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MODULE 3

MARKET SEGMENTATION, TARGET MARKETING AND POSITIONING And INDUSTRIAL MARKETING RESEEARCH

Introduction
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STP is one of the important strategic decision in marketing. Objective is to identify, select, analyse, and evaluate attractive market segments and position the product favourably in the minds of the target customers. It enables the firm maximize the returns on investment It is directly linked to achieve the organizational goals.

STP-A Framework
MARKET SEGMENTATION TARGET MARKETING POSITIONING 1. Develop product/market positioning for each of the target market selected. 1. Identify measurable, 1. Evaluate resulting relevant and operational macro/micro segments: variables for segmenting the a. Profitability analysis market b. Competitive analysis 2. Define macro profiles of resulting segments 3. Define micro profiles of the resulting macro segments 2. Decide on market coverage a. Undifferentiated b. Differentiated c. Concentrated 3. Select the target segments

2. Develop marketing mix for each target market selected.

and evaluate each segment's attractiveness. develop profiles of each resulting segment. The firm identifies different ways to segment the market. .Market Segmentation     Selection of markets to serve effectively It enables the marketing firm to allocate resources effectively It is a process of dividing the total market into several segments or groups of buyers.

Market Segmentation   For example. furniture's. . bus body builders. 2wheelers. Precision steel tubes was done based on the segmentation variables of end users such as bicycles. boilers. an auto company may identify four broad segments: car buyers who are primarily seeking transport or high performance or luxury or safety.

Information on the variables of interest should exists and be obtainable  Relevant.Requirements of Effective Market Segmentation The Variables selected for analysis must be  Measurable. .the variables chosen should impact on decision making to marketing programs  Operational.the variables chosen for evaluation should be related to buying behaviour and differences in customer requirements.

Benefits of Market Segmentation    It enables the industrial marketer to compare marketing opportunities to different market segments. Industrial firms with availability of adequate resources can develop separate marketing programs or plan to meet the specific customer needs Budget allocation of resources can be done effectively to various segments. .

motorcycle.Ex: If scooter. . Differentiable-the segments should be distinguishable and should respond to separate marketing plans. they do not form separate segments.Criteria Used for Selection of Segmentation Variables   Measurable-The variables used should measure sales potential or quantity of product required by customers. and moped manufacturers respond similarly while purchasing steel.

Criteria Used for Selection of Segmentation Variables Sustainable-The segments should be large enough in terms of sales potential and profits.  . and large segments. medium. and the company selected medium and large sized customers as their target markets. Ex. segmented the market into small. a large company manufacturing and marketing electric motors.By using company size as the segmentation variable.

Identifying Variables used for Segmenting Industrial Markets Industrial market segmentation is approached on the basis of:  Macro-variables  Micro-Variables In some instances after using one variable. it may be necessary to sub divide the market by using another segmentation variable in order to obtain a detailed scheme-sequential segmentation process .

. etc.  Company Size . Mining. commercial. Chemical.Major Variables used for Segmenting Industrial Markets Macro-Variables  Type of Industry  Which industry should we market our product or services. Textile. Automobile. Types of customers include Govt. co-operative What size of company should we focus on? Based on the sales potential market is segmented as small. institutional. medium and large. Rubber.

Delhi. Customer Location What geographic area should we concentrate on? Customers located nearer to factory. etc. or customers located near urban areas like Bangalore. electronic equipment as heat sinks. Chennai   End-use or application of products Should we focus on certain end users or application of products instead of all the users Ex:Aluminium extrusions are used for doors and window frames. TV antennas.  . Kolkata. Mumbai.

market based negotiated price. help or discussions in decision making process from the supplier?  Organizational Capabilities Should we concentrate on customers who need financial support or technical support. turn-key contracts or service contracts? . like more service or more credit?  Purchasing policies Should we focus on customers who prefer competitive bidding.0 Micro-Variables  Customer Interaction Needs Should we serve customers who need more information.

risk avoiders. or personal motives. service or price?  Personal Characteristics  Should we focus on customers based on the personal characteristics of buying centre members such as risk takers. Purchasing Criteria Should we serve the customers who seek quality. .

