Marketing Management Chapter 7: Market Segmentation, Positioning, and Branding

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Chapter 7: Summary

Markets can be defined in a number of ways, but for a marketer the key definition is in defining who the customer is. Even so, there are different categories: (1) customers, (2) users, and (3) prospects. This categorization leads to the concepts of penetration and brand (market) share.

Within markets, there may be segments, which a producer may target to optimize use of scarce resources. The viability of these segments depends on (1) size, (2) identity, (3) relevance, and (4) access. The identification of market segments requires a number of activities including (1) background investigation, (2) qualitative research, (3) quantitative research, (4) analysis, (5) implementation, and (6) segmentation/positioning. A major aid to positioning is usually offered by two-dimensional maps based on two most critical dimensions identified by statistical analysis.

Branding is the most powerful marketing device for differentiation, which may, in effect, create a near monopoly. Once established, a brand name has a strong brand equity. Branding policies may be based on (1) company name, (2) family branding, and (3) individual branding. These policies may be developed further by brand extensions and multibrands, but this approach may be limited by cannibalism. Co-branding by companies that market complementary products helps fill market segments not met by them individually. Private brands and generic brands are also becoming increasingly important in price-sensitive markets.

Marketing Management Chapter 6: Estimating the Market Demand

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Chapter 6: Summary

Forecasts predict what may happen, all other things being equal. Budgets go beyond these forecasts to incorporate the effects of an organization’s planned actions. Both may be

•     Short term—For capacity loading, information transmission, and control

•     Medium term—For the traditional annual planning process

•     Long term—For strategic planning, resource planning, and communication

Forecasts need to be dynamic. In other words, changes in the environment require modification of forecasts. From them, budgets may be derived at the sales, production, and profit levels.

Forecasting is based on, and derived from, some other data sources; and it is conducted at three different levels. Macroforecasts look at total markets and may be derived from national or global data available from the OECD or the U.S. government. However, the most important aggregate forecast for business is at the market or industry level. Microforecasts build on the predictions of individual or group (customer) behavior. Product forecasts may then be split into forecasts by product type and over time.

There are both qualitative and quantitative forecasting methods. Qualitative forecasting is normally employed for long-term forecasts. Techniques include expert opinion, expert panel method, technological forecasting, Delphi technique, decision tree, and scenario.

Quantitative forecasting techniques for short- and medium-term typically try to isolate the trend, cyclical, seasonal, and random fluctuations. The specific techniques used may be period actuals and percent changes, exponential smoothing, time-series analyses, multiple regression analysis, and more complex econometric modeling. Various leading indicators are also readily available from government sources to forecast the short- to medium-term conditions of the market. Although most forecasting techniques ignore the competitors’ possible reaction to one company’s competitive move, game theory is gaining popularity in recent years to address the likely impact of the competitors’ moves in forecasting.

With the widespread use of personal computers, spreadsheets have become a useful forecasting tool to model many hypothetical “what if” scenarios. By developing many scenarios, you can determine which factors are sensitive to changes in the conditions under investigation.

The primary role of forecasting is risk reduction. You should note that risk can also be reduced by purchasing insurance against unfavorable events, diversifying into a portfolio of different products and markets, or adopting flexible manufacturing to better cope with unexpected changes in the market. Finally, thanks to Internet use, many companies, emphasizing the needs of the customers with an ability to satisfy and serve them quickly and efficiently, have begun to adopt the “build to order” model of sales fulfillment with no forecasting error rather than the traditional “build to forecast” model.

Marketing Management Chapter 5: Marketing Research and Information

Chapter 5: Summary

This chapter explored the search for information about the customer and the market. This constitutes the listening part of the marketing dialogue. Marketing research is also needed to assist managers in the decision-making process and to analyze organizational performance. To be viable, however, the benefits derived from marketing research need to exceed the cost of conducting such research.

A systematic research approach will lead to the development of a Market Information System (MIS) that contains information both internal and external to the firm. Important internal data sources are performance analyses, sales reports and employees’ ongoing experience. The more data the intelligence system receives and the more precisely the system can process the available data, the better it can serve the manager. It is therefore important to develop ways of entering nonnumerical reports, such as accounts from a sales conversation or information about customer interests. New technology can enable an MIS to alter communication and decision structures within a firm but also requires careful planning of information distribution and retention.

