Strategic issues in Service Marketing

From- Bus. Adm. Department

MEANING OF SERVICES MARKET SEGMENTATION

Segmentation is a Marketing Strategy which involve dividing a broad target market into subset of Consumers, Businesses or countries who have common needs, interests and priorities and then designing and implementing strategies to target them.

DEFINITION OF MARKET SEGMENTATIONMarket Segmentation is the Sub- dividing of

customers into homogenous sub-set of customers where any sub- set may conceivably selected as market target to be reached with distinct Marketing Mix.

Philip Kotler

Segmentation aim to match groups of purchasers with the same set of needs and buyer behaviour. Such group is known as a ‘Segment’.

REQUIREMENT OF EFFECTIVE SEGMENTATION

Distinctiveness

Measurable Segment

Substantial Size of the Market

Accessibility

Actionable

Market Segmentation

WHY MARKET SEGMENTATION ? To develop marketing activities Increase marketing effectiveness Understanding customers & generate greater

customer satisfaction Design a Marketing Mix that precisely matches the

expectation of customers in the targeted segment Adjustment of product to the market need To overcome competition effectively To contribute towards achieving company goals

STP stands for-a) Starting, Transportation, Promotionb) Segmentation, Targeting, Promotingc) Segmentation, Targeting, Positioningd) Selling, Telling, Providing

Segmentation is the approach of-a) Marketing Mixb) Marketing Strategyc) Marketing Environmentd) Marketing Plan

_____________ is the process of dividing the broad target market into sub-markets, sub units of consumers.

a) Market Targetingb) Market Positioningc) Market Segmentationd) None of these

BASES FOR MARKET SEGMENTATION

Market Segmentation

Demographic Segmentation Geographic Segmentation

Psychographic Segmentation

Behavioural Segmentation

Age, Gender, Income,

Marital Status

Local, Regional, National,

International

Life Style, Social class, Personality,

Values

Benefits, Volume

purchased, Loyalty,

Product uses rates

Market can be Segmented by-a) Demographic Segmentationb) Geographic Segmentationc) Psychographic Segmentationd) All of these

Variable not including in Demographic segmentation is-

a) Ageb) Genderc) Citiesd) Income

Match the following-a) Geographic Segmentation 1. Whob) Psychographic Segmentation 2. Howc) Behavioural Segmentation 3. Whatd) Demographic Segmentation 4. Where

DEMOGRAPHIC SEGMENTATION

Demography is the study of people in the aggregate, including population size, age, sex, income, occupation and family life cycle.

In Demographic Segment market is divided into groups on the basis of Variables such as religion, community, language, age, stage in the family life cycle, gender, marital status, family size, occupation, income, educational level and social status of the consumer .

E.g.- A bank establishes an executive banking group specifically for accountants, doctors and professionals etc.

VARIABLES IN DEMOGRAPHIC SEGMENTATION

Age- Babies, Kids, Teen, The Youth (age 29 and below), The working group of age 30 and Above, The senior Citizen

Example- marketing company engaged in ready-made garments should opt for age-group distribution of population for the purpose of market segmentation.

Gender- Man, Woman

Income/ Purchasing Capacity- Buyer’ Preferred Price Range

Example- HCL identified the Below Rs 10000 per month’ income group as a distinct and strong segment in home PC’s. By offering PC’s at a low price of Rs. 12990. the company found it a ‘growth segment’. Through this segmentation , HCL has come to enjoy a 14.5% market share in home PC’s.

Suzuki SX4

Tata Nano

Audi

GEOGRAPHIC SEGMENTATION

In geographical segmentation, the marketers divide the market according to geographic units.

Geographically markets can be segmented on the basis of Climate zone, Region, Countries, Nations, States, Districts and urban/ rural area.

A firm may decide to market different products or services in certain areas and not in other.

Region- Metro, urban, sub-urban and rural

Metro City Urban City

Sub-urban City Rural City

PSYCHOGRAPHIC SEGMENTATION Psychographics is a technique that classifies

lifestyle by investigating how people live, what interests them and what they like.

It is also called lifestyle analysis or AIO because it relies on number of statements about a person’s activities, interests and opinions.

Market can be segmented on the basis of the psychological elements like psyche and personality traits like self-concept, life styles, attitude and value system.

It facilitates grouping of consumers in such a manner that group shares a common buying behaviour .

VARIABLES IN PSYCHOGRAPHIC SEGMENTATION Lifestyle- It takes into account different

dimensions of consumer such as their activities, interests, opinions and their spending.

