13 Market Analysis and Selection

Kulbhushan Chandel

1. Learning Outcome

After completing this module, the students will be able to:

Explain how the segmentation of business markets is done.
Explain the market analysis and selection procedure.
What is target marketing?
What is product positioning? What are the various strategies of positioning of a product?
Explain the VALS segmentation system.

2. Introduction

Market segmentation being the process of dividing the total market into distinctive sub-groups of consumers with specified characteristics who might need separate products or marketing mixes. Marketing segmentation is helpful for both consumers and marketers. As marketers would be able to identify the needs, desires, preferences of the particular target market and make product accordingly and for consumers also it helps to have the desired product. After the market segments are decided by the marketer. Next he has to select a specific segment and then target marketing is done on it. After evaluation of different segments, the company must decide which and how many segments it would target. A target market comprises of the set of buyers who share common needs which the company decides to serve. And accordingly positioning of the products is done.

3. Segmentation of Business Markets

Operating variables: technology
Purchasing approaches: Centralised/ decentralised, purchasing power structure, purchase policies and criteria.
Situational Factors: urgency, specific application, size of order.
Personal Characteristics: buyer seller similarity, attitude toward risk, loyalty.

4. Market Analysis and Selection

The full segmentation, targeting and positioning process is the fundamental concept in the understanding of marketing strategies of the firm. Following are the main steps of segmenting, targeting and positioning:

Defining the market: the definition of the total market is necessary for segmenting it. When the market is segmented, each segment should be decided such a way that the each segment has same type of customers whose needs and requirements are same.
Creating market segments: Different variables and segments of the markets are to be studied which are important for the segmentation of the market.
Evaluating segments for marketing: after the segmentation of the markets, the important step comes is to evaluate the segments using a set criterion so as to analyse whether it is usable and logical. The various segments to be checked are whether the products are as per the needs of the customers, the customers are approachable, and so on.
Constructing segment profile: after evaluation of the segments, segment profile is constructed. Segment profiles are the detailed description about the numerous customers to be covered, their needs, preferences, behaviours, demographics, shopping styles and so on.
Evaluating the effectiveness of each segment: the available market data and consumer research findings are then added to the description of the segments. Using the combined information, the firm then analyses the each segment on the basis of the overall attractiveness of the segment.
Selecting target market: using the detailed information available for each segment, then the company decides to use the appropriate one for each segment. The numerous factors to be considered while choosing the target markets are firm strategy; attractiveness of segment, firm’s ability to firmly compete and so on.
Developing positioning strategy: firms have to make strategies for launching its product in the target market.
Developing and implementing marketing mix: after deciding the positioning strategy the firm ahs to implement it. For implementation, marketing mix is developed which supports the position of the product in the market. This consists of designing of suitable products, setting up suitable prices, deciding suitable channel of distribution and effective promotional programme.
Review of the performance: after a period of time, the firm has to review its performance regularly. In this changing marketing environment, the marketer has to continuously monitor its marketing mix so that the necessary changes could be made in it.

For example: the small car segmentation for the Indian Automobile industry to make a big roar globally. The small cars segment in India is reviving up for bigger and better things. Gone are the days when Indian roads were populated with the Ambassadors or the Premier Padminis. Now the roads are mainly filled with the small car segments. All the major car manufacturing companies are launching small cars. Tata launched the world’s cheapest car “Nano” with 33 bhp petrol engine to grab the market.

5. Product Positioning

Product positioning strategy is a useful technique for creating a sound product image in the minds of the consumers. Product positioning is regarding the mind of the customer, it is not regarding what is done with the product it is just related to the minds of the customer. Hence, product positioning is the act of positioning the product in the mind of the customer. Product positioning strategy is concerned with selecting the marketing mix, which is most appropriate to each market segment.

5.1 Definitions of Product Positioning

According to Philip Kotler, “Product positioning is the act of designing the company’s image and value offer so that the segment’s customers understand and appreciate what the company stands for in relation to its competitors.”

From the above definition, it is clear that product positioning is an attempt to regain or revise that product image that one has been prevailing in the market, so that company’s customers in a segment may think that company’s products are superior to competitor’s products.

5.2 Steps in Product Positioning

According to Philip Kotler, The positioning task consists of three steps:

Identifying possible competitive advantages.
Choosing the right competitive advantages.
Signalling the competitive advantage.

A brief, explanation is as follows:

Identifying possible competitive advantages: The first step of product positioning is to identify possible competitive advantages to be exploited by the company. There are basically two types of competitive advantages such as: (i) Cost leadership and (ii) Product differentiation.
Choosing the right competitive advantages: The second step is to choose the best one or ones among the available advantages. A company may have several competitive advantages for a given product. Now that one is chosen which helps in building the positioning strategy of the company.
Signalling the competitive advantage: The last step of product positioning is that the company should select the overall positioning strategy and signal it effectively to the market. The company should take specific steps to advertise the competitive advantage it has.

