Transcript Slide 1

CHAPTER 2
Understanding and
Approaching the Market
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• Role of market in the exchange
process
• Distinguish basic kinds of markets
• Difference between undifferentiated
and segmental approach
• Various bases for market
segmentation
• Modes of selecting target markets
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• Market is people
• Market is a place
• Market is an economic
entity
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• Individuals, groups,
organizations
• Overt or latent wants or
need
• Ability to pay for the
product via accepted
means
• Willingness to buy the
product
• Authority to buy the
product
• Large enough
people/organizations to
ensure profitability
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A geographic
location where
trading takes
place
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• Market characterized by dynamic system
of economic forces
• Supply and demand – buyer’s or seller’s
market (different bargaining power)
• Competition – pure, monopoly, oligopoly
• Government control – free, socialistic
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• Consumer
• Industrial
• Institutional
• Reseller
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Individuals and
households
who buy and
consume
goods and
services for
their own
personal use
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• Organizations and
their employees,
who buy products
or services for use
in their own
businesses, or to
make other
products
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• Includes profit and non-profit
institutions
• Satisfy mostly esoteric, often
intangible needs
• Profits are re-invested into the
institution
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Intermediaries that buy
finished or semi-finished
products and resell them
for profit
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The person (s) /
organization (s)
selected as
potential
customers by the
product provider
e.g., Harley
Davidson
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• Undifferentiated Market
(Market Aggregation)
• Product Differentiation
• Segmented Market
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• Market is viewed as a homogeneous
aggregate e.g., milk consumers
• Main considerations – per unit profit
margin and the amount of competition
• Carries the potential threat of lack of
appeal to anyone and waste of
resources
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• Tangible or intangible distinction of the same product
from those of competitors e.g., endurance, status
• Mention core appeals of the product
• Too much difference from the norm might be
ineffective
• The differentiation basis should be meaningful and
important for the consumer
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• Identify, classify people
into homogeneous
groups/segments
• Reduce risk in deciding
where, when, how and to
whom product will be
marketed
• Increase marketing
efficiency by directing
effort appropriately
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• Concentration –focus on only one market
segment; better depth but lack of demand
can cause financial loss
• Multi-segment –focus on two or more
distinct markets; different marketing mix;
increased costs offset by increased sales;
but too many products along with
misdirected marketing efforts may result
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• Geography
• Demography
• Usage
• Psychological
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• Conditions like weather, topography,
physical factors like oceans,
population density affect consumer
needs and desires
• Too large a geographic area may
mean heterogeneous population
making it a less effective ‘segment’
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• Occupation e.g.,
• Age e.g., Baby
bankers vs. plumbers
Boomers
with different lifestyles
• Gender
•
Geographic
Mobility
• Family life cycle e.g.,
newly married couple • Race and national
origin (affects products
vs. parents
and
media
• Income
preferences)
• Education
• Religion
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• Consumption is measured directly
• Marketing mix aimed at groups considered
either heavy, medium, light or non-users
• Sub-bases of segmentation – purchase
occasion (reasons for buying); user status
(non, heavy, ex, first-time); loyalty; stage
of readiness (unaware, aware, desirous,
intend to buy soon)
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• Attitudes – predispositions to behave in certain
ways to given stimuli
• Personality – long-lasting characteristics and
behaviors that allow one to cope with the
environment
• Motives – positive or negative reasons for behavior
• Lifestyle – orientation, interests, opinions about
consumption, work and leisure
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• Type of customer
• North American Industry
Classification System/Standard
Industrial Classification
• End use
• Common buying factors
• Buyer size and geography
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• Original equipment manufacturers
e.g., Caterpillar
• End users e.g., farmers who use
John Deere farm equipment
• Aftermarket e.g., those who buy
spare parts for automobiles
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• Main product or service provided
• SIC classify firms under 10 basic
industries with a two digit coding system
• NAICS has added newer industries e.g.,
healthcare
• NAICS has a six digit coding system
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The manner in
which a
product is used
by the potential
buyer in
different
situations
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• Product
Performance
• Product Quality
• Service
• Delivery
• Price
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Small, medium
and large
buyers and
their location
in relation to
the seller
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• Clarity of identification – who is in
and who is out
• Actual or potential needs
• Effective demand: desire plus
ability to buy
• Economic accessibility
• Positive responses
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• Identify relevant
customers,
purchase situation
variables beyond core
product
• Collect, analyze other
related data
• Evaluate segments
• Select one or more target
markets
• Develop appropriate
action programs
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The act of designing
the company’s
offering and image
to occupy a
distinctive place in
the target market’s
mind in relation to
other competitors,
e.g., Volvo
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Markets of one person or
one company,
customized product
design, relationship
marketing, and one-onone marketing are the
trends of future
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