Marketing_Management

Marketing Management Assignment 1 Q1. Using an example of your own choice explain how the various components of the marketing framework relate to each other. What are the implications of this model for marketers' Safe n Sound child seats will be used in this explanation of the marketing framework. The Marketing Framework begins with a situational analysis using the 5Cs; Customer, Company, Context, Collaborators and Competitors. The 5Cs are dynamic, so this aspect of the marketing framework requires ongoing monitoring and adjustments (Iacobucci, 2010). The customers for this product are new customer parents, repeat purchasers or carers. The company should be reviewed by identifying the internal strengths and weaknesses, as well as the external opportunities and threats using a S.W.O.T analysis. In addition to the physical product, the company is able to provide the additional customer benefit of child safety during transport. The context for the product has recently changed quite favourably, as it is now legislated that children up to seven years old must travel in a car seat. Parents use the internet to gather information and ask opinions in web forums before decision making. Possible collaborators to help meet customer needs and strengthen B2B partnerships could be entertainment companies e.g. addition of iPod speakers or DVD accessories. There are a relatively small number of competitors, however the two main competitors, MotherCare and Safety First have lower safety ratings and are set at lower price points. An emerging competitor is HiPod, a trendy alternative but lacking the high safety rating of Safe n Sound. When the situational analysis information has been collated, strategic marketing planning using Segmentation, Targeting and Positioning (S.T.P) is done. Market segmentation is derived from dividing a market into ‘distinct groups of buyers with different needs, characteristics or behaviour’ (Kotler, Brown, Adam, Armstrong, 2001: 293). They divide the market into distinct groups of buyers on the basis of homogenous needs, characteristics or behaviour. For example one segment may be aligned around a tight budget, another segment may prioritise the highest safety rating of car seats. They have are distinct needs as customers, so can be seen as two separate segments. Once the segments have been identified, the business needs to determine which one would make the best customers, and then target that segment so that they can focus on the most profitable, sustainable segment. As McDonald (1999: 131) notes, few companies can afford to be ‘all things to all people’, and not all segments will be appropriate targets. As Wong and Saunders (1993) cited in Dibb and Simpkin (2009) explain, by improving customer orientation, market segmentation also has the potential to develop competitive advantage and improve business profitability. Once the target market has been identified, businesses can then position their product or service most effectively. Positioning is the strategic recognition of competitive advantages and selling points. It enables the business to establish a distinctive place in the mind of target customers relative to its competitors. For the Safe n Sound child seat, it successfully aims to position itself as the safest of all child seats. Mazumdar (1993) reminds us that the targeting decision is dependent on whether the segment is large enough to be profitable, as well as accessible. Iacobucci (2010) reminds us that the marketing tactics to apply the marketing strategy come from a customer focus using the 4Ps consisting of Product, Price, Place and Promotion. The product in a physical sense is the car seat. It has the highest safety rating available in Australia, so the benefit of the product is safety for children during car travel. Development is focused on improved safety features, however there’s potential to expand the product range with features such as automatic straps and iPod speakers or DVD accessories. The pricing of the child seats are at the higher end of the pricing scale, ranging from $399-$599, however the company has a return offering a free replacement seat if a seat is ever involved in an accident. A customer’s perception of value is important and if the seat were at a lower price it is possible customers may feel that quality is being compromised. The places where customers purchase the product are specialty baby stores or high end department stores. They are not available at the discount department stores where most of their competitors are found. Promotion for the product is centred on the slogan ‘Arrive…Safe n Sound’. The business has very astutely ensured that promotional videos for the product are shown at antenatal classes and they donate child seats to be used at antenatal class demonstrations. Communicating with potential customers through advertising in parenting magazines, glossy brochures at point of sale featuring the positive result of safety rating comparisons and well trained sales staff, who describe the product as ‘the Volvo of baby seats’. The framework gives us a structured approach to considering and analysing market questions (Iacobucci, 2010), however businesses need to be aware that all aspects of the marketing framework are interdependent. An awareness of the changeable aspects of the framework