KLS, Gogte Institute of Technology

Department of MBA

UNIT – III
MARKET SEGMENTATION AND PRODUCT DECISIONS

Prof S N Khanai
Business Marketing – 15MBAMM301
III
 MARKETING RESEARCH

• Assessing market opportunities is basic to

strategic planning
• Strategic decision making must be based on
knowledge about market potential, customer
segments and requirements and other forces in
the firm’s internal and external environment
• MR is the systematic design, collection, analysis
and reporting of data and findings relevant to a
specific marketing situation
 COMPETITIVE INTELLIGENCE

• Involves learning about a firm’s competitors.

• That is about competitor’s SWOT and strategic
actions
• The intention is to enhance responses to
competitor’s planned actions.
• It emphasizes increased learning about competitor’s
SWOT and strategic actions
 CONSUMER & INDUSTRIAL MARKETING
RESEARCH
• Technical orientation
– Industrial marketing researchers are more technically oriented
• Concentrated access to information
– Since the information sources tend to be concentrated, there is a
greater reliance on secondary data sources
• Survey techniques
– It is easy to identify the specific respondents within a sample base,
personal interviewing is more convenient.
• Respondent cooperation
– Obtaining data from industrial respondents are often more difficult.
 MARKETING RESEARCH
PROCESS
1. Defining the problem and research objectives:
– Research Methodologies: Exploratory, Descriptive and
experimental research.

2. Developing the information sources:

To specify the type of information needed
– Secondary data: computerized and non-computerised
sources, government sources etc
– Primary data: Unstructured surveys, (both
unstructured and nondisguised) Structured surveys etc.
 Contd;

3. Collecting the information:

4. Analyzing the information:
The increased use of computers and software
programs have led to greater usage of quantitative
methods of analyzing data
5. Presenting the findings

6. Suggestion and conclusions

 STRATEGIC PLANNING
Industrial Markets
• Consumer marketing – Where the products are
normally marketed through one or two channels
• Industrial marketing – Where the products are
normally marketed through multiple channels,
each requiring a different marketing approach
• Industrial marketing depends more on other
functional areas
 INDUSTRIAL MARKET SEGMENTATION
TARGETING & POSITIONING (STP)

• Industrial customers too differ in their needs,

resources and buying attitudes.

• Market segmentation strategy is undertaken to

identify groups of firms whose purchasing
requirements and responses to marketing
programs are similar.

• It is the process of dividing a market into distinct

groups of buyers whose marketing responses to
products may be similar
 ADVANTVAGES

• The seller is in a better position to spot and compare

marketing opportunities.
• The seller can create separate marketing programs
aimed to meet the needs of different buyers
• The seller can develop marketing programs and
budgets based on a clearer idea of the response
characteristics of specific market segments.
REQUIREMENTS OF EFFECTIVE SEGMENTATION

• Measurable
Information needed should exist and can be obtainable
either through primary or secondary data
• Relevant
The information collected is related to the research
problem
• Differentiable
The segments should respond differently to separate
marketing plans
• Substantial
– The segments should be large enough in terms of
sales potential and profits.
 BASIS FOR SEGMENTATION
• Macro variables
– Industry – Agriculture, mining, construction etc
– Organizational Characteristics – Size of customers,
Parent company, size of customers
– Plant Characteristics – Size and age of customer’s plant,
inventory turnover, degree of automation
– Location – Distance from plant, suburban/urban/rural
etc
– Competitive forces: Degree of competition, entry
barriers etc
– Purchasing factors: decentralized v/s centralized
– End-use markets:
– Product application:
 Micro variables
• Organizational variables
– Purchasing situations: New task, modified or straight

– Customer experience stage: PLC stages

– Customer interaction needs: Dependence on supplier

– Product innovativeness: Innovative firms v/s followers

– Organizational capabilities: Extent of operating,

technical or financial capabilities
 • Purchasing situation variables
– Inventory requirements: MRP or JIT

– Purchase importance: Cost, usage factors or time

– Purchasing policies: Market based prices or bids

– Purchasing criteria: supplier reputation, technical services

– Structure of buying behaviour: Key influencers and decision

makers

• Individual variables
– Personal characteristics: Demographics, perceptions and risk-
takers

