Page 513 - Encyclopedia of Business and Finance

eobf_M 7/5/06 3:15 PM Page 490

Marketing

customers because allowing products to sell themselves MARKET SEGMENTATION
was not effective. Rather, the marketing concept philoso- In order to better manage the marketing effort and to sat-
phy was adopted by many firms in an attempt to meet the isfy the needs and wants of customers, many firms place
specific needs of customers. Proponents of the marketing consumers into groups, a process called market segmenta-
concept argued that in order for firms to achieve their tion. In this process, potential customers are categorized
goals, they had to satisfy the needs and wants of con- based on different needs, characteristics, or behaviors.
sumers. Market segments are evaluated as to their attractiveness or
The relationship era began in the 1990s and contin- potential for generating revenue for the firm. Four factors
ues today. The thrust of the relationship era is to establish are generally reviewed to determine the potential of a par-
and foster long-term relationships with both customers ticular market segment. Effective segments are measura-
and suppliers. These long-term relationships with both ble, accessible, substantial, and actionable. Measurability
customers and suppliers add value to the marketing is the degree to which a market segment’s size and pur-
process that benefits all affiliated parties. chasing power can be measured. Accessibility refers to the
degree to which a market segment can be reached and
served. Substantiality refers to the size of the segment in
MARKETING IN THE OVERALL
terms of profitability for the firm. Action ability refers to
BUSINESS
the degree to which a firm can design or develop a prod-
There are four areas of operation within all firms:
uct to serve a particular market segment.
accounting, finance, management, and marketing. Each
Consumer characteristics are used to segment mar-
of these four areas performs specific functions. The
kets into workable groups. Common characteristics used
accounting department is responsible for keeping track of
for consumer categorizations include demographic, geo-
income and expenditures. The primary responsibility of
graphic, psychographic, and behavioral segmentation.
the finance department is maintaining and tracking assets.
Demographic segmentation categorizes consumers based
The management department is responsible for creating
on such characteristics as age, ethnicity, gender, income
and implementing procedural policies of the firm. The
level, and occupation. It is one of the most popular meth-
marketing department is responsible for generating rev-
ods of segmenting potential customers because it makes it
enue through the exchange process. As a means of gener-
relatively easy to identify potential customers.
ating revenue, marketing objectives are established in
alignment with the overall objectives of the firm. Categorizing consumers according to their locations
is called geographic segmentation. Consumers can be seg-
Aligning the marketing activities with the objectives of
mented geographically according to the nations, states,
the firm is completed through the process of marketing
regions, cities, or neighborhoods in which they live, shop,
management. The marketing management process involves
and/or work. Psychographic segmentation uses con-
developing objectives that promote the long-term compet-
sumers’ activities, interests, and opinions to sort them into
itive advantage of a firm. The first step in the marketing
management process is to develop the firm’s overall strate- groups. Social class, lifestyle, or personality characteristics
gic plan. The second step is to establish marketing strategies are psychographic variables used to categorize consumers
that support the firm’s overall strategic objectives. Lastly, a into different groups. In behavioral segmentation, mar-
marketing plan is developed for each product. Each prod- keters divide consumers into groups based on their knowl-
uct plan contains an executive summary, an explanation of edge, attitudes, uses, or responses to a product.
the current marketing situation, a list of threats and oppor- Once the potential market has been segmented, firms
tunities, proposed sales objectives, possible marketing need to station their products relative to similar products
strategies, action programs, and budget proposals. of other producers, a process called product positioning.
Market positioning is the process of arranging a product
The marketing management process includes analyz-
ing marketing opportunities, selecting target markets, so as to engage the minds of target consumers. Firm man-
agers position their products in such a way as to distin-
developing the marketing mix, and managing the market-
guish them from those of competitors in order to gain a
ing effort. In order to analyze marketing opportunities,
competitive advantage in the marketplace. The position of
firms scan current environmental conditions in order to
a product in the marketplace must be clear, distinctive,
determine potential opportunities. The aim of the mar-
and desirable relative to those of its competitors in order
keting effort is to satisfy the needs and wants of con-
for it to be effective.
sumers. Thus, it is necessary for marketing managers to
determine the particular needs and wants of potential cus-
tomers. Various quantitative and qualitative techniques of COVERAGE STRATEGIES
marketing research are used to collect data about potential Marketing managers use three basic market-coverage
customers, who are then segmented into markets. strategies: undifferentiated, differentiated, and concen-
490 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION