PRINCIPLESOF MARKETING DPM10013 Notes and Exercise FIRST EDITION SITI HAJAR BINTI KHAZALI IMAN BINTI MOHAMAD FAWZI
DPM10013 PRINCIPLES OF MARKETING NOTES & EXERCISE
Synopsis Principles Of Marketing provides knowledge to students regarding the concepts and terminologies in marketing. This course emphasizes the marketing principles, the environment, segmentation, targeting and positioning and marketing mix focusing on the consumer market. Course Learning Outcome Upon completion of this course, students should be able to: CLO1: Explain concepts and terminologies in the marketing field (C2, PLO1) CLO2: Apply the knowledge of marketing strategies and marketing mix that are relevant to the organizations’ objective (C3, PLO1) CLO3: Present with confident the marketing mix strategies to show the ability as a leader and working in a team (A2, PLO6) INTRODUCTION i
Managing Editor Norleza binti Lehat Editor Ruslina binti Awang @ Faudzi Writer Siti Hajar binti Khazali Iman binti Mohamad Fawzi Designer Siti Hajar binti Khazali Iman binti Mohamad Fawzi Application Publishers and Developers Siti Hajar binti Khazali Iman binti Mohamad Fawzi 1st Edition 2022 All rights reserved. No part of this work may be reproduced, stored in any form or by any means without the written permission of the publisher. Published by: Politeknik Muadzam Shah, Lebuhraya Tun Abdul Razak, 26700 Muadzam Shah, Pahang Darul Makmur ii EDITOR COMMITTEES
ACKNOWLEDGMENT We would like to record our warm appreciation and thanks to the many parties who have provided encouragement and helpful comments towards the arrangement of this Principles of Marketing Notes eBook. It is our hope that this eBook would help students to gain better understanding of this course. SITI HAJAR BINTI KHAZALI IMAN BINTI MOHAMAD FAWZI Lecturer Department of Commerce Politeknik Muadzam Shah iii
CONTENTS iv Introduction i | Editor Comittes ii | Acknowledgement iii OVERVIEW OF MARKETING 1 1.1 What is marketing? 2 1.2 Marketing Management Philosophies 2 – 5 1.3 Marketing Process 6 – 9 1.4 Marketing Ethics 10 – 12 1.5 Social Responsibility 13 1.6 Exercise Chapter 1 14 MARKETING MANAGEMENT 15 2.1 Marketing Environment 16 2.2 The Microenvironment 16 – 19 2.3 The Macroenvironment 19 – 22 2.4 Exercise Chapter 2 23 CONSUMER AND BUSINESS MARKET 24 3.1 Consumer Market 25 3.2 Business Market 26 – 28 3.3 Difference between consumer and business market 29 3.4 Exercise Chapter 3 30 MARKET SEGMENTATION, TARGETING AND POSITIONING 31 4.1 Steps In Market Segmentation, Targeting and Positioning 32 4.2 Market Segmentation 32 – 42 4.3 Market Positioning 43 – 48 4.4 Exercise Chapter 4 49 Chapter 1 Chapter 2 Chapter 3 Chapter 4
CONTENTS v PRODUCT 50 5.1 Marketing Mix 51 5.2 Product and Services 51 5.3 Three different levels of product 52 – 53 5.4 Product Classification 53 – 57 5.5 Product Life Cycle 58 – 60 5.6 Exercise Chapter 5 61 PRICING 62 6.1 Pricing 63 6.2 Major Pricing Strategies 63 – 69 6.3 New Product Pricing Strategies 70 6.4 Product Mix Pricing Strategies 71 – 73 6.5 Exercise Chapter 6 74 MARKETING CHANNEL 75 7.1 Define Marketing Channel / Distribution Channel 76 7.2 Functions of Marketing Channel 77 7.3 Term Used for Marketing Intermediaries 77 – 78 7.4 Major Channel Alternatives 78 – 80 7.5 Exercise Chapter 7 81 INTEGRATED MARKETING COMMUNICATION 82 8.1 Integrated Marketing Communication (IMC) 83 8.2 Promotion Mix 83 8.3 Objective of Promotion Mix 83 – 85 8.4 Elements Marketing Promotion Mix 85 – 90 8.5 Exercise Chapter 8 91 References vi Chapter 5 Chapter 6 Chapter 7 Chapter 8
CHAPTER 1 OVERVIEW OF MARKETING DPM10013 PRINCIPLES OF MARKETING COURSE LEARNING OUTCOMES After studying this chapter, students will be able to: Explain concepts and terminologies in the marketing field “ ( C2 , PLO 1 ) ” Explain marketing Discuss the marketing management philosophies Discuss core marketing concept 1
It is not only Selling and Advertising! It is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. 1.1 What is Marketing? It is also a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others. Selling Concept 1.2 Marketing Management Philosophies Production Concept Societal Marketing Concept Product Concept Marketing Concept 2
