The concept of market and marketing

The word market means people and marketing means the activities of the people where market brings people and the people bring goods and services for the purpose of buying and selling in order to make profit. . A market is an aggregate of people who, as individuals or organizations, have needs for products in a product class and who have the ability, willingness and authority to purchase such products where the conditions required for  an exchange of goods  or services).

The following are the types of markets:

1. Consumer market: Here the consumers intend to consume or benefit, but not to make a profit.
2. Organizational/Business  market: For this type of market, the following things are important:
• Resale
• Direct  use in production
• Or general daily operations.

Catering to Middle-Aged BBs...

TM = Baby Boomers...40-60 year olds
PRODUCT Attributes:

• High Powered
• Roomy
• Safety Features

PRODUCTS:

• Toyota Avalon
• Oldsmobile Aurora
• Mercury Mystique
• Dodge Intrepid
• Chrysler Concorde
• Vision

Developing a Target Market Strategy

Developing a target market strategy has three phases:

1. Analyzing consumer demand
2. Targeting the market(s)
• undifferentiated
• concentrated
• multi-segmented
3. Developing the marketing strategy

Selecting Target Markets (Analyzing Demand)                              

Need to aggregate consumers with similar needs.
Demand patterns: Do all potential customers have similar needs/desires or are there clusters?

Types of demand patterns are:

• Homogeneous Demand-uniform, everyone demands the product for the same reason(s). Very rare in the market like  staple foods...
• Clustered Demand-consumer demand classified in 2 or more identifiable clusters. IE Automobiles:
• luxury
• cheap
• Sporty
• Spacious
• Diffused Demand-Product differentiation more costly and more difficult to communicate  like  Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify consumer demand to develop clusters of at least a moderate size. Or uses one MM.

Targeting the Market

Undifferentiated Approach (Total Market Approach)

Single Marketing Mix for the entire market.

All consumers have similar needs for a specific kind of product. Homogeneous market or demand is so diffused it is not worthwhile to differentiate, try to make demand more homogeneous.

Single Marketing Mix consists of:

•  Pricing strategy
•  Promotional program aimed at everybody
•  Type of product with little/no variation
•  Distribution system aimed at entire market
• Creating customer loyalty
• Setting display and sales centre

The elements of the marketing mix do not change for different consumers; all elements are developed for all consumers.
Examples include Staple foods-sugar and salt and farm produce. Henry Ford, Model T, all in black.

The products are popular when large scale production began.  These are not so popular now due to competition, improved marketing research capabilities, and total production and marketing costs can be reduced by segmentation.

Organization must be able to develop and maintain a single marketing mix.

·         Major objective is to maximize sales where Market Segmentation Approach may be applied.

·         Individuals with diverse product needs have heterogeneous needs.
Market segmentation is the process of dividing a total market into market groups consisting of people who have relatively similar product needs, there are clusters of needs.

The purpose is to design a MM(s) that more precisely matches the needs of individuals in a selected market segment(s).

A market segment consists of individuals, groups or organizations with one or more characteristics that cause them to have relatively similar product needs.

There are two Market Segmentation Strategies.

Concentration Strategy.

A single market segment with one MM.

                        Market

                        |

                        |A Market Segment

                        |-------------------

One MM------------------>A Market Segment

                        |-------------------

                        |A Market Segment

                        |

PROS   include:

• It allows a firm to specialize
• It can focus all energies on satisfying one group's needs
• A firm with limited resources can compete with larger organizations.

CONS   include:

• Puts all eggs in one basket.
• Small shift in the population or consumer tastes can greatly effect the firm.
• May have trouble expanding into new markets (especially up-market). Haggar having problems finding someone to license their name for womens apparel, even though women purchase 70% Haggar clothes for men.

Objective is not to maximize sales, it is efficiency, attracting a large portion of one section while controlling costs.

Examples include
ROLEX, Anyone wear one.
Who are their target markets?? Over $100,000
Multi-segment strategy

2 or more segments are sought with a MM for each segment, different marketing plan for each segment. This approach combines the best attributes of undifferentiated marketing and concentrated marketing.

                         Market

 MM--------------------->|A Market Segment

                         |_______________________

 MM--------------------->|A Market Segment

                         |_______________________

 MM--------------------->|A Market Segment

                         |_______________________

 MM--------------------->|A Market Segment

                         |

                         |

Example: Marriott International:

1. Marriott Suites...Permanent vacationers
2. Fairfield Inn...Economy Lodging
3. Residence Inn...Extended Stay
4. Courtyard By Marriott...Business Travellers

PROS include:

·         Shift excess production capacity.

·         Can achieve same market coverage as with mass marketing.

·         Price differentials among different brands can be maintained Contact Lens!!

·         Consumers in each segment may be willing to pay a premium for the tailor-made product.

·         Less risk, not relying on one market.

·         CONS include:

·         Demands a greater number of production processes.

·         Costs and resources and increased marketing costs through selling through different channels and promoting more brands, using different packaging etc.

·         Must be careful to maintain the product distinctiveness in each consumer group and guard its overall image (Contact lenses)

·         Handout...The only difference is when you throw them away.