will allow for ongoing monitoring and adjustments, and this should be recognised by not only the marketing department, but also the other business divisions that are responsible for other elements. Q2. What is segmentation and what role does it play in the marketing process' What are the possible bases for consumer marketing (B2C) segments' According to Reed (1992), market segmentation was first recognised by Wendell Smith in 1956. It is now a core concept of marketing and can be explained as: ‘a process of partitioning a market into segments of potential customers with similar characteristics who are likely to exhibit similar purchase behaviour’ (Reed, 1992: 99). Market segmentation is similarly described by Cravens (1997: 125) as ‘the process of placing the buyers in a product market into sub groups…so they display similar responsiveness to a particular marketing positioning strategy’. Market segmentation has also been defined as the process of dividing a potential market into distinct subsets of consumers with common needs or characteristics, then selecting one or more segments to target (Schiffman, Bednall, Watson, Kanuk 1997: 49). Segmentation can be used to better align products with buyer preferences, or to identify a possible market target. Market segmentation makes it possible for companies to match their marketing programmes for specific target markets. Not all elements of the marketing mix are necessarily changed from one segment to another. A market can be segmented by various bases, and industrial markets are segmented somewhat differently from consumer markets. Reed (1992) states that consumer marketing (B2C) segments can be selected from: Analysis of who the consumer is, analysis of what and where they buy, as well as analysis of why they buy. Kotler (2000) notes that some researchers try to form segments by looking at consumer characteristics; geographic, demographic and psychographic, then examine if they the segments have differing needs or product responses. There are also behavioural responses used for segmentation, such as purchase occasion, status and consumer (Kotler, Brown, Adam & Armstrong, 2001). Demographic segments may be generated from parameters such as age, sex, family life cycle, education, income and ethnicity, geographic segments may be related to climate, population density or region. Psychographic may segment socioeconomic groups, values or personality or may use the three primary motivations of Vals; ideals, achievement or self expression (Iacobucci 2010: 20). Market segmentation may be required for competing in many-product markets (Cravens, 1997). In Lyons and de Bono (2005: 233) Claire Jennifer says ‘Very specific niches, segmentation, and market focus have always been a way of achieving surpetition’. However a segment needs to be large enough to support a business strategy. Aaker (1998: 45-46) notes that the task of identifying segments is difficult because ‘in any given context there are hundreds of different ways to divide up the market’. To avoid missing a useful way of defining segments, it’s important to consider a broad range of variables. Palmer and Millier (2004) cited in Tonks (2009) conclude that segmentation is problematic because so many prescriptions for segmentation are context dependent. Similarly, Dibb and Simkin (2009) propose that because there are numerous possible segmentation variables when choosing segmentation bases, it’s not possible to maintain that there is one best way to segment a particular market. O’Shaughnessy and O’Shaughnessy (2002: 152) state “It is unfortunately the case that the definitional logic for establishing market segments is seldom made explicit or properly understood.” Whilst acknowledging these limitations, Dibb (2009) recognises that market segmentation is used widely across business sectors to manage diverse customer needs and to target marketing resources. The underlying principle is that heterogeneity in preferences and buying behaviour can be effectively managed by grouping similar customers into segments, of whom some become the focus for marketing. Iacobucci (2010) reminds us that once segments are defined, it is necessary to ensure a fit with existing corporate goals, and to ascertain that segmentation activities should be actionable. Bailey, Baines, Wilson and Clark (2009) argue that although market segmentation, using a variety of segmentation bases, is still essential, organisations with rich data on individual customers should go beyond this by instigating propensity modelling systems and the use of triggers to respond to individual customer interactions. Tonks (2009) states that over the last three decades attention has moved from more traditional general segmentation variable (geographic and demographic) measures, towards more qualitative measures such as lifestyle and family life cycle. Sudbury and Simcock (2009) have developed a segmentation model for older consumers that innovatively utilises perceived age, rather than chronological age as the variable to understand older consumers. Koontz and Rockwood (2001) used segmentation calculate more precise performance measures for a library’s productivity for each segment. Tonks (2009) also notes that attention has shifted towards the use of multivariate methods and geodemographics for analysis. Market segmentation, within