Unit I Introduction to Marketing and Focusing Marketing Strategy with Segmentation, Targeting and

Positioning:
Nature, importance and scope, evolution/various marketing orientations, Evaluating Opportunities in the
Changing Marketing Environment. Bases for market segmentation of consumer goods, Effective
segmentation criteria, Evaluating & Selecting Target Markets, Concept of Target Market and Concept of
positioning – Value Proposition & USP, positioning errors, International Marketing-Entry strategies.

Meaning of Marketing
Marketing refers to performance of set of activities essential to direct, regulate and facilitate the flow of goods
and services from the manufacturer to ultimate consumer in the process of distribution. These activities include
market analysis, market planning, product planning, product development, pricing of product or services,
physical distribution, warehousing, financing, risk bearing etc.
As per American Marketing Association, ‘marketing is a process of planning and executing the conception,
pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and
organizational objectives.’
Paul Mazur defined marketing as ‘the creation and delivery of standard of living to society.’
Nature of Marketing
The follow points describe the nature of marketing:
 Marketing is a process of discovering and translating consumer wants into products and services.
 Marketing is a concept and way of thinking.
 Marketing is a dynamic process.
 Marketing relates with movement of goods and services from producer to ultimate consumer.
 Marketing creates time, place and possession utilities through warehousing, transportation and selling.
 It focuses on satisfaction of customer’s wants. Customer is considered as the ‘King’ of the market. All
activities of marketing begin and end with customers.
 Marketing involves various activities such as product planning and development, product pricing,
promotion, physical distribution and selling.
 Marketing is wider than selling. It not only aims at physical movement of goods but also focuses on
customer satisfaction.
 Marketing involves creative thinking which provides a competitive edge to the organization.
 Marketing information system as well as integrated marketing is essential to achieve marketing goals.
Scope of Marketing

The scope of marketing is very wide. Various functions are performed under it. Different authors have included
different functions in marketing. However, the general functions of marketing have been grouped under three
major categories. These functions have been described as follows:
4.1 Merchandising Functions
It means those activities which are essential to make possible the availability of goods and services to the
market. Various activities that are covered under merchandising functions have been described as follows:
 Product Planning and Development: Planning for product, is the first step of marketing programme in
a firm. It implies all activities which are associated with the determination of line of products which a
firm can offer. It involves extensive marketing research so as to provide a product or service as per
customer’s needs. It helps in development and commercialization of new product, modification of
existing lines and discontinuance of unprofitable product lines.
Product development comprises of technical activities of product engineering and design. Product planning
and development involves certain activities as described below:
(i) Creation of Idea
(ii) Screening of Idea
(iii) Assessing technical feasibility
(iv) Analyzing its business prospects
(v) Designing the product i.e. giving shape, testing, packaging and labelling etc.
(vi) Test marketing (offering product as sample or launching it in small segment of market)
(vii) Analysing the reactions of customers and modifying the product accordingly
(viii) Pricing the product
(ix) Producing the product for sale in the local, national or international market (commercialization)
 Standardisation and Grading : Standardisation refers to the process of setting up standards so as to
ensure that goods are produced as per those standards. A standard is a constant physical feature of the
product like design, shape, size and colour. Standardisation brings uniformity in quality which further
helps in marketing. A buyer can buy goods only by examining the sample rather than inspecting the
whole lot. This saves lot of time and botheration of buyers and sellers. Grading means dividing the
products into different classes as per their size, quality and other features. Products with similar features
are placed in one grade and are distinguishable from other products. Since, all products of the
manufacturer may not be of same quality, so they are divided into different groups in accordance with
specifications set in standards and are given different grades. e.g. Basmati rice differs in quality, so they
are classified according to quality and grades are assigned. Thus grading creates heterogeneity among
groups but homogeneity within the group. Grading provides various benefits such as (i) sale of goods by
description (ii) raising of loan by giving graded goods as collateral security (iii) smooth trading in
commodity exchanges (iv) winning buyer’s confidence as he is assured of a particular standard of
goods.
 Product Pricing : Product pricing is vital function of marketing and involves the determination of
adequate price which can achieve pricing objectives. There are various methods of pricing viz. cost-
based method, demand based method, competition based method and perceived utility method. Prices of
the products are determined by selecting an appropriate method. Correct pricing is necessary for
generating long term demand of the product. There is a need to follow proper pricing strategies to
survive in this highly competitive market. Prices should be fixed in such a manner that on one hand,
customer’s preference for product is created and on the other hand, genuine profits are earned.
  Buying and Assembling: Buying means procuring goods at right time, at right price, in right quantity
and quality and from a right source. It involves transfer of ownership from seller to buyer. Buying is an
important function of marketing. Manufacturers have to purchase raw materials and other things.
Trading houses buy goods for the purpose of selling them to others. Wholesalers and retailers buy good
for resale purpose. Good buying ensures acquiring of such goods which can profitably be sold to
customers. Buying decisions can be facilitated by gathering information through marketing research,
consumers and salesperson.
Buyers follow different buying practices while making purchases such as:
(i) Hand to mouth buying : This is also known as conservative buying. Under this system, buyers purchase
goods strictly as per their requirement.

