Target Marketing Segmentation & Other Selection Strategies Target Market STRATEGIES An entrepreneur researching the feasibility plan must think about who will buy the P or S. Remember, just because you have an idea that you think is a good idea, does not mean customers will agree with you. Good ideas are like ears; everyone has a couple of them. Every market consists of potential or actual customers who will differ in one or more ways. These differences can be used to segment a market. Marketing Strategies for Entrepreneurial Ventures SEGMENTATION AREAS 1. Geographic – Region and/or area 2. Demographic – Age, gender, family size 3. Psychographic – Social class, life style 4. Behavioral – Benefits to user’s status Marketing Strategies for Entrepreneurial Ventures TARGET MARKET SELECTION STRATEGIES 1. Single segment concentration – specialize in one segment 2. Selective specialization – several attractive segments 3. Product specialization – make one product to sell in several segments 4. Market specialization – serves many needs in selected segment. 5. Full market coverage – serve all customers. Marketing Strategies for Entrepreneurial Ventures DIFRFRENTIATION STRATEGIES 1. Product itself – emphasize features, performance, reliability, etc. 2. Services – delivery, installation, customer training, etc. 3. Personnel – competency, courtesy, credibility 4. Image – logo, color identifier, famous person Marketing Strategies for Entrepreneurial Ventures 4 P’s 1. Product or service 3. Promotion 2. Pricing 4. Place Target Market Market segments are large, identifiable groups within the total market. At the most basic level, your firm must chose a marketing strategy to either: 1. Divide or segment the market into different groups; or 2. Treat it as one homogeneous market. Target Market If you choose to segment your market, you can select from several different variables including: Geographic - (region, city or metropolitan area, population density, and climate); Demographic – (age, gender, family size, family life cycle, income level, occupation, education level, religion, race, and nationality) Target Market Psychographic (social class, lifestyle, attitudes toward various societal situations, and personality); and Behavioral (occasion for product or service use, benefits or problems solved, user status, use rate, loyalty status, readiness to purchase, and attitude toward the product or service) Target Market If your venture sells products or services to the business market rather than the consumer market, the major approaches to segmentation include: 1. Demographic (industry type, customer’s company size, and location); 2. Operating variables (technology and customer capabilities); Target Market 3. Purchasing approaches (purchasing department, power structure, nature of existing relationships, general purchasing policies, and purchasing criteria); 4. Situation factors (urgency, specific applications, and order size); and 5. Personal characteristics (buyer-seller similarity, attitudes toward risk, and loyalty). Target Market Once possible customer segments are identified, the next step is to determine which are the most attractive targets for selling your P or S. This is called ―Target Marketing Selection.‖ Target Market Selection Approaches Target Market Selection can use one of five possible approaches: 1. Single segment concentration when you select a single segment (out of all possible segments) to target. Target Market Selection Approaches 2. Selective specialization when you choose to serve a number of equally attractive and appropriate segments that have little or no common characteristic. 3. Product specialization strategy when your firm concentrates on making a certain product or providing a certain service that is sold to several segments. Target Market Selection Approaches 4. Market specialization strategy your firm serves many needs or one particular segment or customer group. 5. Full market coverage strategy your firm is attempting to serve all customer groups (segments) with all the products or services you have to sell. Target Market Selection Approaches After deciding the segmentation and Target Market Selection strategies for your venture, you have a good idea of the customer group (or groups) your firm hopes to target. However, designing appropriate marketing strategies does not stop here. Target Market Selection Approaches Now, you decide how to get the customer group to notice your firm’s products or services rather then other firms’ products or services. Target Market Selection Approaches You are the ‖new kid on the block‖, and you are competing with established firms. This is hard, but you must convince potential customers to leave their existing suppliers and buy from you - an untried and untested firm. How will you do this? Figure it out now. Once you open your doors, it will be too late. That is where the differentiation strategies come in. Target Market Differentiation Strategies How important are differentiation strategies? Very important! With new firms differentiation is the most direct means of success. So let’s go into some more details. Just think, if this were a Marketing class, you would have to memorize all this stuff. Target Market Differentiation Strategies Since the vast majority of selling takes place in competitive markets, you must look for ways to differentiate your Ps or Ss from established competitors. Here are four basic differentiation strategies to think about: Target Market Differentiation Strategies 1. Differentiating the P or S itself by emphasizing features, performance, conformance, durability, reliability, reparability, style, and design. 2. Differentiating on the basis of services offered such as free delivery, installation, customer training, consulting services, repair, and other miscellaneous factors. Target Market Differentiation Strategies 3. Differentiating by personnel based on their competency, courtesy, credibility, reliability, responsiveness, and communication ability. Target Market Differentiation Strategies 4. Differentiating by image: A. Through focusing on symbols such as a logo, color identifier, or a famous person; B. Through written and audio-visual media; through atmosphere features like building design, interior design, layout, colors, or furnishings; or C. Through sponsored events or causes. Target Market Differentiation Strategies Although choosing the best differentiation strategy is vital to success, there is more to decide. The ―more‖ is the Marketing Mix Strategies. Target Market Market Mix Strategies Market-mix strategies get into the specific details of: 1. What Ps or Ss will be offered to customers; 2. How it or they will be priced; 3. How it or they will be promoted; & 4. Where it or they will be placed so the customer can buy it. Target Market Market Mix Strategies The following are the 4 P’s referred to in marketing: 1. Product; 2. Price; 3. Promotion; & 