Marketing Management – Module-4 27. Identifying market segments, targets.

Levels o
f market segmentation. Most companies are turning to micromarketing at one of th
e four levels: segments, niches, local areas, and individuals. Segment marketing
. A market segment consists of a group of customers who share a similar set of n
eeds and wants. The marketers task is to identify such segments, and decide whic
h one(s) to target. The key benefits that segment marketing offers over mass mar
keting are –
The company can better design, price, disclose and deliver the product or servic
e and also can fine-tune the marketing program and activities to better reflect
competitors’ marketing. But a segment of this sort, where all are alike, is a fict
ion, as not everyone in the segment wants the same thing. It is therefore, sugge
sted to have flexible market offerings to all members of a segment. A flexible m
arket offering consists of two parts: (1) a naked solution containing the produc
t and service elements that all segment members value, and (2) discretionary opt
ions that some segment members value. Each of the discretionary option will carr
y an additional charge. e.g., Automobile companies in India offer different vers
ions of the same
model with different features. The base model may not have air conditioner or po
wer steering, or power windows. Domestic airlines in India offer economy class a
nd business or executive class. Prices for the two options are significantly dif
ferent. The executive or business-class passengers get extra facilities – comforta
ble seats, better menu for food, and greater preference while checking in and bo
arding the aircraft as well as in luggage clearance. Niche Marketing. A niche is
a more narrowly defined customer group seeking a distinctive mix of benefits. N
iche is identified by dividing segments into sub-segments. Niche products: EZEE –
mild detergent for woolen and other delicate clothes.
CRACK – ointment from Paras Chemicals for female segment for prevention of cracks
in the feet. ITCHGUARD – treating itching sensation caused by perspiration in summ
er. NEEM ACTIVE tooth paste from Henkel has survived more than 75 years. VICCO V
AJRADANTI, MESWAK, BABOOL, have carved out their own segments. COLGATE HERBAL – ba
sed on neem, clove, mint and tulsi. TV Channels: AASTHA and QTV (Pakistan) – relig
ion and spirituality. STAR sports, ESPN, Ten Sports, Zee sports – sports. STAR Cri
cket – cricket lovers. In a Niche, customers have a distinct set of needs; they pa
y a premium to the firm
that best satisfies them; the niche is fairly small but has size, profit and gro
wth potential and is unlikely to attract many competitors. Even some large compa
nies have turned to Niche marketing: Hallmark personal expression products can b
e found in more than 43000 retail outlets, accounting for one out of every two g
reeting cards sold in the US. Nichers willingly pay a premium. Ayurvedic product
s and “all natural” products usually command a premium. Pirulina, an extract of a sp
ecific “bluegreen algae” promoted as a natural food supplement commands a premium. H
imalaya Drug Co.specializes in ayurvedic products for general health as well as
for specific therapeutic functions.
Local marketing. Target marketing is leading to marketing programs tailored to t
he needs and wants of local customer groups in trading areas, neighborhoods, eve
n individual stores. Many banks in India have specialized branches for Corporate
customers. In Kerala, there are “NRI branches” to cater to the needs of families wh
ose relatives remit money from abroad. There are local couriers, in many cities
in India, who deliver the mail the same day within the city. Spiderman-3 dubbed
in five difference local languages including Bhojpuri, was released, breaking al
l records for a foreign movie released in India.
Local marketing reflects a growing trend called grassroots marketing. Marketing
activities concentrate on getting as close and personally relevant to individual
customers as possible. Those who favor localized marketing, see national advert
ising wasteful. Those against local marketing argue that it drives up manufactur
ing and marketing costs by reducing economy of scale and magnifying logistical p
roblems. Individual marketing. The ultimate level of segmentation leads to “segmen
ts of one”, “customized marketing” or “one-to-one marketing”. Customers today are taking m
ore individual initiative in determining what and how to buy. They log on to the
net; look up informatioin and evaluations of
product or service offers; conduct dialogue with suppliers, users, and product c
ritics; and in many cases design the product they want. Customerization combines
operationally driven mass customization with customized marketing in a way that
empowers consumers to design the product and service offering of their choice.
