Marketting Management

1. Explain the concept of Marketing Segmentation & Target Marketing.

Market Segmentation is defined as:

“The process of dividing a market into

distinct subsets of consumers with

common needs and selecting one or more

segments to target with a distinct

marketing strategy”

Market segmentation is a strategy that involves dividing a larger market into subsets of
consumers who have common needs and applications for the goods and services offered in the
market. These subgroups of consumers can be identified by a number of different demographics,
depending on the purposes behind identifying the groups. Marketing campaigns are often
designed and implemented based on this type of customer segmentation.

One of the main reasons for engaging in market segmentation is to help the company understand
the needs of the customer base. Often the task of segregating consumers by specific criteria will
help the company identify other applications for their products that may or may not have been
self evident before. Uncovering these other ideas for use of goods and services may help the
company target a larger audience in that same demographic classification and thus increase
market share among a specific sub market base. Market segmentation strategies can be
developed over a wide range of characteristics found among consumers. One group within the
market may be identified by gender, while another group may be composed of consumers within
a given age group. Location is another common component in market segmentation, as is income
level and education level. Generally, there will be at least a few established customers who fall
into more than one category, but marketing strategists normally allow for this phenomenon.

Along with playing a role in the development of new marketing approaches to attract a certain
demographic within the market base, market segmentation can also help a company understand
ways to enhance customer loyalty with existing customers. As part of the process of identifying
specific groups within the larger client base, the company will often ask questions that lead to
practical suggestions on how to make the products more desirable to customers. This activity
may lead to changes in packaging or other similar changes that do not impact the core product.
However, making a few simple changes in the appearance of the product sends a clear message
to consumers that the company does listen to customers. This demonstration of good will can go
a long way to strengthen the ties between consumer and vendor.

Target Market:
A specific group of consumers at which a company aims its products and services.

Your target customers are those who are most likely to buy from you. Resist the temptation to be
too general in the hopes of getting a larger slice of the market. That's like firing 10 bullets in
random directions instead of aiming just one dead center of the mark--expensive and dangerous.

Try to describe them with as much detail as you can, based on your knowledge of your product
or service. Rope family and friends into visualization exercises ("Describe the typical person
who'll hire me to paint the kitchen floor to look like marble...") to get different perspectives-the
more, the better.

Here are some questions to get you started:

• Are your target customers male or female?

• How old are they?

• Where do they live? Is geography a limiting factor for any reason?

• What do they do for a living?

• How much money do they make? This is most significant if you're selling relatively expensive
or luxury items. Most people can afford a carob bar. You can't say the same of custom murals.

• What other aspects of their lives matter? If you're launching a roof-tiling service, your target
customers probably own their homes.

Once upon a time, business owners thought it was enough to market their products or services to
"18- to 49-year olds." Those days are a thing of the past. Because the consumer marketplace has
become so differentiated, it's a misconception to talk about the marketplace in any kind of
general way anymore. Now, you have to decide whether to market to socioeconomic status or to
gender or to region or to lifestyle or to technological sophistication. There's no end to the number
of different ways you can slice the pie.

Further complicating matters, age no longer means what it used to. Fifty-year-old baby boomers
prefer rock 'n' roll to Geritol; 30-year-olds may still be living with their parents. People now
repeat stages and recycle their lives. You can have two men who are 64 years old, and one is
retired and driving around in a Winnebago, and the other is just remarried with a toddler in his
house.

Generational marketing, which defines consumers not just by age, but also by social, economic,
demographic and psychological factors, has been used since the early 80s to give a more accurate
picture of the target consumer.

A newer twist is cohort marketing, which studies groups of people who underwent the same
experiences during their formative years. This leads them to form a bond and behave differently
from people in different cohorts, even when they're similar in age. For instance, people who were
young adults in the 50s behave differently from people who came of age during the tumultuous
60s, even though they're close in age.

To get an even narrower reading, some entrepreneurs combine cohort or generational marketing
with life stages, or what people are doing at a certain time in life (getting married, having
children, retiring) and physiographics, or physical conditions related to age (nearsightedness,
arthritis, menopause).

