Marketing for Beginners: Targeting & Positioning, Segmentation, Costs & Pricing.

[SVB]

Originally Posted by Albert1

hi everybody. I'm looking to expand my website and need tips on how to market it. I'm not sure how to market online with minimal costs. Any suggestions as to where to market? costs? people? etc.?

The question above was asked by a member of this forum. I think it would be best to post the response here, as it will be helpful to anyone else who wants to address these concerns with their own businesses. Basically what I am giving you here is a beginners guide to the questions shown. Hopefully this guide to your questions will help you think with a more marketing mind, and from here you will be able to make your own decisions regarding marketing and your company. I won't go into each topic in detail, as it will take forever, but the basics will be presented for you to ponder over.

Ok, you are asking 3 main questions here. These questions are the basics which all managers of a business (or more specifically, the marketers within a business) should be considering. I will cover these with the aim to give you an idea about what you should be thinking of. I am not your marketer, I don't know your business, I haven't done my little PESTLE and my SWOT diagrams, I have no idea about the current market structure in your business. But these points will apply to everyone, be it the owners of a small website looking to sell teeshirts of their favourite band, to huge firms supplying companies around the world with electronics.

• Where will I market?
• Who will I market to?
• What will the costs be?

1. Where will I market?
This is a good question. When people talk about marketing their product (note I will refer to the 'product', this could be any product, a brand, a website, a service, anything), who are they marketing it to? Can you just market to everybody? Well, theoretically, you could. But this is not to your benefit. Remember, the third basic thought revolves around costs. You want to minimise costs. Remember the basics of economics. A firm looks to maximise profit. This requires total costs to be minimum, and total revenue to be as high as possible. Opportunity costs should also be low. Why do something if you can do something better?


Now, when looking at where to market, you should consider two things; targeting and positioning. How do you choose criteria for targeting? How do you position your product or service? You should realise that you will have to segment your market. Segmentation will split your market into subsets with similar needs. Targeting will let you choose what segment to aim for. Why segment you ask? Remember that needs are diverse. Markets are rarely homogenous. Segmentation allows us to view the market from the customers position. We can design more focused strategies, and identify many opportunites for new products.

Consumer Segmentation

There are many ways of segmenting consumers. Here are a few basic examples.

Geographic: Urban, Rural
Demographic: Age (eg. grey market), Gender
Socioeconomic: Social Class
Lifestyle: Values (see http://www.sric-bi.com/VALS/)

Let's look at some forms of targeting, which basically gives us an idea as to which segment to go for. I can give you four main targeting strategies. There are more, but these will get you going.

1. Undifferentiated marketing
This is when you have one marketing mix, targeted towards the whole market. For example, in the UK, the Post Office has it's marketing mix (Price, Place, Product, Promotion, Distribution), and targets towards everybody.

POST OFFICE -> MARKETING MIX -> EVERYBODY


2. Differentiated marketing

Differentiated marketing is used when you have multiple marketing mixes. This will involve multiple products, targeted towards multiple segments.
For example, a clothing brand such as Levis will have multiple marketing mixes.

LEVIS -> MARKETING MIX 1 -> UTILITARIAN GUY
MARKETING MIX 2 -> TRENDY/CASUAL
MARKETING MIX 3 -> PRICE SHOPPER
MARKETING MIX 4 -> MAINSTREAM
MARKETING MIX 5 -> TRADITIONALIST


3. Focused marketing

Focused marketing is used when you have one marketing mix and multiple segments. You will focus on one segment in particular, who will have control over the other segments. You can see this if you look at a cement manufacturer:

MARKETING MIX -> SEGMENT 1
-> SEGMENT 2
-> SEGMENT 3

CEMENT
MANUFACTURER -> MARKETING MIX-> BUILDERS

The marketing mix is targeted towards the builders merchants. These merchants then supply the independent DIY shops, and national DIY chains. As you are focusing towards this one segment of the market, that segment gains control over the others. They can set the prices. The others are relying upon them. Therefore you can change your pricing fairly easily without much change in purchases.


4. Customised marketing

This is when you have one marketing mix per customer. Effectively, you make items to order. For example, an industrial electronics supplier .

SUPPLIER -> MARKETING MIX 1 -> NISSAN
MARKETING MIX 2 -> BIRDSEYE
MARKETING MIX 3 -> LEVIS


Evaluating potential target markets

• Select criteria
• Weight attractiveness & competitive position
• Access potential markets
• Project future positions
• Evaluate implications

Step 1: Targeting Attractive Segments

• Market Attractiveness -eg.
  • size
  • growth rate
  • profitability
• Competitive Position -eg
  • Relative market share and growth
  • perceived quality
  • Manufacturing process
  • Logistics
  • Marketing competence

• Avoid too small a segment
• Avoid overcrowded segments
• Avoid left-over segments
• Avoid market leader failures

Positioning: Where and how we compete against the competition

Positioning involves:

• Market Segmentation
• Target Market
• Differentiated advantage

Keys to successful positioning

• Clarity
• Consistency
• Credibility
• Competitiveness

2. Who will I market to?
We have so far looked at targeting, with a little segmentation and positioning. After considering various targeting issues, you should have an idea as to what segment to target your product towards. This basically covers the question of "who". But how do we get here? How do we segment? There are a variety of methods of segmentation, and you must target one or more of them.

