COMPETITION IS EVERYWHERE Chapter 7

MARKET SEGMENTATION  Marketing segmentation has become an important part of the marketing

efforts of many companies.  The Benefits of Segmentation  Market segment – a group of individuals or organizations within a larger market that

share one or more important characteristics.  These shared characteristics result in similar product or service needs.

 Market Segmentation – the process of dividing a large group of consumers into

subgroups based on specific characteristics and common needs.  Recognizing the needs of a group of prospective customers enables a business to develop

marketing strategies that match those needs.  The company views its competition as only those businesses that have products and

services appealing to the selected market.  Companies that believe in the marketing concept recognize that the increased time and

expense of market segmentation will enable them to identify groups of customers and understand their needs.

MASS MARKETING  Mass marketing – directs a company’s marketing mix at a large and

heterogeneous group of customers.  Considers all of the consumers in a market as potential customers and every other

business competing in that market as a competitor.  Because companies are competing with more businesses and trying to reach

customers with many different needs, success may be more difficult.  Advantages to mass marketing include higher potential sales volumes and efficiencies

of scale in a larger market.  Larger companies with high volume production and vast distribution networks reaching

many national and international markets can benefit from mass marketing.  Smaller and more specialized companies find this strategy harder to maintain.

SEGMENTATION CATEGORIES  Geographic Segmentation – dividing consumers into markets based on

where they live.  Based on the concept that people who live in the same geographic area might have

the same wants and needs.

 Demographic Characteristics  Demographics – the descriptive characteristics of a market such as age, gender, race,

income, and educational level.  Often, marketers want to serve a market segment that has similar demographic

characteristics.

SEGMENTATION CATEGORIES  Psychographics – people’s interests and values.  Examples include the way you spend your time and lifestyle choices you make.  Lifestyle research has been particularly valuable in establishing market segments

because your lifestyle influences the type of housing you live in, the transportation you use, and how often you choose to eat out, just to name a few.

 Product Usage – how frequently consumers use products and the

quantity of product used.  By segmenting the market based on usage, business people can make sure each group

has the preferred size and type of container to meet their consumption needs.  Customer experience is also part of product usage. The type of experience will help

determine whether a market segment represents a valuable group of potential customers and what type of marketing effort is needed.

SEGMENTATION CATEGORIES  Benefit Expectations – divides consumers into groups depending on

specific values or benefits they expect or require from the use of a product or service.

Segmenting the Business Market  Business markets are segmented by the type of company and the major

activities and operations of the business.  Segment criteria may include:  Size  Location

 Where they operate (multiple states or internationally)  Type of product or service sold  Buying procedures and frequency of purchases

IDENTIFYING AND ANALYZING MARKET SEGMENTS Two reasons to segment a market:  Business has a better understanding of the market and the potential customers.  Business can identify the best market opportunities. 

Market opportunity – an identified market with excellent potential based on careful research.

 Identifying Possible Segments  To successfully segment a market, a business must recognize possible factors that affect

consumer purchasing and collect information to determine if market segments are alike or different in their purchasing behaviors and consumption patterns.

 Identifying segments involve the following steps: 

Select a market or product category.



Choose a basis for segmenting the market.



Gather information for analysis.



Identify the segments that exist in the market.



Use market information to choose the markets that present the greatest and least amount of potential.

IDENTIFYING AND ANALYZING MARKET SEGMENTS  Determining Market Potential  To be an effective market segment, it has to have the potential to be profitable with

needs that the company can satisfy through its marketing efforts.

 Evaluate using the following criteria:  Number of potential customers  Customers’ interest in the product or service and other mix elements  Amount of money customers have available to make the purchase  Business’s ability to communicate with and distribute the product to consumers

 Since businesses operate to make a profit, it is important to estimate the market

potential.

 Market potential – the total revenue that can be obtained from the market segment.

 Market share – the portion of the total market potential that each company expects

in relation to its competitors.

BASIS FOR POSITIONING  Market position – refers to the unique image of a product or service in

a consumer’s mind relative to similar competitive offerings.  In order to influence consumers’ purchases, businesses position their

products and services to highlight their differences from those of competitors.

POSITIONING METHODS  Attributes  The positioning is accomplished with the specific product attribute and related

promotion that identifies the attribute and its value for the customer.

 Price and Quality  This position strategy may stress a higher price as a sign of quality, or it may

emphasize a lower price as an indication of value.

 Use or Application  Stressing unique uses or applications can be an effective means of positioning a

product.

 Product User  This positioning strategy encourages use of a product or service by associating a

personality or type of user with the product.

POSITIONING METHODS  Product Classification  When positioning according to product class, the objective is to associate the

product with a particular category of products.

 Competitor  Marketers make an effort to demonstrate how they are positioned against

competitors that hold a strong market position.

SELECTING A POSITIONING STRATEGY  All businesses need to develop a positioning strategy.  A positioning strategy will outline how a company is going to present its

product or service to the consumer and how it will compete in the marketplace with other businesses offering similar products and services.  Usually revolve around three major areas  Consumer perceptions  Competitors in the marketplace  Changes in the business environment

POSITIONING STRATEGIES  Consumer Perceptions – the images consumers have of competing

goods and services in the marketplace.

 The objective is for marketers to position their products to appeal to the desires

and perceptions of a target market.