(ii) Concentrated buying : It is the practice under which buyers make purchases from few suppliers or from a
single supplier. They are able to secure certain benefits from the seller being their ‘loyal buyers’.

(iii) Diversified buying : This is also called as scattered buying. This practice refers to buying from different
suppliers. Buyer can get competitive price, better service and wider choice.

(iv) Reciprocal buying : This refers to buying on reciprocal basis, i.e. if you buy from me, I will buy from you.
Under this, there is assured market for the buyer.

(v) Speculative buying : It is practice of making bulk purchases so as to sell them at higher price in near future.

Assembling refers to collecting goods from different production houses and bringing them to a central place for
sale. Assembling facilitates in providing goods of different variety at a place and time they are demanded.
There are number of intermediaries who are involved in the process of assembling.
 Selling : Selling implies the process of transfer of title to goods or services in exchange of money. The
buyer gets the ownership of goods but may or may not hold their possession immediately. Selling is
considered as the vital function of marketing. In fact, all marketing activities are directed
towards effective selling. A firm can earn profit only through successfully selling i.e. disposing of goods
at reasonable prices. It is through selling that goods or services reach to ultimate consumer. Selling
consists of personal and non-personal activities aimed at creating, maintaining and even developing
demand for products or services. A seller has to establish contact with the buyer, create demand,
negotiate terms and conditions of exchange, complete all formalities and finally enter into contract of
sale i.e. legally transferring ownership of goods from seller to buyer. Selling is a creative and difficult
art. A seller should have zeal, imagination and presence of mind. Best selling practices will ensure
repeated or more sales. Selling can be personal or impersonal. Personal selling refers to face to face
interaction between buyer and seller. It usually includes sales talk, demonstrations, handling prospective
buyer’s queries, negotiations and transfer of ownership in exchange of money which may be collected
immediately or at some future date as happens in case of credit transactions. Impersonal selling means
selling the goods or services not through face to face interaction but by making use of courier or postal
services. The orders are received over phone, through e-mail or by post and then goods are dispatched.
 Money can be collected before transferring ownership i.e. before goods are delivered or at the time of
transferring ownership i.e. by V.P.P.
There exists various methods of selling such as :
(i) Sale by Description
(ii) Sale by Inspection
(iii) Sale by Sample
(iv) Sale on Approval or Return basis
(vi) Hire purchase selling.

4.2 Physical distribution functions

It involves activities which are essential to move products from the place of production to the place of
consumption. Various activities carried out under physical distribution functions are as follows:
 Warehousing: Warehousing means storing the goods from the time of their production till they are
demanded and it involves certain other functions like sorting, packing in convenient lots, risk- taking
etc.
Need for warehousing
Warehousing is primarily needed to adjust demand and supply of goods in the market. Its need has been
highlighted in the following points :
 Middlemen have to keep stock of goods to earn profits by supplying goods on time.
 Certain commodities are required to be stored to improve their quality like liquor, curing of tobacco etc.
 Warehousing is needed for goods which are produced regularly but have seasonal consumption.
 There are certain commodities which have consistent consumption throughout the year but they are
produced seasonally like wheat. Such commodities are produced in large quantity and then stored.
 Sometimes there is need to break-up lots and repack goods in small lots which can be delivered to
retailers. For this, bulk purchases are first stored in warehouses.
 Warehousing aids in widening the market and also in foreign trade
Warehousing provides following benefits / services :
 It creates time utility in goods. Goods which are produced regularly but have seasonal consumption are
stored so as to deliver them when they are in demand.
 Warehousing creates place utility in goods by making goods available at places of demand. Sometimes
transported goods have to be stored before their final disposal. Warehouses located at different places
help in it.
 It stabilizes prices by matching demand and supply of goods in the market.
 Warehousing helps in securing loan against security of goods deposited in the warehouses.
  Public warehouses share the risk of loss of damage of goods in storage.
 Sometimes, warehousing creates form utility in goods by improving their quality through storage like
tobacco, liquor etc.
 Storage enables accumulation of stock and then transporting in bulk quantity. It saves transportation
cost.
 Economies of large scale can be availed by producer or wholesaler. Goods produced in bulk or
purchased in bulk, can be stored in warehouses.
 Transportation : Consumers are usually scattered geographically. They are made available goods and
services at their places through various means of transport like airways, waterways, roadways and
railways. Each mode of transport has its own merits and limitations. These modes are selected by
considering factors like nature of product, speed, performance, cost, and availability of mode of
transport. Goods are also made available to wholesalers and retailers through various means of transport
for resale. Transportation creates place utility in goods.
 Inventory Management : Inventory management is important function of marketing. It aims at
reconciliation of two conflicting goals of management i.e. (i) to offer better customer service by strictly
dispatching orders as per scheduled delivery dates and (ii) to minimize capital investment and cost of
handling inventory. Inventory acts as a link between customer’s orders and company’s production
activity. There is a need to maintain an adequate inventory level which calls for effective inventory
management. The size of inventory is determined by keeping in mind market demand and inventory
cost. However, the optimum size is also decided by considering responsiveness of distribution system
and desired level of customer service. The firm determines maximum stock level and minimum stock
level. Maximum stock level helps in meeting sudden rise in demand whereas minimum stock level
points out the need to replenish the stock and avoids in running out of stock position. Hence, inventory
control is exercised to avoid (i) out of stock position and (ii) piling up a large undesired stock.
4.3 Auxiliary Functions
These functions facilitate the process of transfer of goods from the manufacturer to the consumers and are
described below:
 Risk bearing : The process of transfer of goods from the place of production to the ultimate consumer
involves many risks and loss during transportation and warehousing such as theft, damage, pilferage,
obsolescence, breakage, fall in demand etc. There is also a risk of loss due to non-payment by buyer.
Marketers are confronted with these risks. However, insurance and banking facilities try to mitigate
these losses or risks.
 Financing : Finance is considered as lubricant of marketing machinery. Production of goods does not
mean immediate consumption too. There is time gap between the production of goods and their sale.
This results in blockage of working capital. However, funds are required to purchase raw material and
for paying warehouse rent and other associated warehousing costs. It is also required to pay for
transportation cost. There is further need of finance when sales are made on credit basis. Many financial
institutions and banks provide loan facilities to meet financial requirements of firms and
middlemen. Many a times, finance is raised against goods which are presented as collateral securities.
Thus, banking companies and financial institutions act as facilitators in marketing of goods and services.
 Packing and packaging: Goods may get damaged during transportation or they may be damaged in
warehouses. Goods are packed in suitable containers so as to protect them from leakage, spoilage or
breakage. Packing means to wrap or fill goods with the purpose of their protection and convenient
 handling. It will also increase their durability. Package means specially designed wrapper, container or
case which is used for packing goods. It gives identity to the product. Packaging refers to putting goods
in convenient sized lots like bottles, jars, cans, bags etc. It will help in making goods familiar with
consumers. Packaging facilitates branding and advertising of goods.
 Branding : Branding means giving name or symbol to a product so as to enable consumer to distinguish
it from other similar products. Branding helps in popularizing the products. Mass advertising media
plays an important role in creating popularity of certain products among consumers. However, to survive
in market, producers should provide quality in branded goods. Further it is necessary that brand name
should be attractive, suggestive and easy to spell and remember. Branding can be done by giving special
names to the product like Dalda Ghee, Dove Shampoo or by using names of manufacturers such as LG
refrigerators, Bata Shoes etc.
 Advertising and Sales Promotion : These activities are necessary to create, maintain and develop
demand for the product. Even best products may fail to attract customer due to lack of proper advertising
and sales promotion.
 Market analysis : Marketing involves the study of market environment which consists of political,
legal, cultural, social, technical and ecological factors. These factors constitute remote environment.
There is need to collect information about consumers, competitors and suppliers that constitute operating
marketing environment. The analysis of market environment provides information about opportunities
and threat prevailing in the external environment. Marketers can make or adjust plans according to the
trends prevailing in the market. The marketing information will enable firms to produce products as per
customers’ needs and wants and develop a good marketing mix. It will also help in accelerating sales by
proper product positioning and pricing.

