ocr cambridge tec - level 3 certificate/diploma business lo3 - understand how and why customer...

OCR Cambridge TEC - Level 3 Certificate/Diploma Business

LO3 - Understand how and why customer groups are targeted

Unit 03 – Introduction To Marketing

Y/502/5411

Scenario Criteria Tasks Assessment1 2 3 4

Learners should be introduced to the concept of market segmentation, target markets or customer groups. Tutors should explain the characteristics used for segmentation and the reasons why organisations do this.

Learners should be able to build on work that they carried out for learning outcome 1 regarding fashion items, mobile phones and phone contracts and consider which segments have been identified and why.

Learners could be encouraged to identify why products and services are consumed by people, taking into consideration different ages, backgrounds and socio-economic groups.

Learners could work in small groups and feedback their findings as a presentation to their peers. Tutors should also introduce learners to the difference between B2B and B2C markets and how the segmentation characteristics will be different.

Unit 03 - Delivery Outcomes


Learning Outcome (LO) The learner will:

Pass The assessment criteria are the pass requirements for this unit. The learner can:

Merit For merit the evidence must show that, in addition to the pass criteria, the learner is able to:

Distinction For distinction the evidence must show that, in addition to the pass and merit criteria, the learner is able to:

1 Know the role of marketing in organisations

P1 Describe how marketing techniques are used in the marketing of products in two organisations

M1 - Analyse marketing techniques used in the marketing of products in two organisations

D1 - Recommend improvements to the marketing techniques in one organisation

P2 Describe the main employability and personal and communication skills required when applying for a specific job role

2 Be able to use marketing research and marketing planning

P3 Describe how a selected organisation uses marketing research to contribute to the development of its marketing plans

P4 Use marketing research for marketing planning

3 Understand how and why customer groups are targeted

P5 Explain how and why groups of customers are targeted for selected products

4 Be able to develop a coherent marketing mix.

P6 Develop a coherent marketing mix for a new product or service

M2 - Evaluate how the developed marketing mix would need to be modified for a new contrasting target group of customers

D2 - Evaluate how the developed marketing mix would need to be modified for a new contrasting target group of customers

LO3 - Assessment Criteria


Assessment Criteria P5 The company asks you to identify a group of customers that they

should target their new product at. Recommend a customer target group, ensuring that you explain how and why you have chosen that group.

Guidance: Learners should explain the segmentation methods used for market segmentation in both B2B and B2C markets, and provide a variety of examples for different products and/or services.

Assessment Criteria – P5


Segmentation - The process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.

Few companies are big enough to supply the needs of an entire market; most must breakdown the total demand into segments and choose those that the company is best equipped to handle.

Four basic factors that affect market segmentation are◦ clear identification of the segment,◦ measurability of its effective size,◦ Its accessibility through promotional efforts, and◦ Its appropriateness to the policies and resources of the company.

The four basic market segmentation-strategies are based on◦ behavioural,◦ demographic,◦ psychographic, and◦ geographical differences.

P5.1 – Targeting Customers - Segmentation


Segmentation also means to divide the marketplace into parts, or segments, which are definable, accessible, actionable, and profitable and have a growth potential. In other words, a company would find it impossible to target the entire market, because of time, cost and effort restrictions.

Market segmentation is the technique used to enable a business to better target its products at the right customers. It is about identifying the specific needs and wants of customer groups and then using those insights into providing products and services which meet customer needs.

Segments are usually measured in terms of sales value or volume. In the diagram below, segment B is twice the size of segment C:

Why do businesses need to segment their markets? Because customers differ in terms of:◦ Benefits they want◦ Amount they are able to or willing to pay◦ Media (e.g. television, newspapers, and

magazines) they see◦ Quantities they buy◦ Time and place that they buy

There are various a business can use to segment a market.

Using three different types of products, fashion items, mobile phones and phone contracts, consider which segments have been identified and why.

P5.1 – Task 01 - Explain how and why groups of customers are targeted for 3 selected products. For each of the 3 products, discuss the Geographic, Demographic, behavioural and Psychographic

tools companies use to promote the sales of these goods.