Macro Segmentation   This approach consists of identifying the macro-variables on the basis of Industry characteristics and organizational characteristics such as size. Industry Characteristics-Industrial firms market their product or service to industries classified by Standard Industries Classification(SIC) . geographical location or product application. type.

chemical.0 Ex:A MR firm decides to segment its market based on industry type. to develop industry knowledge and information to give better value in the competitive market. engineering. service organizations like hotels banks. fertilizers. trade associates and tourism . agricultural and food processing industries. The company uses the SIC codes to club different industries into homogenous groups like.

Ex:transportation time. Large organizations avoid purchases from small firms.  . and differ in their marketing strategies. inventory control.  Customer location-the geographical locations of customer is an important factor in serving the needs of on time delivery. aftersales service.Organizational Characteristics The “size” of the customer is an important macro variable used to segment the market. availability of warehouse facilities.

and commercial establishments. electronic sinks. offices. partitions in factories. Market segmentation by “end use of product” is used by the firm who market product or service to the end use markets. Ex: Market segment for aluminium observed are doors. bus body builders. windows. 0 . dish antennas etc. And other end user segments are electrical control panels.

Industrial marketers subdivide macro-segments into micro-segments only if necessary. . Information and data required for developing micro segmentation is gathered by sales persons and market surveys.Micro Segmentation    Micro segments are homogenous group of customers within the macro segments. and mainly based on purchase decision.

technical. Organizational Capabilities-factors include financial. Ex-computarized numerically controlled machines. or operational Ex-financially week companies are attracted by long credit terms than on product quality or delivery. Mainly done on the basis of customer interaction needs.Micro-variables in Microsegmentation   Buy Phases-buy situations are used to segment the customer group. .

.Ex-criteria such as price. education. Purchasing Criteria-used to segment customers based on the criteria used by buying organizations.Expersonal attributes like willingness to take risk. and personal motives.   Personal Characteristics of individual buyers within an organization is an important variable as the ultimate decision makers are individuals. Purchasing Policies-used to segment customer based on the purchasing practices. inventory carrying cost. Ex: Govt. payment terms. dominate the purchase decisions. rejection cost. and inspection cost. Customers have standard purchasing policy of tender bidding. age. need of social relationship.

.Overview     The degree of market segmentation depends on how detailed the customer knowledge is for effective utilization. and only if necessary move to micro-segmentation Segmentation may even be based on the purchase situation and the power structure in the organization. More the market is segmented more it becomes costly and time consuming. Emphasis more on macro-segmentation.

Profitability Analysis.Indicates the size and market growth in each of the segment. Forecasting methods are used to obtain the market demand and Growth.Target Marketing  Evaluating the Market Segments  Size and Growth.3 elements involved in analysing the profitability are:    Market Potential Sales forecast Profitability .

 . distribution. Competitive Analysis-Profit potential depends on the careful analysis of the competitor's strengths and weakness w. delivery performance. technology. sales force. and organizational reputation.Check whether each potential segment is in line with firm's long term objectives. Ex:success factors for automotive industry are quality and after sales service. finance. service product quality. if not eliminate the segment.r. R&D. advertising. technical.t manufacturing. Company Objectives and Resources.

high price and highly selective promotional and distributional products. Done by firms whose resources are limited. its reputation and share in business increases. the firm has to adopt certain strategies to enter the market: 0 Concentrated Marketing:  The firm carefully defines a single or few segments Then focus all the marketing efforts The focus is on narrow range of products/services accompanied by high quality. When the firm increases its focus and gain better information than the competitors.    0 .0 Target Market Strategies 0 After deciding the target segments.

0 Ex:the company decided to segment the market

based on the customer location, and concentrated its marketing efforts only on those customers who were located near to the manufacturing plant, so as to give a superior pre sales and post sales services than the competitors. Although the company had limited resources and was in small scale sector, it was able to gain good profits. the market declines or competitor may invade the selected segments.