The firm provides a platform and ‘tools’ and gives to its customers the means to des
ign their own products. A company is customerized when it is able to respond to
individual customers by customizing its products, services, and messages on a on
e-to-one basis. E.g.Siemens – hearing aid, Dell computers. Though customization ca
nnot be applied for all products, it has worked well for some.
Paint companies Asian Paints, Nerolac, Jenson & Nicholson, Berger – facilitate cus
tomers to mix and match colors from the catalogue, and the desired colors are mi
xed and quantities using equipments installed at retail points. Arvind Mills lau
ched Ruff-n-Tuff Jeans, branded ready-to-stitch jeans. The product positioned in
the economy segment, offered branded denim at a low cost with flexibility of cu
stomization at the neighbourhood trained tailor. Galleria credit card offered by
United Bank Ltd., Pakistan allowed customers to have the photograph of their ch
oice on their credit cards making UBL cards distinct and exclusive. Bases for se
gmenting consumer markets.
The major segmentation variables are: 1. Geographic – Region, city, Rural and semi
-urban areas. 2. Demographic – Age, family size, gender, income, occupation, educa
tion. 3. Psychographic – socio-economic classification (SEC), lifestyle, personali
ty. 4. Behavioral – occasions, benefits, user status, usage rate, loyalty status,
readiness stage, attitude towards product. Geographic segmentation. Geographic s
egmentation calls for division of market into different geographical units such
as nations, states, regions, countries, cities or neighborhoods. In India, geogr
aphic segmentation assumes importance due to variations in consumer preferences
and
purchase habits across different regions and across different states. One of the
major geographic segmentation variables relevant for marketers is the division
of markets into rural and urban markets. Ref. Rural marketing M-6-L1. Demographi
c segmentation. Here, we divide the market into groups on the basis of variables
such as age, family size, family life cycle, gender, income, occupation, educat
ion, religion, race, generation, nationality and social class. Age & Life cycle:
Consumer wants and abilities change with age. Infants and children: J&J babysoa
p, HLL’s pink Pears soap, Magic Pot magazine for nursery children. ‘No
tears” shampoo children, Clearasil – pimple cream. JAM magazine – young adults TV chan
nels: Aastha Sanskar – older generation; Cartoon network, Pogo, Nick, Disney, Hung
ama TV – children. MTV and VTV – youngsters. Lifestage: defines a person’s major conce
rn, such as getting married, deciding to buy a home, sending child to school, ta
king care of older family members, marrying off children, planning for retiremen
t, etc. When a person gets married and starts his family, a host of products and
services, such as furniture, kitchen appliances, cooking gas connection,. Plann
ing education of children, getting them married, or planning retirement – savings-
cum-insurance schemes.
Gender: Gender differentiation has been applied to product categories such as cl
othing, hairstyling, cosmetics and magazines. Park Avenue, Van Huesen, Allen Sol
ly – Men’s brand of clothing. ‘Be’ for women. Motorcycles target men – Bajaj Wave and Hero
Honda Pleasure for women. Fair and lovely for women; fair and handsome for men.
‘Fa’ deo for women, Nivea for men. Income: Income determines the ability of consume
rs to participate in the market exchange and hence this is a basic segmentation
variable. (Ref.M-6, L-1) Nirma – priced low, targeted at middle income group.
Detergents, shampoo, hair oil marketed in villages in “sachet marketing” or small pa
cks. Generation: Each generation is influenced by the times in which it grows up
– music, movies, politics and defining events of that period. Members share the s
ame cultural, political, and economic experiences and have similar outlooks and
values. Younger generations play significant roles, not only as consumers but al
so as initiators and influencers of buying decisions. Social class: In India, th
e concept of social class is influenced by the caste system. The caste system ev
en transcends to the income level resulting in complicating the segmentation sch
emes.
