4.

2 Marketing
planning

IB Business Management
4.2 Marketing planning
By the end of this chapter, you should be able to:
• Explain the role of marketing planning
• State the elements of a marketing plan
• Comment on the four Ps of the marketing mix
• Prepare and analyse an appropriate marketing mix for a particular
product or business
• Discuss the effectiveness of a marketing mix in achieving
marketing objectives
• Distinguish between target markets and market segments
• Identify possible target markets and market segments in a given
situation
• Distinguish between niche market and mass market
• Analyse how organisations target and segment their market and
create consumer profiles
• Draw a product position map / perception map and comment on it
4.2 Marketing planning
By the end of this chapter, you should be able to:
• Explain the importance of having a unique selling point/proposition
(USP)
• Evaluate how organisations can differentiate themselves and their
products from competitors
Market segmentation
• Sometimes referred to as differentiated marketing.
• Process of dividing a market into smaller sub-groups based
on some key defining characteristics of consumers.
• Involves the division of larger markets into small clearly
identifiable sections.
• Allows a business to better target its marketing efforts,
using more specific promotional activity to better meet the
needs of its consumers.
• Instead of trying to sell just one product to the whole
market, different products are targeted at different
• segments.
Market segment is a
sub-group of a whole market in
which consumers have similar
characteristics. The energy
drink market is one segment
of the much larger drinks
market.
Demographical
segmentation
• The broadest of all segmentation methods and includes a
wide range of different criteria.
• Includes age, gender, race, location, employment status, etc.
• Markets may also be segmented according to social class
groupings (socio-demographic segmentation).
Geographical
segmentation
• Concerned with identifying consumers according to the area
where they live.
• Could be fairly broad. For example, Waitrose supermarkets
are located predominantly in the south of England.
• May be quite specific. Many insurance companies target
customers according to crime rates in their locality.
Psychographic
segmentation
• Divides the market based on people’s lifestyles choices or
personality characteristics.
• Includes social and economic status – some
high-income-earning individuals belong to particular luxury
clubs that exclude people not of a certain wealth status.
• Also includes the values – people’s morals and beliefs need
to be considered here, for example customer values
regarding recycling of products or animal testing.
Examples

PCs for office and home

use, including games

Laptop models for

business people who
travel
Examples
Standard cola
drink

For dieters

Flavored drinks
for consumers
with particular
tastes.
Advantages
• Businesses can define their target market precisely and
design and produce goods that are specifically aimed at
these groups leading to increased sales.
• It helps to identify gaps in the market – groups of consumers
that are not currently being targeted – and these might then
be successfully exploited.
• Differentiated marketing strategies can be focused on
target market groups. This avoids wasting money on trying
to sell products to the whole market – some consumer
groups will have no intention of buying the product.
• Small firms unable to compete in the whole market are able
to specialize in one or two market segments.
• Price discrimination can be used to increase revenue and
profits.
Limitations
• Research and development and production costs might be
high as a result of marketing several different product
variations.
• Promotional costs might be high as different
advertisements and promotions might be needed for
different segments – marketing economies of scale may not
be fully exploited.
• Production and stock holding costs might be higher than for
the option of just producing and stocking one
undifferentiated product.
• By focusing on one or two limited market segments there is
a danger that excessive specialization could lead to
problems if consumers in those segments change their
purchasing habits significantly.
Market segmentation
• Sometimes firms only market their goods or services to one
segment and deliberately do not aim to satisfy other
segments.
• Gap is a clothing retailer that aims only at the youth market,
Nike shoes are only for sports use and Coutts Bank only
offers banking services to the seriously rich.
• These businesses make a virtue out of concentrating on one
segment and developing an image and brand that suits that
segment.
Targeting
• After segmenting its market, a firm must now decide on its
target market.
• A target market consists of a group of consumers with
common needs or wants that a business decides to serve or
sell to.
• It is the process of marketing to a specific market segment.
• Targeting can be carried out using the following strategies:
• Mass marketing
• Segmented marketing
• Niche marketing
Mass marketing
• Also known as undifferentiated marketing.
• A firm ignores the differences in the specific market
segments and targets the entire market.
• Businesses consider the common needs or wants of
consumers in the market and aim to sell their products to a
large number of customers in order to maximize their sales.
• Examples of companies that do this are Samsung, Nokia, LG,
Dell, HP, and Coca Cola.
Segmented marketing
• A differentiated marketing strategy targets several market
segments and develops appropriate marketing mixes for
each of these segments.
• For example, Toyota designs cars for the different
socio-economic status of people in the world.
• With segmented marketing, firms hope to gain a stronger
position in each of their segments and so increase their
sales and the market share of their brands.
Niche marketing
• Concentrated marketing is a strategy that appeals to smaller
and more specific market segments.
• It is a good strategy for smaller firms that may have limited
resources.
• These firms may serve market niches where there are few
competitors and take advantage of opportunities that may
have been overlooked by larger firms.
• Products provided by businesses that operate in niche
markets include Apple’s iTunes and Rolls-Royce cars.
• Businesses using this strategy can market their products
more efficiently and effectively.
Consumer profiles
• It is important to be aware of who its consumers are.
• Consumers profiles are detailed breakdowns of the demographic
characteristics of the consumers of a particular product.
• Consist of information provided about the characteristics of
consumers of a particular product in different markets.
• It will include age, gender, income levels and social group.
• Once a business knows its key consumers are, it can target its
marketing activity specifically at those groups.
Positioning
• Position maps allow a business to see where existing brands are
aimed and identify potentially profitable niches in the market.
• This is also called positioning the product by using a technique
such as market mapping.
• In the car market you can see that most brands will have a
consistent marketing strategy – those with a high price will
strongly advertise their quality (promotion), have better standard
features (product) and charge higher prices (price).
• Some markets will not be as saturated as the car industry. In these
cases, gaps in the market can be identified and new products
launched to meet the needs of consumers in each target market.
Positioning

A positioning map for brands in the clothing market

Workpoint
Business investigation
• Choose an industry you are interested in.
• Draw a position map showing different brands.
• Why would companies in the industry you’ve chosen find it useful
to have the information your position map shows?
Unique selling proposition
• Differentiating factor that makes a company’s product unique,
designed to motivate customers to buy.
• USPs are key in protecting a niche once a business has identified
it.
• If a product does not have something
special or different about it, customers
may be easily tempted away by rival
products.
• Companies spend a lot of time and
money ensuring that their product is
clearly differentiated both in the design
and the branding.
Sources
• Stimpson, P., Smith, A. (2015) Business Management for the
IB Diploma. Cambridge
• Lominé, L., Muchena, M., and Pierce, R. (2014) Business
Management. Oxford
• Clark, P. and Golden, P. (2009) Business and management
Course Companion
• Gutteridge, L. (2009) Business and Management for the IB
Diploma
• Thompson, R. and Machin, D. (2003) AS Business Studies