– Power structure:
 MARKET SEGMENTATION: A STEP-BY-STEP
PROCESS

Industry characteristics
Identify
Analyze
relevant macro market
Financial Institution characteristics
variables profitability,
competitive
position
Organizational characteristics

Organizational variables

Analyze
Identify
market Purchasing situation variables relevant micro
profitability, variables
competitive
position Individual variables
EVALUATING POTENTIAL SEGMENTS

• Market profitability analysis

– Market potential
– Sales potential
– Sales forecast
– Profitability

• Competitive analysis
The success of any marketing strategy depends on
the strength of the competitive analysis on which it
is based
 TARGET MARKETING
• Undifferentiated Market selection
The product or services produced by an organization
are relatively standardized and sold in a potential
markets

One Product Entire Market

The elements of the marketing mix do not change

for different customers, all elements are
developed for all customers.
• Differentiated market Selection
A firm may also choose to offer its products or
services to a number of diverse segments, whose
needs, product usage, or responses are appreciably
different.

Segment 1

Company Segment 2

Segment 3
• Concerted Market Selection
When company recourses are limited, the firm may choose to go
after a large share of one or a few markets

Segment 1

Company Segment 2

Segment 3

• For example Rolls Royce cars aim its vehicles at the premium segment
• Niche Marketing

• PRODUCT POSITIONING
FORMULATING PRODUCT PLANNING
 INTRODUCTION
• It is the product offer that must ultimately satisfy
customer needs

• New product design, development and

introduction are a costly venture

• Further, due to the increased pace of technological

change, products can become obsolete before the
firm has recouped all its development costs.
 INTRODUCTION
• An industrial product is a complex set of
economic, technical, legal and personal
relationship between the buyer and the seller.

• A company as a buyer of an industrial product

considers price, specification of the product,
the supplier’s delay in delivery, the personal
relationships etc…
 INDUSTRIAL PRODUCT
• Consumer products are bought to satisfy an individual’s
personal wants.

• Business products are used to manufacture other goods are

services, to facilitate an organization's operations or to resell
to other customers.

• From the buyer’s perspective, a product is a combination of

basic, enhanced and augmented properties.
Core Product - This is the basic product and the focus is on the
purpose for which the product is intended.

Generic Product - This represents all the qualities of the

product.

Expected Product - This is about all aspects the consumer

expects to get when they purchase a product.

Augmented Product - This refers to all additional factors which

sets the product apart from that of the competition. And this
particularly involves brand identity and image.

Potential Product - This is about augmentations and

transformations that the product may undergo in the future.
For example,
• Basic properties:
Are those that constitute the generic product and denote
the various benefits sought by buyers and influencers.

• Enhanced properties:
Generic products are made differentiable by adding
enhanced properties.

• Augmented properties:
Augmented properties are the additional benefits added
into a particular product, which are preferably intangible
in nature.
 PRODUCT STRATEGY
• Product strategy involves continuous change.

• Any change in customer needs must ultimately

results in changes in the firm’s product offerings.

• Product strategy involves the decisions regd;

– Whether changes are needed in current products?
– Whether products should be added or dropped?
 INDUSTRIAL PRODUCT LIFE-CYCLE ANALYSIS

INTRODUCTION STATE:
• Product acceptance during introductory stage is
considerably different from consumer market.

• Product acceptance in the industrial market is affected

by how the product fits into the buyer’s total use
system.

• When the products have the potential for rapid

acceptance, the marketer must be prepared to meet
vigorous competition.
GROWTH STAGE:

• In this stage, the emphasis on product

strategy shifts to improving product
design, improving distribution service.

• The product gets lowering price as

increasing product demand, accompanied
by accumulated product experience,
begins to lower cost substantially.
MATURITY STAGE:

• Marketing strategy is towards keeping current users

satisfied.

• Looking for opportunities to find new buyers or

enter new markets through product modification
and changes in other marketing mix variables.