Today's consumers are more marketing-savvy than ever before and don't like to be "lumped"
with others--so be sure you understand your target market. While pinpointing your market so
narrowly takes a little extra effort, entrepreneurs who aim at a small target are far more likely to
make a direct hit.

2. Why is Chico’s so successful with the female baby boomer market?

Chico’s is very successful with the female baby boomer market as they have made that their
niche market. They offer a rotating variety of clothing, which consists of their wrinkle-free
Travelers Collection, their clothes also drape than cling and are categorized, or segmented, into 4
different types:

• Size 0 – Traditional sizes 4-6

• Size 1 – Traditional sizes 8-10

• Size 2 – Traditional sizes 10-12

• Size 3 – Traditional sizes 14-16

These sizes have been introduced by Chico so that women don’t have to feel bad about their
double-digit size, as it’s now categorized into a single digit form.

Plus, another part of the service is their customer service. There aren’t any mirrors in the
dressing rooms, which is done purposely, so that customers have to step out and seek the help of
the staff, which also booms their customer service.

Another reason that Chico’s is so successful would be its pricing strategy. All clothes are
charged with an average price of $50 per item. In today’s time, most of the people look for
quantity over quality, henceforth, Chico’s has rightly priced its commodities.

Finally, regular customers, or those who spend more than $500, are rewarded with a special
membership in Chico’s Passport Club which allows them to gain 5% discount on whatever they
plan to buy from them next time. This is a smart move by Chico as they have found out that
membership owners spend about 40% MORE than the usual customers and also shop at Chico’s
six times than the others.
3. Should Chico’s stick with the female baby boomer market or expand to include other
demographic markets and why?

Seeing that Chico’s is doing extremely well in the Baby Boomer market (referring to the rise in
sales at over 45% percent, which is $378 million) and it’s their niche product line, I feel that they
shouldn’t expand into a different market, although they CAN expand the number of stores within
the country or internationally. Baby booms are everywhere and considering their strategies,
every country would love a Chico store where good things come for good value and not the
opposite. Chico has already decided on increasing the number of stores from 320 to over 500,
which IS a big move for a company which owns about 10% of their market. If they excel even
more in what they do, gradually they’ll get hold of about 20-30% more market share and they’ll
have a separate identity making them the leading brand in baby boom products/clothes.

So, for now, Chico should stick to its current niche as it’ll do them wonders and also gain lots of
profit. In the future, Chico can expand into the other segments related to babies, for example:
diapers, clothes and many more.

4. In your opinion, is there any other brand close to Chico’s in M.E.? If yes, then support your
answer with reasoning and examples, and if no, then why Chico’s is not able to penetrate the
market.

Apparently, there ARE a lot of brands in the M.E., or Dubai for that case, which are direct
competition to Chico’s, such as Marks & Spencer, Benetton, Carrefour, Top Shop, Forever 21,
H&M and many more! Also, Chico sells its clothes at $50 per item, whereas (for example)
Carrefour sells ONE maternity jeans for JUST AED 29, which is about $10. Value for money is
what I talked about in my second answer, and Carrefour doesn’t fail to deliver that. There are
others which sell the same thing but of higher quality and price. New Look sells the same piece
of clothing, but for AED 129, which is a bit lesser than what Chico’s sell for. Mr. Price sells
those jeans for AED 20, again proving tough competition for Chico’s. Also, Next sells its
maternity jeans at AED 195, a price higher than Chico’s, so it’s in no way competition, but
Chico’s is a threat to them. Jenny Rose is the same, but it’s priced at AED 300 each and so,
Chico’s is a threat to them. Debenhams has the same thing, but the prices over there always
change. They can be dirt cheap or highly expensive, so they are competition to Chico’s.