0 Concentrated marketing strategy may be a risk if

0 Differentiated Marketing

The firm decides to target several market segments whose needs, product usage, market responses are different. Develops seperate marketing strategies for some chosen segments and avoid some segments in the same market.

Gains higher sales volume and stronger position in the chosen market
Leads to higher costs in product development, promotion, production and administration.

0 Ex: an electrical engineering company decided

to market its medium range motors to cover entire domestic market. To succeed in the competitive market, the company decided to segment its whole market into OEMs, large users, and dealers. Different marketing strategies were developed on these focusing on 4Ps. sales and profits.

0 The strategy helped the company to increase

Ignores different marketing strategies for different segments.   Develop a single marketing plan common to all the segments. Strategy used in market where there is a lack of differentiation among the customers Strategy used if there is a lack of management planning or analysis   .0 Undifferentiated Marketing  Lack of effective market segmentation.

MR. the sales person has . inventory..e. advertising. i. follows differentiated marketing strategy. to use 4Ps to differentiate among the competitors 0 Sales persons face a tough job if the competitor 0 If the products are similar. production..0 Advantage is to keep the marketing costs low.

then the firm can adopt concentrated or undifferentiated marketing strategy. the firm should also follow the same. If the competitor uses undifferentiated marketing strategy. . and when it reaches the mature stage.Criteria in Choosing Target Market Strategy     If the company resources are limited then the firm can choose concentrated marketing strategy If a new product is in the introduction stage of PLC. If the competitor follow differentiated marketing strategy. then the firm can use differentiated or concentrated marketing strategy. differentiated marketing strategy is advisable.

A strategic approach to gain increased acceptance in individual market. Its objective is to reach unsatisfied potential customers more effectively than competitors.0 Niche Marketing  A customer group that seeks product or service tailored specially to the individual needs.  . desires and preferences.   A selective approach to find a market niche where the company's strengths and capabilities best match the customers' need.

the Hybrid Electric car.0 Ex: A company focuses its services on training field sales ad service persons to suit the needs of each individual customers. To answer this need. Ex:Toyota was one of the first companies to realize there was a group of car buyers who would be very interested in environmentally friendly cars. 0 . it came up with the legendary Prius.

0  Overview Niche Marketing is followed when the customer has a complex and unique set of needs. Difficult for a competitor to attack a niche market leader. the firm has to concentrate to develop two or more niche markets. as the customers are willing to pay for their special needs. Niche marketing strategy achieves high profits. .      To be safe in market. In the mature stage of the PLC the company should be in top 3 positions or adopt niche marketing strategy. Major advantage is to attain high profits and sales may decline due to low demand or large competitor attack.

firms specialize in marketing their products/services to one or few customers.the firm sells only in certain geographic location.the organization decides to specialize in one type of end use customer-Management B-Schools. Customer size-many small scale firms prefer to market their products/services to small size customers.Ex:automobile component suppliers sell entire products to TVS or Yamaha. Product line-a firms manufacturers only one product to focus on a particular need of the customer. Educational Institutional.0 Ways to achieve Niche specialization  Geographic location.Ex:lighting Customer.Ex-UPS manufacturers market locally.    .  End User.

L&T positioned as a leading engineering company. or  How the firm wants its products/services to be perceived by the target customers.  It should clearly differentiate its company and its products from that of its competitors.Positioning A distinct place a product/service occupies in the minds of the target customers. TATA positioned for the best quality in the minds of the customer  . Ex:Infosys Technologies is positioned as a leading software company.

levels. . 0 Personal Variables: arranging training programmes at all 0 Image Variables: the way buyers perceives a company- competitive edge. during sales service and after sales service. Variables used to differentiate products are: 0 Product Variables:ISO certification 0 Service Variables:Pre sales service.0 Procedure for Developing a Positioning Strategy:  Identify the target customers' needs in terms of major attributes or benefits. Conduct MR to understand major attributes. which the target customer consider important factor in decision making.

r.1 in Technology. Select one or more major attributes for differentiation based on company's strengths.1 in Quality.t important attribute. How does the target customers perceive the company's products/services w. No. No. No.1 in Car Radials.1 in R&D. How does the target customers perceive the competitor's products/services w. JK tyre has positioned as No.    . 1 in Exports   Siemens Healthcare has positioned as Answers for life. best service or most advanced technology to differentiate from competitors.r. No.t same attribute. 0 While deciding promotion strategy: the marketer has to keep in mind which are the factors that customer consider while selecting suppliers.  Selection of the attributes like best quality.