Example- Titan Watches, Cafe coffee day

Personality- Extrovert, novelty seeker, aggressive, innovators

Perception- Low risk, Moderate risk, High risk

BEHAVIOURAL SEGMENTATION

It is also called Buyer behaviour segmentation. Market can be segmented on the basis of the

behaviour of buyer like benefit sought, product usages rate, brand loyalty, buyer’s readiness status for the product , volume of purchase, purchase occasion Buyer’s attitude towards the products.

Benefit sought- Benefit expected by the consumer

Example- Natural beauty care product Product uses rate- the market is divided into

currently users & currently non- users. Volume-Quantities of purchase Attitude- it is a learned tendency to respond

towards a product range from enthusiastic, positive, indifferent negative hostile

Occasions- choose Cadbury Brand loyalty- Johnson's

PROCESS OF MARKET SEGMENTATION

Identify Bases for Market Segmentation

Develop Profile of resulting Segments

Develop Measures of Segment Attractiveness

Select the Target Segments

Ensure that the Target Segment are Compatible

BENEFITS OF MARKET SEGMENTATION o The benefits of marketing segmentation are:

It helps to distinguish one customer group from another within a given market.

It facilitates proper choice of target market.

It facilitates effective tapping of the market.

It helps to divide the markets and conquer them.

It makes the marketing effort more efficiently.

BENEFITS OF MARKET SEGMENTATION o The benefits of marketing segmentation are:

Firm can create marketing plans & programmes according to needs of market.

Design the right products & services that match the market demand.

Small marketing firm with limited resources can compete more efficiently.

4 p’s can de used intelligently & rationally to obtain the twin objectives- maximum customer

satisfaction & Profitable sales volume.

It better explains the needs & preference of customers.

TARGET MARKETING A target market is a set of buyers sharing

common needs and characteristics that the marketing firm decides to serve.

Deciding which segment will be selected as target market.

Ramaswami & Namakumari opine that ‘through segmentation, a firm divides the market into many segments but all these segments need not form its target market.

CONT.… Target marketing involves 3 activities:-

MARKET SEGMENTATION MARKET TARGETING MARKET POSITIONING

It is called S.T.P. strategy in Marketing. Market segmentation is a process of taking the total

heterogeneous market for a product & dividing it into sub-markets or segments, each of which tends to be homogeneous.

Market targeting means choosing one’s target market. In choosing the target market, a firm basically carries out on evaluation of the various segments and select those segments that it wants to adopt as its market.

Market positioning is next dimension of marketing strategy, which indicates the place, the brand or product occupies in a given market. Positioning is not what you do to a product, it is what you do to the mind of the prospect. Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market.

SELECTION OF THE TARGET MARKETMarket Targeting is a process of evaluating & selecting the market segments which the firms decides to serve.Basis of Targeting- Segment Size and Growth Potential Structural Attractiveness Company Objectiveness and ResourcesIn evaluating different market segments, the firm must look at two factors:-

• THE SEGMENT’S OVERALL ATTRACTIVENESS• THE COMPANY’S OBJECTIVES &

RESOURCES

EVALUATING MARKET SEGMENTS Size of the Segment In evaluating the segment, its size must be considered whether it is sizable or not. If a firm wants a very large volume, it should think on bigger segment comparison to premium segment.

EVALUATING MARKET SEGMENTS Growth potential In evaluation of the segments, the growth rate of the segment should also be considered.Usually business firms, seek out the high growth segments.

EVALUATING MARKET SEGMENTS Attractiveness

It focus on whether a potential segment have characterize that make it generally attractive, such as size, growth, profitability and low risk.If a firm feels attractiveness in a segment it can select as target market.

EVALUATING MARKET SEGMENTS Must be measureable

The degree to which any information about the segment (buyer characteristics) obtainable could be measured determines the market targeting.It is hard to measure the number of customers who are motivated to buy a car with accessories primarily by consideration of credit policy.

EVALUATING MARKET SEGMENTS Accessible- The effectiveness of market targeting is considered by the effective focus on chosen segment.Popular segment may be accessible only to firms with a cost advantages so price is the major determinant in this segment.Premium segment may be accessible only to firms which enjoy a differentiation advantage.

EVALUATING MARKET SEGMENTS Conformity with company’s goals &

objectives In evaluating & selecting the segment, company’s goals & objectives should be considered.Some of the segments may be attractive, but they do not match with the company’s goals & objectives. Therefore, segment (target market) should be having conformity with company’s goals & objectives.