5. Identify and explain macro and micro environmental factors which influence marketing
decisions.

MARKETING ENVIRONMENT

In order to correctly identify opportunities and monitor threats, the company must begin with a
thorough understanding of the marketing environment in which the firm operates. The marketing
environment consists of all the actors and forces outside marketing that affect the marketing
management’s ability to develop and maintain successful relationships with its target customers.
Though these factors and forces may vary depending on the specific company and industrial
group, they can generally be divided into broad micro environmental and macro environmental
components. For most companies, the micro environmental components are: the company,
suppliers, marketing channel firms (intermediaries), customer markets, competitors, and publics

which combine to make up the company’s value delivery system. The macro environmental
components are thought to be: demographic, economic, natural, technological, political, and
cultural forces. The wise marketing manager knows that he or she cannot always affect
environmental forces. However, smart managers can take a proactive, rather than reactive,
approach to the marketing environment.

As marketing management collects and processes data on these environments, they must be ever
vigilant in their efforts to apply what they learn to developing opportunities and dealing
withthreats. Studies have shown that excellent companies not only have a keen sense of customer
but an appreciation of the environmental forces swirling around them. By constantly looking at
the dynamic changes that are occurring in the aforementioned environments, companies are
better prepared to adapt to change, prepare long-range strategy, meet the needs of today’s and
tomorrow’s customers, and compete with the intense competition present in the global
marketplace. All firms are encouraged to adopt an environmental management perspective in the
new millennium.

A company’s marketing environment consists of the actors and forces outside marketing that
affect marketing management’s ability to develop and maintain successful relationships with its
target customers.

1). Being successful means being able to adapt the marketing mix to trends and changes this
environment.

2). Changes in the marketing environment are often quick and unpredictable.

3). The marketing environment offers both opportunities and threats.

4). The company must use its marketing research and marketing intelligence systems to monitor
the changing environment.

5). Systematic environmental scanning helps marketers to revise and adapt marketing strategies
to meet new challenges and opportunities in the marketplace. The marketing environment is
made up of a:

1. Micro environmental

2. Macro-environment.

1. Micro Environmental

The microenvironment consists of five components. The first is the organization’s internal
environment—its several departments and management levels—as it affects marketing
management's decision making. The second component includes the marketing channel firms
that cooperate to create value: the suppliers and marketing intermediaries (middlemen, physical
distribution firms, marketing-service agencies, financial intermediaries). The third component
consists of the five types of markets in which the organization can sell: the consumer, producer,
reseller, government, and international markets. The fourth component consists of the
competitors facing the organization. The fifth component consists of all the publics that have an
actual or potential interest in or impact on the organization’s ability to achieve its objectives:

financial, media, government, citizen action, and local, general, and internal publics. So the
microenvironment consists of six forces close to the company that affect its ability to serve its
customers:

a. The company itself (including departments).

b. Suppliers.

c. Marketing channel firms (intermediaries).

d. Customer markets.

e. Competitors.

f. Publics.

1. The Company’s Microenvironment

As discussed earlier the company’s microenvironment consists of six forces that affect its ability
to serve its customers. Lets discuss these forces in detail:

a. The Company

The first force is thecompany itself and the role it plays in the microenvironment. This could be
deemed the internal environment.

1). Top management is responsible for setting the company’s mission, objectives, broad

strategies, and policies.

2). Marketing managers must make decisions within the parameters established by top

management.

3). Marketing managers must also work closely with other company departments. Areas such as
finance, R & D, purchasing, manufacturing, and accounting all produce better results when
aligned by common objectives and goals.
4). All departments must “think consumer” if the firm is to be successful. The goal is to provide
superior customer value and satisfaction.

b. Suppliers

Suppliers are firms and individuals that provide the resources needed by the company and its
competitors to produce goods and services. They are an important link in the company’s overall
customer “value delivery system.”

1). One consideration is to watch supply availability (such as supply shortages).

2). Another point of concern is the monitoring of price trends of key inputs. Rising supply costs
must be carefully monitored.

c. Marketing Intermediaries

Marketing intermediaries are firms that help the company to promote, sell, and distribute its
goods to final buyers.

1). Resellers are distribution channel firms that help the company find customers or make sales
to them.