P5.1 – Targeting Customers - Segmentation


B2B marketing and B2C marketing are the most common forms of business contact. There is also C2B and C2C but these involve less marketing.

There is a difference between marketing to a business and marketing to a consumer. Although a company is still selling a product to a person, experience shows that the difference between these two types of markets involves different tactics.

When a company markets to a B2B they will realise these businesses work hard to streamline the buying process in order to save time and money. This often explains why a B2B purchase is based more on predictive business assumptions and why a consumer's purchase is based more on emotion.

It is true that the cost of a sale for the business-to-business market is more expensive and typically higher than the business to consumer market.

Marketing to B2B - When a business is marketing in the form of a B2B the business will want to focus on the financial benefits of the product. The business will do this by focusing on the features of the product, sales figures, possible business benefits, associated sales etc. There is little to no personal emotion involved in the purchasing decision. The business will want to focus on understanding the business buyers and how they operate within the confines of their company's procedures. The B2B market are information seekers, thinking about the resale value. They will be more in-depth with your businesses marketing style. The businesses most effective marketing message will focus on how the product or service saves them time, money and resources.

P5.2 – Targeting Customers – B2B and B2C


Marketing to B2C - When you are marketing to a consumer you want to focus on the benefits of the product. Their decision is more personal. Consumers are different in that they demand a variety of distribution channels for convenience, not so with the B2B market. Consumers are less likely to be interested in a lengthy marketing message. They will want you to get right to the point. Consumers don't want to work to understand your benefits, instead they will want you to clearly point out the benefits to them. Your most effective marketing strategies will focus on the results and the benefits that your product or service will bring to them.

When we think of branded content, the campaigns of packaged goods and restaurant chains typically come to mind. We picture Red Bull and Chipotle, viral videos and millennials, all of which are B2C marketing. B2B branded content may not always be as visible, but it’s just as widespread and pursues the same goal, connecting brands with customers in exceptional ways.

Despite this shared devotion to branded content, the strategies used to approach B2B and B2C content marketing are notably different. Marketers in both spaces hope to engage potential customers through stories. But the nature of the messaging and the channels used to distribute those stories are as distinctive as the content itself.

P5.2 – Task 02 - Explain B2b and B2C marketing techniques, how they differ and how you will need to adapt them using the 3 selected products as examples.

P5.2 – Targeting Customers – B2B and B2C


There are several important reasons why businesses should attempt to segment their markets carefully. No company’s product is going to appeal to everyone, not even Apple and any marketing that points in their direction can have a detrimental effect, look of globalisation, over visibility, seeming too common etc.

Better matching of customer needs - Customer needs differ from one to another. E.g. for Mobile Phones there are contracts, pay-as-you-go, apps, simplicity, 4G, large, small, popular, unique, and each of these USP’s will appeal to different people. Creating separate offers for each segment makes sense and provides customers with a better solution.

Enhanced profits for business - Customers have different disposable incomes. They are, therefore, different in how sensitive they are to the price of the product marketed. By segmenting markets, businesses can raise average prices and subsequently enhance profits, called demographic focussing.

Better opportunities for growth - Market segmentation can build sales, this is its function. For example, customers can be encouraged to "trade-up" after being introduced to a particular product with an introductory, lower-priced product, maintaining a degree of loyalty, reducing upgrade charges and making them feel like they are special.

Retain more customers - Customer circumstances change, for example they grow older, form families, change jobs or get promoted, change their buying patterns and location. By marketing products that appeal to customers at different stages of their life, a business can retain customers who might otherwise switch to competing products and brands.

P5.3 – Targeting Customers – Why Use Segmentation


Focus marketing communications - Businesses need to deliver their marketing message to a relevant customer audience. If the target market is too broad, there is a strong risk that the key customers are missed and the cost of communicating to customers becomes too high and unprofitable. By segmenting markets, the target customer can be reached more often and at lower cost.

