STP –
SEGMENTATION
TARGETING
POSITIONING
INTRODUCTION-
Ø Marketing strategies require an
identification of the markets and an understanding of thelr differences with
respect to affordability, accessibility, acceptance and availability.
Ø In fact, in the face of competition,
companies thrive on the ability to spot differences and fine-tune a
differentiated marketing strategy that matches the diffused preferences of
target customers effectively.
Ø Accordingly, we find that companies
today are developing differentiated offers in terms of products (brands with
different names, in different pack sizes and with different formulations),
prices (at diferent price points), promotions (with different communication campaigns)
and places (traditional channels, haats, melas, e-choupals, rural retail
outlets, Shakti groups, etc.) to win over consumers in different market
segments.
Ø Both companies and market research
agencies are engaged in research to learn more about the characteristics of
consumer markets in terms of geographic, demographic, psychographic and
behavioral aspects to obtain rich and reliable data and to develop indices to
take segmentation decisions.
Ø Based on such intelligent decisions,
marketers Are focusing on attractive segments to reach and serve them
effectively and achieve results economically.
Ø Selecting and attracting markets
involves three key decisions-segmenting, targeting and positioning.
Ø Segmenting is the process of dividing
or categorizing the market into different groups based on one or more
variables.
Ø Targeting involves selecting the market
segments that can be served efficiently and profitably.
Ø It involves making decisions on market
coverage strategies.
Ø Positioning is a market attraction
strategy that involves placing the brand in the minds of the customers in the
target market.
Ø The changing face of Indian society has
brought about new challenges and opportunities.
Ø A new India has been envisaged where women
and youth will claim more importance, where rural folks will be more demanding
and where products and service offerings will be tailored to suit this new set
of consumers.
Women's segment
Ø The population of women in rural India
is 48.1 per cent and the population of men is 51.9 per cent.
Ø Female illiteracy is 62 per cent whereas
the male illiteracy rate is 34 per cent.
Ø The labour force participation rate of
women is 22.7 per cent, less than half of the men's rate of 51.6 per cent.
Ø In rural India agriculture and allied
industrial sectors employ as much as 89.5 per cent of the total female labour.
Youth segment
Ø R. V. Rajan, President of RMAAI,
defines rural youth as the population aged between 18 and 35 years.
Ø He said, "just as in the rest of
the country, this segment forms over 50 per cent of the rural population
making it a potent force for the marketers to target."
Ø Why is the rural youth segment
important?
Ø The sheer size of the segment-5O per
cent of the rural population-is estimated to be between 25 & 40 years of
age.
Ø They are also earning members who
want to live life as per their own choices.
Ø The rural youth bring brand
knowledge to the household and thereby, emerge as key influencers in
the purchase process.
Ø This segment is an early adopter of
technology and aspires for more.
Ø A study by Internet research fum fuxtConsult
in 2008 revealed that one out of every seven regular Internet user was from
rural areas.
Ø
The
study revealed that rural net users were younger than their urban
counterparts.
GUIDES TO EFFECTIVE SEGMENTATION
Ø Marketers are often faced with segment.
More often than not, the dilemma of making a decision whether to segment or not
to the decision is in favor of segmentation.
Ø How is the market to be segmented and
how is the effectiveness of the segmentation to be tested?
Ø As discussed above, segmentation can be
done using one or more bases.
Ø Now, we will identify the criteria used
to determine effectiveness of segmentation.
Ø Segmentation is effective when it can
establish segments that are measurable, accessible, differentiable and
substantial.
Measurable
Ø Segments are formed with the help of
certain variables.
Ø These variables should be distinct,
clear and measurable.
Ø Only then can segments be described
in exact terms and differences between them understood.
Ø Companies so far, are not able to reach
rural markets due to lack of proper data.
Ø In the absence of information
related to size, purchasing power and profiles of rural consumers, they
were considered to be similar to the urbanites.
Ø Today, rural markets are studied by
various agencies to obtain useful data for segmentation.
Accessibility
Ø Reach is important to serve the segments.
Ø Till recently, marketers preferred
urban markets to rural ones because of the inaccessibility of the latter.
Ø They were dependent on mobile vans and
nearby town distributors and retail outlets to reach rural consumers.
Ø Now research has established that rural
folk can be reached effectively by participating in weekly haats or shandies.
Ø Also, the considerable improvement
in the infrastructure has made several villages more accessible
Differentiable
Ø Rural consumers are identified as a
different segment as their responses are different from the urban consumers'
in case of some products and programmes.
Ø For instance, in the case of buying wrist
watches, rural consumers difier from urbanites.
Ø Rural buyers are more worried about the
value for money and usually weigh the watch in their hands to gauge how
heary it is.
Ø On the contrary, urban consumers prefer
light ones equipped with the latest technology.