DECLINE STAGE:

• Changes in customer desires as well as changes in

the state of the art bring about decline in the sales
and profits.
Locating industrial production in their plc

• Develop trend information for the past three to five

years regd, sales in volume and value, profit margins,
ROI market share etc
• Examine the recent trends in the number and nature of
competitors and their market share.
• Analyze short-term competitive tactics
• Obtain and analyze historical information
• Project product sales for the next 3 to 5 years
• Estimate the number of profitable years remaining in
the PLC etc.
 DEVELOPING PRODUCT STRATEGIES FOR
ESTABLISHED PRODUCTS

• Product evaluation matrix:

“Where they have been and where they might go”
• Strategic alternatives:
– Maintaining the product and its marketing strategies
in the present form
– Maintaining the present form of the product but
changing its marketing strategy
– Changing the product or the entire product line
– Dropping the product or the entire product line
– Adding one or more new items into a line or adding
new product lines
 Perceptual Mapping:
It is a technique used for examining the relative strength
and weaknesses of a product compared to competitors.

It generates three important types of information;

1. The position of competing brands relative to one
another
2. The position of brands, or product options with respect
to their attributes
3. The position of product attributes compered to each
other
• New product opportunity analysis:
 Perceptual attributes
• Accurate process readings
• Clear, sharp results
• Cost/performance ratios
• Pleasantness of sales people
• Technical support
• On-time delivery, flexible delivery
• Company image, advertising
• Cost, pricing flexibility
• Good return policy
• Usage by major customers
 PRODUCT REVITALIZATION STRATEGY

• The question is to whether revitalize or eliminate,

when a product’s profit margin, sales volume, or
market share falls below expectation.
– Identify causes of poor product performance
– Identify alternative corrective action
• Cost reductions
• Product modifications
• Price change considerations
• Promotion change considerations
• Channel change considerations
 Product elimination decisions
– New product potential
– Customer relationships
– The impact on profit and sales of other products

– The corporate image

– Employee relationships
– Competitor’s move
 System marketing
• System marketing is one where, a seller not
only sells a system of interrelated products,
but a system of operating procedures,
management routines, inventory control, and
other service components to meet buyer’s
needs.

• Systems Marketing is Service Marketing.

THE ELEMENTS OF SYSTEMS MARKETING

• Identifying the problems in financial terms

• Developing and quantifying a profit

improvement solution to customer problems

• Accepting the management of and

responsibility for the performance of the
system
 SYSTEM MARKETING - RESPONSIBILITIES

• Developing the general system design for a broad set of

product – market system needs
• Analyzing the needs of the individual customers
• Determining the best solution for individual customers
• Installing and ensuring timely delivery

• Debugging the system

• Assisting in the conversion to anew system where one
existed in the past.
 SERVICE MARKETING CHALLANGES

• Intangible

• Inseparable

• Heterogeneous

• perishable
Features Marketing Problems Suggested strategies

Intangibility 1. Cannot be stored 1. Stress tangible cues

2. Cannot be protected through 2. Use personal sources
patents 3. Stimulate word-of-mouth
3. Cannot be readily displayed or communications
communicated 4. Create strong
4. Prices are difficult to set organizational image
5. Engage in post purchasing
communications

Inseparability 1. Consumer involved in 1. Emphasize selection and

production training of both consumers
2. Centralized mass production is and employees
difficult 2. Use multisite locations
Features Marketing Problems Suggested strategies

Heterogeneity 1. Standardization and quality 1. Industrialize service

is control is too difficult 2. Customize service

Perishability 1. Services cannot be 1. Use strategies to cope

inventoried with fluctuating demand
2. Make simultaneous
adjustments in demand
and capacity
 NEW PRODUCT DEVELOPMENT

• WHAT IS A NEW INDUSTRIAL

PRODUCT?
– New-to-the-world products:
New products that create an entirely new market

– New product lines:

New products that allow a company to enter an
established market for the first time

– Additions to existing product lines:

New products that supplement a company’s
established product lines
– Improvements in the existing products:
New products that provide improved performance and
replace existing products

– Repositioning :
Existing products that are targeted to new markets

– Cost reductions:
New products that provide similar performance at lower
cost
 WHY NEW PRODUCT DEVELOPMENT?

• New product development starts with unsatisfied

need.

• New product ideas from within the company

• New product ideas from customers

 INNOVATION AND COMPETITIVENESS
• Productivity:
The ratio of output to input
‘Innovation is new and better ways of doing what
has been done before.’

• Relation of Innovation to productivity:

• Relation of Innovation to competitiveness

 New product development process

• Idea generation
• Idea screening
• Idea evaluation
• Preliminary business analysis
• Product development and testing
• Formal business planning
• commercialization