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Unit-4 Analyzing Marketing 4.1 Analyzing Business Markets and Business Buying Behavior

WHAT IS ORGANIZATIONAL BUYING: Organizational buying is the decision-making process by which formal organizations establish the

need for purchased products and services and identify, evaluate, and choose among alternative brands and suppliers.

DIFFERENCE BETWEEN BUSINESS MARKET AND CONSUMER MARKET:

Business Market: consist of all the organizations that acquire goods and services, used in the production of other products or services, that are sold, rented, or supplied to others. The major industries making up the business market are agriculture, forestry, and fisheries mining, manufacturing, construction, transportation, communication, public utilities, banking, finance, and insurance, distribution and services.

Business markets have several characteristics that contrast sharply with consumer markets some of them are given bellow:

1. FEWER BUYERS: Business marketers normally deals with far fewer buyers than the consumer marketers does.

2. LARGER QUANTITY BUYERS: Buy in bulk items for reproduction. A few large buyers do most of the purchases.

3. CLOSER SUPPLIER-CUSTOMER RELATIONSHIP: Because of the smaller number of customer base and the importance and power of the large customers, there are close relationships between customers and suppliers.

4. GEOGRAPHICALLY CONCENTRATED BUYERS: Generally one type of organizations exist in one locality. Therefore, buyers are concentrated in few localities.

5. DERIVED DEMAND: Demand of business goods is ultimately dependent on demand of consumer goods.

6. INELASTIC DEMAND: The demand of such goods is not much effected by the change in price, especially in the short run, because producers cannot make quick changes in their production methods.

7. FLUCTUATING DEMAND: A small percentage increase in consumer demands can lead to a much larger percentage increase in demand for planed and equipment, necessary to produce the additional output. Sometimes a rise of 10% in consumer demand can cause as much as 200% rise in business demand for the product in the next period, and a 10% fall in consumer demand may cause a complete collapse in business demand. This sales volatility has led many business marketers to diversify their products and markets to achieve more balanced sales over the business cycle.

8. PROFESSIONAL PURCHASING: Business good are purchased by trained purchasing agents, who must follow the organizational policies, constraints, and requirements. Professional buyers spend their lives in learning how to buy better, are more cost effective. This means the business marketers have to provide greater technical data about their product and its advantages over competitors' products.

9. SEVERAL BUYING INFLUENCES: More people can influence a business buying decision than a consumer buying decision. Buying committees consisting of technical experts and senior managers are common in the purchase of major goods. Consequently business marketers have to send well trained representatives and often uses teams to deal with the

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well-trained buyers. Although ad, sales promotion and publicity plays important role but personal selling usually serves as a main marketing tool.

10. DIRECT PURCHASING: Business buyers often buy directly from the manufacturers rather than through intermediaries, especially those items that are technically complex and expensive.

11. RECIPROCITY: Business buyers often select suppliers who also buy from them. 12. LEASING: Many industrial buyers lease their equipment instead of buying it.

Buying Situations: Business buyers faces many decisions in making a purchase. The number of decisions depends on

the type of buying situation. There are three types of buying situations the straight re-buy the modified re-buy and the new task.

1. STRAIGHT REBUY: Purchases are ordered on routine basis from a previous supplier called in-supplier. The out-supplier offer something new or exploit dissatisfaction with the supplier. Out supplier try to get a small order and then enlarge their share over time.

2. MODIFIED REBUY: A situation in which the buyer wants some modification in price, delivery requirements or other terms. It involves additional discussion between buyer and seller representative who tries to defend his position and becomes nervous. The out supplier see an opportunity and offer better facilities to gain some business.

3. NEW TASK: Purchasing for the first time, therefore requires more time and analysis of suppliers.

System Buying and Selling: Many business buyers prefer to buy a total solution of their problem from one seller. It is called

system buying.

Participants in the Business Buying Process: It is also called buying center and includes all persons involved in purchasing which are given bellow:

i. Initiators: Those who request that something be purchased. ii. Users: Those who will use the product or service. In many cases, the users initiate the buying

proposal. iii. Influences: People who influence the buying decision by defining specifications and

providing information for evaluating alternatives. Technical personnel are particularly important influences.

iv. Decider: People who decide on product requirements and or on suppliers. v. Approvers: People who authorize the proposed actions of deciders or buyers. vi. Buyers: People who have formal authority to select the supplier and arrange the purchase

terms. vii. Gatekeepers: People who have the power to prevent sellers or information from reaching to

members of the buying center. e.g. purchasing agents, receptionists, and telephone operators may prevent sales persons from contacting user or deciders.

