Target Marketing Dr. B.N.F. Warnakulasooriya M.Sc. in Management Programme University of Sri Jayewardenepura Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Target Marketing Marketer distinguishes the major markets segments, targets one or more of these segments, and develops products and marketing programmes tailored to each selected segment. TM involves Market segmentation Identify segmentation variables and segment the market Developing profiles of resulting segments Market targeting Evaluate the attractiveness of each segment Select the target segments Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Market Positioning Identify possible positioning concepts for each target Market Select, develop,and communicate the chosen positioning concept. Market Segmentation Identify segmentation variables and segment the product Different variables are used to segment consumer market. Consumer responses Consumer characteristics Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Consumer characteristics Geographic Psycho graphic Region Social Class Density Lifestyle Climate Personality Demographic Behavioural Age Occasions Gender Benefits Family size Family life cycle User Status Income Usage rate Occupation Readiness Stage Education Attitude toward product Religion Dr.B.N.F. Warnakulasooriya Race

Requirements for effective segmentation Measurable: The size, purchasing power, and the profile of the segment can be measurable. Substantial: large and profitable enough to serve. Should be the largest possible homogeneous group worth going after with a tailored marketing mix. Accessible: effectively reached and served Differentiable: conceptually distinguishable and respond differently to different marketing mix elements and programmes. Actionable : Effective programmes can be formulated for attracting and serving the segments. Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Market Targeting Evaluate the attractiveness of each segment Select the target segments Evaluating the market segments Segment size and growth: Whether a potential segment has the right size growth characteristics. Segment Structural Attractiveness: Porter has identifies five forces that determine the intrinsic long run profit attractiveness of a market segment. Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya The basic idea of this model is that the attractiveness of an industry or market depends largely on five factors that influence profitability Porters Five Factor Model Of Market Profitability Threats of potential Entrants Competition among existing firm Bargaining power of suppliers Bargaining power of customers Threats of substitute product Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Intensity of current competitors: depend on several factors. The size of exit barriers. Exit barrier: Firm’s ability to withdraw from a business area. Specialized assets - Plant, equipment, or other assets that are costly to transform into another application and that therefore have little salvage value. Fixed cost such as labour agreements, leases, and a need to maintain parts for existing equipment. Relationship to other business unit in the firm resulting from the firm’s image or from shared facilities, distribution channels, or sales force. Government and social barriers - Managerial pride or emotional attachment to a business or its employees that affects economic decisions Whether their product offering and strategies are similar The number of competitors, their size and their commitment The existence of high fixed cost Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Potential competitors: Whether potential competitors, identified or not, actually do enter depends in large part on the size & nature of barriers to entry. Various barriers to entry: Capital investment Required : Whether large or small investment is required Economies of scale: If scale economies exist in production, advertising, distribution , or other areas it becomes necessary to obtain a large volume quickly. Distribution channel: Gaining distribution in some market can be extremely difficult and costly. Product differentiation :Protected product features, a brand and image, advertising and customer service are some of the attributes that can be used for differentiating product. If product differentiation barriers are high it may be difficult to enter into a market Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Exit Barriers Low High Low stable return Low risky return Low Entry Barriers High stable return High risky return High Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Substitute product: Substitute products compete with less intensity than do the primary competitors. However they are still relevant Customer power : When customers have relatively more power than sellers, they can force prices down or demand more services, set the competitors against each other, thereby affecting profitability. A customer’s power will be greater when: Its purchase size is a large proportion of the seller’s business Alternative suppliers are available The customer can integrate backward and make all or part of the product, The buyers’ switching costs are low The product are undifferentiated Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Suppler power|: Suppliers power will be enhanced when: The supplier industry is concentrated and sells to a variety of customers in diverse market. The cost s to customers of switching suppliers are high There are few substitutes The supplied product is an important input The suppliers can integrate forward Company objectives and resources: Consider whether segments mesh with the company’s long term objectives Consider whether the company possesses the requisite skills and resources to succeed in that segment. Dr.B.N.F. Warnakulasooriya

Five Patterns of Target Market Selection; Single Market Concentration The firm gains a strong Knowledge of the segment’s needs and achieves a strong market presence. The firm enjoys operating economies through specializing its production, distribution, and promotion. Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya If it captures segment leadership, the firm can earn a high return. However, there are risks. A particular market segment can turn sour or a competitor may invade the segment. Selective specialization A firm selects a number of segments, each objectively attractive and appropriate. There may be little or no synergy among segments, however diversifies the firm’s risk. Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Product Specialization The firm makes a certain product that it sells to several different market segment. The firm can build a strong reputation in the specific product area Market Specialization The firm concentrate on serving many needs of a particular customer group (assortment of products). Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya The firm can build a strong reputation in serving this customer group and becomes a channel for additional products the customer group can use. Full Market Coverage The firm attempts to serve all customer groups with all the products they might need. Need resources. A firm can cover a whole market in two broad ways: Undifferentiated marketing and Differentiated marketing Dr.B.N.F. Warnakulasooriya

Five Patterns of Target Market Selection; Selective specialization M1 M2 M3 P1 P2 P3 Product specialization M1 M2 M3 P1 P2 P3 Single-segment concentration P1 P2 P3 M1 M2 M3 P = Product M = Market E.g. Fomula Racing cars E. g. Radio/TV Channels E.g. MS office 2000 Market specialization M1 M2 M3 P1 P2 P3 M1 M2 M3 Full market coverage P1 P2 P3 Elephant House E.g. Johnson & Johnson Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya Undifferentiated marketing: the firm ignores segment differences and goes after the whole market with one offer. It designs a product and other element of marketing mix that will endow the product with a superior image and appeal to the broader number of customers, and it relies on mass advertising and distribution. . Dr.B.N.F. Warnakulasooriya

Dr.B.N.F. Warnakulasooriya The narrow product line keeps down the cost of research and development, production, inventory, transportation, advertising, marketing research and product management. The company can turn its lower costs into lower prices to win the price sensitive segment of the market. Dr.B.N.F. Warnakulasooriya

Differentiated marketing: the firm operates in several market segments and design different product for each. Differentiated marketing typically creates more total sales than undifferentiated marketing. However, it also increases the cost of doing business. Because differentiated marketing leads to both higher sales and higher cost, impact of this strategy on profitability should be carefully analyzed.