its historical and developing methodologies, encourages customer orientation by keeping businesses closely in touch with their customers, ensuring more efficient resource allocation and results in marketing programmes that are better aligned with customer needs. Q3. Outline and discuss the criteria that could be used for targeting customers for a new restaurant operating in the Launceston market. Iacobucci (2010: 29) states that targeting is merely selection and that once a business has identified the market segments, it needs to select the most appropriate to target. Market targeting consists of evaluating and selecting one or more segments that a company decides to serve (Cravens 1997: 124). Companies do best when they choose their target markets carefully and prepare tailored marketing programmes (Kotler 2000: 20). Kotler (2001: 306) says that a business entering a market should first target the most attractive segments that match its capabilities. Market targeting approaches fall into two categories: segment targeting and targeting through product differentiation (Cravens 1997: 191). Schiffman et al (1997: 48) notes that targeting can help sellers find their marketing opportunities more efficiently. Kotler, Brown, Adam, Armstrong (2001) summarises that the key is which segment will produce the greatest customer value and sustain it over time. To select a target market, study of the product market, its buyers, competitive advantages, and the structure of competition is needed (Cravens 1997: 190). When evaluating the attractiveness of a market segment size, growth rate and sales potential, competition, brand loyalty of existing customers, attainable market share, required market share to break even, expected profit margins in the segment should be considered (Aaker 1998; Kotler at al, 2001; Iacobucci 2010). Market research is needed to gather this information. For example, restaurant customer intentions, front of house projections, test marketing and statistical demand analysis are useful for determining sales potential. The impact of variables on the market segment should also be considered i.e. opportunities from tourism. Iacobucci (2010) notes that potential profitability needs to be estimated by using current existing market data, expected increase (or decrease) in volume, existing and future competition and customer behaviour/expectations. The business also needs to conduct a self audit on strategic fit, which is when choosing a target market, considering how the markets fits with the company’s capabilities such as infrastructure and human resources, capital investment required to serve the segment and the potential profitability of the market. A S.W.O.T analysis should be used as a tool to clarify the strategic corporate fit of the potential target market with the business, by examining the internal strengths and weaknesses, as well as external opportunities and threats, driven by changeable nature of the 5Cs. Iacobucci (2010) provides a matrix of strategic criteria for market targeting presenting the attributes of ‘corporate strengths’, ‘less capable’ and ‘attractive market’’ alongside ‘a market that doesn’t look promising’. Competitive comparisons of corporate strengths in comparison to competitors may also be graphically presented using a perceptual map. In the case of a restaurant, quality may have a number of meanings, such as; service time, courteous service, menu selections or other attributes such as environmental friendliness. Yellow Pages has listings for 113 restaurants in the Launceston area, all potential business competitors. McColl-Kennedy, Kiel, Lusch & Lusch (1994: 198) state that a target market requires substantiality, determined by sizing markets and investigating market potential and forecasting sales. Market sizing may be determined by gather total population data then segmenting it into smaller categories. The most recent Launceston ABS data is from the 2006 census, indicating a population of sixty-two thousand (Wardlaw-Kelly, 2008). Sales forecasting may be done by seeking expert opinion, sales force projections or by ascertaining buyer intentions, then extrapolating. More complex methods of forecasting, such as regression analysis or time series analysis may also be done (McColl et al 1994: 202), however in the instance of a new restaurant, the sales data needed may be lacking to complete these methods. Iacobucci (2010: 32) points out that the more precisely defined the market segment, the easier it is to estimate associated numbers. Once a perceptual map is produced, a strategic segment comparison should be prepared. Using this technique, opportunities or vulnerabilities against market competitors can be explored by comparing segments against parameters such as size, growth, competitors and fit. Kotler (2001: 306) identifies that the choice in targeting strategies is between undifferentiated, differentiated or concentrated marketing. A new restaurant with limited resources may apply a differentiated marketing strategy, such as offering catering services, in house dining and take-way product to capture several market segments. However they may aim for a concentrated market strategy, i.e. locally produced food products and a mix of marketing tools could be applied A number of factors are considered when targeting customers, including the