High product quality A1 strong customer service weak customer service A Low product quality .The customer perception is mapped by statistical analysis called perceptual map.

high quality comes with high price . the firm displays superior quality in all the activities like submission of quotations.  Its not only important to position but also important to communicate to the target market Communication of the positioning is done by sales force. Communicate the company's positioning to the target market.  0 0 Some times customers perceive. sales presentation. advertising in technical or trade journals Ex: if the firm chooses TQM as the positioning strategy. trade shows. packaging. exhibitions. after sales service. dispatch. installation.

collection. and reporting of data and findings relevant to the marketing situations.Industrial Marketing Intelligence and Marketing Research Introduction  Industrial marketing research is one of the components of the industrial marketing intelligence  Marketing Intelligence is an on-going activity to provide continuous information for decision making. analysis.  The firm has to carry out external environmental analysis to respond to opportunities and threats. MR consists of systematic design. .

and practices in case of new product development. implement and control marketing strategy effectively.    . information must be gathered. organized. analysed. plan. Its also used to conduct market surveys. Role of MR in Strategic Decision Making Its one of the basis for strategic marketing plan. To analyse. experiments involving buying attitudes.

as it is easier to identify specific respondents with small sample base Respondent Cooperation-data from an industrial respondents are very difficult to obtain than from the consumer market. .Industrial marketing     researchers are more technically oriented than consumer marketing researcher as they interact more with engineers. Concentrated access to Information-due to a smaller concentration of industrial buyers. production and purchasing personnel. Survey techniques-personal interviewing is preferred than telephone or mail. There is a greater reliance on secondary data sources. information sources tend to be concentrated. exploratory studies and expert judgement.Difference between Consumer and Industrial Marketing Research Technical Orientation.

as buying decisions are made by several members of buying committee and not by purchase executives Simple. accessibility is limited to working time Less difficult to obtain data accessibility is easier Defining respondent More difficult. as individuals and house hold users are generally the buyers .Survey methods between consumer and industrial marketing research Areas of Survey Methods Industrial Research Consumers Research Large samples due to large universe. and individual or house hold buyers and are geographically dispersed Sample Size Small sample due to small market size and concentrated buyers Respondent cooperation and accessibility More difficult due to time constraint.

medium range motors and large AC motors. capital expenditure. . budget. small range motors. Ex:A marketing manager of electric motors need information on sales and profit potential of fractional hp motors. so as to decide which product should be dropped or which product should enter the market. advertising.Scope of Industrial Marketing Research Development of Market Potential-Industrial marketers need to gather information on sales and profit potential and should optimally allocate resources such as sales people.

market segment.r.t above parameters. territory. customer.0 Market Share Analysis-Market share of a product for a firm changes due to change in the competitive strategies. 0 Market share is an important performance 0 Sales Analysis-Sales. expenses and contribution are evaluated by each product line. quarterly and yearly basis w. 0 This analysis is important to identify problem . parameter in setting future goal of a firm. sales person. change in customer requirements and change in economic and political environment. areas in market segment. 0 Actual performance is compared on monthly.

pricing and promotion as compared to the firm. service. diversify market. 0 Its important factor to analyse business environment(opportunities and threats and strengths and weakness) and help the firm to take decision on new products. 0 Competitor Analysis-A market analysis is 0 In the highly competitive market the industrial marketer has to satisfy the target customers' needs better than its competitors.0 Forecasting-Its an important input in preparing marketing plan. change in distribution channel etc. . undertaken to understand the customers' perception to competitors' product quality.

operates like customer service. measuring the firms against business leaders anywhere in the world. . on time delivery. 0 It includes success factors for the industry in which the firm 0 The process involves-determine the tasks to benchmark- identify the critical performance factors of measurement-find out the best firm for the given tasks-measuring the performance of the best firm and also the of the firm-collecting the information on the process followed by the best companies-analyse the data and determine which process of the firm may work for the company-implement and monitor the result. or effective sales force.0 Benchmarking-Its used to find out how and why some of the 0 It aims to improve the firms performance by comparing and competitors perform better marketing tasks than other firms.