Major Influences on Business Buyers: Business buyers are subject to many influences when they make their buying decision. They may

be classified into four groups 1) environmental factors, 2) organizational factors, 3) interpersonal factors, and 4) Individual factors.

1. ENVIRONMENTAL FACTORS: Business buyers are heavily effected by factors in the current and expected economic environment, - level of demand for their product

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- Economic outlook,-interest rate - technological developments, and - political regulatory.

2. ORGANIZATIONAL FACTORS: Each buying organization has specific objectives, policies, procedures, organizational structure, and system. Business marketers should be particularly aware of these. Following are the organizational trends in the organizational area: i. Purchasing department upgrading: Purchasing department commonly occupy a low

position in the management hierarchy They are now being up graded. ii. Centralized Purchasing: In multi-divisional companies most purchasing is carried out

by separate divisions because of their differing needs. Recently some of the companies have started the centralized purchasing.

iii. Decentralized Purchasing of small ticket items: iv. Long-term Contracts: Business buyers are increasingly accepting long term contracts

with suppliers. v. Purchasing Performance Evaluation and buyers professional development: Many

companies have installed the incentive systems to reward purchasing managers for goods buying performance.

3. INTERPERSONAL FACTORS: The buying center usually includes several participants with differing interests, authority, status, empathy, and persuasiveness. the business marketer is not likely to know what kind of group dynamics take place during the buying process, although whatever information he can discover about the personalities and interpersonal factors would be useful.

4. INDIVIDUAL FACTORS: Each participant in the business buying process has his own motivations, perceptions, and preference, influenced by the participants age, income, education, job position, personality, attitudes toward risk, and culture.

THE PURCHASING PROCESS: Business buyers purchase goods and services

- to make money - to reduce operating cost, or - to satisfy a legal or social obligation. For buying goods business buyers have to go through buying or procurement process having eight steps called buy phases.

1. PROBLEM RECOGNITION: Someone in the organization recognizes the problem that can be met by acquiring good or service. Events leading to problem recognition are the following: i. Company decides to produce a new product and needs new equipment and materials to

produce it. ii. A machine breaks down and requires replacement or new parts. iii. Purchased material turns out to be unsatisfactory, and the company searches for another

supplier. iv. A purchasing manager senses an opportunity to obtain lower prices or better quality.

2. GENERAL NEED DESCRIPTION: On recognition the buyer proceeds to determine the needed items general characteristics and quality needed.

3. PRODUCT SPECIFICATION: After identifying the general needs the buying organization proceeds to develop the items technical specifications. For it a product value analysis is

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conducted. What is the product value analysis: PVA is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods.

4. SUPPLIER SEARCH: Then the company searches the most appropriate suppliers. For this purpose organizations uses trade directories, computer search or make phone to other companies for recommendations.

5. PROPOSAL SOLICITATION: The buyer invite the qualified suppliers to submit proposals with detailed specifications. The company evaluate proposals and eliminate some suppliers and invite the remaining ones to make a formal presentation.

6. SUPPLIERS SELECTION: The buying center, before selecting a supplier, specify the desired attributes of the suppliers. Then it will rate suppliers on these attributes and identify the most attractive suppliers. For this they often use a supplier-evaluation model. The attributes may include the delivery reliability, price, and supplier reputation are highly important. Then the buying center attempt to negotiate with its preferred suppliers for better prices and terms before making the final selection. The buying center also decide as to how many suppliers touse. Furthermore these companies want each chosen supplier to be responsible for a larger component system. They also often require the chosen suppliers to achieve continuous quality and performance improvement while at the same time lowering the supply price each year by a given percentage.

7. ORDER-ROUTINE SPECIFICATION: After selection of supplier the buyer negotiate final order listing the, i. Technical specifications, ii. Quantity needed, iii. expected time of delivery, iv. return policies, v. warrantees. etc.

Writing a new purchase order each time is expensive and time consuming. The purchaser also do not wants to make a large purchase order ( and thus decreasing number of orders), because it means to carry more inventory. A blanket contract establishes a long term relationship in which the supplier promises to re-supply at an agreed price over a specified period of time.

8. PERFORMANCE REVIEW: When all is done the buyer reviews the performance of the chosen supplier. Three methods are commonly used. 1) the buyer may contact the end user and ask for evaluation, 2) Rate the supplier on several criteria using a weighted score method or 3) aggregate the cost of poor supplier performance to come up with adjusted cost of purchase including price.

