Marketers have essentially four variables to use when crafting a marketing strategy and writing a marketing plan. They are price, promotion, product and distribution (also called placement). They are sometimes referred to as the four p's.
A marketing mix is a combining of these four variables in a way that will meet or exceed organizational objectives. A separate marketing mix is usually crafted for each product offering. When constructing the mix, marketers must always be thinking of who their target market are. Mix coherency refers to how well the components of the mix blend together. A strategy of selling expensive luxury products in discount stores has poor coherency between distribution and product offering.
In the long term, all four of the mix variables can be changed, but in the short term it is difficult to modify the product or the distribution channel. Therefore in the short term, marketers are limited to working with only half their tool kit. This limitation underscores the importance of long term strategic planning.
Some commentators have increased the number of p's in the mix to 5, 6 or even 8. "People" is sometimes added, recognizing the importance of the human element in all aspects of marketing. Others include "Partners" as a mix variable because of the growing importance of collaborative channel relationships.
Market segmentation is the process of grouping a market into smaller subgroups. This is not something that is arbitrarily imposed on society: it is derived from the recognition that the total market is often made up of submarkets (called segments). These segments are homogeneous within (i.e. people in the segment are similar to each other in their attitudes about certain variables). Because of this intra-group similarity, they are likely to respond somewhat similarly to a given marketing strategy. That is, they are likely to have similar feelings about a marketing mix comprised of a given product, sold at a given price, distributed in a certain way, and promoted in a certain way.
The requirements for successful segmentation are:
• homogeneity within the segment
• heterogeneity between segments
• stability of segments
• segments are measurable and identifiable
• segments are accessible and actionable
• segment is large enough to be profitable
The variables used for segmentation include:
• Geographic Variables
o region of the world or country
o country size
• Demographic Variables
o sexual orientation
o family size
o family life cycle
o socioeconomic status
• Psychographic Variables
• Behavioural Variables
o benefit sought
o product usage rate
o brand loyalty
o product end use
o readiness-to-buy stage
o decision making unit
When numerous variables are combined to give an in-depth understanding of a segment, this is referred to as depth segmentation. When enough information is combined to create a clear picture of a typical member of a segment, this is referred to as a buyer profile. A statistical technique commonly used in determining a profile is cluster analysis. Top Price Discrimination
Where a monopoly exists, the price of a product is likely to be higher than in a competitive market and the quantity sold less, generating monopoly profits for the seller. These profits can be increased further if the market can be segmented with different prices charged to different segements (referred to as price discrimination), charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic. The price discriminator might need to create rate fences that will prevent members of a higher price segment from purchasing at the prices available to members of a lower price segment. This behaviour is rational on the part of the monopolist, but is often...