Importance of Marketing

Marketing is indispensable in today’s business world. It plays a significant role in smooth transfer of goods
and services from the place of production to the place of consumption. The following points highlight the
importance of marketing:

 Marketing facilitates exchange of goods: Marketing helps in the possession of goods and transfer of
ownership from seller to buyer. Marketing through promotion brings together the buyers and sellers and
facilitates sale of goods as per need and wants of the consumers. It creates possession, place and time utilities in
goods and services. Through transportation, goods are provided to the consumers who may be scattered
throughout the geographical area or region. Warehousing provides time utilities by holding the stock of goods
when they are not in demand.
 Marketing increases market base: Marketing locates the untapped areas, stimulates demand and creates
demand for new product and services. Banking, insurance and financing facilities ensure smooth flow of goods
to distant markets. It, thus, widens the market. The manufacturers are able to increase production as well
as sale of their products.
 Marketing gives boost to other activities: Marketing increases demand of various related activities like
banking, insurance, warehousing and transport. Advertising, sales promotion and direct marketing efforts also
get a boost as they are needed more to accelerate sales.
 Marketing raises standard of living of people: A society enjoys a better standard of living when necessities,
comforts and luxuries are within the reach of a large number of people. Large scale production and availability
of wide variety of products have become possible due to marketing. Transportation and warehousing functions
 have facilitated the transfer of goods to distant places. People living in remote areas or other places are able to
use a variety of goods at affordable prices. Thus, people are enjoying a better standard of living.
 Marketing provides satisfaction of human wants: Marketing informs and guides the people about product
availability and its utility. People come to know about variety of products. They are able to select the product
which can satisfy their need and wants in best possible manner. Marketing makes possession of goods easier for
consumers and thus provides satisfaction.
 Marketing creates job opportunities: In the highly competitive market, only organized marketing programs
can be implemented. It calls for the need of services of people who are specialized in their fields. Marketing of
goods has become complex. Therefore, organisation creates a separate department for marketing which is
headed by a marketing manager. Other staff is also appointed to assist him. Thus, gainful employment is
provided to large number of people. Apart from this, demand for product has been extended to a larger region.
During the process of transfer of goods, services of various agencies are required. The increasing volume of
trade has increased demand for these specialized services. Many people are now employed in insurance sector,
banking sector and advertising companies.
 Marketing creates stable economy: Marketing creates a link between production and consumption. Goods are
easily available at any part of the country or even in other countries due to fast means of transportation,
communication and warehousing facilities. There is no shortage of goods. Goods are produced in abundance
and stored to supply as per their demand. Hence, prices of goods do not fluctuate. Marketing creates and
maintains demand for product through various promotion tools. Large scale production, higher demand, more
employment and minimum price fluctuation create a stable economy.
 Marketing helps in optimum use of resources: The unused plant capacity increases cost per unit as that
portion of plant does not contribute anything but consumes resources in the form of maintenance charges, rent
of plant, insurance charges and depreciation. Marketing creates more demand. To meet this demand, plants are
used at maximum capacity. Standing charges are justified due to increase in volume of production and as a
result cost per unit reduces. Thus, men, machinery, money and plant are optimally utilized and benefit (in the
form of less cost) is passed to consumers.
 Marketing helps in increasing national income: Marketing activities help in more production of goods and
services and increase in sales. It also improves earning capacity of people due to employment opportunities. The
net effect of marketing efforts is thus increase in per capita income as well as national income.
 Marketing provides base for making production decisions: Marketing research is an important marketing
function. Customer needs and wants are assessed through market surveys. Consumer demands are forecasted on
the basis of surveys as well as retailers and wholesalers’ estimates. The buying pattern of customers is analyzed.
This provides valuable information to producer regarding what to produce, when to produce and how to
produce. Thus, decision regarding production becomes more effective.
 Marketing serves various sections of society: Marketing helps producer in increasing sales. Consumers are
benefited as they get products and services to satisfy their wants. Government gets more revenues in the form of
taxes. NGO gets more funds to carry on welfare activities. Society at large is benefited in terms of more
employment opportunities, optimum utilization of resources, better services, innovations and reasonable cost of
products.

