MGTA04 Textbook Notes, Chapter 5, Understanding Marketing - Market Segmentation and Market Research

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Department
Management (MGT)
Course
MGTA02H3
Professor
Bovaird/ Mc Conkey/ Lawrence
Semester
Summer

Description
Chapter 5 – Understanding Marketing: Markets Segmentation and Market Research WHAT IS MARKETING?  Marketing – the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual (buyer) and organizational (seller) goals (objectives)  The needs and wants of consumers are the most important element of the marketing process  Marketing concept – the idea that the entire firm is directed towards serving its present and potential customers at a profit  Firms must determine what customers really want and follow changes in their tastes  All departments, including marketing, production, finance and human resources, must work together in a well coordinated and unified manner in order to pursuit the common goal of customer satisfaction Providing Value and Satisfaction  Limited financial resources force consumers to be selective, thus, consumers buy products that offer the best value in meeting needs and wants Value and Benefits  Value – relative comparison of a product’s benefits versus costs (high-value products have greater benefits than costs)  In addition to the functions of a product, benefits also include emotional satisfactions associated with owning, experiencing, or possessing it  Costs include sales price, expenditure of the buyer’s time, and emotional costs of making a purchase decision  Value = benefits / costs …(satisfied buyer perceives benefits derived from purchase to be greater than its costs)  Marketing strategies that increase value to products to satisfy consumer needs and wants may include developing new products (that provide greater benefits than existing products), keeping a store open for extra hours (added benefit of greater shopping convenience), price reduction (benefit of lower cost), or informational promotions (benefit of new or unrealized product uses) Value and Utility  To understand how marketing creates value for customers, knowledge of the kinds of benefits that buyers get from products is necessary  Products provide consumers with utility – ability of a product to satisfy a human want or need  Time utility – make products available when consumers want them  Place utility – makes products available where customers can conveniently purchase them  Ownership utility – convenience of transferring ownership from store to customer  Form utility – making products available in a consumable form (i.e. turning raw materials into finished products)  Marketing strategies include the timing, place, and terms of sale, and product features that provide utility and add value for customers  Thus, marketers must begin with an understanding of customers’ wants and needs Goods, Services, and Ideas  Consumer goods – products purchased by the individual for personal use; consumer marketing – firms that sell products to consumers for personal consumption  Industrial goods – products purchased by companies to use directly or indirectly to produce other products; industrial marketing – firms that sell products to other manufacturers  Services – intangible products, such as time, expertise or an activity that can be purchased; service marketing – firms that sell services  Marketers also promote ideas (i.e. driving sober, advantages of not smoking) Strategy: The Marketing Mix  Marketing managers – responsible for planning and implementing all the marketing-mix activities that result in the transfer of goods or services to customers  Marketing plan – detailed and focused strategy for gearing the marketing mix to meet consumer needs and wants  Marketing-mix – combination of product, price, place and promotion strategies used in marketing a product Product  Product – good, service or idea designed to satisfy buyers’ needs and demands  Conceiving and developing new products is a challenge due to the factor of change (technology, consumer wants and needs, economic conditions)  Meeting consumer needs requires changing current products to keep up with emerging markets and competitors  Mass customization – allows marketers to provide products that satisfy very specific needs of consumers  Product differentiation – creation of a feature or image that makes a product sufficiently different from existing products to attract consumers Price  Price – concerned with choosing the appropriate price for a product to meet the firm’s profit objectives and buyer’s purchasing objectives  In addition to the actual amount of money to be paid by consumers, price also includes the total value of things that consumers are willing to give up in return for being able to have the benefits of the product or service (opportunity cost)  For firms, price must support operating, administrative, research and marketing costs without losing customers to competitors  Low prices generally lead to larger sales volumes; high prices usually limit market size but increase profits per unit, and may also imply high quality and attract customers Place (Distribution)  Distribution – concerned with getting products from the producer to the buyer, including physical transportation, warehousing and inventory control, and channels of distribution Promotion  Promotion – techniques for communicating information about products  Important promotional tools include advertising, personal selling, sales promotions, and public relations  Each of the seller’s 4 Ps have corresponding buyer’s 4 Cs: customer solution (product), customer cost (price), customer convenience (place) and customer communication (promotion) TARGET MARKETING AND MARKET SEGMENTATION  Firms and their products cannot be all things to all people, which we have targeting marketing  Target market – any group of people who have similar wants and needs and may be expected to show interest in the same products (i.e. people who enjoy listening to the radio)  Market segmentation – dividing a market into categories of customer types (based on shared traits within the target market, i.e. age  inexpensive/unbreakable for children, inexpensive/portable for teens, moderate/expensive for adults)  Some firms provide a range of products to market their products to (as) many market segments, while others restrict production to one market segment  Segmentation is a strategy for analyzing consumers, not products, but only indirectly then, does it focus on the uses of the product itself  Positioning – the process of fixing, adapting, and communicating the nature of the product itself Identifying Market Segments  Members of a market segment must share some common traits or behaviours that will affect their purchasing decisions; researchers look at the following variables, which help marketers decide what products to sell, at what price to sell tem, how to promote them, and how to distribute them Geographic Variables  Geographical variables – geographical units, from countries to neighbourhoods, that may be considered in a segmentation strategy (i.e. down parkas in rural Saskatchewan: high demand, limited price competition, ads in local newspapers, distribution that can be easily accessed from several small towns) Demographic Variables  Demographic variables – characteristics of populations (i.e. age, income, gender, ethnic background, marital status, race, religion and social class) that may be considered in developing a segmentation strategy  Depending on the marketer’s purpose, a segment can be a single classification or a combination of categories (i.e. aged 20-34, married with children, earning $25,000-$34,999) Psychographic Variables  Psychographic variables – psychological traits that a group has in common, including lifestyle, motives, attitudes, activities, interests, and opinions (i.e. luxury-product shopper as a world traveler who identifies with prestige fashion brands and monitors social and fashion trends in Harper’s Bazaar)  Unlike geographics and demographics, psychographics can sometimes be changed by marketing efforts (i.e. change consumer opinions by running ads highlighting products that have been improved directly in response to consumer desires) Product-Use Variables  Product-use variables – consumer characteristics based on the use of a product, benefits expected from it, reason for purchase, and (brand) loyalty to it (i.e. woman buying an athletic show may not care about its appearance but may care a great deal about arch support)  It is important for effective product positioning – important attributes that consumers use to assess the product (i.e. low priced cars are positions on the basis of economy, while Porsche is positioned in terms of high performance) Market Seg
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