This gave rise the SEC – “socioeconomic classification” Senior level executives with h
igher educatioinal qualifications exhibit different purchase preferences compare
d to persons with similar income level but a different occupation, and lower edu
cation level. Psychographic segmentation: In psychographic segmentation, buyers
are divided into different groups on the basis of psychological/personality trai
ts, lifestyle, or values. Values and lifestyles significantly affect product and
brand choices. Religion has a significant influence on values and lifestyles. T
he strict norms that consumers follow with respect to food habits or even dress
codes are representative examples in this regard. A significant number of
consumers in India are vegetarians. Some of non-vegetarians avoid beef. Beef is
excluded in McDonal’s menu; vegetarian burger is served. Time starved segments are
offered instant noodles, ready-to-eat, fast to cook food brands, such as Maggi,
Top Ramen, MTR, Aashirvad. Behavioral Segmentation. Many marketers believe beha
vioral variables – occasions, benefits, user status, usage rate, buyer-readiness s
tage, loyalty status and attitude. Occasions: Archie’s greeting cards for differen
t occasions – birthdays, weddings, Id, Diwali, Raksha Bandhan. Amul chocolates – ‘gift
for someone you love’.
A number of products – chocolates (Cadbury’s), Snacks/sweets (Lay’s Haldiram’s, Kurkure)
offer special gift packs. Biscuits as accompaniments with tea and coffee. Monac
o with suggestions for toppings to be served to guests. Benefits : Products are
targeted at people who seek benefits. Shampoo – cleaning of hair, conditioning, da
ndruff, Lyril – “freshness”, Cinthol – ‘body odour’, Dettol ‘total protection’ Lifebuoy ‘He
er status:Mothers to be, are potential users who will turn into heavy users. Pro
ducers of infant products and services learn their names and shower them with
products and ads to capture a share of their future purchases. Usage rate: Marke
ts can be segmented to light, medium and heavy users. In mobile phone market, he
avy users account for a significant portion of revenue. Cell phone service provi
ders offer low tariffs at the entry level to attract them to the service. A pote
ntial problem is that heavy users are extremely loyal to one brand or never loya
l to any brand and always looking to lowest prices. They also may have less room
to expand their purchase and consumption. Buyer-readiness stage: Some people ar
e unaware of the product, some are aware, some are informed, some are interested
, some desire, and some intend to buy. The relative numbers pf consumers at
different stages make a difference in designing the marketing program. Loyalty s
tatus: Four groups: 1.Hard-core loyals – consumers who buy only one brand all the
time. 2.Split loyals – consumers who are loyal to two or three brands. 3.Shifting
loyals – consumers who shift loyalty from one brand to another. 4.Switchers – consum
ers who show no loyalty to any brand. Hard-core loyals can help identify the pro
duct’s strengths; split-loyals can show which brands are most competitive with its
own. Company can know about its marketing weakness from the switchers. In Indus
tries such as retailing, hospitality and airlines, companies offer loyalty progr
ams like award, or mileage points,
discount coupons and gifts to retain the loyalty of customers. Loyalty programs
tend to reduce customer switching. Market Targeting. Once the firm has identifie
d its marketsegment opportunities, it must decide how many and which ones to tar
get. Marketers are increasingly combining several variables in an effort to iden
tify smaller, better defined target groups. To be useful, market segments must r
ate favourably on five key criteria: Measurable: The size, purchasing power, and
characteristics of the segments can be measured. Substantial: The segments are
large and profitable enough to serve. A segment should be the largest possible h
omogenous group worth
going after with a tailored marketing program. It would not pay, for example, fo
r an automobile manufacturer to develop cars for people who are less than four f
eet tall. Accessible: The segments can be effectively reached and served. Differ
entiable: The segments are conceptually distinguishable and respond differently
to different marketing-mix elements and programs. If married and unmarried women
respond similarly to a sale on perfume, they do not constitute separate segment
s. Actionable. Effective programs can be formulated for attracting and serving h
e segments.