Above given stages are for the new task buying situation. In modified-re-buy or straight-re-buy situations, some of these stages would be compressed or bypassed.

INSTITUTIONAL AND GOVERNMENT MARKETS: So far our discussion is about the profit seeking organizations. Much of it also applies to the

buying practices of institutional and government organizations. However, their certain special feature found in these markets.

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Unit-4 Analyzing Marketing 4.2 Analyzing Industries and Competitors

There are five forces that determine the intrinsic long-run profit attractiveness of a market or market segment. These are industry competitors, potential entrants, substitutes, buyers, and suppliers. The five threats they poses are as follows:

1. Threat of intense segment revelry: A segment is unattractive if it already contains numerous, strong, or aggressive competitors. It is even more unattractive if the segment is stable or declining. 2. Threats of new entrants: A segment's attractiveness varies with the high of its entry and exit barriers. The most attractive segment is one in which entry barriers are high and exit barriers are low i.e. Few new firms can enter the industry, and poor-performing firms can easily exit. But when the entry and exit both barriers are high it means that poor performing firms will also stay in the market. and if both barriers are low it means more firms can enter in the segment. 3. Threats of Substitute Products; A segment is unattractive when there are actual or potential substitutes for the product are available. 4. Threat of buyers growing bargaining power: A segment is unattractive if the buyer have strong or growing bargaining power because he will force prices down, and demand more quality. 5. Threat of suppliers growing bargaining power;

IDENTIFYING COMPETITORS: Competitors may be at four levels:

1. Brand competitors: A company offering similar product and services to the same customers at similar prices. 2. Industry competitors: Occurs when a company sees its competitors as all companies making the same product or class of products. 3. Form competition: Occurs when a company sees its competitors as all companies manufacturing products that supply the same service. 4. Generic competition: Occurs when a company sees its competitors as all companies compete for the same consumer Rupee.

Industry Concept of Competitors: An industry is a group of firms that offer a product or class of products that are close

substitutes for each other.

Number of Sellers and Degree of Differentiation: The starting point for describing an industry is to specify whether there are one, few, or

many sellers of the product and whether the product is homogeneous or highly structure type:

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1. P U R E M O N O P O L Y : Exist when only one firm provides a certain product or service in a certain country. It may by due to a regulatory edict, patent, license, scale economics or other factors.

2. O L I G O P O L Y : An industry structure in which a small number of (usually) large firms produce product that range from highly differentiated to standardized. there are two forms of oligopoly pure and differentiated.

i. P ur e o l i g op o l y : consist of a few companies producing essentially the same commodity (oil, steel).A company in a pure oligopolistic industry would find it hard to charge anything more than the going price unless it can differentiate its services.

ii. Differentiated Oligopoly: consist of a few companies producing partially differentiated products (cameras, autos) The differentiation can occur along lines of quality, features, styling, or services. Each competitors may seek leadership in one of these major attributes, attract the consumers favoring that attribute and charge a price premium for that attribute.

3. M O N O P O L I S T I C C O M P E T I T I O N : C o n s i s t o f m a n y c o m p e t i t o r s a b l e t o d i f f e r e n t i a t e d t h e i r o f f e r s i n whole or part (restaurants, beauty shops). Many of the competitors focus on market segments where they can meet customer needs in a superior way and command a price premium.

4. P U R E C O M P E T I T I O N : C o n s i s t s o f m a n y c o m p e t i t o r s o f f e r i n g t h e s a m e p r o d u c t a n d s e r v i c e ( s t o c k - market, commodity market). Since there is no basis for differentiation, competitors price will be the same. No competitor will advertise unless advertising can create psychological differentiation (cigarettes) in which case it would be more proper to describe the industry and monopolistically competitive. Sellers will enjoy different profit rates only to the extent that they achieve lower costs of production or distribution.

Entry and Mobility Barriers: Industry differs greatly in their ease of entry. It is easy to open a new restaurant but

difficult to enter the air craft industry. The major barriers include high capital requirements, economies of scale, patents and licensing requirements, scarce locations, raw materials, or distributions, and reputational requirements.

Exit and Shrinkage Barriers: Ideally firms should be free to leave industries in which profit are unattractive, but they

often face exit barriers. Most common barriers are lager moral obligations to customers, creditors, and employees, government restrictions, low asset salvage value due to over-specialization or obsolescence; lack of alternative opportunities high vertical integration and emotional barriers.