External information can be derived from either secondary or primary data. Secondary data, collected in response to someone else’s questions, are obtained through desk research and are available quickly and at a low cost. Main sources of secondary data are internal databases, libraries, directories, newsletters, commercial information providers, trade associations, and electronic information services. To ensure their usefulness, the researcher must determine the quality of the data source, the quality of the actual data, and the compatibility of the data with information requirements. Primary data are collected directly on behalf of a specific research project. Typical ways of obtaining such data are through syndicated research—such as retail audits, panel research, or omnibus surveys—and custom research.

The first step of primary marketing research is to clearly define the objectives to ensure the usefulness of the research. Next, the research level needs to be decided. Exploratory research helps mainly in identifying problems, descriptive research provides information about existing market phenomena, and causal research sheds light on the relationships between market factors. The research approach then determines whether qualitative or quantitative data will be collected. Observation, in-depth interviews, and focus groups are primary techniques to yield qualitative data, which may be very insightful but are not fully generalizable and cannot be analyzed statistically. Quantitative data overcome these problems but require the systematic collection of large numbers of data. Experimentation and survey research are the primary research tools. Good survey research must concentrate on question design and structure to elicit useful responses. Data can then be collected by mail (postal mail or e-mail), by using online applications e.g. SurveryMonkey, by telephone, or in-person after an appropriate sample frame is constructed. The data need to be analyzed with appropriate techniques to make the data set comprehensible, insightful, and useful for management. This usefulness is at the heart of the research report, which in essence is a communication process persuading recipients to use the information.

Marketing Management Chapter 4: Understanding the Buyer

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Chapter 4: Summary

Focus on the buyer is the key dimension of marketing and is what sets the discipline apart from all other business fields. The marketer must therefore understand how buyers come to the decision to purchase a product. This decision-making process is a complex one, both for consumers who are end-users and for industrial buyers. For consumers, the process includes the effects of experience, lifestyle, promotion, and price. More general factors influencing consumers may be culture, geography, social class, occupation, psychological factors, peer pressure, and the effect of globalization. Marketers have conducted a great deal of research to understand the consumer decision process better and, as a result, have developed the tools of lifestyle analysis and segmentation to be able to serve consumers more efficiently and more profitably.

On the industrial side, organizational purchasing is subject to a different set of influences, both because it is usually based on derived demand and because the decision is often split between decision-makers and influences. Other factors that affect buyers’ product acceptance are the diffusion of innovation, usage, and loyalty, and the existence of a customer franchise.

Marketing Management Chapter 3: Understanding the Market Environment and the Competition

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Chapter 3: Summary

An understanding of the environment is important for the marketer. Social, technological, economic, political, and ecological factors can have a major impact on the firm’s opportunities and threats. Key social and cultural elements to consider are the redefinition of occupations, a societal trend toward postmaterialism, and major demographic shifts. In the area of technology, the outlook for marketers is likely to be thoroughly changed by transformations in information processing and the subsequent shifts in business practices as well as the emergence of new materials, new biotechnological products, and growing environmental concerns. In the economic area, increasing globalization, regional integration, and exchange rate effects represent major influences on marketing practice. The political environment is characterized by legislative and regulatory actions that influence the firm but that can also be influenced by the firm. However, the political arena is also increasingly defined by the activities of special-interest groups whose actions can have a major effect on firms. Furthermore, the marketer is likely to be required, either by regulation or by good marketing sense, to take into account various stakeholders beyond the shareholders if the firm and its products are to remain acceptable to society at large. The ecological background of the target market also needs to be considered, in order to satisfy contemporary ethical customers.

To deal with the environment, the firm must first analyze and understand it. Such analysis can be accomplished by environmental scanning, Delphi studies, and scenario building. To understand the competition, however, the firm must evaluate more specific issues such as market structure, products and production processes, and industrial changes taking place.

After understanding these dimensions, the firm can achieve a successful strategic position through economies of scale, political clout, and captive distribution systems. Firms that are unable to win the competitive battle in the field of commerce, in particular, are increasingly seeking victory in the halls of government. Building and maintaining a successful position also requires an understanding of the likely competitive response from adversaries and the different strategies that leaders and followers can employ. Overall, you should remember that as difficult as it may be to maintain a leadership position, it is even harder to be a profitable follower.