A firm must evaluate the various segments and decide how many and which ones to
target: a single segment, several segments, a specific product, a specific marke
t, or the full market. If it serves the full market, it must choose between diff
erentiated and undifferentiated marketing. Firms must also monitor segment relat
ionships and seek economies of scope and the potential for marketing to super se
gments. Marketers must develop segment-bysegment invasion plans and choose targe
t markets in a socially responsible manner at all times. “Brand is a name, term, s
ign, symbol, or design or a combination of them, indented to identify the goods
or services of one seller or a group of sellers and to
differentiate them from those of competitors”. The differences may be functional r
ational or tangible- related to product performance of the brand. They may also
be more symbolic, emotional, or intangible- related to what the brand represents
. Brand is a perpetual entity rooted in reality but reflecting the perceptions a
nd idiosyncrasies of consumers. Branding is endowing products and services with
the power of a brand. Branding creates mental structures that help consumers org
anize their knowledge about products and services in a way that clarifies their
decision making and, in the process, provides value to the firm.
Marketers can apply branding virtually anywhere a consumer has a choice. It is p
ossible to brand a physical good (Maggi noodles, Lux soap, Tata Indica automobil
e), a service ICICI Bank, Jet Airways, Blue Dart courier service) a store (Big B
azaar, Pantaloon, Shoppers’ Stop, a person (Aamir Khan, Tendulkar, Karishma Kapoor
), a place (the state of Goa, the city of Bangalore, or the country of India), a
n organization (UNICEF, Automobile Associations of India), or an idea (family pl
anning, blood donation, freedom of speech). Role of Branding:
1.
Brand is a massive asset – all physical assets can be duplicated very easily; it i
s almost impossible to duplicate a brand name.
2.Brand is a promotional tool – Sales promotion is founded on the idea of product
identification or product differentiation , which is accomplished by a brand. We
cannot effectively advertise without a brand name; the work of a salesman will
be a failure without a brand name.
3.
Brand is a weapon to protect market and is a means of identification – once a cons
umer has tried and liked the product, the brand enables him to identify it and b
uy again.
4.Brand is antidote for middlemen’s survival – The class of middlemen always go for
successful brands representing products tried, tested and liked by consumers. Br
and names can be so strong and penetrating that the very survival of middlemen r
ests
on their ability to sell a powerfully branded product. Characteristics of a good
Brand Name: 1.It must be easy to pronounce and remember. “HOECHST” is difficult to
pronounce. 2.It should be short and sweet. Bata, Tata, Panama. 3.It should point
out the producer: NELCO, AMUL, MICO, INDAL. 4.It should be legally protectable:
Trade mark must be registered. 5.It should be original: It must not be general
but specific and not easily copiable. 6.It should reflect product dimensions: It
should indicate dimensions such as product benefit, function, results and so on
. EZEE, GOOD-NIGHT.
Merits of Branding: Merits to Manufacturers: 1. Products get individuality. “Colga
te is Colgate”, “Promise is Promise” where customers are divided and the producers hav
e their own market share. 2.Control of Product prices: Each pack or wrapper cont
ains MRP and so the middlemen cannot alter the selling price. 3.Increase in barg
aining power: Good brand gives greater bargaining power to the manufacturers wit
h the dealers as it is easier to sell and the middlemen would like to sell estab
lished branded products rather than unbranded ones. 4. It reduces the advertisin
g costs: Once the brand is established, it does not
require frequent advertising, but only reminder ads. 5.Ever increasing demand: P
owerful brands have the capacity to create, maintain and extend the demand for a
product. Once the brand is built, and is in sight and mind, it leads to word of
mouth advertising, leading to increased demand. 6.Introduction of new product i
s made easy: A company whose products are well established, has created such str
ong trust in the company, that their new products will be easily accepted by the
same consumers. 7. It is a powerful weapon for product differentiation: Product
differentiation combats keen competition by positioning and repositioning the p
roduct. E.g., Cocacola and Pepsi war ; “Kuch bhi ho jai,
Coca cola enjoy”, Pepsi “Dil mange more”, Pepsi, “Le Chil, Le Chil” Coca Cola “Thunda matla
coca cola”. Merits to wholesalers and retailers: 1.Quicker sales: Unbranded goods
are slow moving, while branded products move faster, giving them better profita
bility because of quicker turnround. Thus profitability of retailers and wholesa
lers increase. 2.Advertising and display of products is rendered easier: An esta
blished brand has better brand recall and it get sold easily by display advertis
ing both window and counter and POP displays. 3. Increases market share and cont
rol over market: Because of brand value, each supply chain increases its share i
n
the total market sales and have an edge over competition. 4. Introduction of new
products is rendered easier. Retailers will have no hesitation to recommend a n
ew product introduced as a brand extension of an established brand, to customers
. 5.Branded products have more stable prices: When price differentials are margi
nal, consumers go by quality and if a brand and its quality are recognized by co
nsumers, competition cannot take away its share by price difference alone. 6.Eco
nomical way of doing business: When wholesales and retailers decide to trade on
the established brands of manufacturers, they need not create a new brand. Merit
s to consumers:
1.Brand stands for quality. 2. Consumer protection against cheating. Manufacture
rs print, the MRP, expiry date on the branded packs. Thus consumers cannot be ov
ercharged, and they can avoid buying stale goods. 3.Branded products reflect the
ir lifestyle. Branded products speak of the personality of the product. Consumer
s can go in for such products as reflects their lifestyle. 4.Steady and regular
supply of products: There is a steady supply of branded products in the supply c
hain which is well organized. So the customer is able to get his brands regularl
y and in time. 5.Prevalence of stable prices: Prices of branded products stabili
se over a period of time and the MRP ensures
that consumers are not overcharged by intermediaries. Unlike branded products, u
nbranded ones have no such control. Brand Equity: David Aaker defines brand equi
ty as the unique set of brand assets and liabilities that is linked to a brand.
Brand equity is the net result of all the investments and effort that a marketer
puts into building a brand. Usership of the brand, consumer loyalty towards it,
its perceived quality, positive symbols and favourable associations around the
brand…….a bundle of all these attributes together result in brand equity. By continu
ously monitoring all these aspects, the marketer converts what really is a produ
ct into a brand. And that
is how brand equity is built up. Simply put, brand equity is the value or worth
of the brand. According to the model – BAV(Brand Asset Valuator) developed by Youn
g and Republicam (Y&R) Advertising Agency, based on a survey of 500,000 consumer
s in 44 countries, there are five components of Brand Equity: Differentiation – me
asures the degree to which a brand is seen as different from others. Energy – meas
ures the brand’s sense of momentum. Relevance – measures the breadth of a brand’s appe
al. Esteem – measures how well the brand is regarded and respected.
 Knowledge – measures how familiar and intimate consumers are with the brand. Diffe
rentiation, Energy, and Relevance combine to determine Energised Brand Sgtrength
These three pillars point to the brand’s future value. Esteem and Knowledge toget
her create Brand Stature, which is more of a “report card” on past performance. 28.
Creating brand equity & brand strategy
29. Brand positioning Product Differentiation:
There are two basic routes to marketing strategy – the price route and the differe
ntiation (non-price) route. Differentiation allows the firm to fight on a non-pr
ice plank, with all benefits associated with it. Through differentiation, firms
move to a position where they can claim a premium in the market. Differentiation
can be achieved in many ways. Modi Xerox – collaboration with Rank Xerox. Garden
Silks – design. L&T – highly qualified engineers – superiority in execution. DuPont’s – ch
emical technology. Caterpillar Tractor – distribution channels. Eureka Forbes – Pers
onal selling.
Maximum scope for differentiation remains with the product. While other marketin
g mix Ps go as elaborations of the offer, the product forms its core. Product di
fferentiation has two major planks : 1. Tangible product attributes & functions
(2) Intangible characteristics and emotional associations. Differentiation throu
gh Tangible product attributes Close-up with Gel – Colgate compelled to copy this
differentiation. TTK Prestige with Teflon coating. Promise toothpaste with clove
oil. Vatika with herbal ingredients – cocoanut oil, brahmi, lime, mehandi. New Ar
iel with carezyme (Microshine). 3M scotch magic tape – functional value - long las
ting, invisible, no yellowing, can be written on.
Videocon computer controlled fridge. Standard Furukawa Calci charge batteries. P
aints with insecticide – Vinicide launched by Indecor Paints. Roti Chef – Roti maker
. Dunlop’s Olympus tyres – special tyres for each car. Through packaging: Frooti – tet
rapack Brylcream – handy tube. Harpic – Baygon spray - application friendly nozzle.
Product design : Kinetic Honda scooter – electronic ignition – easy starting. Differ
entiation to ‘kick-start’ Tatan watches –Classic in gold case and leather. Rayale – all
gold and precious
metals. Aurum range in 18 carat gold studded with gems. Microsoft and Ford – throu
gh service. FexEx, DHL, Blue Dart – speed. Diffrerentiation through intangible cha
racteristics & emotional associations Dinesh suitings – ‘prestige’ “Dinesh suitings..the
world in your stride’. Reid & Taylor : the legend of a cloth, James Bond the lege
nd of a man. Luxury suitings – ‘bond with the best.’ Ray Ban glasses – aesthetics ‘RayBan
for exhilaration’. The major task involved in differentiating a product is to iden
tify certain product attributes that can attract
buyers. The attributes may be tangible and real or intangible and psychological.
It may be centering on the product quality and characteristics or image, presti
ge dimension. The success depends on the way it is built in and communicated. Th
e name of the game is to make the product distinct. For this it is necessary to
understand the distinct attributes of competitors’ products. It also requires a th
orough appreciation of the expectations of the buyers and their motives in respe
ct of the product. For differentiation to succeed, it should be perceptible; sho
uld be rooted in competitive advantage. Product Positioning. Positioning is the
act of designing the company’s offering and image to occupy
a distinctive place in the minds of the target market. The goal is to locate the
brand in the minds of consumers to maximize the potential benefit to the firm.
A good brand positioning helps guide marketing strategy by clarifying the brand’s
essence; what goals it helps the consumer achieve, and how it does so in a uniqu
e way. The result of positioning is the successful creation of a customer-focuse
d value proposition, a cogent reason why the target market should buy the produc
t. Brand, Target Benefits Value Produc Custome Propositi t and rs on Compa ny Sc
orpio Lifestyle- Ruggedne A vehicle , SUV, oriented ss, luxury, that
M&M
provides the luxury and comfort of a car, and the adventur e and thrill of a SUV
Indica, Small-car Spaciousn A Car, consumer ess spacious, Tata s who small car
Motors want a without more extra spacious costs vehicle Domin Convenie Delivery,
A good, o’s nce speed hot pizza Pizza minded and good delivered
customers and comfort
Pizza lovers
quality
to your door within 30 minutes of ordering
Positioning is the act of designing the company’s image and value offer so that th
e segment’s customers understand and appreciate what the company stands for in rel
ation to its competitors. -Prof. Philip Kotler. ‘The aim of product positioning is
to create a perception for our brand in the prospect’s mind so that it stands apa
rt from competing brands…We must cover the space in the consumer’s mind as if we had
won a
long-term lease. We must find a strong position in that mind and sit on it…..’ – Sengu
pta. Brand Positioning requires that similarities and differences between brands
be defined and communicated. Specifically, deciding on a positioning requires d
etermining a frame of reference by identifying the target market and the competi
tion and identifying the ideal points-of-parity and points-ofdifference in brand
associations. Points of difference (POD) are attributes or benefits consumers s
trongly associate with a brand, positively evaluate, and believe they could not
find to the same extent with a competitive brand. Associations that make up poin
tsof-difference may be based on any type
of attribute or benefit – say, design, performance or quality. Points of Parity (P
OP), on the other hand, are associations that are not necessarily unique to the
brand but may in fact be shared with other brands. These are of two basic forms
: category POP, and competitive POP. Category POP are associations consumers vie
w as essential to a legitimate and credible offering within a certain product or
service category. They represent necessary –but not sufficientconditions for bran
d choice. Consumers might not consider a travel agency truly a travel agency unl
ess it is able to make air and hotel reservations, provide advice about leisure
packages, and offer various ticket payment and delivery options.