Even if some firms do not want to exit the industry they might want to decrease their size. The companies try to reduce the shrinkage barriers to help their ailing competitors get smaller gracefully. Two of the most common shrinkage barriers are contract commitments and suborns management.

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Cost Structure: Each industry has a certain cost mix that drive much of its strategic conduct. For example steel making involves heavy manufacturing and raw-materials cost, while toy manufacturing involve heavy distribution and marketing cost. Firms will pay the greatest attention to their greatest costs and will strategies to reduce these costs.

Degree of Vertical Integration: Some firms find it advantageous to integrate backward and forward which often causes lower in cost and give company more control over the value-added stream. Moreover, vertically integrated firms can manipulate their prices and costs in different segments of their business to earn profit where taxes are low.

Degree of Globalization: Some industries are highly local others are global. Companies in the global industries need to compete on a global basis if they are to achieve economies of scale and keep up with the latest advances in technology.

IDENTIFYING COMPETITORS' STRATEGIES: A company's closest competitors are those pursuing the same target markets with the same strategy. A group of firms following the same strategy in a given target market is called a strategic group. A company need to identify the strategic group in which it competes.

A company must continuously monitor its competitors' strategies and revise their strategies through time depending upon the competitors strategy.

DETERMINING COMPETITORS' OBJECTIVES: After identifying its main competitors and their strategies a company may ask itself: what is each competitor seeking in the marketplace? What drives each competitor's behavior? An initial assumption is that competitors strive to maximize their profits. and alternative assumption is that they pursues a mix of objectives : current profitability, market share growth cash flow, technological leadership, service leadership and so on.

A competitors objectives are shaped by many things, including its size, history, current management, financial situation, and place in the large organization. If a competitor is part of a larger company, it is important to know whether the parent company is running it for growth or milking it. If the competitor is not critical to its parent company, it could be attacked more readily.

Finally a company must also monitor its competitors expansion plans.

Assessing Competitors Strengths and Weaknesses: To identify the strengths and weaknesses of competitors a company should first gather recent information on each competitor's business, including data on sales, market shale, profit margin, return on investment, cash flow, new investments and capacity utilization.

Companies normally learn about their competitors position through secondary data, personal experience, and hearsay. They can augment their knowledge by conducting primary marketing research with customers, suppliers, and dealers. All these sources help a company decide whom to attack in the programmable-controls market.

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In general every company should monitor three variables when analyzing its competitors:

i. Share of market: The competitor's share of the target market. ii. Share of mind: The percentage of customers who named the competitor in responding to the statement. Name the first company that comes to mind in this industry. iii. Share of heart: The percentage of customers who named the competitor in responding to the statement. Name the company from whom you would prefer to buy the product.

Estimating Competitors Reaction Patterns: Identification of competitors strangest and weaknesses help managers to anticipate the competitors likely reactions to other companies' strategies (e.g. a price cut, a promotion step-up, or a new-product introduction). In addition, each competitor has a certain philosophy of doing business, a certain internal culture, and certain guidelines beliefs. Most competitors fall into one of following four categories.

1. THE LAID BACK COMPETITORS: A competitor that doesn't react quickly or strongly to a rival's move. The reasons may vary. The laid back competitors may feel their customer are loyal, slow in noticing the move, may face lack of funds to react.

2. THE SELECTIVE COMPETITORS: A competitor that react to only certain types of attacks and not to others. It might respond to price cuts but not to advertising expenditure increases.

3. THE TIGER COMPETITOR: A competitor that react swiftly and strongly to any assault on its terrain.

4. THE STOCHASTIC COMPETITORS: A competitor that does not exhibit a predictable reaction pattern. Such competitor might or might not retaliate on a particular occasion: there is no way of predicting this decision on the basis of its economic situation, history, or anything else.

Some industries are characterized by relative accord among the competitors, and others by contrast fighting. Here are some of the observations about the likely state of competitive relations.

i. If competitors are nearly identical and make their living in the same way then their competitive equilibrium is unstable.

ii. If a single major factor is the critical factor, then competitive equilibrium is unstable.

iii. If multiple factors may be critical factors, then it is possible for each competitor to have some advantage and be differently attractive to some consumers. The more factors that may provide a advantage, the more competitors who can coexist. Competitors all have their competitive segment, defined by the preference for the factor trade-offs that they offer.

DESIGNING THE COMPETITIVE INTELLIGENCE SYSTEM: Each company should carefully design its competitive intelligence system to be cost effective. Everyone in the company must be only sense, serve and satisfy the customer but also be given an incentive to spot competitive information and pass it on to the relevant parties in the company. Sometimes cross-disciplinary teams are formed specifically for this purpose.