5.3 Factors Effecting Successful Product Positioning

For successful product positioning following factors must be considered:

Designing creative product features: It is concerned with creating outstanding product features. If the product features are more impressive and appealing than that of the competitors, it will result in successful product positioning.
Sizeable and Profitable market segment: The size of the segment must be large enough to make it profitable for the company. It means a market segment must contain enough buyers to make it profitable market and must be identifiable in order to implement the positioning strategy.
Sensitive market segment: Here, sensitivity means response to the marketing efforts. A sensitive market segment is one that receives the communication message transmitted by the company and reacts to it. For successful product positioning, the communication message designed by the company for a segment must be understood or perceived properly by the consumers of those segments.
Existence of competition: Positioning strategy is a counter plan to meet the challenges posed by the competitors at the market place. Positioning or repositioning is always done in response to positioning or repositioning done by the competitors.
Adequate information about consumer’s behaviour: Product positioning is a strategy to match the consumer self-image with the company product image.

6. Target Marketing

After evaluation of different segments, the company must decide which and how many segments it would target. A target market comprises of the set of buyers who share common needs which the company decides to serve. Target market can be conducted at numerous different levels:

Undifferentiated or mass marketing: In this, the company ignores the segments of the market and focuses on the market as a whole. In mass marketing the company mainly focuses on those needs of the customers which are common and the marketing strategy is designed accordingly. That marketing mix is chosen which appeals to the maximum number of the customers. The firm relies on the mass distribution and mass advertisement.
Differentiated or segmented marketing: Here, the company decides to operate in separate market segments separately and designs separate offers for all. By offering products and marketing variations to segments, companies hope for higher sales and stronger position in the market. This type of marketing involves more cost and in this, the marketer makes separate marketing mix for separate segment.
Niche or Concentrated marketing: Niche marketing or concentrated marketing involves marketing in a very small yet profitable market segment. A niche is a very narrowly defined customer group having different mix of benefits. Marketers normally identify the niches by the division of the segments into the sub-segments. In niche marketing, a marketer tries to understand their customers’ needs very well and render service up to their expectations. According to Philip Kotler, a niche is a more narrowly defined group of customers, typically a small market whose needs are not being well served. So under niche producer to become a follower in a large market prefer to be a leader in a small market or niche. Niches normally attract smaller companies. Smaller companies avoid competing with larger companies by targeting small markets of little or no interest to the larger companies. Following Philip Kotler has printed out characteristics of niche marketing:

Customers of a niche market are prepared to pay a premium price.
Customers constitute a distinct set of needs and they are interested to be treated royally.
Niche marketer gains economies through specialization.
Niche market has profit and growth potentials.
Niche is not likely to attract competitors.

The importance of niche marketing can be summed up as, “There will be no market for products that everybody likes a little, and there will be a market for products that somebody likes a lot.” Keeping in view the usefulness of niche marketing number of large size companies are setting up business units to serve niches. As a result the niches can charge premium price due to the perceived additional value. The niches achieves high profit margin, while the mass marketer achieve high sales volume.

Micro marketing or local and individual marketing: Micro marketing is the practice of tailoring products and marketing programmes to suit the tastes of specific individuals and locations. It includes local marketing and individual marketing. Local marketing involves tailoring brands and promotions to the needs and wants of the local customer groups. Individual marketing involves tailoring products and marketing programmes to the needs and preferences of individual customers. This is also known as one to one marketing. Mass customisation is the process through which companies interact on one to one basis with the masses of customers to create customer-unique vale by designing products and services tailor made to individual needs. Many companies practice mass customisation. A platform and tools are provided by the company to the customers to design their own new products.

7. Profiling Each Selected Segment

Before developing a target market programme, a marketer must understand the needs, wants, attitudes, interests of the consumers. The profile of each segment must cover all the segmentation variables like demographic, psychographic, occasion and usage. The profile being a generalised view of the consumers helps the marketer to discover and understand the potential users of the product so that the marketing mix could be designed.

After identification, the company must determine the profitability of determining the profitability of the customisation of marketing efforts. It includes forecasting of demand of each segment. Companies should consider expected growth and competition in sales. A large market share in small and fast growing market is more profitable than a large share in the crowded market. The effect of actions of competitors’ and other environmental actions must be considered as these also affect the sales of the company. Evaluation also covers the determination of projected cost of development and implementation of the specialised marketing efforts.

Once the target markets have been selected and their profiles are fully understood, the marketing mix which suits the target should be developed. Creation and sustainability of the strong, clear and consistent consumer image of the product in comparison with its competitors helps in distinguishing the product from that of its competitors. And moreover, this also helps in development of the brand image.