1.2.1 Production Concept Useful philosophy in two types of situations: 1. Demand for a product exceeds the supply. Increase production. 2. The product’s cost is too high and improved productivity is needed to bring it down. “The idea that consumers will favor products that are available and highly affordable; therefore, the organization should focus on improving production and distribution efficiency.” Management should focus on improving production and distribution efficiency. This concept is one of the oldest orientation that guides sellers. Example: Henry Ford’s Motor Vehicle 1.2.2 Product Concept “The idea that consumers will favor products that offer the most quality, performance and features; therefore, the organization should devote its energy to making continuous product improvements.” Marketing strategy focuses on making continuous product improvements. For example, technology devices from Apple or Samsung have undergone continuous product improvement to give better services to the customer. However, focusing only on the company’s products can also lead to marketing myopia. Example: Kodak 3
1.2.3 Selling Concept “The idea that consumers will not buy enough of the firm’s products unless the firm undertakes a large-scale selling and promotion effort”. This concept is typically practiced with unsought goods (those that buyers do not normally think of buying , such as life insurance, encyclopedia or blood donations. be These industries must good at tracking down prospects and selling them on product benefits. Most firms practice the selling concept when they face overcapacity. Their aim is to sell what they make than make what the market wants. Focuses on creating sales transaction rather than on building long term, profitable customer relationships. 1.2.4 Marketing Concept “A philosophy in which achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors” Marketers’ job is not to find the right customers for the product but to find the right products for the customers. For example, fashion companies used this concept as their basic concept. They start with a well-defined market, focuses on customer needs and integrates all the marketing activities that affect customers. 4
1.2.4.1 Contrasts The Selling Concept And The Marketing Concept Product Centered Make & Sell Hunting Find the right customer for your product SELLING Customer Centered Sense & Respond Gardening Find the right products for your customer MARKETING 1.2.5 Societal Marketing Concept “The idea that a company’s marketing decisions should consider consumers’ wants, the company’s requirements, consumers’ long run interests and society’s long run interests.” For example, Kia’s “Hero’s Journey” commercial starring Melissa McCarthy A company should make good marketing decisions by considering consumers wants, the company’s requirements, consumers’ long run interest, and society long run interests. (improves both the consumer’s and society well-being Companies should balance three considerations in setting their marketing strategies: company profits, consumer wants and society’s interests. Three Considerations in Setting Their Marketing Strategies 5 Adopted from P. Kotler & G. Armstrong (2018) Adopted from P. Kotler & G. Armstrong (2018)
1.3 The Marketing Process A simple Model of the Marketing Process (P. Kotler & G. Armstrong, 2018) An Expanded Model of the Marketing Process (P. Kotler & G. Armstrong, 2018) A marketing process can be interpret as follows: 6
Needs, Wants and Demands Products/Services Value, Satisfaction and Quality Exchange, Transactions and Relationships Markets 1.3.1 The Core of Marketing Concept Human needs are state of deprivation. There are physical, social and individual needs. • Physical needs: food, clothing, warmth, and safety. • Social needs: belonging and affection. • Individual needs: Knowledge and selfexpression. NEEDS The form human needs take as they are shaped by culture and individual personality. For example, Malaysian needs food but want McDonalds. WANTS When backed by buying power, wants become demands. Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction. DEMANDS The common terms associate with marketing process are as follow: 7
PRODUCT Anything that can be offered to consumer for attention, acquisition, use or consumption and that might satisfy a want or need. It includes physical objects, services, persons, places, organizations and ideas. Example: Disney World, Harley Davidson motorcycle. Any activity or benefit that one party can offer to another and that is essentially intangible and does not result in the ownership of anything. Examples: banking, airline, hotel & home repair services SERVICES 1.3.2 Market Offerings The difference between the values the customer gains from owning and using a product and the costs of obtaining the products and services. Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers buy often switch to competitors and disparage the product to others. Marketers must be careful to set the right level of customer expectations. SATISFACTION Customer value concerns the difference between the benefits a customer sees from a firm’s market offering and the costs of obtaining those benefits. CUSTOMER VALUE 1.3.3 Customer Value & Satisfaction 8
