Assignment: Explain and discuss how companies identify attractive market segments and choose a target marketing strategy.
Marketing can be defined as a way of identifying and satisfying consumer needs in such a way as to achieve the organisations objectives for profitability, survival or growth. When looking to develop a new marketing strategy for a certain segment there are a number of stages that are important, if the campaign is to be a success. Initially companies will analyse the current internal and external situation. In the macro environment companies will study the political-legal, economic, socio-cultural and technological environment (abbreviated as PEST) to ensure there are no issues that might affect marketing and performance. In addition, it is crucial to examine resources, offerings and past results within the organisation to make sure the capabilities are there to create a successful marketing strategy.
A market segment is a proportion of the total market that can be described as homogeneous. Meaning the people in the segment are similar to each other in their attitudes about certain variables. Due to this similarity, they are likely to respond in the same way to a marketing strategy i.e. have similar feelings about the marketing mix (consisting of the product, price, place and promotion). How to identify these attractive market segments is attributable to the research and analysis of markets and customers. When beginning to investigate your markets and customers you must examine trends in market share, product demand, buying patterns, customer needs and perceptions, demographics, and customer satisfaction. By doing this hopefully questions such as: ‘who would buy the product and why?’ and ‘how are buying patterns changing and why?’ would be answered, along with many others. Gathering data about customer needs, interests and buying behaviour can be done in many ways. The easiest is with the use of technology; however companies may choose to conduct surveys and interviews to collect their data.
It is considered that no organisation has the resources (people, money or time) in enough abundance to serve all the customers in every market. Therefore it is advantageous to group customers into segments based on distinct characteristics, behaviours, needs or wants. This makes it easier to design a marketing strategy that will appeal to the group and hence make them want to purchase the product. This comes from the idea that not all customers want or are prepared to pay for the same things. For example in the watch market, the type of person who buys a Casio is very different from the type of person who buys a Rolex. Their reasons for purchase are different. The Rolex buyer is looking for status and high quality, whereas the Casio buyer is looking for practicality and reasonable pricing. This technique of breaking up a market into smaller proportions is known as market segmentation. In the edition of ‘Principles and practice of marketing’, Jobber defines market segmentation as: The identification of individuals or organizations with similar characteristics that have significant implications for the determination or marketing strategy.
Once market segmentation is achieved it is more commercially viable to serve these customers in their similar submarkets. It is now the task of the marketers to understand these markets and develop strategies for serving the customers and beating the competition.
Dibb and Simkin (2005:37) state that marketing strategy “articulates the best uses of a business’s resources and tactics to achieve its marketing objectives”. Basically saying that a company will use its resources to satisfy consumer needs and achieve its goals of profitability, survival or growth. When a company finds a segment of the market that it feels fits in with its own objectives and goals it will next decide on a coverage strategy. Targeting coverage strategies include...
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