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Marketing Part (2) Extended marketing mix •Booms and Bitner added three additional P`s to accommodate trends towards a service or economy 1. People: all people who directly or indirectly influence the perceived value of the product or service, including knowledge workers, employees, management and consumers. 2. Processes: as a means to achieve an outcome, for example procedures, mechanisms and flow of activities which lead to an exchange of value. 3. Physical evidence: the direct sensory experience of a product or service that allows a customer to measure whether he or she has received value. Four Cs The Four Ps is also being replaced by the Four Cs model. The Four Cs model is more consumer-oriented and fits better in the movement from mass marketing to niche marketing: 1. The product part of the Four Ps model is replaced by consumer, shifting the focus to satisfying the consumer. 1. Pricing is replaced by cost, reflecting the reality that price is set by the market, not necessarily by the firm. Thus, the firm must focus on cost considerations rather than on what the correct price is to set. Four Cs 3. Place is replaced by the convenience function. With the rise of internet and hybrid models of purchasing, place is no longer relevant. Convenience takes into account the ease to buy a product, find a product, find information about a product, and several other considerations. 4.The promotions feature is replaced by communication. Communications can include advertising, public relations, personal selling, and any form of communication between the firm and the consumer. Core competencies A core competence is the result of a specific unique set of skills or production techniques that deliver value to the customer. A core competency has three characteristics: 1. Provides potential access to a wide variety of markets. 2. Should make a significant contribution to the perceived customer benefits of the end product. 3. Should be difficult for competitors to imitate. Segmentation • Customer segmentation is a method for grouping customers based upon similarities they share with respect to any dimensions marketer deem relevant to his or her business, market, product, competition . • A market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs. • Market segmentation is how to choose one sector from the whole market and design your marketing mix that fit that sector. Common segmentation objectives Common objectives for segmentation include, but are not limited to: • Developing new products. • Creating differentiated marketing communications & ads. • Developing differentiated customer servicing & retention strategies. • Targeting prospects with the greatest profit potential. • Developing multi-channel distribution strategies. Once you have decided what your objective is for the segmentation, you can answer the question, "What do I want the segmentation to do for me . Successful Segmentation •Homogeneity within the segment. •Heterogeneity between segments. •Segments are measurable and identifiable. •Segments are stable over time. •Segments are accessible and actionable. •Target segment is large enough to be profitable . Variables Used for Segmentation Geographic variables : divides the market into groups based on variables such as •Region of the world or country, East, West, South, North, Central, coastal, hilly, etc. •Country size/country size: Metropolitan Cities, small cities, towns. •Density of Area Urban, Semi-urban, Rural. •Climate Hot, Cold, Humid, Rainy. Demographic factors are the most popular bases for segmenting markets: • One reason is that consumer needs, wants, and usage rates often vary closely with demographic variables. • Another is that demographic variables are easier to measure than most other types of variables. Demographic variables: •Age. •Gender Male and Female. •Family size. •Family life cycle. •Education Primary, High School, Secondary, College, Universities. •Income. •Occupation. •Socioeconomic status. •Religion. •Nationality/race (ethnic marketing). Language . Psychographic segmentation: • it divides buyers into different groups based on social class, lifestyle, or personality characteristics. • They found that people in the same demographic group can have very different psychographic makeup's. Behavioral Segmentation: • • • • It divides buyers into groups based on their knowledge, attitudes, uses or responses to a product. Many marketers believe that behavior variables are the best starting point for building market segments. Orange juice is most consumed at breakfast, Cocacola`s campaign “Coke in the morning” attempt to increase Coke consumption by promoting the beverage as an early morning drink. Some holidays such as Mother`s Day and Valentine `s Day were originally promoted to increase the sale of many products. Benefits sought: • It divides buyers according to different benefits that they seek from the product. • Benefit segmentation requires finding the major benefits people look for in the product class, the kinds of people who look for each benefit and the major brands that deliver each benefit. User Status: • Markets can be segmented into groups of nonusers, ex-users, potential users, first-time users, and regular users of products. Loyalty status: • Consumers can be loyal to brands, stores, and companies . • Buyers can be divided into groups according to their degree of loyalty . • Some consumers are completely loyal, they buy one brand all the time. • Others are somewhat loyal ,they are loyal to two or three brands of a given product or favor one brand while sometimes buying others. • Still others buyers show no loyalty to any brand, they either want something different each time they buy or they buy whatever`s on sale. Usage rate: • Markets can also be segmented into light, medium, and heavy product users. • Heavy users are often a small percentage of the market but account for a high percentage of total consumption. • Marketers usually prefer to attract one heavy user to their products or services rather than several users. Using Multiple segmentation bases • Marketers rarely limit their segmentation analysis to only one or a few variables. • rather they are using multiple segmentation bases in an effort to identify smaller, better defined target groups. • This strategy for segmenting markets refining demand estimates, selecting target markets and shaping promotion messages, and making marketing mix. Evaluating market segments • In evaluating different market segments , a firm must look at a three factors: 1. Segment size and growth. 2. Segment structural attractiveness. 3. Company objectives and resources. • The company must first collect and analyze data on current segment sales, growth rates, and expected profitability for various segments. • It will be interested in segments that have the right size and growth characteristics. • But “ right size and growth” is a relative matter. • The largest, fastest growing segments are not always the most attractive ones for every company Evaluating market segments: • The smaller companies may lack the skills and resources needed to serve the larger segments. • Or they may find these segments too competitive. •Such companies may select segments that are smaller and less attractive. •The company also needs to examine major structural factors that affect long-run segment attractiveness. • For example, a segment is less attractive if it already contains many strong and aggressive competitors. • The existence of many actual or potential substitute products may limit prices and the profits that can be earned in a segment. Evaluating market segments: • The relative power of buyers also affects segments attractiveness. • Buyers with strong bargaining power relative to sellers will try to force prices down, demand more services and set competitors against one another, all at the expense of seller profitability. •Finally a segment may be less attractive if it contains powerful suppliers who can control prices or reduce the quality of ordered goods and services. • The company must consider its own objectives and resources. • Some attractive segments can be dismissed because they don`t mesh with the company`s long- run objectives. Evaluating market segments: • Or the company may lack the skills and resources needed to success in an attractive segments. • The company should enter only segments in which it can offer superior value and gain advantages over competitors.