1.3.4 Exchange, Transaction and Relationships The act of obtaining a desire object from someone by offering something in return. Exchange The process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders. Marketing network consists of the company and all its supporting stakeholders. Relationships A transaction occurs When an agreement is reached during exchange. Transaction 1.3.5 Market and Marketer The set of all actual and potential buyers of a product or service. These buyers share a particular need or want that can be satisfies through exchange and are willing to offer these resources in exchange for what they want. Originally the term; for the place where buyers and sellers gathered to exchange their goods, such as a village square. A person whose duties include the identification of the goods and services desired by a set of consumers, as well as the marketing of those goods and services on behalf of a company. Marketer 9
1.4 Marketing Ethics Ethics Ethics is the art and science of determining good and bad or right and wrong moral behavior of a single or group of people. Marketing Ethics An area that deals with the moral principles behind marketing. Ethics in marketing applies to different spheres such as in product, pricing, placing (distribution), promotion & advertising. Unethical marketing harms customers & society & damages the company’s reputation & effectiveness. Company’s need corporate marketing ethics policies ; broad guidelines to everyone must follow (should cover distributor relations, advertising standards, customer service, pricing, product development & general ethical standard) Build & maintain strong customer relationships based on honesty & trust 10
To build good image about the organization in the minds of customer, employees, shareholders and the society To create values or trust with key stakeholders When an organization behaves ethically, customers develop more positive attitudes about the firm, its products, and its services. 1.4.1 Importance of Marketing Ethics Product Consumer safety Product liability and reliability Designing for special needs Price Bid rigging Super competitive pricing Price fixing Price skimming Advertising Puffery ( Nothing to support the fact ) Advertising to Children Promoting Unhealthy Products Subliminal Advertising Deceptive Advertising Packaging Label information Packaging graphics Packaging safety Environmental implication of packaging Placing Crossed expiry date Exerting influence to cause vendors to reduce display space for competitors' products. Promising shipment when knowing delivery is not possible by the promised date. 1.4.2 Ethical Issues in Marketing: 11
Satisfying The Basic Human Needs Every human wants to be in an organization that is fair and ethical in practice Unity Unity within its employees and leaders as well Improves Decision Making All are allowed to put forward their inputs, through which a solid decision can be taken Mutual trust Trust when built within the organization as well as outside it increases customers loyalty! Loyal Customers Loyal customers is what allows a business to survive in the hardest of times 1.4.3 Role of Ethics in Marketing 1 Develop standards based on personal integrity, corporate conscience, & long run consumer welfare 2 Build strong customer relationships based on honesty & trust 3 To overcome bribes, kickbacks & corruption 4 Total Corporate Commitment 12
Societal marketing Companies make marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests. Sense-of-mission marketing: Companies define their mission in broad social terms, rather than in narrow product terms. Customer-oriented marketing Innovative marketing Companies seek real product and marketing improvements. Value marketing: Companies put most of their resources into value-building marketing investments Companies view and organize their marketing activities from the consumer’s point of view. 1.5.1 Role of Social Responsibility Social responsibility is a duty every individual has to perform so as to maintain a balance between the economy and the ecosystems. The obligation of an organization's management towards the welfare and interests of the society in which it operates. Social responsibility occurs when the organization is concerned about people, society and environment with whom and where it conducts business. 1.5 Social Responsibility Socially responsible marketing is taking moral actions that encourage a positive impact on all the company’s stakeholders, including employees, community, consumers, and shareholders. The main responsibility of marketers in this aspect is to package and communicate the organization’s decisions that will impact the various communities with which they interact. Social responsibility An ethical framework and suggests that an entity, be it an organization or individual, has an obligation to act for the benefit of society at large. 13