0 Business Trend Studies-As Industrial demand . is mostly derived from other industries demand. thus reduce the risk of failure.0 New Product Acceptance and Potential-After the new product launch. industrial MR must find out initial reaction from the customer regarding the buying decisions. It helps the firm to decide on further investment in production. its important to study the future trends of the business of those industries on which the demand of the product depends.

By multiplying the area market potential with expected market conditions.0 Sales Quota Determination-marketing research is conducted to evaluate the performance of sales persons and territories and for setting sales goals. Manager decides the sales quota for the individual sales people and territories. quota 0 The objective approach for deciding sales Breakdown the estimated market potential and market share into various geographical segments.   .

Process and analyse the data. Presentation/reporting the research findings. Identify the problem or opportunity and define the research objectives. Collect the data. STEP2. . STEP5. STEP3. STEP1. Develop the research design. STEP4.Marketing Research Process Defines the various tasks involved in the marketing research.

Its a very important step to avoid any contingency at later stages   0 . Preparation of research brief-the background information on the problem and the how the findings will help the research process.0 Identifying the problem and defining the research objectives  The first step is to identify the marketing problem or opportunity and define the objectives accurately.

descriptive.preparation of the research objectives. commercial. or combination Research methods.0 Develop The Research Design/Plan 0 It indicates the procedure and the cost of conducting the research study.observational.primary. 0 Decision Areas in Research Design Information type. experimental  .  Sources of data. secondary. exploratory.

sampling unit. sample size interview 0 Methods of contact-mail. telephone or personal 0 Data collection methods-questionnaire.sampling procedure.0 Sampling Plan. mechanical devices .

0 Decision Area in Research Design: 0 Information Type: 0 Based on the research objective the information should include  List of competitors Their market share Whether they are local national or multinational Whether any new competitor in future Competitors' SWOT analysis and pricing policies     .

without asking questions .0 Sources of Data Primary Data-consists of original information gathered for specific purpose Secondary Data-consists of data that is collected earlier for some purpose Commercial Data include the marketing information offered by some marketing research organizations   0 Research Methods for Primary Data Collection Observational Methods-information is recorded by observation on the behaviour pattern of people.

Ex focus group and depth interviews are used to gain the insight. measure cause and effect relationship by setting up a controlled situation. 0 Experimental Method-The purpose is to .0 Exploratory Methods-When the problem is not clearly defined and little information is available. It measures people's knowledge attitude and buying behaviour. 0 Survey Methods-Descriptive study are used by interviewing people who are believed to possess the desired information.

. editing.0 Survey Research Methods: 0 In industrial marketing research. and instructed to respond to those questions only. tabulating. the most common and the best primary data collection is the survey method. analysing is done easily. 0 Survey methods are classified into:  Structured direct and indirect interviews Unstructured direct and indirect interview.  0 Structured Direct Interview-Its a formal questionnaire approach to people. 0 Since the responses are standardized.

0 Unstructured Direct Interview-It known as 'depth interview' and often used for exploratory research. 0 Its conducted to obtain clear understanding of the problem and to discover information on hidden motives. .0 Its preferred when the sample size is large and are geographically dispersed. Conducted usually in informal and casual manner to build rapport and encourage the respondent to express views. 0 It takes longer time and requires competent interviewer.

0 Delphi is based on the principle that forecasts . interactive forecasting method which relies on a panel of experts.Delphi Technique- 0 Its a structured communication technique. originally developed as a systematic. (or decisions) from a structured group of individuals are more accurate than those from unstructured groups.0 Structured Indirect Interview.