Substantial
Ø A segment is attractive only when it is
profitable.
Ø A segment should possess the following
characteristics:
Ø Homogeneous-It should consist of people, who are similar
in perceptions, learning, preferences, attitudes and action.
Ø As such, covering them will be easy.
Ø Large-It should comprise either a large
number of light users or a small number of heavy users so that marketing
becomes beneficial to the companies.
Ø It is observed that rural areas are
not homogeneous.
Ø Region-wise differences are found in
language, thinking and behaviour.
Ø However, it is difficult to design
separate promotional programmes as the size of the consumer bases is not large
enough to make the effort viable.
TARGETING
Ø Segmentation is the process of identifying and establishing
alternative market segments.
Ø As a next step, targeting involves evaluating
the various segments and selecting how many and which ones to
target.
Ø The three aspects in targeting are evaluation,
selection and coverage
Evaluation of segments-
Ø In evaluating market segments, company has to first identify the criteria
for evaluation.
Ø The following criteria may be applied
to determine the attractiveness of segments.
Profitability-
Ø The company has to collect information
on required aspects to conduct cost-benefit analysis and ascertain
profitability of the segment.
Relevant information includes:
Ø Sales volumes
Ø Distribution costs
Ø Promotion costs
Ø Sales revenues
Ø Profit margins
Attractiveness
Ø Marketers should know whether they
should design effective programmes to attract & serve the market.
Ø Smaller companies or new companies may lack
the skills, experience and resources needed to serve the larger segments.
Ø Some segments may be less attractive when
there is already more competition.
Growth rate
Ø A segment attractiveness depends not
only on its current profitability but also, on future prospects.
Ø The growth rate of the segment in terms
of growth in population, rise in purchasing power and increase in
preferences for the use of the products is to be considered.
Company objectives
Ø A company should evaluate the
segment opportunity with reference to their short-term and long-term
objectives.
Ø If a company's objective is to expand
the sales, it has to go rural instead of pulling rural consumers to
the nearby town in order to buy their products.
Ø This is precisely what Onida, Videocon
Ø and LG Electronics are doing to
promote their TV sales
Limitations
Ø Finally, a company should examine
whether the entry into the segment is acceptable to the society and government.
Ø If its entry provokes unnecessary
criticisms, the company may have to struggle hard to explain its stand and
safeguard its image
Selection of segments
Ø Selection of the segment(s) can be made
by rating the alternative segments on a predetermined scale in respect of the
five aspects explained above.
Ø An evaluation checklist useful in this
context is shown
Ø Segments may be ranked based on the
scores obtained and be considered for selection.
Ø Those with high scores will be accepted
and others will be kept aside for future consideration.
Coverage of segments
Ø Organizations can choose between four
alternative coverage strategies to suit their segmentation approaches.
Ø Undifferentiated in case of zero
segmentation (mass-marketing strategy)
Ø Differentiated when segmentation is
essential (segment or micro-marketing strategy)
Ø Concentrated when one small segment is
selected (niche-marketing strategy,)
Ø Tailored to each customer (customization
strategy)
Undifferentiated market coverage-
Ø There is no need for segmentation when
consumer preferences are homogeneous.
Ø A large market is available for targeting.
Ø Marketers, hence, design an undifferentiated
offer to attract consumers.
Ø For some products, the rural market as
well as the urban market are considered a homogeneous mass market.
Ø Some companies offering such products
choose mass marketing strategies.
Ø Several products like toilet soaps,
shampoos, washing powders, TVs, refrigerators, computers, two-wheelers and
services
Ø like
banking, telecom, medical and education are mass products.
Ø For instance, many toilet soap users
prefer medicinal value, cosmetic
strength, economy and freshness feeling in a toilet soap.
Ø Medimix offers all these and claims
that it is a beauty care Ayrvedic family soap.
Ø This soap appeals to all types of consumers.
Ø Fair & Lovely fairness cream, which has spread its tentacles in the
urban market, has a high penetration of 75 % in the rural market.
Ø Other such products are Lifebuoy,
Ponds talcum powder deluxe and Sampoorna
TV
Ø Differentiated segment wise coverage -
Ø Differentiated marketing strategy investigates
and identifies differences between segments and tries to match the
market offer to the desires and expectations of each segment.
Results-
Ø Strong identification of the company in the product category.
Ø More costs but higher sales.
Hence, more profits.
Ø More loyal consumers
Ø Differentiated Strategy-
Ø Do companies use a differentiated
strategy within rural areas?
Ø Obviously, there are products that are
exclusive to rural areas like fertilizers, tractors, seeds, etc.
Ø The following examples explain the use
ofthis strategy.
Ø Tractor: 25 to 30 HP (marginal or small
farmer);
Ø 50 HP (large farmer)
Ø Pepsodent- 50 g (middle or high
income);
Ø 15 g (low income)
Ø A segment marketer should be careful in
understanding consumer preferences and designing offers.