EVALUATING MARKET SEGMENTS Resources if company’s resources are limited, popular segment may be chosen, for others, the premium segment.

4 GUIDELINES OF STANTON Stanton has suggested the 4 guidelines about

how to determine which segment should be selected as Target Market-

1. The Target market should be compatible with the organization's goals & objectives.

2. It should match with the market opportunity represented in the target markets with the company’s resources.

3. An organization should seek markets that will generate sufficient sales volume at a low enough cost to result in a profit.

4. A company ordinarily should seek a market where there are the least and smallest competitors.

TARGETING STRATEGIES Three alternative strategies for selecting a

target market are:- MARKET AGGREGATION

SINGLE SEGMENT MULTIPLE SEGMENT

AGGREGATION STRATEGY In this strategy, the marketer treats the total

market as a single segment. Therefore, management develops a single

marketing mix and reach most of the customers in the entire market.

So, it is a market coverage strategy in which a firms decides to ignore market differences and present single product for the entire market.

It relies on mass distribution & mass advertising.

This strategy is suitable for the firm that are making an undifferentiated, stable product such as salt or sugar.

COND… Advantage of this strategy is- Cost

minimization It enables a company to produce, distribute,

promote its product very efficiently. Due to low cost, the company can turn its

lower costs into lower prices to win the price- sensitive segment of the market.

Kotler also says that ‘in this strategy the firm ignores segment differences and goes after the whole market with one offer.’

SINGLE SEGMENT STRATEGY It is also known as concentration strategy in

which a firm decides one segment from within the total market as target and develop one marketing mix to reach this single segment.

The strength of a single segment strategy is that a firm can initiate a single segment strategy with limited resources.

Through this strategy, the firm gains a strong knowledge of the segment’s needs and achieves a strong market presence, along with operating economics.

If the market potential of that single segment declines, the marketer can suffer considerably.

MULTIPLE SEGMENT STRATEGY Under this strategy, two or more different groups

of potential customers are identified as target market, and a separate marketing-mix is developed to reach each segment.

In multiple segment strategy, a firm decides to target several market segments and present separate product for each segment.

Market segmentation can also be accomplished with no change in the product, but rather with separate distribution channels or promotional appeals, each tailored for a given market segment.

The firm operates in several market segments and designs different product for each segment.

PRODUCT POSITIONING Positioning is related to the introduction of

product in target market. Positioning is an act of developing the

company’s offerings and image to occupy a distinct place in the minds of the target market.

Positioning is a consumer driven strategy in which the objective is to occupy a unique place in the customer’s mind and maximise its potential benefit for the firm. Each brand must thus be ‘positioned’ in a particular class or segment.

Example, Mercedes is positioned for luxury segment and Volvo is positioned for safety.

COND… The end result of the positioning is the successful

creation of a customer-focused value preposition which explain logically why the target market should buy the product.

In this way by offering varieties of products and market variations, it attains a higher sales and a deeper position within each market segment.

The result of multiple segment strategy is greater sales volume than a single segment strategy.

KOTLER OPINES THAT A COMPANY MUST AVOID THE FOLLOWING 4 MAJOR POSITIONING ERROR:- Confused positioning may be the result of

company’s claims about brand who makes too many claims or changes the brand’s positioning too frequently.

In doubtful positioning, buyers may find it hard to believe the brand’s claims in view of the product’s features or price.

Over positioning may be in the result of too narrow image of buyer about a brand

Under positioning is possible when buyers have only a vague idea of the brand and see it as another entry in a crowded marketplace.

POSITIONING STRATEGY

1. A firm should identify possible competitive advantage in the form of:(a) Product Differentiation(b) Service Differentiation(c) Personnel Differentiation(d) Image Differentiation

2. Then, it should select right competitive advantages3. Then, there should be proper media-planning and

campaign planning by the firm.4. Timing is an important factor in positioning.5. Keeping in view the whole marketing environment, it

should be decided by the firm where and how to position the product.

POSITIONING STRATEGIES IN SERVICES Positioning by Attributes, Features or

customer Positioning by Price value Positioning by Use of Application Positioning according to users or class of

users Position with Respect to product class Positioning against competition

POSITIONING STRATEGIES IN SERVICES Positioning by Endorsement Positioning by Quality Dimensions Positioning by Service Evidence

Positioning by People Positioning by Physical Evidence Positioning by Process

Positioning by Availability Positioning by Comparison

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