CHAPTER 4 MARKET SEGMENTATION, POSITIONING AND DEMAND PROJECTION.

CHAPTER 4

MARKET SEGMENTATION, POSITIONING AND DEMAND

PROJECTION

Important Topics of this Chapter

Successful segmentation strategies in business market.

Differences between macro and micro segmentation.

Evaluation potential business market. Position strategies in business market. Demand projections and sales forecasting

techniques.

Market Segmentation Strategy

It is dividing the market into distinct group of customers with similar requirements

Procedures: Market analysis Market selection Marketing management

Identify market needs

Segmentation and

targeting

Marketing mixdecision

Why Segment Business Market

It is complex and heterogeneous Distinct differences exits among buying policies,

procedures and practices It allows to develop more specialized products for

the clients it is more attuned to customer needs It is more effective way to use resources It gives better direction for creating marketing mix

elements

Strategies for Business Segmentation Undifferentiated Marketing Strategy Differentiated Marketing Strategy

Cost factor:• Product modification cost• Production cost• Administrative cost• Inventory cost• Promotion cost

Concentrated Marketing Strategy One or few segments

Approaches to Market Segmentation Macro Segmentation

Geographic characteristics Demographic characteristics Observable buying characteristics

Micro Segmentation Attitudes of buying influences Similarity in buying motives Similarity in decision making style Life-style of buying influences Self-image of buying influences

A Research Findings

Macro Segmentation It is less important, but very easy to find data.

Micro Segmentation It is very important, but very difficult to find

information.

Conclusion Try to use micro segmentation factors as much as

possible, otherwise segmentation will not be a perfect one.

Approaches to Market Segmentation (cont.) The Nested Approach

It is a balance between macro and micro segmentation and based upon:

• Purchasing function-centralized or decentralized• Power structure-engineering Vs. marketing• Buyer-seller interaction- a link between suppliers and

customers• Purchasing policies-biding Vs. market prices• Purchasing criteria-need and wants/benefits

Nested Segments

Computer Industry OEM

Over $500,000,000 in Sales

Uses Microsoft Windows

Centralized Purchasing

Single Source/JIT Purchases

Segmenting Business Market

Type of Economic Activity Agricultural, manufacturing, retail. NAICS.

Size of Organization Volume of shipment, number of employees ,total sales volume.

Geographic location Global. Domestic.

Product Usage Light, moderate or heavy.

Structure of the procurement Function Centralized or decentralized.

Evaluating Potential Market Segments Market profitability

Market forces that determine attractiveness and long-run profitability of market or segments:

– Industry Competitors:• Intensity of rivalry among existing firms.

– Potential Entrants• Threat of new entrants

– Substitutes• Threat of substitutes

– Buyers• Bargaining power of buyers

– Suppliers• Bargaining power of suppliers

Above all SWOT analysis is necessary when a firm decides to enter a new market segment.

Elements of Industry Structure

New Entrants

Suppliers Buyers

Substitutes

Industry competitors

Intensity of rivalry

Product Positioning Strategy

It is a way that the product/service is defined on product attributes

It is favorable reception in comparison with competitors products

It is an image decision, and based upon product features to emphasize

Perceptual mapping is used to decide about product positioning

Approaches to Positioning Business Products Technology base:

High technology companies. Price base:

Lowest production and distribution cost. High margin.

Quality base: High quality/low price.

Image base: Distinctive quality perception

Distribution base: Innovative and efficient. Federal Express.

Service base: Technical assistance, repair, information and financing.

Business Demand Projections

Market potential

Sales PotentialSales ForecastMarket Demand

Common Forecasting Problems

Forecasting Mystique Many firms are untrained in forecasting area

Forecasting Accuracy 50% art and 50% science

Forecasting Inconsistency Modification and adjustment might be necessary

Forecasting Accountability Forecasters may not live with their decision

Forecasting implementation

Selective Forecasting Methods

Qualitative Jury of Executive Opinion Sales Force Composite Survey of Buyer Intentions Delphi Method-Expert opinion

Quantitative Approaches Time Series Analysis Moving average Exponential smoothing Adaptive Control Box Jenkins

Selective Forecasting Methods (cont.) Casual techniques

Regression Econometrics Leading Indicators Diffusion Index Input-Output analysis Life-cycle analysis