Competitive POP are associations designed to negate competitors’ points-of differe
nce. If, in the eyes of the consumers, a brand can ‘break-even’ in those areas where
the cojmpetitors are trying to find an advantage and achieve advantages in othe
r areas, the brand should be in a strong-and perhaps unbeatable-competitive posi
tion. POP vs POD; For an offering to achieve a point-ofparity on a particular at
tribute or benefit, a sufficient number of consumers must believe the brand is “go
od enough” on that dimension. There is a zone of tolerance or acceptance with POP.
The brand does not literally need be seen as equal to competitors, but consumer
s must feel that the brand does well enough on that particular attribute or
benefit. If so, they may be willing to base their evaluations and decisions on o
her factors potentially more favorable to the brand. With points-of-difference,
however, the brand must demonstrate clear superiority. Consumers must be convinc
ed that Louis Vuitton has the most stylish handbags; Energiser is the longest-la
sting battery; Merrill Lynch offers the best financial advice and planning. The
key to positioning is not so much achieving a POD as achieving POP. 32. PLC mark
eting strategies PRODUCT LIFE CYCLE: A product passes through certain distinct s
tages during its life, and this is called
the Product Life Cycle. The PLC is normally presented as a sales curve spanning
the product’s course from introduction to exit. Four distinct stages in PLC: A typ
ical product passes through four distinct stages during the course of its life a
s shown below: • Market pioneering stage (Introduction) • Market growth stage • Market
maturity stage • Market decline stage Market Pioneering Stage. Now the product is
in its introductory stage. At this stage, there may not be a
ready market for the product. Sales are low; the product undergoes teething trou
bles; profits seem a remote possibility; demand has to be created and developed;
and customers have to be prompted to try out the product. This stage poses seve
ral problems for the marketer. The complexity of the problem and the duration of
the stage depend upon the nature of the product, its price, its technological n
ewness and the consumer’s view of the product. One of the crucial decisions to be
taken at this stage is the pricing decision. Since the product is new, no past d
ata or comparisons are available. The firm opts for one of the following pricing
strategies: (1) market skimming (2) market penetration.
The skimming strategy involves high prices, taking advantage of early entry and
the relative novelty of the product in the pioneering stage. Penetration pricing
involves low pricing, with a view to having good market coverage and eventually
a mass market for the product. This strategy also aims at keeping the competito
rs out. The kind of pricing strategy to be adopted will depend on the characteri
stics of the product, market characteristics and the firm’s objectives. Another cr
ucial area demanding attention at this stage is market development and promotion
. This is the stage when demand has to be created and developed. The firm has to
invest heavily on promotion and wait for the reward. Market Growth Stage.
During the market growth stage, demand for the product increases and the size of
the market grows. The pioneer’s sales and profits go up. By the time the pioneer
thinks of settling down with the product, competitors may enter the scene with s
imilar or improved versions. The pioneer may then have to alter his strategies.
He has to stay ahead of competitors and persuade the customer to prefer his bran
d. He cannot dictate the price to the customer. He cannot dictate the terms to t
he channel members. If he had adopted the price skimming strategy at the pioneer
ing stage, this is the time to reconsider his pricing strategy. He is forced to
follow competition-oriented pricing, because the total market is now being share
d among many firms, though he may still remain the market leader.
Marketing and distribution efficiency become decisive factors at this stage. Dur
ing the growth stage, the firm uses several strategies to sustain rapid market g
rowth: • It improves product quality and adds new product features and improved st
yling. • It adds new models and flanker products i.e. products of different sizes,
flavors and so forth that protect the main product. • It enters new market segmen
ts. • It increases its distribution coverage and enters new distribution channels.
• It shifts from product-awareness advertising to product-preference advertising.
• It lowers prices to attract the next layer of price-sensitive buyers. Market mat
urity stage. In the market maturity stage, demand tends to reach a saturation po
int. There is enough supply from several competing sources. Dealers may dictate
terms to the various competing firms. Price competition becomes intense and the
pioneer tries to distinguish his brand by subtle product differentiation and exp
loits the brand loyalty he has built up. The pioneer feels compelled to communic
ate directly with the consumers, since, by now, dealers have become multi-brand
dealers. The pioneer may try product and packaging modifications, and promotiona
l deals and make special offers to new market
segments so that his sales volume does not shrink. Long-term and short-term mark
eting plans are implemented to possibly prolong the maturity stage; if this is n
ot done, it could easily lead to the stage of decline. Relatively low prices, in
creased marketing costs, keener competition and lesser profits characterize this
stage. Some companies abandon weaker products to concentrate on moreprofitable
and new products. Faced with situation of declining demand for scooters, Bajaj,
one of the largest manufacturers of scooters in the world, focused on motorcycle
s. Three potential ways to change the course for a brand are market modification
, product modification and marketing program modification.
Market modification: A company might try to expand the market for its mature bra
nd by working with the two factors that make up sales volume: Volume = number of
brand users x usage rate per user. Expand number of brand users: Convert non-us
ers; enter new market segments; attract competitors’ customers. Increase the usage
rates among users: Have consumers use the product on more occasions; have consu
mers use more of the product on each occasion; have consumers use the product in
new ways. Product modification: Managers try to stimulate sales through quality
improvement, feature improvement, or style improvement. Marketing Program modif
ication: Product managers might also try to
stimulate sales by modifying marketing program elements such as Prices, Distribu
tion, Advertising, Sales promotion, Personal selling, Services. Market decline s
tage. In the decline stage, sales begin to fall. The demand for the product shri
nks probably due to new and functionally advanced products becoming available in
the market, or the market becoming apathetic to the product. In any case, price
s and margins get depressed, total sales and profits diminish. Some firms try to
link up the sale of these products with some other premium products they have d
eveloped and thus try to stretch the life of the declining product. Firms do per
ceive the impending total decline and prepare for the gradual phasing out of the
product. Successful firms quite
often keep new products ready in queue to fill the vacuum created by the decline
of existing products. The knowledge that a product will pass through such a cyc
le is helpful in evolving proper product policies and promotion and pricing stra
tegies. A marketer can also try to foresee the pattern of life of the proposed p
roduct and plant product, pricing and promotion strategies, so as to shape the l
ife cycle of the product to suit his objectives and requirements. When firms lea
ve the declining market earlier than others, it is tempting for the remaining fi
rms to stay and attract the withdrawing firms’ customers. A company that is in an
unattractive industry but possesses competitive strength should consider shrinki
ng
selectively. A company that is in an attractive industry but has competitive str
ength should consider strengthening its investment. Companies that successfully
restage or rejuvenate a mature product often do so by adding value to the origin
al offering. Strategies for withdrawing can be harvesting or divesting. Harvesti
ng calls for gradually reducing a product or business’s costs while trying to main
tain sales. The first step is to cut R&D costs and plant and equipment investmen
t. The company might also reduce product quality, sales force size, marginal ser
vices, and advertising expenditure. It would try to cut these costs without lett
ing customers, competitors and employees know what is happening. Harvesting can
increase cash flow substantially.
When the company decides to drop a product: if the product has strong distributi
on and residual goodwill, the company can sell it to another firm. If the compan
y can’t find buyers, it must decide whether to liquidate the brand quickly or slow
ly and how much inventory and service to maintain. 33. Pricing strategies and pr
ograms 34. Managing marketing channels &Competitors.