1.6 Exercises Chapter 1 14 1. What is marketing? 3m 2. What is needs and wants? 4m 3. List down the FIVE (5) marketing management philosophies. 5m 4. Describe each marketing management philosophies below: a) Product concept 3m b) Selling concept 3m c) Societal marketing concept 3m 5. Define value and satisfaction and marketers and market 8m 6. Define ethics in marketing 3m 7. List down FIVE (5) role of societal responsibility 5m
CHAPTER 2 MARKETING ENVIRONMENT DPM10013 PRINCIPLES OF MARKETING After studying this chapter, students will be able to: Explain company’s microenvironment Explain company’s macro environment COURSE LEARNING OUTCOMES “ Apply the knowledge of marketing strategies and marketing mix that are relevant to the organizations’ objectives ( C3 , PLO 1 ) ” 15
A company’s marketing environment consists of the actors and forces outside marketing that effect marketing management’s ability to build and maintain successful relationship with target customers. 2.1 Marketing Environment T h e C o m p a n y M i c r o e n v i r o n m e n t M a c r o e n v i r o n m e n t Consist of the forces close to the company that affect its ability to engage and serve its customers. The actors are the company, suppliers, marketing intermediaries, customer markets, competitors and publics. Consists of the larger societal forces that affect the microenvironment. The forces consist of demographic, economic, natural, technological, political and cultural forces. Microenvironment Macroenvironment Marketing management job to build relationship with customer by creating customer and satisfaction. However marketing manager cannot do this alone. 2.2 The Microenvironment 16
2.2.1 The Company Top management sets the company mission, objectives, broad strategies, and policies. Finance department concerned with finding and using funds to carry out the marketing plan. R&D department focuses on designing safe and attractive products. Accounting has to measure revenue and costs. Marketing managers must work closely with these departments. With marketing taking the lead, all departments share the responsibility for understanding customer needs and creating customer value. 2.2.2 Suppliers Suppliers form an important link in the company’s overall customer value delivery network. They provide resources needed by the company to produce its goods and services. Supplier problems can seriously affect marketing. Managers must watch supply chain availability and costs. Supply shortages or delays, natural disasters and other events can cost sales in the short run and damage customer satisfaction in the long run. Rising supply costs may force price increases that can harm the company’s volume. Most marketers today treat their suppliers as partners in creating and delivering customer value. In designing marketing plans, marketing management takes other company groups into account-groups such as top management, finance, research and development (R&D), purchasing, operations, human resources and accounting. 17
Company must provide greater customer value and satisfaction than its competitor do. Company must gain strategic advantage by positioning their offering strongly against competitors offering in the minds of consumers. Each firm should consider its own size and industry position compared with those of its competitors. Large firms with dominant positions in an industry can use certain strategies that smaller firms but there are also losing ones. And small firms an develop strategies that give them better rates of return than large forms enjoy 2.2.3 Competitors 2.2.4 Publics Media publics Carry news, features and editorial opinion. Example: Newspaper, magazines, radio, television stations Government publics Management must take governments into account. Marketers must often consult the company lawyer on issued of product safety, truth in advertising and other matters Citizen action publics Company’s marketing decisions may be questioned by consumer organizations, environmental group, minority group and others. Its public relations department can help it stay in touch with consumer and citizen groups. Example: Pusat khidmat aduan pengguna nasional (NCCC) Local Publics Include neighborhood residents and community organizations. Large companies usually appoint a community relations officer to deal with the community, attend meetings, answer questions and contribute to worthwhile causes. Company concerned about the general public’s attitude towards its product and activity. (Kelab belia) General Public A company needs to be concerned about the general public’s attitude toward its products and activities. The public’s image of the company affects its buying. Internal publics Include workers, managers, volunteers and BOD. Company can use newsletter and other means to inform and motivate their internal publics. When employees feel good about their company, this positive attitude spills over to external publics. 18
