MARKET SEGMENTATION:Product Decisions, Distribution (Place) Decisions, Product Positioning

<< MARKET SEGMENTATION:Demographic Segmentation, Behavioralistic Segmentation

FINANCE/ACCOUNTING ISSUES:DEBIT, USES OF PRO FORMA STATEMENTS >>

Strategic Management MGT603

Lesson 37

MARKET SEGMENTATION

Learning objectives

The main objective of this chapter to enable to students about concern marketing issue such marketing

segmentation, marketing mix and product positioning relating to strategy implementation.

Marketing Mix

Marketing decisions generally fall into the following four controllable categories:

· Product

· Price

· Place (distribution)

· Promotion

The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept

of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had

described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix

included product planning, pricing, branding, distribution channels, personal selling, advertising,

promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome

McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of

marketing, depicted below:

The Marketing Mix

These four P's are the parameters that the marketing manager can control, subject to the internal and

external constraints of the marketing environment. The goal is to make decisions that center the four P's

on the customers in the target market in order to create perceived value and generate a positive response.

Product Decisions

The term "product" refers to tangible, physical products as well as services. Here are some examples of the

product decisions to be made:

· Brand name

· Functionality

· Styling

· Quality

· Safety

· Packaging

132

Strategic Management MGT603

· Repairs and Support

· Warranty

· Accessories and services

Price Decisions

Some examples of pricing decisions to be made include:

· Pricing strategy (skim, penetration, etc.)

· Suggested retail price

· Volume discounts and wholesale pricing

· Cash and early payment discounts

· Seasonal pricing

· Bundling

· Price flexibility

· Price discrimination

Distribution (Place) Decisions

Distribution is about getting the products to the customer. Some examples of distribution decisions

include:

· Distribution channels

· Market coverage (inclusive, selective, or exclusive distribution)

· Specific channel members

· Inventory management

· Warehousing

· Distribution centers

· Order processing

· Transportation

· Reverse logistics

Promotion Decisions

In the context of the marketing mix, promotion represents the various aspects of marketing

communication, that is, the communication of information about the product with the goal of generating a

positive customer response. Marketing communication decisions include:

· Promotional strategy (push, pull, etc.)

· Advertising

· Personal selling & sales force

· Sales promotions

· Public relations & publicity

· Marketing communications budget

Product Positioning

"It simply means Positioning is how a product appears in relation to other products in the market"

After segmenting markets so that the firm can target particular customer groups, the next step is to find

out what customers want and expect. This takes analysis and research. A severe mistake is to assume the

firm knows what customers want and expect. Countless research studies reveal large differences between

how customers define service and rank the importance of different service activities and how producers

view services. Many firms have become successful by filling the gap between what customers and

producers see as good service. What the customer believes is good service is paramount, not what the

producer believes service should be.

Product positioning strategy

The ability to spot a positioning opportunity is a sure test of a person's marketing ability. Successful

positioning strategies are usually rooted in a product's sustainable competitive advantage. The most

common basis for constructing a product positioning strategy are:

· Positioning on specific product features

133

Strategic Management MGT603

· Positioning on specific benefits, needs, or solutions

· Positioning on specific use categories

· Positioning on specific usage occasions

· Positioning on a reason to choose an offering over the competition

· Positioning against another product

· Positioning through product class dissociation

· Positioning by cultural symbols

The following steps are required in product positioning:

1. Select key criteria that effectively differentiate products or services in the industry.

2. Diagram a two-dimensional product-positioning map with specified criteria on each axis.

3. Plot major competitors' products or services in the resultant four-quadrant matrix.

4. Identify areas in the positioning map where the company's products or services could be most

competitive in the given target market. Look for vacant areas (niches).

5. Develop a marketing plan to position the company's products or services appropriately.

134

Table of Contents: