MARKET SEGMENTATION, POSITIONING AND DEMAND PROJECTION

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CHAPTER 4

• MARKET SEGMENTATION, POSITIONING AND DEMAND
  PROJECTION

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Important Topics of this Chapter

• Successful segmentation strategies in business
  market.
• Differences between macro and micro segmentation.
• Evaluation potential business market.
• Position strategies in business market.
• Demand projections and sales forecasting
  techniques.

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Market Segmentation Strategy

• It is dividing the market into distinct group of
  customers with similar requirements
• Procedures
• Market analysis
• Market selection
• Marketing management

Identify market needs
Segmentation and targeting
Marketing mix decision
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Why Segment Business Market

• It is complex and heterogeneous
• Distinct differences exits among buying policies,
  procedures and practices
• It allows to develop more specialized products
  for the clients
• it is more attuned to customer needs
• It is more effective way to use resources
• It gives better direction for creating marketing
  mix elements

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Strategies for Business Segmentation

• Undifferentiated Marketing Strategy
• Differentiated Marketing Strategy
• Cost factor
• Product modification cost
• Production cost
• Administrative cost
• Inventory cost
• Promotion cost
• Concentrated Marketing Strategy
• One or few segments

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Approaches to Market Segmentation

• Macro Segmentation
• Geographic characteristics
• Demographic characteristics
• Observable buying characteristics
• Micro Segmentation
• Attitudes of buying influences
• Similarity in buying motives
• Similarity in decision making style
• Life-style of buying influences
• Self-image of buying influences

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A Research Findings

• Macro Segmentation
• It is less important, but very easy to find data.
• Micro Segmentation
• It is very important, but very difficult to find
  information.
• Conclusion
• Try to use micro segmentation factors as much as
  possible, otherwise segmentation will not be a
  perfect one.

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Approaches to Market Segmentation (cont.)

• The Nested Approach
• It is a balance between macro and micro
  segmentation and based upon
• Purchasing function-centralized or decentralized
• Power structure-engineering Vs. marketing
• Buyer-seller interaction- a link between
  suppliers and customers
• Purchasing policies-biding Vs. market prices
• Purchasing criteria-need and wants/benefits

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Nested Segments

• Computer Industry OEM
• Over 500,000,000 in Sales
• Uses Microsoft Windows
• Centralized Purchasing
• Single Source/JIT
  Purchases

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Segmenting Business Market

• Type of Economic Activity
• Agricultural, manufacturing, retail.
• NAICS.
• Size of Organization
• Volume of shipment, number of employees ,total
  sales volume.
• Geographic location
• Global.
• Domestic.
• Product Usage
• Light, moderate or heavy.
• Structure of the procurement Function
• Centralized or decentralized.

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Evaluating Potential Market Segments

• Market profitability
• Market forces that determine attractiveness and
  long-run profitability of market or segments
• Industry Competitors
• Intensity of rivalry among existing firms.
• Potential Entrants
• Threat of new entrants
• Substitutes
• Threat of substitutes
• Buyers
• Bargaining power of buyers
• Suppliers
• Bargaining power of suppliers
• Above all SWOT analysis is necessary when a firm
  decides to enter a new market segment.

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Elements of Industry Structure

• New Entrants
• Suppliers
  Buyers
• Substitutes

Industry competitors Intensity of rivalry
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Product Positioning Strategy

• It is a way that the product/service is defined
  on product attributes
• It is favorable reception in comparison with
  competitors products
• It is an image decision, and based upon product
  features to emphasize
• Perceptual mapping is used to decide about
  product positioning

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Approaches to Positioning Business Products

• Technology base
• High technology companies.
• Price base
• Lowest production and distribution cost.
• High margin.
• Quality base
• High quality/low price.
• Image base
• Distinctive quality perception
• Distribution base
• Innovative and efficient.
• Federal Express.
• Service base
• Technical assistance, repair, information and
  financing.

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Business Demand Projections

• Market potential

Sales Potential
Sales Forecast
Market Demand
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Common Forecasting Problems

• Forecasting Mystique
• Many firms are untrained in forecasting area
• Forecasting Accuracy
• 50 art and 50 science
• Forecasting Inconsistency
• Modification and adjustment might be necessary
• Forecasting Accountability
• Forecasters may not live with their decision
• Forecasting implementation

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Selective Forecasting Methods

• Qualitative
• Jury of Executive Opinion
• Sales Force Composite
• Survey of Buyer Intentions
• Delphi Method-Expert opinion
• Quantitative Approaches
• Time Series Analysis
• Moving average
• Exponential smoothing
• Adaptive Control
• Box Jenkins

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Selective Forecasting Methods (cont.)

• Casual techniques
• Regression
• Econometrics
• Leading Indicators
• Diffusion Index
• Input-Output analysis
• Life-cycle analysis