market segmentation, product differentiation, and marketing strategy
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TRANSCRIPT
Market Segmentation, Product Differentiation, and
Marketing Strategy Luiz Valério P. Trindade – 05.05.2011
Main Objectives
The focus of this 1987 article is directed towards the
discussion of what the authors consider to be a confusion
regarding the definition of market segmentation and
product differentiation found on a number of marketing
textbooks and shed some lights on this subject matter.
In order to back up their claims, the authors have
undergone a thoroughly research on a group of 16
marketing textbooks published between 1978 and 1985.
Article Structure
First Part
Theories and perspectives of market segmentation and product
differentiation developed by economists and marketers.
Second Part
Set of definitions in an attempt to lessen the current confusion.
Third Part
Use of diagrams in order to illustrate the important differences and
relationships between product differentiation and demand
modification.
Historical Perspectives
Shaw (1912): One of the pioneers of marketing thought;
Smith (1956): Product differentiation as an attempt to alter the shape of the price-quantity demand curve;
Chamberlin (1965): Theory of monopolistic competition published in 1933;
Rosen (1974) and Lancaster (1979): Contributed to the development of an economic demand theory;
Porter (1976): Product differentiation as dependent of product features and elements of marketing mix;
Samuelson (1976): Suppliers fragment industry demand curves into smaller segments;
Smith (1978): Positioned market segmentation and product differentiation as alternatives rather than complements.
Definitions
Market Segmentation
Heterogeinety in demand functions exists such that market
demand can be disaggregated into segments with distinct
demand functions.
Product Differentiation
A product offering is perceived by the consumer to differ
from competition on any physical or nonphysical product
characteristics including price.
Definitions
Product Differentiation Strategy
Alteration of perception so as to result in a state of product differentiation.
Demand Function Modification
Alteration of the functional relationship between perceived product characteristics and demand.
Segment Development Strategy
Alteration of demand functions of a subset of consumers such that they will become similar and constitute a unique market segment.
Strategic Options
Product Differentiation
Strategic Options
Segment-Based Product Differentiation
Strategic Options
Demand Modification Strategy
Conclusion
They end up their study clearly stating that strong
evidences indicates that product differentiation and market
segmentation do not represent what is believed by some as
alternative management strategies.
So that, their final advice is that “It seems important for
both managers and academics to have a common, accepted
understanding of the theoretical and applied meaning of
these concepts.”
How is it like nowadays
or after this research?
Selected Textbook – 01
ASSAEL, Henry. Consumer Behavior and Marketing Action.
3rd Edition. PWS-Kent Publishing Company. USA, 1987
This author address the concept of market segmentation on
many parts of the book, but he does not mention product
differentiation throughout the book.
WEBSTER, Frederick E. Market-Driven Management: Using the New Marketing Concept to Create a Customer-Oriented Company. John Wiley & Sons, Inc., USA, 1994 (pp. 102-103)
Market segmentation and product differentiation are related but distinct concepts. Sometimes they are used interchangeably, which is incorrect and has led to some confusion.
Over the years it has been used to mean three very different things:
1. Offering products with features different from those of more standardized competitive
offerings;
2. Practice of offering somewhat differente products for different market segments;
3. The use of communication tools to make claims infusing a product feature not obsviously perceived by sonsumers.
Selected Textbook – 02
ZIKMUND, William G.; D’AMICO, Michael.
Effective Marketing: Creating and Keeping
Customers. West Publishing Company. USA, 1995
It was not noticed any sort of correlation between the
two concepts.
Selected Textbook – 03
LAMB, Charles W.; HAIR, Joseph F.; MC DANIEL, Carl; FARIA, A. J. The
Subject is Marketing. 2nd Canadian Edition. Thomson-Nleson, Canada, 2002. pp.
154-175
On chapter six (pp. 138-164) of this book it is addressed the issue of segmentation
and targeting markets, however, it was not noticed any sort of direct correlation
between market segmentation and product differentiation.
In fact, only once on the session that explains “Strategies for Selecting Target
Markets” (p. 155) the authors mention the concept of “undifferentiated
targeting strategy”.
What regards product differentiation, these authors argue that it is instead more a
positioning tool.
Selected Textbook – 04
TUCKWELL, Keith J. Canadian Marketing in Action. 8th
Edition. Pearson Prentice Hall, Canada, 2010. pp. 140-142;
160-163
This author address the issue of market segmentation, but he
does not mention a word regarding product differentiation
on this session. Even when he explains Niche Market or
One-to-One Marketing.
In fact, he addresses product differentiation only within the
session Market Positioning Concept. (pp. 160-163).
Selected Textbook – 05
What they Share in Common
Strategic Marketing Process
PLANNING STAGES 1 – Identifying and evaluating opportunities
2 – Analyzing market segments and selecting target markets
3 – Planning a market position and developing a marketing mix strategy
4 – Preparing a formal market plan
ACTION STAGE Executing the plan
CONTROLLING STAGE Controlling efforts and evaluating the results
Obrigado! Luiz Valério de Paula Trindade | 05.05.2011