resources available to the business and the competitors marketing strategies (Kotler & Armstrong, 1991). The best decision making also depends on product or service variability and lifestyle stage (McColl et al 1994: 204). If the most appropriate match between restaurant and attractive market segment is made there is a greater chance of the new restaurant succeeding. Q4. Why is positioning most important in marketing' How can perceptual mapping be used to develop strategies for promoting to consumers' Provide examples. Iacobucci asserts that positioning is probably the most important aspect of marketing as it incorporates all facets of the marketing mix, while the statement ‘succinctly communicates the parameters of the firm’s position to different audiences’ (2010: 49). Da Silva (2007) credits the popularization of the concept of positioning to the work of Ries and Trout in the 1980s. Positioning is the strategic decision about key selling points and competitive advantages. Ideally products should be positioned so that they stand apart from other brands. Positioning shows how a company or brand is distinguished from its competitors (Cravens, 1997: 209). This is supported by pioneering positioning researcher Jack Trout, quoted in Kaydo (2000: 1), who maintains that once a business identifies what makes it unique in the market, that idea should be the centre of its entire sales and marketing strategy. Positioning strategy complements the businesses segmentation strategy and selection of target markets. Schiffman, Bednall, Watson and Kanuk (1997: 177) explain that it conveys the concept, or meaning, of the product or service in terms of how it fulfils a consumer need. Importantly, Schiffman et al (1997) also note that different consumer meanings can be assigned to the same product or service, so that it can be positioned differently to diverse groups. Cravens (1997: 203) purports that the positioning concept indicates the perception or association that management wants target market buyers to have concerning the company’s brand. Positioning analysis shows how to combine product, distribution, pricing, and promotion strategies to favourably position the brand with buyers in the segment (Cravens, 1997: 145). Kaydo (2000: 1) says that positioning is; ‘the marketing tactic of differentiating a product or company in the mind of a prospect’. He quotes Tom Wilson, an executive with Kimberly-Clark Corporation, “Every product, every service needs a unique point of differentiation,” (Kaydo, 2000:1). Jain (2004b) identifies six individual approaches to positioning; by attribute, by price/quality, with respect to use or application, by product user, by product class, with respect to a competitor. Hair, Anderson, Tatham and Black (1992: 319) define a perceptual map as "The visual representation of a respondent's perceptions of two or more dimensions or features". The development and interpretation of perceptual maps use the same principles as when determining the positioning and clustering of the brand attributes (Bendixen 1995: 579). Perceptual mapping is an important tool in the management of brands. An understanding of brand positioning, as perceived by customers, is essential to the development of effective marketing strategies. The segmentation of brands, based on similarity in perceptions, identifies competing sets. This means that businesses can gain a more complete understanding of market structures and consumer behaviour, then apply this knowledge to influence their marketing planning. Gaps in perceptual maps may identify possible opportunities in the market. Jain (2004) provides an example of perceptual mapping in the automobile industry against a mix of parameters. This kind of analysis gives managers a visual demonstration of whether products are on target, or if they may need repositioning. Schiffman et al (1997: 178) summarise that the technique of perceptual mapping helps marketers determine how their products or services appear to consumers in relation to competitive brands, on one or more relevant characteristics. Cravens (1997: 139) asserts that perceptual maps are a way to select market target strategies and decide how to position a product. He provides a generic example that plots customer perceptions in regard to the parameters of expensiveness and quality. This methodology could be applied across numerous products, such as food and beverage products, clothing, white goods, or even household items and cleaners. It allows management to determine if their brand it optimally positioned, and if not to reconsider their strategy (Iacobucci 2010: 41). Mazumdar (1993) explains that a product should be targeted to the segment that has the greatest perception of value, providing it is also large enough and accessible. He shows the example of a perceptual map of a workstation plotted against the parameters of mainframe and P.C users. As consumer segments have diverse competitor products for analysing the value of a new product, a range of competitors or reference products should be used in the value analysis (Mazumdar, 1993). The relative positioning of how brands are perceived against competitors in a market, their similarities, preferences and attributes they’re associated with are key elements in marketing management. 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