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Marketing Basics - Kotler Philip

Selection of target market segments

Marketing segmentation reveals the possibilities of various segments of the market in which the seller is to speak. After that, the company must decide: 1) how many segments should be covered and 2) how to determine the most profitable segments for it. We will consider both of these problems in turn.

Three options for market coverage

A firm can take advantage of three market coverage strategies: undifferentiated marketing, differential marketing, and concentrated marketing. These three approaches are illustrated in Fig. 46 and are described below.

Three options for a market reach strategy

Fig. 46. Three options for a market reach strategy

UNDIFFERENTIATED MARKETING . Perhaps the company will decide to neglect the differences in segments and turn to the entire market immediately with the same offer13. In this case, she focuses her efforts not on how customers' needs differ from each other, but on what is common to these needs. She develops a product and marketing program that will appeal to as many customers as possible. She relies on methods of mass distribution and mass advertising. She seeks to give the product an image of superiority in the minds of people. As an example of undifferentiated marketing, one can cite the actions of the Hershey company, which a few years ago offered one brand of chocolate for all.

Undifferentiated marketing is economical. The costs of producing the goods, maintaining their stocks and transportation are low. Advertising costs for undifferentiated marketing are also kept low. The absence of the need for conducting market research of market segments and planning by these segments helps to reduce the cost of marketing research and product management.

A firm resorting to undifferentiated marketing usually creates products designed for the largest market segments. When several firms resort to this practice at the same time, intense competition arises in large segments, and buyers in smaller segments receive less satisfaction. So, the American automobile industry for many years produced only large cars. As a result, work in large market segments may be less profitable due to the intense competition prevailing there.

DIFFERENTIATED MARKETING . In this case, the company decides to speak on several market segments and develops a separate offer for each of them. Thus, the General Motors Corporation seeks to produce cars "for any wallets, any purposes, any persons." By offering a variety of products, she hopes to achieve sales growth and deeper penetration into each of the market segments she masters. She expects that by consolidating her position in several market segments, she will be able to identify a company with a given product category in the minds of consumers. Moreover, she relies on the growth of repeat purchases, since it is the company's product that meets the desires of consumers, and not vice versa. The practice of differential marketing is resorting to an increasing number of firms. Here is a great example. 14.

The Edison Brothers company owns 900 shoe stores combined in four types of networks, each of which is designed for a separate market segment. In the Chandler chain stores they sell expensive shoes, in Baker chain stores - shoes at reasonable prices. The Bert network offers shoes for customers with limited funds, and the Wild Payr network is aimed at shoe lovers with a pronounced style. On State Street in Chicago, Bert, Chandler, and Baker are located in three neighboring neighborhoods. Such a close location does not harm shops, as they focus on different segments of the women's shoes market. A similar strategy helped Edison Brothers to become the country's largest retailer of women's shoes.

Another example of differentiated marketing is described in Box 15.

Box 15. Farm Journal magazine “shoots” its readers with 1134 issues

The pig farmer is not at all concerned about stories about how to fatten calves fortified with alfalfa. But the cattle breeder is neither warm nor cold because the farrow at the sow comes faster if the light is not turned off in the pigsty.

Awareness of these simple truths of rural life has helped Farm Journal to become the largest agricultural publication nationwide distributed and at the same time one of the most versatile and advanced magazines in general. So, his February issue will be released in 1134 versions, which will take into account the most specific tastes of the millionth audience of subscribers.

“Farmers are becoming more specialized, and the task of servicing them is becoming increasingly complex,” said Dale E. Smith, president of Farm Journal, Inc., headquartered in Philadelphia. “Today's farmer is unlikely to be very interested in stories about what he has nothing to do with his farm.”

With this in mind, Farm Journal produces applications for farmers in five different profiles — cotton growers, dairy farm owners, beef cattle breeders, pig farmers and livestock breeders — and for 26 different regions of the country. In addition, the magazine publishes the tab "Best Producer" with stories about farmers whose turnover exceeds $ 200 thousand per year. About 20% of the editorial content of each issue of the journal is the same for all editions. The remaining 80% consists of a combination of materials from 32 different applications and is determined by the specialization and location of the subscriber farm. The subscription price is the same for all farmers and is $ 8 for 14 issues of the magazine per year.

Regardless of their specialization, each subscriber finds practical information useful for himself in the journal. Recently, articles published in the journal discuss the problems of deepening irrigation pipelines of the drip irrigation system and “sniper” fertilizer application. According to D. Smith, "a farmer picks up an agricultural journal not to have fun."

CONCENTRATED MARKETING . Many companies see for themselves a third marketing opportunity, especially attractive for organizations with limited resources. Instead of concentrating efforts on a small share of a large market, the company concentrates them on a large share of one or more submarkets.

There are several examples of such concentrated marketing. Volkswagen focused its efforts on the small car market, Hewlett-Packard focused on the expensive calculator market, and the publisher of this book, Richard D. Irwin, focused on the market for textbooks on economics and business. Thanks to concentrated marketing, the company maintains a strong market position in the serviced segments, since it knows better than others the needs of these segments and enjoys a certain reputation. Moreover, as a result of specialization of production, distribution and sales promotion measures, the company achieves savings in many areas of its activities.

At the same time, concentrated marketing is associated with an increased level of risk. The selected market segment may not live up to expectations, as happened, for example, when young women suddenly stopped buying sportswear. As a result, Bobby Brooks, the company that produced such clothes, suffered heavy losses. And it may happen that a competitor wants to infiltrate your chosen market segment. Given these considerations, many firms prefer to diversify their activities, covering several different market segments.

CHOICE OF A MARKET COVERAGE STRATEGY . When choosing a market coverage strategy, the following factors should be considered15:

• Company resources. With limited resources, the most rational strategy is concentrated marketing.

• Degree of product uniformity. An undifferentiated marketing strategy is suitable for uniform products such as grapefruits or steel. For products that may differ in design, such as cameras and cars, differentiated or concentrated marketing strategies are more suitable.

• Stage of the product life cycle. When a company enters the market with a new product, it is advisable to offer only one version of the new product. Moreover, it is most reasonable to use undifferentiated or concentrated marketing strategies.

• The degree of market uniformity. If buyers have the same tastes, they buy the same quantities of goods at the same time intervals and react equally to the same marketing incentives, it is appropriate to use an undifferentiated marketing strategy.

• Marketing strategies of competitors. If competitors are segmenting the market, applying an undifferentiated marketing strategy can be disastrous. Conversely, if competitors use undifferentiated marketing, a firm can benefit from the use of differentiated or concentrated marketing strategies.