There are four main steps involved in designing a competitive intelligence system:

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1. Setting up the System: The first stem calls for identifying vital types of competitive information identifying the best sources of this information and assigning a person who will manage the system and its services.

2. Collecting the Data: the data are collected on a continuous basis from the field, circuits, and competitors' employees, from people who do business with competitors.

3. Evaluating and Analyzing the Data: The data are checked for validity and reliability, interpreted, and organized.

4. Disseminating information and Responding: Key information is sent to relevant decision maker and managers' inquires about competitors are answered.

SELECTING COMPETITORS TO ATTACK AND AVOID: With good competitive intelligence, managers will find it easier to formulate their

competitive strategies. They will have a better sense of whom they can effective compete with in the market. Generally managers conduct a customer value analysis to reveal the company's strengths and weaknesses relative to various competitors.

The aim of a customer value analysis is to determine the benefits that customers in a target market segment want and how they perceive the relative value of competing suppliers, offers. The major steps in customer value analysis are:

1. Identifying the major attributes that customers value 2. Assess the quantitative importance of the different attributes. 3. Assess the company's and competitors' performances on the different customer values

against their rated importance. 4. Examine how customers in a specific segment rate the company's performance

against a specific major competitor on an attribute-by-attribute basis. 5. Monitor customer values over time.

After the company has done its customer value analysis, it can focus its attack on one of the following classes of competitors: strong versus weak competitors, close versus distant competitors, and good versus bad competitors.

1. Strong Versus Weak Competitors: Most companies aim their shots at their weak competitors. This strategy requires

fewer resources and time per share point gained. But in the process of attacking weak competitors, the firm may achieve little in the way of improved capabilities. The firm should also compete with strong competitors to keep up worth the state of the art. Furthermore, even strong competitors have some weaknesses, and the firm may prove to be a worthy competitor.

2. Close versus Distant Competitors: Most companies compete with competitors who resemble them the most. At the same

time, the company should avoid trying to destroy the close competitor. 3. Good Versus Bad Competitors: Porter argues that every industry contains "good" and "Bad" competitors. Good competitors have a number of characteristics: they play by the industry's rules: they make realistic assumptions about the industry's growth potentials; they set prices in a reasonable relation to costs; they favor healthy industry; they limit themselves to a portion or segment of the industry; they motivate

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other to lower costs or improve differentiation's; and the accept the general level of their share of profits.

Bad competitors violate the rules: They try to buy share rather than earn it: they take large risks; they invest in over capacity; and in general, they upset the industrial equilibrium.

A company benefits in several ways from good competitors. Competitors confer several strategic benefits: They lower the antitrust risk; they increase total demand; they lead to more differentiation; the share the cost of market development and legitimatize a new technology; they improve bargaining power vis--vis labor unions or regulators; and they may service less attractive segments.

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Unit-4 Analyzing Marketing 4.3 Identifying Market Segments and Selecting Target Markets

A company that decide to operate in a broad market recognizes that it cannot serve all customers in that market because customer are too numerous and diverse in their buying requirements. Instead of competing every where the company needs to identify the market segments that it can serve most effectively.

In target marketing the sellers distinguish the major market segment, target one or more of those segments and develop products and marketing programs for each segment. Target marketing involves three major steps:

1. Market Segmentation: Identifying distinct groups of buyers who might require separate products.

2. Market Targeting: Select one or more market segments to enter. 3. Market Positioning: Establish and communicate products, key distinctive benefits in

the market.

MARKET SEGMENTATION: Market consist of buyers who differ in many ways. Markets can be segmented in a number of way. Here will examine (A) level of segmentation, (B) patterns of segmentation, (C) market segmentation procedure, (D) basis for segmenting of consumer and business markets, and (E) requirements for effective segmentation.

A. Levels of Segmentation: Market segmentation represents an effort to increase a company's targeting precision.

It can be carried out at four levels. 1) segments, 2) niches, 3) local areas, and 4)individuals and 5) self marketing.

Before discussing these levels first we have to understand MASS MARKETING. In mass marketing the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers, like coca cola.

The traditional argument is that mass marketing creates the largest potential market, which leads to the lowest costs and ultimately results in lower prices or higher margins, but it is difficult to carry out.