·         Discusses the individual branding of contact lenses.
3 brands:

·         Sequence2 $7-$9

·         Medalist $15-$25

·         Optima $70

The core product is the same, use different Packaging, Brand Name, and Price to differentiate and create a different marketing mix.
What will happen if consumers find out??

Objective: Sales maximization, but can remain a specialist. Can get firmly established in one segment, then pursue another.

Criteria needed for segmentation

For segmentation to occur:

Segments must have enough profit potential to justify developing and maintaining a MM

Consumer must have heterogeneous (different) needs for the product.

Segmented consumer needs must be homogeneous (similar)

Company must be able to reach a segment with a MM, IE Review to reach Delaware undergraduates.
How do marketers reach children?

Cartoons on Saturday

Nickelodeon

Cereal boxes

Sports illustrated for kids

Look at how media has changed recently due to changing demographics etc. and therefore the need of marketers to reach these groups.
Media must respond because they are essentially financed by the marketers or at least heavily subsidized

Indicates how media format changes due to changing population needs.

Must be able to measure characteristics & needs of consumers to establish groups.

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Variables that can be used to segment markets.

Need to determine the variables that distinguish marketing segments from other segments.

Segmentation variables should be related to consumer needs for, and uses of, or behavior toward the product. IE Stereo; age not religion.

Segmentation variable must be measurable. No best way to segment the markets. Selecting inappropriate variable limits the chances of success.

Variables for segmenting Consumer Markets include:

Demographic - age, sex, fertility rates, migration patterns, and mortality rates, ethnicity, income, education, occupation, family life cycle, family size, religion and social class.

Handout...Photography companies try to click...

Photography companies identify a new target market (children) to market their product to, current sales are declining with current target market due to advances in technology (video cameras etc.)

Handout...Two income marriages are now the norm

Families have more income and less time...esp. for children!!

Handout...Travel agents target grandma and grandpa

Travel agents developing a MM to attract grandparents, not senior citizens!!

Geographic -Climate, terrain, natural resources, population density, subcultural values, different population growths in different areas.

City size

Metropolitan Statistical Area

Primary Statistical Metropolitan Area

Consolidated Metropolitan Statistical Area

Market density-# of potential customers within a unit of land.

Handout...Social well being mapped out...

Geographic breakdown of the wealth/well being of the US.

Psychographic - personality characteristics, motives and lifestyles

Handout...Lifestyle appropriate greeting cards

Marketers must be aware of the changing lifestyles and market products accordingly.

Behavioristic Variables - Regular users-potential users-non users Heavy/moderate/light users, 80-20 rule
Frequent User Incentives
It is five x more expensive to attract a new customer, as it is to satisfy your current customers.
Benefits segmentation-focus on benefits rather than on features.

Single Variable vs. Multi-Variable Segmentation

Single variable--achieved by using only one variable to segment

Multi-variable-- more than one characteristic to divide market.
Provides more information about segment. Able to satisfy customers more precisely. More variables creates more segments reducing the sales potential in each segment.

Will additional variables help improve the firms MM. If not there is little reason to spend more money to gain information from extra variables.

Introduction

In order to implement the marketing concept, marketers require information about the characteristic, needs, wants and desires of their target markets.

Marketing Research:
Marketing research is the process of defining a marketing problem & opportunity, systematically collecting and analyzing information, & recommending actions to increase an organizations marketing activities. It is the function that links the consumer (customer) and public to the marketer through information.  It needs to approach the research in a logical manner. Difference between good and bad research can depend on the quality of the inputs. It must be conducted in a systematic manner which involves a series of steps/processes where data may be available from different sources and research applies to any aspect of marketing that needs information findings must be communicated to the appropriate decision maker.

There are 5 steps in the marketing research process, it is an overall approach, not a rigid set of rules.

Defining and Locating the problem

Usually a departure from some normal function, IE conflicts between or failures in attaining objectives. (goals may be unrealistic) Need to probe beneath the superficial symptoms.
Research objective specifies what information is needed to solve the problem.

Marketing Plan: It needs to determine the unfulfilled needs/wants within specified target market(s).  It may need to use exploratory research here, before conclusive research.
Therefore query news group with your ideas to better define your research needs perhaps, refine your ideas before developing your hypothesis!!

Assess the decision factors

Different sets of variables, alternatives and uncertainties that combine to give the outcome of a decision.
Alternatives---decision maker has control
Uncertainties--uncontrollable factors

Decision maker must:

Determine the principal alternatives that can be considered reasonable approaches to solving the problem...i.e. reasonable outcomes of research.

The major uncertainties that can affect particular alternative and result in it being a GOOD OR POOR SOLUTION TO A PROBLEM.

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Collect Relevant Information

Concepts

Developing Hypothesis
Drawn from previous research and expected research findings. An informed guess or assumption about a certain problem or a set of circumstances.
Residents of Newark, DE, as well as students of the University of Delaware would frequent a Bagel Store.
As information is gathered researchers can test the hypothesis. Can have more than one hypothesis in a study.
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Methods

Collecting the data

Two types of data, Primary, Secondary inside or outside the organization.