Five orientations (philosophical concepts to the marketplace have guided and continue to guide
organizational activities:
 The Production Concept.
 The Product Concept.
 The Selling Concept.
 The Marketing Concept.
 The Societal Marketing Concept.
The Production Concept. This concept is the oldest of the concepts in business. It holds that consumers will
prefer products that are widely available and inexpensive. Managers focusing on this concept concentrate on
achieving high production efficiency, low costs, and mass distribution. They assume that consumers are
primarily interested in product availability and low prices. This orientation makes sense in developing
countries, where consumers are more interested in obtaining the product than in its features.

The Product Concept. This orientation holds that consumers will favor those products that offer the
most quality, performance, or innovative features. Managers focusing on this concept concentrate on making
superior products and improving them over time. They assume that buyers admire well-made products and can
appraise quality and performance. However, these managers are sometimes caught up in a love affair with their
product and do not realize what the market needs. Management might commit the “better-mousetrap” fallacy,
believing that a better mousetrap will lead people to beat a path to its door.

The Selling Concept. This is another common business orientation. It holds that consumers and
businesses, if left alone, will ordinarily not buy enough of the selling company’s products. The organization
must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers
typically sho9w buyi8ng inertia or resistance and must be coaxed into buying. It also assumes that the company
has a whole battery of effective selling and promotional tools to stimulate more buying. Most firms practice the
selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the
market wants.

The Marketing Concept. This is a business philosophy that challenges the above three business
orientations. Its central tenets crystallized in the 1950s. It holds that the key to achieving its organizational
goals (goals of the selling company) consists of the company being more effective than competitors in creating,
delivering, and communicating customer value to its selected target customers. The marketing concept rests on
four pillars: target market, customer needs, integrated marketing and profitability.

Distinctions between the Sales Concept and the Marketing Concept:

1. The Sales Concept focuses on the needs of the seller. The Marketing Concept focuses on the needs of
the buyer.

2. The Sales Concept is preoccupied with the seller’s need to convert his/her product into cash. The
Marketing Concept is preoccupied with the idea of satisfying the needs of the customer by means of the product
as a solution to the customer’s problem (needs).

The Marketing Concept represents the major change in today’s company orientation that provides the
foundation to achieve competitive advantage. This philosophy is the foundation of consultative selling.

The Marketing Concept has evolved into a fifth and more refined company orientation: The Societal
Marketing Concept. This concept is more theoretical and will undoubtedly influence future forms of marketing
and selling approaches.

The Societal Marketing Concept. This concept holds that the organization’s task is to determine the
needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and
efficiently than competitors (this is the original Marketing Concept). Additionally, it holds that this all must be
done in a way that preserves or enhances the consumer’s and the society’s well-being.

This orientation arose as some questioned whether the Marketing Concept is an appropriate philosophy
in an age of environmental deterioration, resource shortages, explosive population growth, world hunger and
poverty, and neglected social services.
 Are companies that do an excellent job of satisfying consumer wants necessarily acting in the best long-run
interests of consumers and society?

Types of marketing environments you should know

There are two significant types of marketing environments:

 Internal marketing environments

 External marketing environments

You can break down the external marketing environment further into:

 Micromarketing environment
 Macro marketing environment

Examples of a marketing environment

To help you understand the effects of different marketing environments, let's look at some examples.