Ø The prerequisites for segment marketing
are:
Ø Understanding of consumer needs and
wants
Ø Awareness of competitors, products and services
Ø Innovative capabilities of marketers to
finetune products and services to the varied customer groups
Ø Selective
segment cove rage
Ø A niche is a very small group with a distinctive
set of traits, where the members seek a special
Ø combination of benefits.
Ø Niche marketing or concentrated
strategy identifies special sub-groups within
Ø larger segments and offers different
products and services.
Ø Concentrated strategy facilitates specialization
Ø in serving the segment and achieving
higher level of consumer satisfaction,
delight and loyalty.
Ø However, it is not without risks.
Ø In course of time, preferences of
consumers may change, and large companies may become competitors
seeing the success of one company.
Ø Generally, large companies may prefer
to offer specialized services as a part of their diversification
Ø Individual coverage
Ø Customized marketing is also termed as one-to-one
marketing.
Ø Tailoring units, hotels, tourist
operators,
Ø and doctors provide individualized
services.
Ø Building contractors build houses or
flats to the specific requirements of customers.
Choosing a coverage strategy
Ø which guides companies in their making
of coverage-strategy choices, with reference to the state of the four
variables,
for example,
Ø company resources,
Ø product variability,
Ø product lifecycle stage and
Ø market variability.
Ø For instance, undifferentiated strategy
is to be chosen when company resources are moderate, product variability
is less, and the product is in the introduction stage in a market that
has less variability. The options and determinants are
Ø indicated in Table
Ø Positioning is the act of finding a
place in the minds of consumers and locating the brand therein. Companies
Ø have to plan positions that give their
products the necessary advantage in the target markets.
Ø Positioning involves three tasks:
Ø . Identifying the differences of the
offer vis-d-vis the competitors' offers
Ø . Selecting the differences that have
greater competitive advantage
Ø . Communicating such advantages
effectively to the target audience.
Identify
differences
The marketing
offer may be differentiated along the following lines:
Product
Services
People
Image
Product differentiation
Ø Products can be differentiated based on
attributes such as shape, size, colour, quality, composition and
Ø performance. Functional
differentiations signify ease in process and benefits of use.
Ø Mysore Sandal soap comes in three
shapes-round, oval and rectangular.
Ø Close Up has three colour variants-red, blue
and green.
Ø Surf Excel is a high-quality product compared
to Wheel-both are from the stable of HUL.
Ø Coke has 400 calories whereas Diet coke has 1
calorie. Diet Coke is for diabetics.
Ø Singer sewing machine stitches, "Memory
craft" can even scan designs.
Services differentiation
Ø Services may be differentiated with
respect to delivery, installation and maintenance, Long warranty
Ø periods, free service coupons, service
at phone-call distance, 24-hours service, emergency care, etc.
Ø some examples
People
Ø People who come into contact with users
may quite often influence the decision of consumers. In this
Ø cra of relationship marketing,
differentiation by people is worth considering. Service organizations
Ø llke hospitals, schools, banks, road
transport and telecommunication require people who serve with
Ø n smile and are efficient, Service
organizations mostly emphasize the competencies of their people.
Ø Examples: Sayrng "Innovative
team]' "know how to servei' "smile and serve,"
"professional experts"
Ø und "ready to solve your
problems," etc.
IMAGE
Ø The image of a brand or company may win
over a consumer, even though the product is very similar
Ø to a competing product. Image is built
by advertisements, symbols, signs, colours, logos, atmosphere of un
organization and social activities. The images may be related to attributes
such as quallty, being hightech,
Ø being a samaritan, achievement,
honesty, etc.
Ø The evaluation requires the following
steps-
Ø Identification of attributes, which can
give competitive advantage. For example, quality, service, technology and
economy.
Ø Use of a rating scale. Maybe, a
1O-point scale.
Ø Rating the attributes on five criteria,
i.e. attractive, distinctive, pre-emptive, afordable and communicable
Ø Then, developing a comparative table of
competitive advantages to arrive at an appropriate decision
Ø In Tables 6.28 arrrd6.29,the
economyposition has a clear advantage overthe service aspect. The other
Ø two diferences are strengths of
competitors. Hence, positioning on economy will benefit the company.
Ø The next question is how many
differences to promote?
Ø Roosser Reeves advocated marketers to
develop "Unique Selling Proposition" (USPs) for each brand
Ø and maintain it. Thus, best quality,
best technology, best service, etc. can become USPs. It has to claim
Ø that it is the "best" in that
respect. However, companies may claim more than one benefit to make its
Ø position less vulnerable when it has no
one "best."
Ø Communication strategy
Ø Once the company has chosen the
differences, A high-tech position may be communicated by large showrooms
with good atmosphere
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