Customer markets: consist of individuals and households that buy goods and services for personal consumption. Business markets: buy goods and services for further processing or for use in their production process Reseller markets: buy goods and services to resell at a profit. Government markets: made up of government agencies that buy goods and services to produce public services or transfer the goods and services to others who need them. International markets: consists of these buyers in other countries, including consumers, producers, resellers and government. 2.2.5 Customers 2.3 The Macroenvironment The company and all of the other factors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company . consists of the larger societal forces that effect the microenvironment The company needs to study five types of customer markets: (differ in decision buying process) 19
Human population in terms of size, density, location, age, gender, race, occupation and others statistics. Changes in the world demographic environment have major implications for business. Changing age structure of the population. World population – more than 6.4 billion & will exceed 8.1 billion by the year 2030. Changing pattern of the family- woman in the workforce (The number of working women has increased) A better educated, more white collar, professional population. Increasing Diversity. 2.3.1 Demographic Consists of factors that effect consumer buying power and spending patterns. Changes in income-marketers should pay attention to income distribution as well as average income. Changing consumer spending patterns-consumers at different income levels have different spending patterns. Changes in major economic variables such as income, cost of living, interest rates and savings and borrowing patterns have a large impact on the marketplace. All forces are beyond any company’s control. Companies watch these variables by using economic forecasting. 2.3.2 Economic 20
Natural resources that are needed as inputs by marketers or that are affected by marketing activities. In many cities around the world, air and water pollution have reached dangerous levels. Marketer should be aware several trends in the natural environment. Example: shortage of raw materials (oil, increased pollution (packaging material), increased government intervention (promote clean environment), environmentally sustainable (ecologically safer product, recyclable, pollution controls) 2.3.4 Natural Forces that create new technologies, creating new product and market opportunities Technological environment changes rapidly. New technologies create new markets and opportunities. New technology replaces an older technology Companies that do not keep up with technological change soon will find their products outdated and they will miss new product and market opportunities. Many companies are adding marketing people to R&D teams to try to obtain a stronger marketing orientation. Technology has released both positive and negative impact. 2.3.5 Technological 21
Consist of political situation, laws, government agencies Example: business law – reasons : protect companies, protect consumers from unfair business practices, protect the interest of society 2.3.6 Political 2.3.7 Cultural Is made up of institutions and other forces that effect a society’s basic value, perceptions, preferences, and behaviors. People grow up in a particular society that shapes their basic belief and values. 22
2.4 Exercises Chapter 2 23 1. Compare the microenvironment and macroenvironment. 8m 2. List the SIX (6) microenvironment and SIX (6) macroenvironment. 12m 3. Briefly explain the THREE (3) microenvironment below: a) The company 3m b) Supplier 3m c) Competitors 3m
CHAPTER 3 CONSUMER AND BUSINESS MARKET DPM10013 PRINCIPLES OF MARKETING COURSE LEARNING OUTCOMES After studying this chapter, students will be able to: Explain concepts and terminologies in the marketing field ( C2 , PLO 1 ) “ Define the CONSUMER market. Define the CONSUMER buying behavior. Define BUSINESS market. Define BUSINESS buying behavior. Examine the differences between CONSUMER and BUSINESS markets. Apply the knowledge of marketing strategies and marketing mix that are relevant to the organizations’ objectives ( C2 , PLO 1 ) ” 24