 Target market – a group of consumers that has a distinct idea of the image desired for a

product or service.

 Competition  A great deal of marketing effort is used in competitive positioning.  The pricing, promotion, product development, and distribution strategies are all

planned with an eye toward the competition.

 Companies must be careful not to base their positioning decisions solely on the

actions of their competitors because they each have unique strengths, weaknesses and goals.

POSITIONING STRATEGIES  Business Environment  Organizations should continually pay attention to possible changes in the business

environment that might affect the position of their products or services including:  New products entering the market  Changing consumer needs  New technology  Negative publicity  Resource availability

TYPES OF COMPETITION FOR POSITIONING DECISIONS  To be able to compete successfully, businesses must be able to identify

and reach a market segment that has a need for their product or service and position itself effectively against its competitors.  The type of competition faced by a business will affect its positioning.  Two major types of competition that businesses must recognize and

address:  Direct vs indirect competition  Price vs non-price competition

TYPES OF COMPETITION  Direct and Indirect Competition  Direct competition – competition in a market with businesses that offer the same

type of product or service.  Businesses that compete directly must know who their competitors are.

 Indirect competition – occurs when a business competes with other companies

offering products that are not in the same product category but that satisfy similar customer needs.  Each market segment places value on different things, and each business must appeal to the

characteristics of that segment or segments on which it focuses.

TYPES OF COMPETITION  Price and Non-Price Competition  Price competition – rivalry among businesses on the basis of price and value.  Example: restaurants offering lunch and dinner specials.  Example: new airlines offering lower rates will often result in competitors lowering their

airfares.  Non-Price competition – occurs when businesses decide to emphasize factors of

their marketing mix other than price; including quality, brand name, location, or special customer service.  Some businesses do not have a great deal of control over their price in relation to

competitors so they focus on non-price issues (insurance companies).  Another reason a company might choose to use non-price competition is because its

product is higher priced, so they focus on a market that is looking at other factors other than price (small business competing with larger business).  Consumers must recognize a unique quality in the product that leads to a product

preference regardless of the price.

BENEFITS OF COMPETITION  Consumers benefit from competition in many ways.  One benefit is that the consumer receives the best price for products.  Competition encourages improvements in products with the addition of

unique features and benefits.  The benefit to consumers is that they continue to see changes and improvements in

product features and quality, often at little additional cost.

 To match their competition, businesses must continually search for new

product ideas.  Competition offers consumers the benefit of a wide variety of products

from which to choose.

TYPES OF COMPETITIVE INFORMATION  In order to make sure the company’s offerings will be the best available,

a business must be aware of the strategies that will be used by competitors.  A company needs to gather information on each of the competitors’

marketing mix elements.  Pricing Strategies  When businesses are in direct competition, competitors’ pricing strategies are very

important.

 Distribution Decisions  An important part of satisfying the wants and needs of the consumer is to have the

product in the right place at the time the customer wants to purchase it.

TYPES OF COMPETITIVE INFORMATION  Product/Service Planning  One of the greatest challenges to a business is anticipating the introduction of a new

product or service by a competitor.

 A new product will usually result in at least a temporary shift in consumer purchases until

customers decide whether or not they like the new product.

 If customers prefer the new product, it may be difficult for a business to attract them back

even when it is able to obtain and offer a similar product choice.

 Promotional Efforts  More attention will be focused on competitors’ promotional efforts than on any of the

other mix elements.

 A well-timed promotion can have a direct effect on the sales of the business running the

promotion and on its competitors.

 Promotions can be changed quickly, and competitors needs to consider how to respond

not only to the promotion but also to the other changes in the marketing mix.

 Most promotions are designed to support other changes in a business’s marketing mix-a

new product introduction, opening a new location, or a special sale or price incentive.

TYPES OF COMPETITIVE INFORMATION  Competitive Market Position  Studying competitors to understand the strengths and weaknesses and to be able to

anticipate and be prepared for competitors’ actions is essential for the future success of a business.

COLLECTING COMPETITIVE INFORMATION  Market intelligence – the process of gaining competitive market

information.  Businesses engage in the following activities to gain information about the competition:  Direct salespeople and other employees to be alert to information about competitors’

products, prices, and anticipated changes.

 Purchase and analyze competitors' products.

 Collect and study newspaper and magazine articles, government and university research

reports, and other public information on competitors, new product research, and marketing trends.

 Subscribe to professional association and trade group publications and special research

reports.

 Study customers and customer records to learn about the competition.  Attend trade shows – exhibitions where companies associated with an industry gather to

showcase their products.

 Use the internet.

COLLECTING COMPETITIVE INFORMATION  Businesses do not collect competitive information randomly.  Their objectives are to identify the strengths and weaknesses of key

competitors, assess their current marketing strategies, and predict their future actions.

ETHICS IN GATHERING INFORMATION  The usual standard is that if a competitor has information it considers to be

private and does not disclose to people outside the business, obtaining and using that information would be unethical.  Obtaining information through false pretenses or misleading information or

by accessing data from restricted locations is unethical.  Unethical actions might involve coercing a customer or supplier to provide

competitive information.  Some may participate in dumpster diving (going through trash) or bribery.  Many companies include guidelines in their codes of ethics about sharing

information with others and obtaining and using competitive information.