Secondary data collection
Internal database data (MIS). Accounting data, government data, magazines, survey of buying power, syndicated data services, Marketing Research Corporation of America.

PRO Inexpensive, quick to obtain, multiple sources available, obtain info. that cannot be obtained through primary research, independent therefore credible.

CON maybe incomplete, dated, obsolete, methodology maybe unknown, all findings may not be public, reliability may be unproven.

SOURCES: internal = budgets, sales figures, profit and loss statement, all research reports.
External = government, must consider dates, census of population/manufacturing/retail trade, regular publications, IE Wall Street Journal, Business Week, Commercial research houses: for a fee as a subscriber IE AC Nielsen.

Primary data collection
Information "collected specifically for the purpose of the investigation at hand", Dictionary of Marketing Terms. When a thorough analysis of secondary research provides insufficient information for a marketing decision to be made.

PRO Fits the precise purpose of the organization, information is current, methodology is controlled and known, available to firm and secret from competitors, no conflicting data from different sources, reliability can be determined, only way to fill a gap.

CON Time consuming, costly, some information cannot be collected. The following things are important in this context:

·         Research Design

·         The frame work or plan for a study that guides the collection and analysis of data, it includes:

·         Who collects the data?

·         What should be collected?

·         Who or what should be studied?

·         What technique of data collection should be used?

·         How much will the study cost?

·         How will data be collected (personnel)?

·         How long will data collection be?

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·         Gathering Data

·         Sampling

·         To select representative units from a total population.
A population "universe", all elements, units or individuals that are of interest to researchers for a specific study. IE all registered voters for an election.
Sampling procedures are used in studying the likelihood of events based on assumptions about the future.

·         Random sampling, equal chance for each member of the population

·         Stratified sampling, population divided into groups re: a common characteristic, random sample each group

·         Area sampling, as above using areas

·         Quota sampling, judgmental, sampling error cannot be measured statistically, mainly used in exploratory studies to develop hypotheses, non-probabilistic.

·         Survey to news group is an example of quota sampling...will be non-probabilistic.

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·         Survey Methods

Mail-wide area, limited funds, need incentive to return the questionnaire Mail panels, consumer purchase diaries. Must include a cover letter to explain survey!!

news group...electronic survey

Telephone-speed, immediate reaction is negative, WATS, computer assisted telephone interviewing.  Personal interviews-flexibility, increased information, non-response can be explored. Most favored method among those surveyed. Can be conducted in shopping malls.

In home (door-to-door) interview, get more information but it is costly and getting harder to accomplish. Mall intercepts-interview a % of people passing a certain point. Almost half of major consumer goods and services orgs. use this technique as a major expenditure. Can use demonstration, gauge visual reactions. Regarding social behavior, mall surveys get a more honest response than telephone surveys. There is a bias toward those that spend alot of time in malls. Need to weight for this. On site computer interviewing, respondents complete self administered questionnaires conducted in shopping malls. Questions can be adaptive depending on the responses. Focus groups-observe group interaction when members are exposed to an idea or concept, informal, less structured. Consumer attitudes, behaviors, lifestyles, needs and desires can be explored in a flexible and creative manner. Questions are open ended. Cadillac used this method to determine that they should be promoting safety features.

Return to Contents List where Questionnaire Construction is designed to elicit information that meets the studies requirements. Questions should be:

questions from a survey sent to parents of children that went on summer camp:

What is your income to the nearest hundred dollars?
Should not be at clear and easy to understand as directed towards meeting an objective. It needs to define objectives before designing the questionnaire. Must maintain impartiality and be very careful with personal data. Four basic types of questions are:

·         Open ended

·         Dichotomous

·         Multiple choice.

·         Scaled (lickert)

·         Time frame must be stipulated so that it does not drag on. Only ask needed questions...keep it short!!
Demographic questions at the end!!...Always!!
Always attach an explanatory cover letter!!

·         Example of poor the beginning! Should use multiple choice...categories of income!

·         Are you a strong or weak supporter of overnight summer camping for your children?
What does strong/weak mean!? No middle ground answer!

·         Do your children behave themselves well at summer camp?
Yes [ ] No [ ]
Of course they do ;-) Would parents really know?!

·         How many camps mailed literature to you last April, this April?
No-one will remember!

·         What are the most salient and determinant attributes in your evaluation of summer camps?
What do you mean ;-)

·         Do you think it is right to deprive your child of the opportunity to grow into a mature person through the experience of summer camping?
Of course not!!

In view of the above, it is obvious that Observation Methods record overt behavior, note physical conditions and events. "How long does a McDonald's customer have to wait in line". Can be combined with interviews, IE get demographic variables. To avoid bias must avoid being seen.

Mechanical observation devices, IE cameras, eye movement recorders, scanner technology, Nielsen techniques for media. Observation avoids the central problem of survey methods, motivating respondents to state their true feelings or opinions. If this is the only method, then there is no data indicating the causal relationships to find a Solution where the best alternative that has been identified to solve the problem to evaluate the results Coke, do the results make sense, don't always accept them at face value. Where relationship Marketing Definition is clearly indicated that Organizations efforts to develop a long term, cost effective link with individual customers for mutual benefit