Culture is the most basic determinant of a person ‘s wants and behavior. Subcultures are ‘cultures within culture’ that have distinct values and lifestyles and can be based on anything from age to ethnicity. Many companies focus on their marketing programs on the special needs of certain cultural and subcultural segments. 3.1.1 Characteristic Affecting Consumer Market The buyer’s age, life-cycle stage, occupation and economic circumstances, personality and other personal characteristics influence his or her buying decisions. Consumer lifestyles (the whole pattern of acting and interacting in the world ) are also an important influence on purchase decisions. Consumer buying behavior is influenced by four major psychological factors: motivation, perception, learning and Belief and attitudes Each of these factors provides a different perspective for understanding the workings of the buyer’s behavior. 3.1 Consumer Market Example: Your mother bought a new dress to attend a function, you buy shoes for their own use and buy a car for the convenience of the family. The buying behavior of final consumersindividuals & households that buy goods & services for personal consumption. Consumer buying behavior All the individuals & households that buy or acquire goods & services for personal consumption. Consumer market Cultural Psychological Social Personal Social factors also influence a buyer’s behavior. A person’s reference groups such as family, friends, social networks, professional associations strongly affect product and brand choices. 25
3.2 Business Market Example: ABC construction business, which operates the construction of houses and buildings in need of sand, cement and other machine tools. Then sell the buildings to housing companies like TTDI development, this company is selling the houses and buildings to consumers. All the organizations that buy goods & services for use in the production of other products & services or for the purpose of reselling, rented or supplied to others. Business Market / Business Buyer Behavior The decision making process by which business buyers determine which products & services their organizations need to purchase and then find, evaluate & choose among alternative suppliers and brands. Business Buying Process Market Structure and Demand Types Of Decision An The Decision Process Nature Of The Buying Unit 3.2.1 Characteristic Of Business Market Business markets contain fewer but larger buyers. Business buyer demand is derived from final consumer demand. Demand in many business markets is more inelastic-not affected as much in the short run by price changes. Demand in business marketfluctuates more & more quickly. • Business buying involves a more professional purchasing effort. • Business buyers usually face more complex buying decisions. • The business buying process is more formalized. • In business buying, buyers and sellers work more closely together and build close longterm relationships. 26
3.2.2 Market Structure and Demand Example: Black& Decker : Tools And Outdoor Equipment. Home Depot Walmart: Retail Customer (FEWER) → Consumer Worldwide (LARGER) Far fewer but far larger buyers It ultimately derived from the demand for consumer goods. Example: Intel microprocessor : computer chips → HP and DELL consumer Honda buys steel because consumers buy cars. Demand for wheat flour manufacturer Gardenia bread is made from a consumer demand for Gardenia bread. Therefore, business marketers sometimes promote their products directly to final consumers to increase business demand. Derived demand Total demand for many business products is not affected much by price changes, especially in the short run. Example: A drop price of leather will not cause shoe manufacturers to buy much more leather unless it result in lower shoe price, will increase consumer demand for shoes. Inelastic demand The demand for business goods and services tends to change more quickly than the demand for consumer goods. Small % increase in consumer demand can cause large increase in business demand. Fluctuate demand 27
3.2.3 Nature Of The Business Unit Business buying involves a more participants & professional purchasing effort. Business buying is done by trained purchasing agents who spend their working lives learning how to buy better. The more complex the purchase, the more likely it is that several people will participate in the decisionmaking process. Buying committees composed of technical experts and top management are common in the buying of major goods. 3.2.4 Types Of Decision And The Decision Process Business purchases often involve large sums of money, large quantity, complex technical and economic considerations, and interactions among many people at many levels of the buyer’s organization. Because the purchases are more complex, business buyers may take longer to make their decisions. Business buyers usually face more complex buying decisions Large business purchases usually call for detailed product specifications, written purchase orders, careful supplier searches, and formal approval. The business buying process tends to be longer & more formalized The buyer and seller are often much more dependent on each other. Work closely with their customers during all stages of the buying process—from helping customers define problem, to finding solutions, to supporting after-sale operation. They often customize their offerings to individual customer needs. In business buying proses, buyers and sellers work more closely together and build close long-term relationships 28