4. Place. Target Market Market Mix Strategies 1. Product strategy: involves several aspects. The important one is how your venture will approach new-product development. New products can include original products, improved products, modified products, and new brands. Target Market Market Mix Strategies Strategic product decisions involve: A. Product line width (how many different products line lines to offer), B. Product line depth (how many variations of a product or service to offer), Target Market Market Mix Strategies C. Product line and links (how many different products or services to offer within the product line), and D. Product line consistency (how closely related to product lines and products are). Target Market Market Mix Strategies There also may be product strategy choices, that involve brand decisions such as whether to use: 1. A brand name, 2. A brand sponsor, and 3. What type of brand strategy to pursue. Other product strategies involve packaging and labeling decisions. Target Market Market Mix Strategies Once the product or service is on the market, product strategies concern managing the various stages in the product lifecycle (PLC). The PLC concept is a recognition that a product’s sales rise and decline, bringing about the need for different strategies to cope with these ups and downs. The various stages of PLC might require changes in the product strategy, as well as in the 3 P strategies. Target Market Market Mix Strategies A. Pricing Strategies: Most entrepreneurs tend to set prices too low when they first launch their ventures. They are not quite sure what customers are willing to pay or how much they value what they are getting. Along with the uncertainty there is the element of fear. Terror is more like it. Target Market Market Mix Strategies Entrepreneurs fear that if they charge too much: A. They might lose a customer. B. Or they worry about pricing their product or service out of the market. But remember this: Many customers equate low prices with low quality. No one wants to buy low quality. If you are known for high quality, you will not have to worry about selling at high prices. So, the choice of pricing strategy is an important one! Target Market Market Mix Strategies It depends on your pricing objectives (survival, maximum current profit, maximum current revenue, maximum sales growth, maximum market skimming, product-quality leadership, or others.) It is also influenced by the customers’ demand for the P or S, costs of producing and marketing the product, and competitors’ prices. Target Market Market Mix Strategies Based on these factors, you may choose one of the following pricing strategies: A. Markup pricing (pricing by adding a standard% markup). This is very inflexible & you can miss out of maximizing prices for special Ps or Ss. B. Target-return pricing (pricing to achieve a targeted or desired return) Target Market Market Mix Strategies C. Perceived-value pricing (based on the customers’ perception of value) D. Going-rate pricing (based largely on what competitors are charging) E. Sealed-bid pricing (used in bid situations and based on expectations of how competitors will bid). Target Market Market Mix Strategies Other pricing strategy decisions you will face include whether to use: A. geographical pricing (charging different prices for different locations), US drug industry. B. price discounts and allowances (giving discounts or allowances to certain customers), or C. promotional pricing (running special promotion pricing. Target Market Market Mix Strategies Also, even though you may establish what you believe is an effective pricings strategy, competitive and marketplace dynamics will require raising or lowering prices and creating a need to change the current pricing strategy from time to time. Three important things to remember about your pricing policy: 1. Keep it fluid. 2. Never write it in stone. 3. Prices are easy to lower and hard to raise. So what do you do? Target Market Market Mix Strategies A good overall marketing strategy requires plans for promoting the product. Common strategies for promotion involve the use of the various marketing communication tools. Target Market Market Mix Strategies These include: Advertising (print and broadcast media ads, brochures and booklets, posters and leaflets, billboards, point-of-purchase displays, symbols and logos, packaging inserts, and many others) Target Market Market Mix Strategies Sales promotion (contests, games, sweepstakes and lotteries, gift premiums, sampling, fairs, trade show exhibits, demonstrations, coupons, airline miles, rebates, trading stamps (a very old idea), and others) Target Market Market Mix Strategies Public relations (press kits, speeches, annual reports, charitable contributions, sponsorship, community relations, lobbying, community events, company magazine, and others) Target Market Market Mix Strategies Personal selling (sales presentations, sales meetings, samples, and others) and Direct marketing (catalogs, mailing, electronic shopping, the Internet, or TV shopping). Target Market Market Mix Strategies What are your most appropriate promotional strategies? It depends on the target audience and the marketing communication objectives. What do you want to communicate and to whom? Target Market Market Mix Strategies Once this is a determined, the appropriate message, communication channels, promotion budget, and promotion of these strategies can be designed. Target Market Market Mix Strategies One important aspect for you to determine is the choice of distribution channels for product or service: wholesaler, dealer, direct sales, value added resale, mail-order marketer, & number of intermediaries. Target Market Market Mix Strategies Be careful with sales intermediaries like marketing representatives. Every level that separates you from your customer cost money, which reduces your profits. An important aspect of the place strategy involves the actual physical distribution of the product or service—also referred to as market logistics. Target Market Market Mix Strategies Normally, there are four logistics strategies to decide: 1.Determine how customer orders will be placed 2. What warehousing arrangements (if any ) are most appropriate. 3. Decisions about inventory. (When to order and how much to order.) Target Market Market Mix Strategies Obviously, decisions about the inventory strategy must be coordinated with the operation strategy. Finished products must be available when needed, in the style and design needed, and an appropriate cost. Target Market Market Mix Strategies 4. The place strategy involves decisions about transportation and your outlet location. If you cannot find a good, convenient location, you must offer pickup and delivery services. That way customers do not need to come to you. You can office in the low-rent district of town, saving money. Target Market Entrepreneurs in action End of Target Marketing.