 Internal marketing environment: Your internal company culture has an impact on how your employees
behave, which in turn affects your marketing operations. An organization that emphasizes teamwork and
collaboration, for example, will have more engaged employees. This, in turn, will help the organization perform
better than competitors who do not share these values.
 Micro marketing environment: Say your business relies on a network of suppliers, distributors, and retailers
to get your products to the customer. It's wise to build good relationships with these vendors, as any changes
can influence your marketing strategy.
 Macro marketing environment: The shockwaves from the COVID-19 pandemic are still hitting marketers —
first, social distancing and remote work changed how we market goods and services. Now, inflation and the
rising cost of living loom large over the macro marketing environment.

Evaluating Opportunities in the Changing Marketing Environment

 Competitive Environment.
 Economic Environment.
 Resources and Objectives of the firms.
 Evaluating Opportunities in the Changing Marketing Environment.
 Technological Environment.
 Cultural and Social Environment.
 Political and Legal Environment.

Competitive Environment
Economic Environment
Resources and Objectives of the firms

 Competitive Analysis- is an organized approach for evaluating the strengths and weaknesses of current
or potential competitors' marketing strategies
  Competitive Rivals-the firms that will be the closest competitors
 Competitive Barriers- the conditions that make it difficult or impossible for a firm to compete in a given
market
 Competitive Environment- The different types of competitive things that the firm cant control
 Monopolistic competition- a number of different firms offer marketing mixes that at least some
customers see as different

 Mission Statement- an organization's basic purpose for being

 Economic and Technological Environment- affects the way firms and the whole economy use resources.
The economic environment is affected by the interactions of all the elements of the macro-economic
system

Evaluating Opportunities in the Changing Marketing Environment

Technological Environment

 Internet- is a system for linking computers around the world

 Technology- is the application of science to convert an economy’s resources to output. Technology
affects marketing in two basic ways: with new products and with new processes. In modern economies,
the rate of technological change is very rapid

Cultural and Social Environment

 Cultural and Social Environment- affects how and why people live and behave as they do
 Gross national income (GNI)- the total value of goods and services produced by a country’s economy in
a year by its residents and not including income earned by foreigners who own resources in that nation
 Gross domestic product (GDP)- which includes GNI for a nation plus income earned by foreigners who
own resources in that nation
 Metropolitan Statistical Area(MSA)- an integrated economic and social unit with a large population
nucleus. Usually, the core of an MSA is a city or urban area of 50,000 or more inhabitants.
 Strategic business unit (SBU)- may help an organizational sub-unit of a larger company that focuses on
some product-markets and is treated as a separate profit center
 Senior citizen group- people over 65

Political and Legal Environment

 Nationalism- is an emphasis on a country’s interests before anything else

 Consumerism- a social movement that seeks to increase the rights and powers of consumers
 North American Free Trade Agreement(NAFTA)- lays out the plan for reshaping the rules of trade
among US, Canada, Mexico

Bases for market segmentation of consumer goods

What Are Segmentation Bases in Marketing?

Segmentation bases are the characteristics marketers use to separate an audience into groups, or segments, that
can be targeted with specific marketing efforts.

These bases help the marketer better understand how consumers are similar yet different from one another,
which helps inform a segmentation strategy and analysis.

Understanding segmentation bases in marketing is the first step in creating a segmentation strategy that creates
beneficial results for your business and customers.

Bases of market segmentation

A segmentation base is a specific way of categorizing or grouping people that has been proven to lead to greater
responsiveness to marketing efforts. It's an extremely useful but often overlooked aspect of an effective global
marketing strategy. Many companies ignore segmentation and risk losing huge returns on their marketing
campaigns.

Understanding segmentation bases helps your company develop campaigns that connect to the customer base
and generate results. You become better positioned to create campaigns that outperform your competitors.

To achieve this, you need a solid understanding of the different types of market segmentation and why each is
useful for improving your marketing results.

The different types of market segmentation

There are three main types of segmentation bases. Each works well with different businesses and industries, so
it's essential to consider your options before deciding on the best for your needs. The three main types of market
segmentation are demographic, psychographic, and behavioral.

 Demographic segmentation divides people based on their age, income, education level, and
occupation. Some examples of companies that use demographic segmentation include insurance
providers, healthcare companies, and banks.
 Psychographic segmentation divides people based on their values, attitudes, and interests. Some
examples of companies that use psychographic segmentation include car manufacturers, clothing
retailers, and political campaigners.
 Behavioral segmentation divides people based on their buying habits and brand loyalty. Some
examples of companies that use behavioral segmentation include supermarkets, hotels, and fast-food
restaurants.

In addition to these three popular types of market segmentation, there are other bases certain businesses should
consider, including geographic and firmographic.

Geographic segmentation divides people based on where they live, while firmographic segmentation divides
people based on their work.

Understanding segmentation in marketing

To succeed, marketers must understand their target audience. Small business owners may understand their
target customers by speaking to them informally, while a Fortune 500 analyst might need in-depth research and
focus groups to learn more about theirs. Understanding customers improves decision-making across an
organization, not only in marketing.
Psychographic

This segmentation strategy focuses on an individual's psychological and emotional needs and motivators. It may
sound complicated to uncover, but tools are available to help you learn what customers use your solution for.
Techniques like market research, focus groups, and surveys can help you better understand your target
audience.