3.3 Difference between Consumer and Business Market CHARACTERISTICS Demand Distribution Structure Nature Of Buying Unit Type Of Decisions And Decision Process Relationship Use Of Leasing Promotion Technique BUSINESS MARKET Organizational More Direct More Professional More Complex And Formalized Close Supplier-customer Relationship Greater Specific Promotion: Personnel Selling(buyer Need To Know More) CONSUMER MARKET Individual More Indirect More Personal Simpler & Informal Indirect Relationship Lesser Mass Media: Advertising & Sales Promotion. 29
3.4 Exercise Chapter 3 30 1. Define the consumer market. 2m 2. Define the consumer market behavior. 2m 3. Briefly explain the characteristics of market structure and demand. 8m 4. Describe the nature of the business unit. 4m 5. Describe the decision process. 9m
After studying this chapter, students will be able to: CHAPTER 4 MARKET SEGMENTATION, TARGETING, AND POSITIONING DPM10013 PRINCIPLES OF MARKETING Define market segmentation 1 2 Identify the major bases for segmenting consumer market 3 Define target market 4 Describe the segment evaluation 5 Describe the target market segment selection 6 Define market positioning 7 Identify differentiation and positioning strategy 8 Describe the communication and delivering the chosen positioning COURSE LEARNING OUTCOMES Explain concepts and terminologies in the marketing field ( C2 , PLO 1 ) “ ” 31
4.1 Steps in Market Segmentation, Targeting and Positioning 4.2 Market Segmentation Market segmentation is the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs to respond with appropriate marketing strategies that satisfy the different preferences. Dividing a market into smaller groups of buyers distinct needs, characteristics, or behavior who might require separate products or marketing mixes 32
Buyers differ in Wants/needs Resources Locations Buying attitudes Through market segmentation, companies divide large, heterogeneous (different) markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs Publics Segmented by Gender Segmented by Age 33
4.2.1 Bases For Segmenting Consumer Markets Behavioral Geographic Psychographic Demographic Dividing a market into different geographical units such as nations, states, regions, countries, cities, neighborhoods. Does not ensure that all consumers in a location will make the same buying decision. Example: Target, Walmart, Kohl’s and Staples 4.2.1.1 Geographic Segmentation 34
Most popular because our needs, wants and usage rates depend on the demographics. Bases For Segmenting Consumer Markets 4.2.1.2 Demographic Segmentation Age and Life Cycle Family size Gender Income Race and nationality Education and occupation Age And Life Cycle Segmentation Dividing A Market Into Different Age And Life Cycle Groups Kids ,Adults, J&J Life Cycle Example: Anmum (Pregnancy, Breast Feed, Kid) Gender Segmentation Dividing A Market Into Different Groups Based On Gender Clothing, Cosmetics, Toiletries And Magazine Income Segmentation Dividing The Market Into Different Income Groups Cars, Furniture, Automobiles, Boat, Clothing, Cosmetics, 35
Dividing a market into different groups based on social class, lifestyle or personality characteristics 4.2.1.3 Psychographic Segmentation Described in terms of traits e.g. self confidence, dominance, sociability, autonomy. Example: cosmetics, fragrance, fashion Personality Pattern of living as expressed by activities, interests and opinions. Activities – work, hobbies, shopping, sports, social events Interests – food, fashion, family, recreation Opinions – about themselves, social issues, business, products. Example: Mobile (express music- NOKIA) Lifestyles A strong effect on preferences in cars, clothes, home furnishings and reading habits. Social class (upper, lower, middles) Social classes How about this ad? What is the target psychographic for this ad campaign? 36