Gain share of the market segment - Unless a business has a strong or leading share of a market already, it is unlikely to be maximising its profitability. Minor brands suffer from lack of scale economies in production and marketing, pressures from distributors and limited space on the shelves. Through careful segmentation and targeting, businesses can often achieve competitive production and marketing costs and become the preferred choice of customers and distributors. In other words, segmentation offers the opportunity for smaller firms to compete with bigger ones.

Competitive positioning – Products need to be placed on the scale measured by price, quality, desire. You would not advertise Rolls Royce in a typical car magazine, £2K graphics cards in PCWorld, or a £5 disposable phone in an Apple Shop. Advertise where your customers are according to where you product lies on the market.

Improve customer service – Customers who over buy or under buy are likely to complain or ask for help, targeting the right customers who already have the right knowledge and right level of skill use reduces down the customer service needs. This also reduces returns, complaints, and disappointment, all Customer Service headaches.

P5.3 – Task 03 - Explain why a company needs to use segmentation, different purposes and how you might adapt them using the 3 selected products as examples.

P5.3 – Targeting Customers – Why Use Segmentation

Better matching of customer needs Enhanced profits for business Better opportunities for growth Retain more customers

Focus marketing communications Gain share of the market segment Competitive positioning Improve customer service


Choosing Target Market Segment - The next step in selecting target markets requires the business to critically evaluate the segments identified in order to select those which are most attractive. For small firms this step may not be very involving since they may lack the resources needed to do it effectively. So they are often left with using their own intuition or judgment to determine which segments are the most promising. For companies with the time and money to commit to this step, the results may identify the segments that are prime customer base for current marketing efforts and also present segments that are future targets for the company’s offerings.

In determining whether a segment is worthy of being a target market, the marketer needs to address the following questions: Choosing Market Size - Is the segment large enough to support the marketer’s objectives, is the time right, is the location right, is

the market saturated already with adverts and marketing? This is an especially critical question if the marketer is entering a market served by many competitors.

Choosing profitability - Is the segment showing signs of growth? If not, should you be spending so much doing the marketing or drop it back a notch. One of the worst situations for a marketer is to enter a market whose growth is flat or declining, especially if competitors already exist.

Choosing relevance to available marketing mix – Is the company small or large, can it manage the 4P’s or 7P’s, is it overkill to do so much research, can SWOP or PESTLE work with the kind of product you are selling. Does the company have the necessary skills, knowledge and expertise to service the segment? The company should understand and be able to communicate with the customers in the segment, otherwise they may face a significant learning curve in understanding how to effectively market to a segment.

Choosing fit with corporate strategy and objectives - Does the segment meet the mission of the company? Is it ethical, Legal, does the kind of marketing reflect the image of the company, Rolex serious, Breakfast serials fun, Games Machine entertaining, Clothes sleek or rough. The segment should not extend too far beyond the direction the company has chosen to take.

Once one or more segments have been identified the marketer must choose the most attractive option(s) for their marketing efforts. At this point the choice becomes the firm’s target markets.

P5.4 – Task 04 - Explain the need for clarity and considerations on Segmentation marketing, how these considerations can impact on marketing and how you might adapt them using the 3 selected products as examples.

P5.4 – Targeting Customers – Target Markets

Market Size Profitability

Relevance to available marketing mix

Fit with corporate strategy and objectives


P5.1 – Task 01 - Explain how and why groups of customers are targeted for 3 selected products.P5.2 – Task 02 - Explain B2b and B2C marketing techniques, how they differ and how you will need to adapt them using the 3 selected products as examples.P5.3 – Task 03 - Explain why a company needs to use segmentation, different purposes and how you might adapt them using the 3 selected products as examples.P5.4 – Task 04 - Explain the need for clarity and considerations on Segmentation marketing, how these considerations can impact on marketing and how you might adapt them using the 3 selected products as examples.

Assessment Tasks – P5

ocr cambridge tec - level 3 certificate/diploma business lo3 - understand how and why customer...

Documents