Demographic

If you focus on demographics, you can divide customers in many ways, including by age, income, occupation,
gender, or race. Each category is a segment. Marketers target these groups with their own messaging and tactics
to appeal specifically to them. Demographic segmentation enhances product value by allowing a product to
mean something more to customers. Demographic segmentation can make a product more personal to the target
group.

Geographic

If you're an international company or plan to expand someday, understanding different customer habits and
preferences related to specific geographic regions is a crucial part of your role. Customers in Western Europe
might respond differently to campaigns than people who live in Asia. No two geographic regions, even two that
are side by side, are exactly alike. People living on opposite sides of a national border might have vastly
different cultures and habits. This is why it's important to know where your customers are coming from.

Firmographic

Firmographic segmentation is data that describes a business, including where it's located, its legal structure,
whether it's privately or publicly owned, how many employees it has, and so on. Firmographic segments are
typically stable unless there's a significant change within a company (like a merger, acquisition, or bankruptcy).

Behavioral

One of the most widely used types of segmentation is behavioral. In behavioral segmentation, marketers focus
on consumers' behaviors and characteristics — how they spend their time, hobbies, personality types, etc.

Marketers who follow a behavioral-based segmentation strategy use existing data to create profiles of groups
that exhibit commonalities within specific markets. Marketers then target these groups with products and
services that appeal to their interests and needs.

The benefits of market segmentation

Simply put, segmentation is about dividing an audience into groups based on several factors.

 Allows you to apply different strategies to specific audience groups depending on what they're looking
for, the issues they face, or what they love doing.
 Facilitates better engagement with your target demographic, allows you to be more relevant to your
audience, and helps you create more value
 Forces you to look at how your product or service fits into your customers' lives, then communicate that
by appealing to their needs to influence their behavior without feeling like you're imposing on them
 Creates brand advocacy and loyalty, e.g., word-of-mouth support – which is always a great boost to
marketing
  Allows you to appeal to a broader audience of potential customers by giving your product more
versatility and personality
 Helps reduce costs by focusing on reaching fewer people overall but making sure each one of them is
engaged with your brand.

Effective segmentation criteria

Market segmentation is a marketing technique that almost all companies practice. The process provides
marketing strategists with data for a better understanding of their market, allowing them to create more
personalized and profitable strategies. This practice is important for companies because it minimizes the amount
of time, money, and effort marketing strategists put in certain campaigns.

So, what are the requirements for effective market segmentation? Effective segmentation should be measurable,
accessible, substantial, differentiable, and actionable. When a company has segmented their market accordingly,
there is a higher chance that it will become more profitable and successful in the long run.

5 Requirements for Effective Segmentation

Identifying the requirements for effective market segmentation allows companies to create marketing
campaigns that are essential for their growth and development. Here are the five criteria for effective market
segmentation:

1. .Measurable

The size and purchasing power profiles of your market should be measurable, meaning there is quantifiable data
available about it. A consumer’s profiles and data provide marketing strategists with the necessary information
on how to carry out their campaigns.

It would be difficult to create advertisements for markets that have little to no data or for audiences that can’t be
measured. Always ask whether there is a market for the kind of product or service that your business wants to
produce then define how many possible customers and consumers are in that market.

2. Accessible

Accessibility means that customers and consumers are easily reached at an affordable cost. This helps determine
how certain ads can reach different target markets and how to make ads more profitable.

A good question to ask is whether it’s more practical to place ads online, on print, or out of house. For example,
gather data on the websites a specific target market usually visits so you can place more advertisements on those
websites instead.

3. Substantial

The market a brand should want to penetrate should be a substantial number. You should clearly define a
consumer’s profiles by gathering data on their age, gender, job, socio-economic status, and purchasing power.

It doesn’t make sense to try and reach an unjustifiable number of people — you’re just wasting resources.
However, you also don’t want to market the brand to a group too small that the business doesn’t become
profitable.

4. Differentiable
When segmenting the market, you should make sure that different target markets respond differently to different
marketing strategies. If a business is only targeting one segment, then this might not be as much of an issue.

But for example, if your target market is college students, then it’s essential to create a marketing strategy that
both freshman students and senior students react to in the same positive way. This process ensures that you are
creating strategies that are more efficient and cost-effective.

5. Actionable

Lastly, your market segments need to be actionable, meaning that they have practical value. A market segment
should be able to respond to a certain marketing strategy or program and have outcomes that are easily
quantifiable.

As a business owner, it’s important to identify what kind of marketing strategies work for a certain segment.
Once those strategies have been identified, ask yourself if the business is capable of carrying out that strategy.

Evaluating & Selecting Target Markets

How to Define and Analyze Your Target Market

To best serve your customers, you have to know who they are. Here's how to determine your core group of
customers.

To best serve your customers, you have to know who they are. Of course, not everyone who buys your products
or services fits the same profile, but as a company you should have a core customer base in mind. Not only does
it help you streamline your product offerings, it also allows you to give those customers the best possible
experience.

What is a target market?

Another way to describe your core customer base is your target market. These are the people you think are the
most suited to your products and services, so it’s essential that you understand them.

Understanding your target market is different from just making assumptions about it. Instead, it’s about really
trying to figure out its needs and motivations. Demographics such as age, gender, education level, occupation,
and family situation can help you determine what your customers need and what they’re willing to spend.