4.2.1.4 Behavioral Segmentation Occasion segmentation Dividing the market into groups according to occasions when buyers get the idea to buy. Benefit sought segmentation Dividing the market into groups according to the different benefits that consumers seek from the product Example: detergent (DOWNY), toothpaste (Fresh N White) User status Segmented into groups of nonusers, ex-users, potential users, first-time users, and regular users of a product. Example: special introductory price/ sample- new buyer Usage rate Segmented into light, medium & heavy product users. Heavy users are often a small percentage of the market but account for a high percentage of total consumption Example: Packaging, special price package. Loyalty status/ perception and belief Firm trying to segment their market by loyalty and firm are using loyalty scheme to do it. Example: members card Anakku ( discount 50%), gift for members. Prestige? Safety? Fuel Economy? Dividing a market into groups based on consumer knowledge, attitude, use, or response to a product. 37
4.2.2 Market Targeting 1. Evaluating market segment Right size & growth Segment attractiveness Objectives & resources 2. Selecting Target Market Segments (Strategies for reaching target market) Undifferentiated marketing Differentiated marketing Concentrated marketing Micro Marketing Definition The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. A set of buyers who share common needs or characteristics that a company decides to serve. Who is Target Market? 38
Segment Size and Growth Analyze current sales, growth rates and expected profitability for various segments.(collect & analyze data) Segment Structural Attractiveness Consider effects of: competitors, availability of substitute products and, the power of buyers & suppliers. Company Objectives and Resources Company skills & resources needed to succeed in that segment(s). Look for Competitive Advantages. 4.2.2.1 Evaluating Market Segments 4.2.2.2 Selecting Target Market Segments Segment Marketing (Differentiated Marketing) Mass Marketing (Undifferentiated Marketing) Niche Marketing (Concentrated Marketing) Local Marketing Individual Marketing Micro Marketing 39
No segmentation Firm decide to ignore market segment differences and target the whole market with one offer. Focus: what is common in the needs of consumer. Advantages: Create the largest potential market, which leads to the lowest costs. Pepsi Co. & Coca Cola – offer carbonated soft drink Mass Marketing (Undifferentiated Marketing) Company Marketing Mix Market 40 Adopted from P. Kotler & G. Armstrong (2018)
A market-coverage strategy in which a firm targets several market segments and design separate offers for each Recognized that buyers differ in their needs, perceptions & buying behaviors. The company can market more efficiently, targeting its products or service, channels & communications programs toward only consumers that it can serve best. Segment Marketing (Differentiated Marketing) Segment 1 Segment 2 Segment 3 Company Marketing Mix 1 Company Marketing Mix 2 Company Marketing Mix 3 41 Adopted from P. Kotler & G. Armstrong (2018)
A market-coverage strategy in which a firm goes after a large share of one or a few segments on niches Focusing on sub segments or niches with distinctive traits that may seek a special combination of benefits. More efficiently – product/ services, communications programs toward only consumers that it can serve best and more profitable. Niche characteristics - small segment, low market share, understand customer need Advantage Factors of Niche - understand market segment and greater knowledge of consumer need, high margin sales, profit market, specialization Niche Marketing (Concentrated Marketing) Segment 1 Segment 2 Company Marketing Mix Segment 3 42 Adopted from P. Kotler & G. Armstrong (2018)
The practice of tailoring products & marketing programs to the need and wants of specific individuals and local customer segment-includes local marketing and individual marketing. Local marketing (LM) - tailoring brands & promotions to the needs & wants of local customer groups – cities, neighborhoods & specific stores. Individual Marketing - tailoring products and marketing programs to the needs & references of individual customer-also labeled “market-of-one marketing”, “customized marketing” and “one-to-one marketing” Micro Marketing 4.3 Market Positioning The way that product is defined by consumers on important attributes - the place the product occupies in consumer’s minds relative to competing products. Developing a marketing program in such a way that the product is perceived to be very different from competitors products. Location of your product is in the mind of your customer Important because your product can be differentiated from others. - Giving consumer a reason to buy. The complex set of perceptions, impressions and feelings that consumers have for the product compared with competing products. 43