Focus Group Interview 0 A focus group is a form of qualitative exploratory research in which a group of people are asked about their perceptions. 0 Questions are asked in an interactive group . idea. beliefs and attitudes towards a product. concept. service.0 Unstructured Indirect Interview. opinions. attitude or packaging. advertisement. setting where participants are free to talk with other group members.

0 Sampling Plan 0 A sample is a part of the population which is 0 Sampling Plan consists of 3 decisions:  selected to obtain the necessary information. Sampling unit Sample size   Sampling procedure 0 Sampling Unit: The researcher should determine the population to be surveyed. .

. The cost and time of sampling is less.based on Random Selection and statistical measurement of errors could be done.  . how many firms to be selected for survey. Non Probability Sampling-based on non Random Sampling and sampling errors cannot be estimated.e.0 Sample Size-the researcher should determine the sample size i. 0 Sampling Procedure-the researcher has to 0 Its classified into:  determine how the objects are to be selected. Probability Sampling.

this method is more effective. Its time consuming. .0 Methods of Contact 0 The 3 methods of contact in industrial marketing research are:  Personal Interview  Telephonic interview Mail surveys  0 Personal Interviews: Its a most widely used method as the sample size is small. expensive and needs more planning and supervision. When the product is more technical.

evaluating advertising recall. and expenses are minimal. who are not easily approachable 0 Mail Survey. such as measuring corporate awareness.The contact is impersonal and can . Its free from interviewer bias and can reach the respondents. and the responses are low.Generally the information gather is quicker. expect the possibility of ambiguity. response rate is higher. Therefore the wordings of the questionnaire for data collection is important. The interviews are short and not personal.0 Telephonic Interview.

psycho-galvanometer. are used to collect the information directly like the eye camera. The questionnaire should be pre tested to bring out the weakness in wording and sequencing of questions.0 Data Collection Methods(Research Instruments) 0 Questionnaire-most common method used when the sample size is large. and motion picture cameras. 0 Mechanical Instruments-these are devices which . The questions can be closed end or open ended. audiometer. It includes a number of questions in a proper sequence contributing to the research objectives.

which is needed for efficient data analysis. whenever required to ensure consistency and accuracy. . Classification and Tabulation Editing: consists of checking the completed questionnaires for any errors or omissions and correcting.Processing and Analysing the Data Processing of data includes: Editing. Coding: includes assigning symbols and numerals to answers so that the answers can be put into limited category. Coding.

0 Classification-consists of arranging the data in groups or classes based on common characteristics. into columns and rows so that further data analysis can be done. 0 Tabulation-Its an ordinary arrangement of data . 2 types of classification observed are: descriptive or qualitative and numerical or quantitative.

and analysis of more than two variables is called multivariate analysis.0 Data Analysis is categorized into Descriptive and 0 Inferential. 0 Some of the multivariate analysis are: 0 Multiple Regression Analysis 0 Multi discriminant Analysis 0 Inferential Analysis .t 2 variables is referred to bivariate analysis. 0 Descriptive Analysis: Its a study of distribution of one variable such as size. 0 Analysis of data w.r. efficiency and performance.

Report preparation:  The researcher has to collect information about the profile of the executives of the user company. .  The research findings should be relevant to the market research objectives.Presenting the Research Findings/Report The final stage of the research is the report preparation including communication of the research findings.

under “Research Methodology”  The researcher must not try to satisfy the personal likes and dislikes of the executives in the user company. data analysis techniques etc. data collection method. The researcher should logically justify the choice of research method.. The researcher should have clarity of thought and expression.  .

Standard format of marketing research report. • • • • • • • • • • • Title Page Table of Contents Executive Summary Introduction( or research brief) Problem Formulation and Research Objectives Research Methodology Findings of the Research Conclusions and Recommendations Appendix References Bibliography .

Industrial Marketing Intelligent System Marketing intelligence system provides relevant. The components include: • • • • Marketing Research Studies Internal Information System Secondary Data Sources Decision Support System . Industrial marketing intelligence system is defined as a broad spectrum of information that is required to make decisions. accurate and timely information on continuous basis to the industrial marketing manager to make decisions.