Beyond this, you should also consider who your customers are as people. What do they value? What is their
lifestyle? What do they enjoy doing with their spare time? The answers to these questions can help you
understand your target market on a deeper level.

How to identify your target market

Determining your target market isn’t as simple as guessing who your customers are, or hoping for a certain
demographic. Instead, it requires an in-depth review of your products and services, the marketplace, your
potential (or current) customers, and more.

Here are some tactics to help you identify your target market:
Analyze your offerings

Ask yourself what problems your products and services solve, and, in turn, to whom they appeal. For example,
if you operate a landscaping business, your services would be attractive to homeowners with lawns and, more
specifically, people who are too busy to care for their yard and can afford to pay someone to do it.

So, your target market would include higher-income adults with demanding jobs and/or children, who don’t
have time for or interest in lawn care but still want it to look good.

Conduct market research

Analyzing your target market goes beyond understanding your customers — you also have to understand the
marketplace. Analytics tools like Quantcast, Alexa, and Google Trends give you a comprehensive view of the
landscape by identifying and assessing competitors, helping you find new customers, and enabling you to
determine ways to improve.

And check out the U.S. Small Business Association’s SizeUp tool, which (as the name implies) helps you size
up the competition in your market by providing data like other nearby businesses that offer similar services and
local consumer spending in that category. The U.S. Census Bureau’s site, though a bit unwieldy, can serve as
another helpful resource for finding local demographic information like education level, income, and household
size.

And don’t forget that some of the most helpful data can come from both existing and prospective customers.
Tools like surveys, focus groups, and in-person discussions can help you understand what your target market
needs, why it is (or isn’t) shopping with you, and what you can do to make your offerings more appealing. You
can also look at data from your POS or CRM to glean insights about your customers.

Create customer profiles and market segments

Market segmentation is the process of organizing a group based on various categories, like demographics and
psychographics.

As discussed earlier, demographics describe the more surface-level, baseline characteristics, like age, gender,
education level, ethnic background, and marital and family status. Psychographics, on the other hand, offer a
deeper look into who people really are, like behaviors, values, personality, and lifestyle.

It’s important to consider both demographics and psychographics when trying to conduct a full analysis of your
target market.

Assess the competition

Conduct a competitive analysis by using a competitor analysis template to get a comprehensive view of the
competitive landscape. What are the businesses that offer comparable products and services? How much do
they charge? What are they doing differently?

Unless you believe you have a significant advantage, avoid going after the same customer, especially in a small
market where your competitors’ businesses are well established.

Using your target market analysis

Once you’ve completed your analysis, put that data to work. Here are some ways to use the information to grow
and improve your business.
Product development: If your analysis helped you identify some holes in the market, you can use this
information to create products and services that your target market needs.

 Niche markets: Did you identify an underserved population? Instead of going after the same customers
as your competitors, explore untapped markets.
 Expansion opportunities: While assessing your local market, you might identify underserved areas.
This is valuable information if you’re considering franchising or adding a new location.
 Pricing strategy: While assessing your competition, you might have found that you’re either pricing
yourself out of the market or not charging enough. Use comparative data to determine a fair price.
 Curation: There is such a thing as offering too many options, and customers don’t like it. If you offer
many of the same items as your competitors (and they aren’t big sellers anyway), pare down your
inventory to focus on top-selling and exclusive items.
 Marketing: Your target market should be the foundation of your marketing strategy. Use what you
know to determine what channels you should be using to communicate with your customers and what
messages work with them. Whenever you think about implementing something new, whether it’s a
social platform or a promotional campaign, check your analysis to see if it resonates.

Concept of Target Market and Concept of positioning

What is 'Positioning'

Definition: Positioning defines where your product (item or service) stands in relation to others offering similar
products and services in the marketplace as well as the mind of the consumer.

Description: A good positioning makes a product unique and makes the users consider using it as a distinct
benefit to them. A good position gives the product a USP (Unique selling proposition). In a market place
cluttered with lots of products and brands offering similar benefits, a good positioning makes a brand or product
stand out from the rest, confers it the ability to charge a higher price and stave off competition from the others.
A good position in the market also allows a product and its company to ride out bad times more easily. A good
position is also one which allows flexibility to the brand or product in extensions, changes, distribution and
advertising.

– Value Proposition & USP: In marketing, the unique selling proposition (USP), also called the unique selling
point, or the unique value proposition (UVP) in the business model canvas, is the marketing strategy of
informing customers about how one's own brand or product is superior to its competitors (in addition to its other
values).

a unique selling proposition focuses on what makes a product or service unique. a value proposition focuses on
the overall value that it provides to customers.

Types of Brand Positioning Errors

A few common brand positioning errors are:

 Over Positioning: When a brand differentiates itself to the extent that its products only appeal to a
section of the target audience due to the over emphasis of certain aspects of the product.

 Under Positioning: When a brand has failed to communicate a compelling position due to which
consumers are unclear about the key benefits of their brand.
  Double Positioning: When customers do not believe or accept the claims of the brand.

 Confused Positioning: When a brand’s positioning efforts result in their customers having a confused
image of the company and/or its products.

International Marketing-Entry strategies

The five most common modes of international-market entry are exporting, licensing, partnering, acquisition,
and greenfield venturing. Each of these entry vehicles has its own particular set of advantages and
disadvantages.

