brand associations

Brand loyalty

Brand name awareness

The extent to which a brand is recognised by potential customers and correctly associated with a particular product or service.

How easily is the name evoked?

Does a brand name come to mind when consumers think about a particular product category?

Brand name awareness leads to brand familiarity- one brand is more likely to be selected over another unfamiliar brand.

Brand awareness pyramid

Top of mind awareness

Brand recall

Brand recognition

Unaware of brand

Brand recognition

Aware a brand exists and views it as an alternative purchase if the preferred brand is unavailable or other brands are unfamiliar.

Brand insistence

The customer strongly prefers a specific brand and will accept no substitutes.

Brand preference

The degree of brand loyalty in which a customer prefers one brand over competitors.

Brand loyalty

A customer's favourable attitude towards a specific brand.

If it is strong enough, customers will purchase the product consistently.

Customer satisfaction is the most common reason for brand loyalty.

The development of brand loyalty decreases the risk of mis-purchase and shortens time and mental effort spent buying the product.

Brand loyalty decreases a brand's vulnerability to competitor's actions.

It allows a company to keep existing customers and decrease the costs needed to gain new ones.

Loyal customers provide brand visibility and reassurance to potential new customers.

Perceived brand quality

An intangible, overall brand evaluation

Brand association

Set of associations linked to a brand which connect a particular lifestyle/personality type with a specific brand.

Why brand equity?

It seeks to increase market share, brand loyalty and revenue.

Manufacturer Brands

Brands initiated by producers. Producers identified with the products at point of purchase. e.g. Toyota, Ford.

House brands

Brands initiated and owned by re-sellers. Also called store/generic brands. Manufacturers are not identified in the product. e.g. Home brand

Selecting a brand name

1. Easy to say, spell and recall

2. Indicate product's major benefits. If possible, a brand name should positively suggest a product's major uses and special characteristics.

3. Distinctive, to set it apart from competing brands and be compatible with all products in the line.

4. Be designed for use and recognition in all types of media.

5. Consider cultural interpretations.

Protecting a brand

Brands should be designed so that they can be protected easily through registration.

Surnames and descriptive, geographic or functional names are difficult to protect.

A company needs to ensure their brand is unlikely to infringe on another brand already registered.

Contention with brand counterfeiting.

Registration with the patent and trademark office protects a brand for 10 years with indefinite renewals.

Branding policies- individual branding

Policy of naming each product differently.

e.g. Unilever brands its personal care brands individually- Dove, Rexona.

Branding policies- Family branding

Branding all of a firm's products with the same name.

e.g. Kellogg's special K, Kellogg's Coco pops

Brand essence

Goal is to identify the central characteristics that define the brand.

Internal implementation

Internal systems that empower staff and front line personnel have a better chance of accurately representing the essence of the brand.

Internal systems include customer service, front line management, operational support and delivery systems

Brand resourcing

Evidence must be collected to justify the investment of resources, where meeting brand objectives is a basic requirement to justify sustained investment.

Brand evaluation

Carried out regularly. Continual monitoring of brand performance against key criteria identifies whether the brand is on track or not. This guides future action and strategic direction.

What is a product

A good, service or idea received in an exchange.

Total product offering

Core product, supplementary features, symbolic and experiential benefits.

Consumer products

Products purchased to satisfy personal and family needs.

Convenience products

Inexpensive and frequently purchased with minimal purchasing effort. e.g. an ice cream

Shopping products

Buyers willing to expend considerable effort in planning and making the purchase. e.g. hotels

Specialty products

Possess one or more unique characteristics and buyers are willing to expend considerable effort to obtain them.

Unsought products

Purchased when a sudden problem must be solved, customers are unaware of them and do not usually think of them.

Product item

A specific version of a product that can be designated as a distinct offering among a firm's products.

Product line

A group of closely related product items viewed as a unit because of marketing, technical or end-use considerations.

Product mix

The total group of products that an organisation makes available to customers

Width of product mix

The number of product lines a company has.

Depth of product mix

The average number of different product items offered in each product line.

Product life cycle

1. Introduction

2. Growth

3. Maturity

4. Decline

PLC: Introduction

Usually a single company only produces the product.

Product first appears in the market place. Sales start at 0 and profits are negative. Risk of failure high.

Goal is to get first time consumers to try the product.

If the product is successful, competitors will follow.

Buyers must be made aware of new product features, uses and benefits.

Sellers lack the resources, technological knowledge and marketing know-how to launch the product successfully.

Marketers should be alert to identify product weaknesses and make corrections quickly to prevent product failure.

PLC: Growth

The goal is to encourage repeat purchase and to build brand loyalty.

Sales rise rapidly and profits peak before starting to decline.

More competitors enter the market.

Aggressive product pricing.

Price competition may develop.

Brand loyalty becomes important.

Gaps in market coverage are filled.

More product variations are introduced to target more market segments.

Promotion expenditures moderate.

Production efficiencies lower costs.

PLC: Maturity

Usually the longest stage.

Companies will try and sell the product through as many outlets as possible.

The sales curve peaks and starts to decline and profits continue to fall.

Intense competition.

Emphasis on improvements and differences in competitors' products.

Weaker competitors lose interest and exit the market.

Advertising and dealer-oriented promotions predominant.

Promotion is aimed at reminding customers and reinforcing brand loyalty.

Distribution sometimes expands to the global market.

Strategic objectives for maturity stage are to generate cash flow, maintain market share or increase share of customer.

PLC: Decline

Competitors start to withdraw.

Less product variations exist.

Sales fall rapidly.

Pruning items from the product line.

Cutting promotion expenditures.

Eliminating marginal distributors.

Planning to phase out the product.

Opportunity to reposition the product to extend its life.

A few companies may remain quite profitable.

Product adoption process (PAC)

Awareness

Interest

Evaluation

Trial

Adoption

PAC: Awareness

The buyer becomes aware of the product

PAC: Interest

The buyer seeks information.

PAC: Evaluation

The buyer considers the products benefits.

PAC: Trial

The buyer examines, tests or tries to product to see if it meets their needs.

PAC: Adoption

The buyer purchases the product and hopefully enjoys usage which will ensure repurchase.

Product Adopter Categories

Innovators, early adopters, early majority, late majority, laggards.

Marketing existing products

Line extensions, product modifications, product deletions, quality modifications, functional modifications, aesthetic modifications.

Line extension

Development of a product closely related to existing products in the line but meets different customer needs.

Product modifications

Change in one or more characteristics of the product.

Quality modifications

Changes to a product's dependability and durability

Functional modifications

Changes affecting a product's versatility, effectiveness, convenience or safety

Aesthetic modifications

Changes to the sensory appeal of a product.

Product deletions

Eliminating a product from the product mix, usually because it no longer satisfies a sufficient number of customers.

Service characteristics

Intangible

Inseparable-

services are produced and consumed simultaneously.

Perishable

Heterogeneous- no two services can be of the same quality.

Client based relationship-

interaction that leads to satisfied customers.

Customer contact- the level of interaction between service provider and customer needed to deliver the service.

Profit

Total revenue (p x q) - total costs

Price competition

Emphasising price as a competitive positioning. Involves matching or beating competitors' prices