1. SEGMENT MARKETING:A segment consist of large identifiable group within a market. Segment marketing is the midpoint between mass marketing and individual marketing. The segment marketing companies know that buyers differ in want, purchasing power, location, buying habits. etc. The company tries to isolate some broad segments. e.g. an auto company identify four levels segments of car buyers, i) those who are seeking basic transportation, ii) those who are seeking high performance, iii) those who are seeing luxury, and iv) those who are seeking safety. Consumers belonging to one segment are considered quit similar in their wants and needs. yet they are not identical. Some segment members wants additional features not included in the offer while others would gladly give-up what they do not want very much.

Segment marketing offers several benefits over mass marketing. The company can produce a more fine-tuned product and price it appropriately for the

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target audience. The choice of distribution channels, and communication channels becomes much easier, and company have to face fewer competitors.

2. NICHE MARKETING:A niche means a small market whose needs are not being well served. It is usually identified by dividing a segment into sub-segments. For example in the segment of heavy smokers a sub-segment of heavy smokers with emphysema. Segments being fairly large attract several competitors while niches are fairly small and normally attract only a few competitors.

3. LOCAL MARKETING: Also called regional marketing, or localized marketing. In it market programs are tailored to the needs and wants of local customers groups, (trade areas neighbor hoods).

4. INDIVIDUAL MARKETING: It is the ultimate level of segmentation which lead to "one -to-one marketing". it means producing a thing on receipt of order from customer according to the specifications.

5. SELF MARKETING: A form of individual marketing in which individual customer takes more responsibility for determining which product and brands to buy.

B. Patterns of Market Segmentation: Market segments can be built up in many ways. Instead of looking at demographic or lifestyle segments, we can distinguish preference segments. Three different patterns can emerge.

i. HOMOGENEOUS PREFERENCES: A market where all the customers roughly have the same preference. The market shows no natural segments.

ii. DEFUSED PREFERENCES: At the other extreme the customers preferences may be scattered and customers vary greatly in their preferences. The first brand to enter the market is likely to position in the center to appeal to the most people. A second competitor would locate next to the first brand and fight for market share. Or it could locate in a corner to attract a customer group that was not satisfied with the center brand. If several brands are in the market they are likely to position throughout the space and show real differences to match consumer-preference differences.

iii. CLUSTERED PREFERENCES: The market might reveal distinct preference clusters, called natural market segments. The first firm in this market has three options. It might position in the center, hoping to appear to all groups. It may position in the largest market segment. It might develop several brands, each positioned in a different segment. If the first firm developed only one brand, competitors would enter and introduce brands in the other segments.

C. Market Segmentation Procedure: Marketing research firms uses a three-step approach to identify the segments in the market.

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STEP ONE. SURVEY STAGE: Researchers conduct exploratory interviews and focus on consumer's motivations, attitudes and behavior. From these findings researchers prepare a formal questioner to collect data about their:

- Attitudes and their importance rating - Brand awareness and brand ratings. - Product usage patterns. - Attitudes towards the product category. - Demographics, geographic, psycho-graphic and media-graphics of the respondents.

STEP TWO. ANALYSIS STAGE: The researcher applies factor analysis to the data to remove highly correlated variables, then apply cluster analysis to create a specific number of (maximally different) segments.

STEP THREE. PROFILING STAGE: Each cluster is profiled in terms of its distinguished attitudes, behavior, demographics, psycho-graphics, and media patterns. Each segment can be given a name, based on dominant distinguishing characteristic.

D. Basis of Segmenting Consumer Markets: Two broad groups are used to segment consumer markets. First researchers form segments by looking at consumer characteristics, which may include geographic, demographic, and psycho-graphic characteristics. Other researchers try to form segments by looking at consumer responses to benefits sought. They use occasions and brands. The major segmentation variables are: 1) geographic, demographic, psycho-graphics and behavioral segmentation.

1. GEOGRAPHIC SEGMENTATION: Dividing the market into different geographical units such as nations, states, regions countries, cities, urban, rural, climate etc. and then decide to operate in one or a few geographic areas.

2. DEMOGRAPHIC SEGMENTATION: In it market is divided into groups on the basis of demographic variables such as age, family size, family life cycle gender, income, occupation, education religion, race, generation, nationality, or social class. These variables are the most popular because they are easier to measure than most other types of variables. a. Age and Life - Cycle Stage: Consumers wants and abilities change with age.

However it is a tricky variable and is mostly effected by the psychology. b. Gender: Generally applied in clothing hair-styling, cosmetics, and magazines.