8. Positioning Strategy

Positioning is an act of designing the offerings and image of the company so as to occupy a distinctive place in the minds of the target market. The end result of positioning is the creation of the consumer focused value proposition i.e., the reason due to which the target market will buy the product. A product can be positioned for an exclusive, well-to-do segment of the market; it can be positioned for men, for children, for women and for health conscious people. It can be claim on luxury, claim on distinctiveness, and a claim on convenience, economy, novelty or usage. The marketer must decide where he should introduce the product; to whom and on what distinctive claim he should go and promote his product.

8.1 Types of Positioning Strategies

Companies can follow any of the following positioning strategies:

Attribute positioning: A company can position its product as an attribute also, such as size, number of years in existence, etc. Like Saffola was introduced by the company stating that it is cholesterol free.
Benefit Positioning: The product could be positioned on the basis of its benefits.
Application Positioning: A product could be positioned best for some use or application.
User Positioning: The product could be positioned by focusing on the particular user group.
Competitor Based Positioning: The products are positioned claiming to be better than its competitors.
Product Category Positioning: The product can be positioned as a leader in certain product category.
Price Positioning: The product is positioned as offering the best value.

8.2 Successful Positioning of a Brand

Perpetual mapping is used for the successful positioning of the brand. This technique involves studying the consumer perceptions of the product, competitors’ brand and based on it identifying vacant positions in the map. The various steps of perpetual mapping are as follows:

Studying the ideal product perception: It involves studying the both tangible and intangible attributes which the consumer considers while purchasing a product. These include features of products, its performance level, style, packing, after sale services, warranty and many more.
Get those attributes ranked by the customers in order of the importance to them.
Assess the knowledge of customers regarding the substitutes of the product i.e. competitors brands.
Assess the perception whether positive or negative, by the customer of the competitors’ products.
Based on the contribution of competitors’ brand on the ideal map, identify the vacant slots and build the positioning strategy by filling them.

It is important here to note that if an attribute sought by a customer id not high on the priority level and the company consider it to be strength, then the company should adopt the policy accordingly. After perpetual mapping is done, the marketer uses the statistical tools to arrive at a position.

9. VALS Segmentation System

On the basis of the Maslow’s need hierarchy, the concept of social characters and psychographics is generalised by the researchers at SRI consultants, U.S. known as Values and Lifestyles System (VALS) in 1970. This system is based on psychographic measurements. It was revised by the SRI consultants in 1989 to focus on explain the consumer purchaser behaviour. The consumers are divided into eight distinctive sub-groups or segments based on the consumer responses.

The major tendencies of the four groups with high resources are as follows:

Actualisers: these are successful, sophisticated and active take charge people.
Fulfilled: these are those who are mature, satisfied, comfortable, and reflective. These people favour durability, functionality and value in products.
Achievers: these are successful, career and work-oriented. They prefer prestige products that demonstrate success to their peers.
Experiencers: these are young, vital, enthusiastic, impulsive and rebellious. They spend comparatively high portion of income on clothing, fast food, music, movies and video.

The major tendencies of the four groups with lower resources are as follows:

Believers: these are conservative, conventional and traditional people. They favour familiar products and established brands.
Strivers: these are uncertain, insecure and resource constrained people. They favour stylish products that enumerate purchase of those with greater material wealth.
Makers: these are practical, self-sufficient, traditional and family-oriented people. They favour products with a practical purpose such as tools, utility vehicles.
Strugglers: they are elderly, resigned, passive, and concerned and resource constrained people. They are cautious consumers who are loyal to favourite brands.

In terms of consumer characteristics, the eight VALS segments differ in some ways. Like believers tend to buy local products and actualisers are drawn to top of the line and new products.

10. Summary

Industrial or business markets are generally segmented in numerous ways with the same and many variables used in the consumer market segmentation. Business buyers are generally segmented on the base of geographically, demographically or benefits sought user status, usage rates and loyalty status. As in consumer segmentation, many marketers believe that the buying behaviour and benefits provide the best basis for segmentation of the business markets. The full segmentation, targeting and positioning process is the fundamental concept in the understanding of marketing strategies of the firm. Product positioning strategy is a useful technique for creating a sound product image in the minds of the consumers. Product positioning is regarding the mind of the customer, it is not regarding what is done with the product it is just related to the minds of the customer. Hence, product positioning is the act of positioning the product in the mind of the customer. Product positioning strategy is concerned with selecting the marketing mix, which is most appropriate to each market segment. After evaluation of different segments, the company must decide which and how many segments it would target. A target market comprises of the set of buyers who share common needs which the company decides to serve. Before developing a target market programme, a marketer must understand the needs, wants, attitudes, interests of the consumers. The profile of each segment must cover all the segmentation variables like demographic, psychographic, occasion and usage. The profile being a generalised view of the consumers helps the marketer to discover and understand the potential users of the product so that the marketing mix could be designed.

Suggested Readings (Books and Websites)

Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
McCarthy, Jerome E. (1975)”Basic Marketing: A Managerial Approach,” fifth edition, Richard D. Irwin