2). These include wholesalers and retailers who buy and resell merchandise.

3). Resellers often perform important functions more cheaply than the company can perform
itself. However, seeking and working with resellers is not easy because of the power that some
demand and use. Physical distribution firms help the company to stock and move goods from
their points of origin to their destinations. Examples would be warehouses (that store and protect
goods before they move to the next destination).

Marketing service agencies (such as marketing research firms, advertising agencies, media firms,
etc.) help the company target and promote its products. Financial intermediaries (such as banks,
credit companies, insurance companies, etc.) help

finance transactions and insure against risks.

d. Customers

The company must study its customer markets closely since each market has its own special
characteristics. These markets normally include:

1). Consumer markets (individuals and households that buy goods and services for personal
consumption).

2). Business markets (buy goods and services for further processing or for use in their
production process).

3). Reseller markets (buy goods and services in order to resell them at a profit).

4). Government markets (agencies that buy goods and services in order to produce public
services or transfer them to those that need them).

5). International markets (buyers of all types in foreign countries).

e. Competitors

Every company faces a wide range of competitors. A company must secure a strategic advantage
over competitors by positioning their offerings to be successful in the marketplace. No single
competitive strategy is best for all companies.

f. Publics

A public is any group that has an actual or potential interest in or impact on an organization’s
ability to achieve its objectives. A company should prepare a marketing plan for all of their
major publics as well as their customer markets. Generally, publics can be identified as being:

1). Financial publics--influence the company’s ability to obtain funds.

2). Media publics--carry news, features, and editorial opinion.

3). Government publics--take developments into account.

4). Citizen-action publics--a company’s decisions are often questioned by consumer

organizations.

5). Local publics--includes neighborhood residents and community organizations.

6). General publics--a company must be concerned about the general public’s attitude toward its
products and services.

7). Internal publics--workers, managers, volunteers, and the board of directors.

MACRO ENVIRONMENTAL

The Company’s Macro environment

The company and all of the other actors operate in a larger macro environment of forces that
shape opportunities and pose threats to the company. There are six major forces (outlined below)
in the company’s macro environment. There are six major forces (outlined below) in the
company’s macro environment.
a. Demographic.

b. Economic.

c. Natural.

d. Technological.

e. Political.

f. Cultural.

a. Demographic Environment

Demography is the study of human populations in terms of size, density, location, age, sex, race,
occupation, and other statistics. It is of major interest to marketers because it involves people and
people make up markets. Demographic trends are constantly changing. Some more interesting
ones are.

1). The world’s population (though not all countries) rate is growing at an explosive rate that will
soon exceed food supply and ability to adequately service the population. The greatest danger is
in the poorest countries where poverty contributes to the difficulties. Emerging markets such as
China are receiving increased attention from global marketers.

2). The most important trend is the changing age structure of the population. The population is
aging because of a slowdown in the birth rate (in this country) and life expectancy is increasing.
The baby boomers following World War II have produced a huge “bulge” in our population’s
age distribution. The new prime market is the middle age group (in the future it will be the senior
citizen group). There are many subdivisions of this group.

a). Generation X--this group lies in the shadow of the boomers and lack obvious distinguishing
characteristics. They are a very cynical group because of all the difficulties that have surrounded
and impacted their group.

b). Echo boomers (baby boomlets) are the large growing kid and teen market. This group is used
to affluence on the part of their parents (as different from the Gen Xers). One distinguishing
characteristic is their utter fluency and comfort with computer, digital, and Internet technology
(sometimes called Net-Gens).

c). Generational marketing is possible, however, caution must be used to avoid generational
alienation. Many in the modern family now “telecommute”--work at home or in a remote office
and conduct their business using fax, cell phones, modem, or the Internet In general, the
population is becoming better educated. The work force is be-coming more white-collar.
Products such as books and education services appeal to groups following this trend. Technical
skills (such as in computers) will be a must in the future. The final demographic trend is the
increasing ethnic and racial diversity of the population. Diversity is a force that must be
recognized in the next decade. However, companies must recognize that diversity goes beyond
ethnic heritage. One the important markets of the future are that disabled people (a market larger
any of our ethnic minority groups).

b. Economic Environment

The economic environment includes those factors that affect consumer purchasing power and
spending patterns. Major economic trends in the United States include:

1). Personal consumption (along with personal debt) has gone up (1980s) and the early 1990s
brought recession that has caused adjustments both personally and corporately in this country.
Today, consumers are more careful shoppers.

