Market orientated businesses
Successful businesses are likely to be market orientated rather than product orientated. Their products must meet the needs and wants of their customers.
Customers need to appreciate or value what the business is offering them. It will only buy a product that represents good value for money.
A market-orientated business is likely to design its marketing mix after following a process of segmentation, targeting and positioning.
A target market is a set of customers sharing common needs, wants and expectations that the business tries to sell to.
Firms will conduct market research to analyse the probable returns from the market segments identified (e.g. current sales, projected sales growth, profitability)
Firms will assess how targeting the selected sectors will help them achieve their business objectives.
Choice of target segment influenced by:
- The ability to clearly identify segment
- The returns expected from the sector (e.g. sales, value)
- Whether promotional activities can succesfully target the sector
- Whether the sector fits in with the policies and resources of the company.
THREE MARKETING APPROACHES
Mass marketing (undifferentiated)
- Business targets the WHOLE market, ignoring segments
- Products will focus on the needs and wants that customers have in common (rather than how they differ)
- Business target several market segments within the same market
- Different products will be designed and targeted for each segment
- This will require separate marketing plans for each sector
- Business focuses narrowly on smaller segments or niches
- Aim is to achieve a strong market position (share) within those niches
Advantages of segmentation, targeting and positioning
- Businesses can provide products that match the needs and wants of more customers. Customer needs differ so it is sensible to provide different products.
- Businesses are likely to retain customers whose needs and wants are being met.
- The business can plan a separate focused marketing mix for each of the chosen target customer groups.
- Opportunities for sales growth can be discovered and targeted
- Total sales and profits will probably be higher
ISSUES TO CONSIDER
- Segment and position mapping is over-simplifies market complexity. Using only two demand characteristics may cause businesses to ignore other important demand factors (e.g. the price and quality may be right but distribution could be poor)
- The STP approach works better for simple, straightforward products where purchase decisions can be made with relatively ease.
- Market research may not accurately discover what the customers think is important. What the business thinks is good value and what the customer thinks may not coincide (e.g. feedback on social media may be unrepresentative)
- Markets are dynamic with demand characteristics changing on a regular basis.
Key words needed to describe:
- Market segmentation
- Product positioning
Five general areas that provide basis for market segmentation
Three criteria firms may use to choose target segments
Sketch of a market segmentation and positioning map
Four advantages of market segmentation
Four evaluation points about STP approach