We have covered segmentation briefly. The question of "who" is very similar to the question of "where", because the people involved (the who) are usually located in the same locations (the where).


When segmenting your market, take note of the following:

Market segments must be

• Measurable
• Accessible
• Substantial
• Unique
• Stable

Segmentation is a simple concept if you have the right frame of mind. Just remember the old phrase, "birds of a feather, flock together".

I won't go into the various methods of segmentation, as there are simply too many. Take a look at the 1978 view of Lifestyles and Values (VALS), which is based upon the view that social class, although significant, does not determine all our values.
3. What will the costs be?
Well, there will be a range of costs, depending on the type of marketing chosen. You may decide you want to target a really specific sector in order to gain maximum profits. But how do you find this sector? Market research will be required. Your company will need a research programme involving researchers, questionnaires etc. This will build up costs. For guaranteed successful marketing, positive research outcomes and costs will be required. You must find your target audience. Segment the market. Find the sector you wish to target. Target this sector. You will encounter marketing costs whatever route you take. Even routes such as buzz marketing, which involves the media spreading the word of your brand, will involve costs, the intitial costs of allowing the media to know your brand exists. However, always remember, at the other side of these costs is profit. You are running a business. You are making money from supplying some sort of service. You have control over your prices. Pricing is a large factor when it comes to costs. Remember, profit is determined by total costs and total revenue. If you maintain costs, and increase total revenue, you increase total profit.

continued next post....

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[SVB]

Let's take a look at pricing.

If you find your costs are rising, you may wish to increase prices of your products. Under what circumstances should you increase price?

• Inflation
• Stock market expectations
• Desire to grow turnover quickly/improve margin quickly (cost reduction too slow)
• Rising costs
• Excess demand
• Harvest objective
• Value greater than price

And when should prices be reduced?

• Value less than price
• Falling demand/excess supply
• Build objective
• Price war unlikely
• Pre-emptive strike on competitor
• You can afford to do it

Remember that a price change will be immediately noticed by the customer.

Reducing customer sensitivity to price rises

• Trading up - Quality improvements (New and improved)
• Line extensions - Longer acting varients, etc
• Unbundling - Charge extra for elements that were previously free
• Lower discounts - eg remove cash back, quantity discounts, etc
• Multiple Branding - Introduce a fighter brand to combat discounting and at the same time, raise price of original
• Repositioning - Creating luxury proposition and by association decreasing price sensitivity
• Escalation clauses - Allows supplier to pass on rises as appropriate (favoured nation?)
• Cost plus formulas - All changes and enhancements met by customer on cost plus basis (get the basic cheaply, change your mind mmmm)
• Staged price increases vs Jump - staged allows testing, jump if you don't care.

When it comes to pricing itself, there are a variety of methods you can use.

• Full Cost Pricing
  • Take all of your costs (direct and fixed), estimate volume, apply markup, and you have your price.
  • Considerations:
    • Volume falls and prices increase
    • Illogical to estimate volume before set price (price sensitivity)
    • Focus is on internal costs rather than willingness to pay
    • Maybe technically difficult to allocate a 'fair' proportion of overheads

• Direct Cost Pricing
  • • Take direct costs, apply your markup, and you have the price.
    • Considerations:
      • Other customers may find out this new price if done as one off
      • Enable asset utilisation and makes a contribution to fixed costs (useful for services, where there is no sotrage facility)
      • Still no account of customer willingness to pay

• Going Rate Pricing
  • The commodity rate

• What the competitor charges but a bit less
  • Power of Internet - make use of your online status vs the offline alternatives

• Competitive Bidding
  • Sealed bids

What I have given you here are some basic points to think about when you consider the three main questions you originally asked. Hopefully this will help you think in a more marketing style. If you have any more questions or want me to expand on any points mentioned or not, feel free to ask and I will try my best to answer.

[Noon_an_Night]

Great Info Steve...

I really love your Biography..."I love beer" you are funny.

You make us Irish in America proud...cheers!

[Jesse Vlasveld]

Very usefull information!
Thanks for sharing.

[rakeshmosaic]

Nice post SVB.......

[musestech]

nice post..

[TheFriend]

Right you are guys: Really nice post..........

[kevinzhang]

Thanks, really nice atricle.

[chicgeek]

Good article. Up!

[Mike Morrison]

SWOT and PESTLE are tools which are treated glibly on many courses and then forgotten about in business. They are essential simple tools which can support decision making and policy in all manner of parts of our business.

Great post - useful.

[Jonathan_Hue]

excellent post!

[CarlOrf00]

Solid stuff