Occasionally other marketers notice an opportunity for gender segmentation. c. Income: Another long-standing practice in such product and service categories as

automobiles boats, clothing, cosmetics and travel. However, income does not always predict the best customers for a given product.

d. Generation: Each generation is profoundly influenced by the milieu in which it grows up. Some marketers target baby bombers using communications and symbols that appeal to the optimism of that generation.

e. Social Class: It has a strong influence on a person's preference in cars, clothing, home furnishing, reading habits etc. Many companies designee products for specific social classes.

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3. PSYCHO-GRAPHIC SEGMENTATION: In psycho-graphic segmentation, buyers are divided into different groups on the basis of lifestyle and / or personality. People within the same demographic group can exhibit very different psycho-graphic profiles. a. Lifestyle: People exhibit many more lifestyles than seven as are suggested by the

social classes. People product interests are influenced by their lifestyles. In fact, the goods they consume express their lifestyles. Marketers are increasingly segmenting their markets by consumer lifestyles.

b. Personality: Marketers also use personality variables to segment marketers. They endow their products with brand personalities that correspond to consumer personalities.

4. BEHAVIORAL SEGMENTATION: Buyers are divided into groups on the basis of their knowledge of , attitude toward, use of, or response to a product. Following are the types of behavioral segmentation. 1. Occasions: Buyers can be distinguished according to the occasions they develop a

need, purchase a product, or use a product. e.g. air travel is triggered by occasions related to business, vacation, or family. An air line can specialize in serving people for whom one of these occasions dominates.

2. Benefit Segmentation: A powerful form of segmentation involves classifying buyers according to the benefits they seek from the product.

3. User Status: Markets can be segmented into groups of nonusers, ex users, potential users, first-time users, and regular users of a product. The company's position in the market will also influence its focus. Market-share leaders will focus on attracting potential users, while smaller firms will often focus on attracting current users away from the market leader.

4. Usage rate: Market can also be segmented into light, medium, and heavy product users. Heavy users are often a small percentage of the market but account for the high percentage of total consumption. Marketers usually prefer to attract one heavy user to their product or service rather than several light users.

5. Locality Status: A market can be segmented by consumer-locality patterns. Consumers can have varying degrees of loyalty to brands, stores, and other entities. Buyers can be divided into four groups according to their brand-loyalty. i. Hard-core loyals: Who buy one brand all the time. ii. Split Loyals: Who are loyal to two or three brands. iii. Shifting Loyals: Those shift from favoring one brand to another. iv. Switchers: Consumers who show no loyalty to any brand.

6. Buyers-Readiness Stage: A market consist of people in different stages of readiness to buy a product. Some are unaware of the product, some are aware, some are formed, some are interested, some desire the product, and some intend to buy. The relative numbers make a big difference in designing the marketing program.

7. Attitude: Five attitude groups can be found in a market enthusiastic, positive, indifferent, negative, and hostile.

5. MULTY ATTRIBUTE SEGMENTATION: Marketers no longer talk about the average consumers, or even limit their analysis to only a few market segments. Rather they are

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increasingly crossing several variables in an effort to identify smaller, better defined target groups.

Targeting Multiple Segments: Very often, companies may begin their marketing with one targeted segment, then expand

into other segments.

BASIS FOR SEGMENTING BUSINESS MARKETS: Business market s can be segmented with many of the same variables employed in consumer market segmentation, such as geography, benefit sought and usage rate. Yet business markets can also use several other variable given bellow:

Demographic: It may include: 1. Industry: Which industries should we serve. 2. Company size: What size companies should we serve. 3. Location: Which geographical areas should we serve.

Operating Variables: 1. Technology: What customer technologies should we focus on? 2. User /Nonuser status: Should we serve heavy users, medium, light or nonuser? 3. Customer Capabilities: Should we serve customers

needing many or few goods or services?

Purchasing Approach: 1. Purchasing Function Organization: Should we

serve highly centralized or decentralized purchasing organizations?

2. Power Structure: Should we serve Co. engineering dominants, financially dominants or so forth?

3. Nature of Existing Relationships: Serve companies having strong relations with us, or go after the most desirable.

4. General Purchase Policy: Serve them who prefer leasing, service contracts, system's purchases or sealed bidding.

5. Purchasing Criteria: Serve those companies seeking quality? Service? or price?

Situational Factors: 1. Urgency: Should we serve companies that need quick

and sudden delivery or service? 2. Specific application: Should we focus on certain

application of our product rather that all applications? 3. Size of Order: Should we focus on larger or small orders?

