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Summary Marketing Fundamentals chapter 6
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Summary Marketing 6: Market segmentation and positioningTo be sure that we are focusing on
the right target market, a strategy of
market segmentation is essential.
This boils down developing a well-
planned marketing strategy focusing
on just a part of the total market.
6.1 Defining the market
Markets are often identified by type
of customers – groups of people or
organisations with needs and wants
that companies can satisfy by
providing products and services.
In the market arena companies are
competing and selling products for
the same needs of the customer.
Generic need satisfaction contains
the need to relax and enjoy leisure
time.
When developing a marketing plan we also assess the market potential or the potential market: an
estimate of the maximum possible sales of a product or service in the entire market within a
specified time frame with optimal marketing efforts from all suppliers.
The effective demand is the total number of products currently sold or in the case of durable goods,
products that have already been purchased.
The potential demand is the number of products over and above current sales that suppliers could
sell between them, assuming they have developed the optimal marketing mix.
The effective demand plus the potential demand make up the market potential.
Fast moving goods always keep track of repeat purchases. Only this will indicate whether the market
has accepted the product and if consumers are becoming loyal to the brand.
Durable goods are more expensive like a TV.
We distinguish three submarkets or types of demand that together form the effective demand: the
initial demand, replacement demand and additional demand.
Initial demand originates with those who do not own the product and buy it for the first
time.
, Replacement demand is the demand on the part of those who already own the product but
buy a new one to replace it.
Additional demand is the demand on the part of those who already own the product but buy
another one.
The sum total of the initial demand plus the additional demand for a particular product or brand
during a certain period is known as extended demand. If we add the extended demand to the
replacement demand, we arrive at the total sales or the total demand for the product.
When the initial demand starts to fall a company needs to apply product differentiation or product
innovation strategy in order to increase the market share.
6.2 What is marketing segmentation?
Market segmentation: a demand-oriented approach that divides the total market for a product into
smaller subsets of customers having similar needs or behaviours, and then modifying the firm’s
products and marketing strategies to fit the needs and wants of these individual, homogenous
market segments rather than those of the aggregate market.
1 Segmenting the market: dividing a larger, heterogeneous market –based on one or more
meaningful and shared characteristics – into smaller, fairly homogeneous groups of
people or companies that respond similarly to a marketing strategy developed especially
especially for them. By marketing research groups of people can be segmented in to
market segments.
2 Targeting: assessing the attractiveness of each of the identified segments that meet
certain criteria, and selecting one or more of these market segments on which to
concentrate when entering the market.
3 Positioning: finding ways to make the company (or its products) stand out – in the
customer’s perception – from competitors.
The costs of maintaining inventory increase. With market segmentation, we have to maintain a
safety stock of each product in order to be able to absorb unforeseen fluctuations in demand. This
requires capital, promotion etc.
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