Paper: 14, Marketing Management

Module: 12, Market Analysis and Selection

Prof. S P Bansal
Principal Investigator Vice Chancellor
Maharaja Agrasen University, Baddi

Prof YoginderVerma
Co-Principal Investigator Pro–Vice Chancellor
Central University of Himachal Pradesh. Kangra. H.P.

Dr. Kulbhushan Chandel

Paper Coordinator Department of Commerce and Management
Himachal Pradesh University, Shimla
es
BPSMV, KhanpurKalan, Sonipat
Dr. Kulbhushan Chandel
Content Writer Department of Commerce and Management
Himachal Pradesh University, Shimla
 Items Description of Module
Subject Name Management
Paper Name Marketing Management
Module Title Market Analysis and Selection
Module Id Module no.- 12
Pre- Requisites Basic knowledge of marketing
Objectives To study the components of marketing segmentation
Keywords Market Analysis, Target Marketing, Positioning.

QUADRANT-I

Module 12 Market Analysis and Selection

1. Learning Outcome
2. Introduction
3. Segmentation of Business Markets
4. Market Analysis and Selection
5. Product Positioning
6. Target Marketing
7. Profiling each Selected Segment
8. Positioning Strategy
9. VALS Segmentation System
10. Summary

1. Learning Outcome
After completing this module, the students will be able to:
 Explain how the segmentation of business markets is done.
 Explain the market analysis and selection procedure.
 What is target marketing?
 What is product positioning? What are the various strategies of positioning of a product?
 Explain the VALS segmentation system.
2. Introduction

Market segmentation being the process of dividing the total market into distinctive sub-groups of
consumers with specified characteristics who might need separate products or marketing mixes.
Marketing segmentation is helpful for both consumers and marketers. As marketers would be able to
identify the needs, desires, preferences of the particular target market and make product accordingly
and for consumers also it helps to have the desired product. After the market segments are decided by
the marketer. Next he has to select a specific segment and then target marketing is done on it. After
evaluation of different segments, the company must decide which and how many segments it would
target. A target market comprises of the set of buyers who share common needs which the company
decides to serve. And accordingly positioning of the products is done.

3. Segmentation of Business Markets

Industrial or business markets are generally segmented in numerous ways with the same and many
variables used in the consumer market segmentation. Business buyers are generally segmented on the
base of geographically, demographically or benefits sought user status, usage rates and loyalty status.
As in consumer segmentation, many marketers believe that the buying behaviour and benefits provide
the best basis for segmentation of the business markets. Some additional variables used are:

 Operating variables: technology

 Purchasing approaches: Centralised/ decentralised, purchasing power structure, purchase
policies and criteria.
 Situational Factors: urgency, specific application, size of order.
 Personal Characteristics: buyer seller similarity, attitude toward risk, loyalty.

4. Market Analysis and Selection

The full segmentation, targeting and positioning process is the fundamental concept in the
understanding of marketing strategies of the firm. Following are the main steps of segmenting,
targeting and positioning:

 Defining the market: the definition of the total market is necessary for segmenting it. When
the market is segmented, each segment should be decided such a way that the each segment
has same type of customers whose needs and requirements are same.
 Creating market segments: Different variables and segments of the markets are to be studied
which are important for the segmentation of the market.
  Evaluating segments for marketing: after the segmentation of the markets, the important step
comes is to evaluate the segments using a set criterion so as to analyse whether it is usable
and logical. The various segments to be checked are whether the products are as per the needs
of the customers, the customers are approachable, and so on.
 Constructing segment profile: after evaluation of the segments, segment profile is
constructed. Segment profiles are the detailed description about the numerous customers to be
covered, their needs, preferences, behaviours, demographics, shopping styles and so on.
 Evaluating the effectiveness of each segment: the available market data and consumer
research findings are then added to the description of the segments. Using the combined
information, the firm then analyses the each segment on the basis of the overall attractiveness
of the segment.
 Selecting target market: using the detailed information available for each segment, then the
company decides to use the appropriate one for each segment. The numerous factors to be
considered while choosing the target markets are firm strategy; attractiveness of segment,
firm’s ability to firmly compete and so on.
 Developing positioning strategy: firms have to make strategies for launching its product in the
target market.
 Developing and implementing marketing mix: after deciding the positioning strategy the firm
ahs to implement it. For implementation, marketing mix is developed which supports the
position of the product in the market. This consists of designing of suitable products, setting
up suitable prices, deciding suitable channel of distribution and effective promotional
programme.
 Review of the performance: after a period of time, the firm has to review its performance
regularly. In this changing marketing environment, the marketer has to continuously monitor
its marketing mix so that the necessary changes could be made in it.

For example: the small car segmentation for the Indian Automobile industry to make a big roar
globally. The small cars segment in India is reviving up for bigger and better things. Gone are the
days when Indian roads were populated with the Ambassadors or the Premier Padminis. Now the
roads are mainly filled with the small car segments. All the major car manufacturing companies are
launching small cars. Tata launched the world’s cheapest car “Nano” with 33 bhp petrol engine to
grab the market.

5. Product Positioning

Product positioning strategy is a useful technique for creating a sound product image in the minds of
the consumers. Product positioning is regarding the mind of the customer, it is not regarding what is
done with the product it is just related to the minds of the customer. Hence, product positioning is the
act of positioning the product in the mind of the customer. Product positioning strategy is concerned
with selecting the marketing mix, which is most appropriate to each market segment.

5.1 Definitions of Product Positioning

According to Philip Kotler, "Product positioning is the act of designing the company's image and
value offer so that the segment's customers understand and appreciate what the company stands for in
relation to its competitors."

From the above definition, it is clear that product positioning is an attempt to regain or revise that
product image that one has been prevailing in the market, so that company's customers in a segment
may think that company's products are superior to competitor’s products.

5.2 Steps in Product Positioning

According to Philip Kotler, The positioning task consists of three steps:

 Identifying possible competitive advantages.

 Choosing the right competitive advantages.
 Signalling the competitive advantage.

A brief, explanation is as follows:

 Identifying possible competitive advantages: The first step of product positioning is to

identify possible competitive advantages to be exploited by the company. There are basically
two types of competitive advantages such as: (i) Cost leadership and (ii) Product
differentiation.
 Choosing the right competitive advantages: The second step is to choose the best one or ones
among the available advantages. A company may have several competitive advantages for a
given product. Now that one is chosen which helps in building the positioning strategy of the
company.
 Signalling the competitive advantage: The last step of product positioning is that the
company should select the overall positioning strategy and signal it effectively to the market.
The company should take specific steps to advertise the competitive advantage it has.

5.3 Factors Effecting Successful Product Positioning

For successful product positioning following factors must be considered:

 Designing creative product features: It is concerned with creating outstanding product

features. If the product features are more impressive and appealing than that of the
competitors, it will result in successful product positioning.
  Sizeable and Profitable market segment: The size of the segment must be large enough to
make it profitable for the company. It means a market segment must contain enough buyers to
make it profitable market and must be identifiable in order to implement the positioning
strategy.
 Sensitive market segment: Here, sensitivity means response to the marketing efforts. A
sensitive market segment is one that receives the communication message transmitted by the
company and reacts to it. For successful product positioning, the communication message
designed by the company for a segment must be understood or perceived properly by the
consumers of those segments.
 Existence of competition: Positioning strategy is a counter plan to meet the challenges posed
by the competitors at the market place. Positioning or repositioning is always done in
response to positioning or repositioning done by the competitors.
 Adequate information about consumer’s behaviour: Product positioning is a strategy to match
the consumer self-image with the company product image.

6. Target Marketing

After evaluation of different segments, the company must decide which and how many segments it
would target. A target market comprises of the set of buyers who share common needs which the
company decides to serve. Target market can be conducted at numerous different levels:

 Undifferentiated or mass marketing: In this, the company ignores the segments of the market
and focuses on the market as a whole. In mass marketing the company mainly focuses on
those needs of the customers which are common and the marketing strategy is designed
accordingly. That marketing mix is chosen which appeals to the maximum number of the
customers. The firm relies on the mass distribution and mass advertisement.
 Differentiated or segmented marketing: Here, the company decides to operate in separate
market segments separately and designs separate offers for all. By offering products and
marketing variations to segments, companies hope for higher sales and stronger position in
the market. This type of marketing involves more cost and in this, the marketer makes
separate marketing mix for separate segment.
 Niche or Concentrated marketing: Niche marketing or concentrated marketing involves
marketing in a very small yet profitable market segment. A niche is a very narrowly defined
customer group having different mix of benefits. Marketers normally identify the niches by
the division of the segments into the sub-segments. In niche marketing, a marketer tries to
understand their customers' needs very well and render service up to their expectations.
According to Philip Kotler, a niche is a more narrowly defined group of customers, typically a
 small market whose needs are not being well served. So under niche producer to become a
follower in a large market prefer to be a leader in a small market or niche. Niches normally
attract smaller companies. Smaller companies avoid competing with larger companies by
targeting small markets of little or no interest to the larger companies. Following Philip Kotler
has printed out characteristics of niche marketing:
i. Customers of a niche market are prepared to pay a premium price.
ii. Customers constitute a distinct set of needs and they are interested to be treated
royally.
iii. Niche marketer gains economies through specialization.
iv. Niche market has profit and growth potentials.
v. Niche is not likely to attract competitors.

The importance of niche marketing can be summed up as, “There will be no market for products that
everybody likes a little, and there will be a market for products that somebody likes a lot." Keeping in
view the usefulness of niche marketing number of large size companies are setting up business units
to serve niches. As a result the niches can charge premium price due to the perceived additional
value. The niches achieves high profit margin, while the mass marketer achieve high sales volume.

 Micro marketing or local and individual marketing: Micro marketing is the practice of
tailoring products and marketing programmes to suit the tastes of specific individuals and
locations. It includes local marketing and individual marketing. Local marketing involves
tailoring brands and promotions to the needs and wants of the local customer groups.
Individual marketing involves tailoring products and marketing programmes to the needs and
preferences of individual customers. This is also known as one to one marketing. Mass
customisation is the process through which companies interact on one to one basis with the
masses of customers to create customer-unique vale by designing products and services tailor
made to individual needs. Many companies practice mass customisation. A platform and tools
are provided by the company to the customers to design their own new products.

7. Profiling Each Selected Segment

Before developing a target market programme, a marketer must understand the needs, wants,
attitudes, interests of the consumers. The profile of each segment must cover all the segmentation
variables like demographic, psychographic, occasion and usage. The profile being a generalised view
of the consumers helps the marketer to discover and understand the potential users of the product so
that the marketing mix could be designed.
 After identification, the company must determine the profitability of determining the profitability of
the customisation of marketing efforts. It includes forecasting of demand of each segment. Companies
should consider expected growth and competition in sales. A large market share in small and fast
growing market is more profitable than a large share in the crowded market. The effect of actions of
competitors’ and other environmental actions must be considered as these also affect the sales of the
company. Evaluation also covers the determination of projected cost of development and
implementation of the specialised marketing efforts.

Once the target markets have been selected and their profiles are fully understood, the marketing mix
which suits the target should be developed. Creation and sustainability of the strong, clear and
consistent consumer image of the product in comparison with its competitors helps in distinguishing
the product from that of its competitors. And moreover, this also helps in development of the brand
image.

8. Positioning Strategy

Positioning is an act of designing the offerings and image of the company so as to occupy a distinctive
place in the minds of the target market. The end result of positioning is the creation of the consumer
focused value proposition i.e., the reason due to which the target market will buy the product. A
product can be positioned for an exclusive, well-to-do segment of the market; it can be positioned for
men, for children, for women and for health conscious people. It can be claim on luxury, claim on
distinctiveness, and a claim on convenience, economy, novelty or usage. The marketer must decide
where he should introduce the product; to whom and on what distinctive claim he should go and
promote his product.

8.1 Types of Positioning Strategies

Companies can follow any of the following positioning strategies:
 Attribute positioning: A company can position its product as an attribute also, such as size,
number of years in existence, etc. Like Saffola was introduced by the company stating that it
is cholesterol free.
 Benefit Positioning: The product could be positioned on the basis of its benefits.
 Application Positioning: A product could be positioned best for some use or application.
 User Positioning: The product could be positioned by focusing on the particular user group.
 Competitor Based Positioning: The products are positioned claiming to be better than its
competitors.
 Product Category Positioning: The product can be positioned as a leader in certain product
category.
 Price Positioning: The product is positioned as offering the best value.
 8.2 Successful Positioning of a Brand
Perpetual mapping is used for the successful positioning of the brand. This technique involves
studying the consumer perceptions of the product, competitors’ brand and based on it identifying
vacant positions in the map. The various steps of perpetual mapping are as follows:
 Studying the ideal product perception: It involves studying the both tangible and intangible
attributes which the consumer considers while purchasing a product. These include features
of products, its performance level, style, packing, after sale services, warranty and many
more.
 Get those attributes ranked by the customers in order of the importance to them.
 Assess the knowledge of customers regarding the substitutes of the product i.e. competitors
brands.
 Assess the perception whether positive or negative, by the customer of the competitors’
products.
 Based on the contribution of competitors’ brand on the ideal map, identify the vacant slots
and build the positioning strategy by filling them.

It is important here to note that if an attribute sought by a customer id not high on the priority level
and the company consider it to be strength, then the company should adopt the policy accordingly.
After perpetual mapping is done, the marketer uses the statistical tools to arrive at a position.

9. VALS Segmentation System

On the basis of the Maslow’s need hierarchy, the concept of social characters and psychographics is
generalised by the researchers at SRI consultants, U.S. known as Values and Lifestyles System
(VALS) in 1970. This system is based on psychographic measurements. It was revised by the SRI
consultants in 1989 to focus on explain the consumer purchaser behaviour. The consumers are divided
into eight distinctive sub-groups or segments based on the consumer responses.

The major tendencies of the four groups with high resources are as follows:

 Actualisers: these are successful, sophisticated and active take charge people.
 Fulfilled: these are those who are mature, satisfied, comfortable, and reflective. These people
favour durability, functionality and value in products.
 Achievers: these are successful, career and work-oriented. They prefer prestige products that
demonstrate success to their peers.
  Experiencers: these are young, vital, enthusiastic, impulsive and rebellious. They spend
comparatively high portion of income on clothing, fast food, music, movies and video.

The major tendencies of the four groups with lower resources are as follows:

 Believers: these are conservative, conventional and traditional people. They favour familiar
products and established brands.
 Strivers: these are uncertain, insecure and resource constrained people. They favour stylish
products that enumerate purchase of those with greater material wealth.
 Makers: these are practical, self-sufficient, traditional and family-oriented people. They
favour products with a practical purpose such as tools, utility vehicles.
 Strugglers: they are elderly, resigned, passive, and concerned and resource constrained
people. They are cautious consumers who are loyal to favourite brands.

In terms of consumer characteristics, the eight VALS segments differ in some ways. Like believers
tend to buy local products and actualisers are drawn to top of the line and new products.

10. Summary

Industrial or business markets are generally segmented in numerous ways with the same and many
variables used in the consumer market segmentation. Business buyers are generally segmented on the
base of geographically, demographically or benefits sought user status, usage rates and loyalty status. As
in consumer segmentation, many marketers believe that the buying behaviour and benefits provide the
best basis for segmentation of the business markets. The full segmentation, targeting and positioning
process is the fundamental concept in the understanding of marketing strategies of the firm. Product
positioning strategy is a useful technique for creating a sound product image in the minds of the
consumers. Product positioning is regarding the mind of the customer, it is not regarding what is done
with the product it is just related to the minds of the customer. Hence, product positioning is the act of
positioning the product in the mind of the customer. Product positioning strategy is concerned with
selecting the marketing mix, which is most appropriate to each market segment. After evaluation of
different segments, the company must decide which and how many segments it would target. A target
market comprises of the set of buyers who share common needs which the company decides to serve.
Before developing a target market programme, a marketer must understand the needs, wants, attitudes,
interests of the consumers. The profile of each segment must cover all the segmentation variables like
demographic, psychographic, occasion and usage. The profile being a generalised view of the
consumers helps the marketer to discover and understand the potential users of the product so that the
marketing mix could be designed.