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Personal Characteristics: 1. Buyer Seller Similarity: Should we serve companies

whose people and values are similar to ours? 2. Attitudes toward risk: Should we serve risk-taking or risk-avoiding customers? 3. Loyalty: Should we serve companies that show high

loyalty to their suppliers?

E. Requirements for Effective Segmentation: There are many ways of segmenting a market, however, all segmentation are not

effective. To be useful market segments must be: 1. MEASURABLE: The purchasing power and characteristics of the segment can be

measured. 2. SUBSTANTIAL: Segment should be large and profitable enough to serve. 3. ACCESSIBLE: The segment can be effectively reached and served. 4. DIFFERENTIABLE: The segment are conceptually distinguishable and respond

differently to different marketing -mix elements and programs. If married and un-married woman respond similarly to a sale on perfume, they dont constitute separate segments.

5. ACTIONABLE :Effective programs can be formulated for attracting and serving the segments.

TARGET MARKETING After identifying market-segments the enterprise has to evaluate them and decide, how many and which ones to target. Now we will examine the process of evaluating and selecting marketing segments:

1. Evaluating the Market Segments: While evaluating the market segments the firm must look at two factors given bellow:

i. The overall attractiveness of the segment and ii. The companies objectives and resources.

2. Selecting the Market Segment: After evaluating the firm decide to which and how many segments to serve. Selection can be made in any of the following five patterns.

a. SINGLE SEGMENT CONCENTRATION: The most simplest case in which company selects only one segment and concentrates on it.

b. SELECTIVE SPECIALIZATION: Here the firm selects a number of segments, each objectively attractive and appropriate, given the firm's objectives and are resources. there may be little or no synergy among the segments, but each segment promises to be a money maker. This multi-segment coverage strategy has the advantage of diversifying the firm's risk. Even if one segment becomes unattractive the firm can continue to earn more in other one.

c. PRODUCT SPECIALIZATION: When the firm concentrates on making a certain product that it sells to several segments. In it a company can build strong reputation in the

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specific product area. The downside risk is that the product may be supplanted by an entirely new technology.

d. MARKET SPECIALIZATION: Here the firm concentrates on serving many needs of a particular custom group.

e. FULL MARKET COVERAGE: When the firm attempts to serve all customer groups with all the products that they might need. Only very large firms can undertake a full market coverage strategy. Large firm scan cover a whole market in two broad ways through undifferentiated marketing or differentiated marketing. a. Undifferentiated Marketing: In it the firm ignores market-segment differences and

goes after the whole market with one market offer. It focuses on buyers needs rather than differences among buyers. It design a product and a marketing program that will appeal to the broadest number of buyers. It relies on mass distribution and mass advertising.

b. Differentiated Marketing: In it firms operate in several market segments and designs different programs for each segment. differentiated market creates more total sales than undifferentiated It also increase the cost of business the following are the costs:

- Product modification cost: Modifying a product to meet different market segment requirements usually involves more research and development, engineering and special tooling costs.

- Manufacturing cost: It is usually more expensive to produce 10 units of 10 different products than 100units of one product.

- Administrative cost: for separate marketing plan for each market segment. This requires extra marketing reach, forecasting, sales analysis, promotion, planning and channel management.

- Inventory Costs: It is usually more to manage inventories containing many products than inventories containing few products.-Promotion costs: The company has to reach different markets segments with different promotion programs. the result is increased promotion-planning costs and media costs.

ADDITIONAL CONSIDERATION IN EVALUATING AND SELECTING SEGMENTS: Following four more considerations must be taken into account in evaluating and selecting segments: 1) Ethical choice of market targets, 2) segment interrelationships and super segments, 3) segment-by-segment evasion plans, and 4) intersegment cooperation.

1. Ethical Choice of Market Targets: Market targeting sometimes generates controversy like cigarette markets have generate much controversy. In market targeting the issue is not who is targeted but rather how and for what. Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company but also the interests of those targeted.

2. Segment Interrelationships and Super segments: In selecting more than one segment, the company should pay close attention to segment interrelationships on the cost, performance and technology side.

Companies should also identify and try to operate in super segments rather than in isolated segments. A super segment is a set of segments sharing some exploitable similarity.

3. Segment By Segment Invasion Plans:

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Even if the firm plans to target super segment, it is wise to enter one segment at a time and conceal its grand plan. The competitors must not know to what segment(s) the firm will move next.

4. Intersegment Cooperation: The best way to manage segments is to appoint segment managers with sufficient authority and responsibility for building their segment's business. At the same time, segment managers should not be so segment-focused as to resist cooperation with other company personnel to improve overall company performance.