1. Exporting

Exporting is a typically the easiest way to enter an international market, and therefore most firms begin their
international expansion using this model of entry. Exporting is the sale of products and services in foreign
countries that are sourced from the home country. The advantage of this mode of entry is that firms avoid the
expense of establishing operations in the new country. Firms must, however, have a way to distribute and
market their products in the new country, which they typically do through contractual agreements with a local
company or distributor. When exporting, the firm must give thought to labeling, packaging, and pricing the
offering appropriately for the market. In terms of marketing and promotion, the firm will need to let potential
buyers know of its offerings, be it through advertising, trade shows, or a local sales force.

2. Licensing and Franchising

Licensing essentially permits a company in the target country to use the property of the licensor. Such property
is usually intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in
exchange for the rights to use the intangible property and possibly for technical assistance as well.

However, licensing may involve a loss of control over the brand and requires careful selection of reliable and
capable licensees. Franchising is another market entry mode where businesses grant franchisees the right to
operate under their established brand and business model.

3. Partnerships and Strategic Alliances

Another way to enter a new market is through a strategic alliance with a local partner. A strategic alliance
involves a contractual agreement between two or more enterprises stipulating that the involved parties will
cooperate in a certain way for a certain time to achieve a common purpose. To determine if the alliance
approach is suitable for the firm, the firm must decide what value the partner could bring to the venture in terms
of both tangible and intangible aspects. The advantages of partnering with a local firm are that the local firm
likely understands the local culture, market, and ways of doing business better than an outside firm. Partners are
especially valuable if they have a recognized, reputable brand name in the country or have existing relationships
with customers that the firm might want to access. For example, Cisco formed a strategic alliance with Fujitsu
to develop routers for Japan. In the alliance, Cisco decided to co-brand with the Fujitsu name so that it could
leverage Fujitsu’s reputation in Japan for IT equipment and solutions while still retaining the Cisco name to
benefit from Cisco’s global reputation for switches and routers.Steve Steinhilber, Strategic
Alliances (Cambridge, MA: Harvard Business School Press, 2008), 113. Similarly, Xerox launched signed
strategic alliances to grow sales in emerging markets such as Central and Eastern Europe, India, and Brazil.
“ASAP Releases Winners of 2010 Alliance Excellence Awards,” Association for Strategic Alliance
Professionals, September 2, 2010, accessed February 12, 2011, newslife.us/technology/mobile/ASAP-Releases-
Winners-of-2010-Alliance-Excellence-Awards.
Examples of Strategic Alliance

 Spotify And Uber. A prominent strategic alliance example is the partnership between Spotify and
Uber. ...
 MasterCard And Apple Pay. ...
 Chevrolet And Disney. ...
 Vodafone India And ICICI Bank. ...
 Barnes & Noble And Starbucks. ...

What is an example of a strategic alliance partnership?

Strategic Alliances: How They Work in Business, With Examples

The deal between Starbucks and Barnes & Noble is a classic example of a strategic alliance. Starbucks brews
the coffee. Barnes & Noble stocks the books. Both companies do what they do best while sharing the costs of
space to the benefit of both companies.

4. Acquisitions

An acquisition is a transaction in which a firm gains control of another firm by purchasing its stock,
exchanging the stock for its own, or, in the case of a private firm, paying the owners a purchase price. In our
increasingly flat world, cross-border acquisitions have risen dramatically. In recent years, cross-border
acquisitions have made up over 60 percent of all acquisitions completed worldwide. Acquisitions are appealing
because they give the company quick, established access to a new market. However, they are expensive, which
in the past had put them out of reach as a strategy for companies in the undeveloped world to pursue. What has
changed over the years is the strength of different currencies. The higher interest rates in developing nations has
strengthened their currencies relative to the dollar or euro. If the acquiring firm is in a country with a strong
currency, the acquisition is comparatively cheaper to make. As Wharton professor Lawrence G. Hrebiniak
explains, “Mergers fail because people pay too much of a premium. If your currency is strong, you can get a
bargain.”“Playing on a Global Stage: Asian Firms See a New Strategy in Acquisitions Abroad and at
Home,” Knowledge@Wharton, April 28, 2010, accessed January 15,
2011, http://knowledge.wharton.upenn.edu/article.cfm?articleid=2473.

5. Greenfield Venture (Launch of a new, wholly owned subsidiary)

Greenfield Venture is a form of market entry strategy with establishment of a new wholly owned subsidiary in
either a foreign country or one's own country by constructing its facilities from start.

A green-field investment is a type of foreign direct investment (FDI) in which a parent company creates a
subsidiary in a different country, building its operations from the ground up.

A form of foreign direct investment where a parent company starts a new venture in a foreign country by
constructing new operational facilities from the ground up.

What Is a Green-Field Investment?

A green-field investment is a type of foreign direct investment (FDI) in which a parent company creates a
subsidiary in a different country, building its operations from the ground up. In addition to the construction of
new production facilities, these projects can also include the building of new distribution hubs, offices, and
living quarters.
Advantages: Gain local market knowledge; can be seen as insider who employs locals; maximum control

Disadvantages: High cost, high risk due to unknowns, slow entry due to setup time

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