2). Value marketing (trying to offer the consumer greater value for their dollar) is a very serious
strategy in the 1990s. Real income is on the rise again but is being carefully guarded by a value-
conscious consumer.

3). Income distribution is still very skewed in the U. S. and all classes have not shared in

prosperity. In addition, spending patterns show that food, housing, and transportation still
account for the majority of consumer dollars. It is also of note that distribution of income has
created a “two-tiered market” where there are those that are affluent and less affluent. Marketers
must carefully monitor economic changes so they will be able to prosper with the trend, not
suffer from it.

c. Natural Environment

The natural environment involves natural resources that are needed as inputs by marketers or that
are affected by marketing activities. During the past two decades environmental concerns have
steadily grown. Some trend analysts labeled the specific areas of concern were:

1). Shortages of raw materials.

Staples such as air, water, and wood products have been seriously damaged and non-renewable
such as oil, coal, and various minerals have been seriously depleted during industrial expansion.

2). Increased pollution is a worldwide problem. Industrial damage to the environment is very
serious. Far-sighted companies are becoming “environmentally friendly” and are producing
environmentally safe and recyclable or biodegradable goods. The public response to these
companies is encouraging. However, lack of adequate funding, especially in third world
countries, is a major barrier.

3). Government intervention in natural resource management has caused environmental concerns
to be more practical and necessary in business and industry. Leadership, not punishment, seems
to be the best policy for long-term results. Instead of opposing regulation, marketers should help
develop solutions to the material and energy problems facing the world.
4). Environmentally sustainable strategies. The so-called green movement has encouraged or
even demanded that firms produce strategies that are not only environmentally friendly but are
also environmentally proactive. Firms are beginning to recognize the link between a healthy
economy and a healthy environment.

d. Technological Environment

The technological environment includes forces that create new technologies, creating new
product and market opportunities.

1). Technology is perhaps the most dramatic force shaping our destiny.

2). New technologies create new markets and opportunities.

3). The following trends are worth watching:

a). Faster pace of technological change. Products are being technologically outdated at a rapid
pace.

b). There seems to be almost unlimited opportunities being developed daily. Consider the
expanding fields of health care, the space shuttle, robotics, and biogenetic industries.

c). The challenge is not only technical but also commercial--to make practical, affordable

versions of products.

d). Increased regulation. Marketers should be aware of the regulations concerning product safety,
individual privacy, and other areas that affect technological changes. They must also be alert to
any possible negative aspects of an innovation that might harm users or arouse opposition.

e. Political Environment

The political environment includes laws, government agencies, and pressure groups that

influence and limit various organizations and individuals in a given society. Various forms of
legislation regulate business.

1). Governments develop public policy to guide commerce--sets of laws and regulations limiting
business for the good of society as a whole.

2). Almost every marketing activity is subject to a wide range of laws and regulations. Some
trends in the political environment include:

1). Increasing legislation to:

a). Protect companies from each other.

b). Protecting consumers from unfair business practices.

c). Protecting interests of society against unrestrained business behavior.

2). Changing government agency enforcement. New laws and their enforcement will continue or
increase.

3). Increased emphasis on ethics and socially responsible actions. Socially responsible firms
actively seek out ways to protect the long-run interests of their consumers and the environment.

a). Enlightened companies encourage their managers to look beyond regulation and “do the right
thing.”

b). Recent scandals have increased concern about ethics and social responsibility.

c). The boom in e-commerce and Internet marketing has created a new set of social and ethical
issues. Concerns are Privacy, Security, Access by vulnerable or unauthorized groups.