B2B Market Segmentation Variables
Market segmentation is one of the important processes through which the entire target audience can be segregated, as per their similarities, on the basis of characteristics as well as interests. The segmentation process is related with the segregation strategy, which contributes to the development of particular customers’ segments, according their similarity of traits. Companies can segment one specific market through several ways. However, the choices of segmentation strategies can be modified and revised according to the products’ or services’ characteristics. Most often, there are certain variables that are considered as the major factors for business expansion and consistent sustainability, such as geographic locations, business description, behavioral practices and product applications (1Hearst Newspapers, LLC., 2016). In the following sections, the segmentation strategies followed by McDonald’s have been elaborated, as an example.
Geographic Locations: One of the simplest and common segregation strategies is segmentation on the basis of geographical range. If a company has a huge customer base that helps it to assemble within local, regional, national or international locations, it can be considered as worthy to invest in geographic marketing. In geographic segments, population density, size of region and climate factors are the most important factors in order to segregate the similar kind of customers. For instance, McDonald’s offers its customers with seasonal foods, such as sea foods in selective market places, which is based on customer preferences (1Hearst Newspapers, LLC., 2016; 4Hearst Newspapers, LLC., 2016).
Business Description: To segregate the customers’ choices and trends, there are certain factors associated with business description. The type of specific business, the pattern of particular industry, classification of business, size of business region, annual growth of the company and profitability tendency among others, make the difference regarding consumer base and market position. It must be noted in this regard that the size, growth and the profitability of business are directly related with the company or the brand, which may affect the choice of customers at large. McDonald’s offers available seasonal meals for England’s customers as per their preferences to maintain business profitability (1Hearst Newspapers, LLC., 2016; 4Hearst Newspapers, LLC., 2016).
Behavioral Practice: Behavioral practice can develop on the basis of customers’ interests and their experiences with the particular company or the brand of the products and/or services. With this specific strategy, the market segment of a company can possess collective familiarities with the products and/or services wherein the customers’ behaviors are highlighted through their tradition, loyalty and prospects among other common characteristics. Most often, company’s operational practices are based on urgency, occasions, and users’ demand to generate benefits through behavioral approaches. The similar kind of demands is often observed in New England’s customers at seasonal time spans for sea foods. Due to this reason, McDonald’s offers them with a variety of sea foods (1Hearst Newspapers, LLC., 2016; 4Hearst Newspapers, LLC., 2016).
Product Application: The specification of products is also allied with the psychological and demographical aspects of consumers. According to the purchasing requirements of customers, product applications have also been changing over time. Therefore, the purchasing requirements can be deemed as dependent on the demographic and psychological drivers to consumers’ purchase decisions, which can affect the prospects of market segregation as well (1Hearst Newspapers, LLC., 2016).
Characteristics of Service and Method to Reduce the Problems
Dinning etiquette training service is invisible and an intangible aspect of marketing, while its significant traits can affect the consumers’ behaviors during the buying process and the system through which the company can interact with them. In case of the given scenario, the company wants to provide training services to its employees for betterment in their dinning etiquette. In doing so, the following measures can be adopted.
Intangibility: Intangibility is an important characteristic of training service. Customers can purchase the service without seeing, feeling, touching, hearing or smelling it. In case of such aspects, only consumers’ feedbacks and testimonial letters from satisfied clients will be able to make certain changes and reduce intangibility perspectives.
Inseparability: According to the given scenario, the etiquette training service is offered and consumed at the same time. It signifies a situation, wherein production of the service cannot be separated from its consumption. There is no time difference between both of these operations. This in turn has given rise to certain problems regarding quality and value concerns within the operational environment.
Perishability: The term refers to a condition when companies fail to store services after a specified period of time. The problem of service perishability develops when demand is unstable for specific services. Perishability of training services might harm the business at time of non-peak periods.
Variability: Training services are highly variable, because it entirely depends on the trainers’ perspectives. Timing, place and process all are associated with the service provider. Due to this reason, effective training and efficient selection of human resource is required for the standardization of the overall service process.
One method through which the problems of each characteristic can be mitigated has been illustrated in the following steps:
Efficient selection and recruitment for effective trainer
An appropriate training process including training notes, DVDs for dining etiquette learning
Online seminars for dining etiquette training
Provide training services according clients’ needs and timing
3Ps Strategies in Etiquette Training
Physical Evidence: For the dinning etiquette training service, physical evidence can be referred as one of the most important aspects in terms of system standardization. Packaging of entire training service is essential to make a belief towards the authorization that the trainers and other associates are most appropriate for the job role. The dressing etiquette, attitudes, professionalism, satisfied customers’ testimonial letters and attracting brochures may prove effective to draw clients’ attentions towards the offerings.
Process: Procedures and policies of the training services make the scenario effective and efficient altogether. To be noted in this regard, the process of dinning etiquette training service must be valuable to the employees. The responsibility to make the process successful is one of the marketing strategies of dinning etiquette training service providing firm. The training process should also be clear and understandable for employees to improve their dining etiquette.
People: People form the most essential part of etiquette training service allies, emphasizing the selection of right people for service providing. If the training service recruits efficient, skilled, experienced and knowledgeable personnel as a trainer, the dining etiquette training will be successful.
1. Appropriate marketing channel structure for Consumer Products
Chocolate Bars - The most effective marketing channel for chocolate bars is the wholesale channel, as they are mostly ordered in bulks and are inexpensive, widely purchased by people all round the globe.
Text Books - Retailers channel would be the best option in case of delivering text books to the customers (readers) from the publishers with the assistance of the retailers. In this case, the customers get an ample opportunity to select the book of their choice.
New Cars- Cars and automobile products are largely selective and expensive in nature and hence, are not sold in bulks, but are purchased only after minute observations. Hence, retailers channel would be the most appropriate option for marketing new cars.
Handmade designer jewelry – The direct channel is mostly used for marketing the hand-made consumer products as they are mostly manufactured on the direct demand of the customers and do not require the need of any kind of middlemen.
Product Examples for Pricing Strategies
Penetration Pricing- The automobile brand Lexus is giving a stiff competition to the well recognized and demanding brands, such as Mercedes as well as BMW, within the premium luxury targeted market of the US, using the strategy of penetration pricing (Spann et.al., 2009).
Price Skimming- The iPhone, of the widely known brand Apple, follows the price skimming strategy to penetrate the most competitive market of mobile and telecommunications. This strategy is followed by the company since its initial phase of start-up (Spann et.al., 2009).
Product-Line Pricing- Sony implements the product-line pricing strategy by offering its customers with a wide-range of models in the domain of televisions, easily segmented based on their product differences as well as prices (Armstrong & Kotler, 2005).
Captive-Product Pricing- This strategy of pricing is largely used by Gillette, which sells razors at a comparatively lower price, but fixes higher prices for its cartridges or the blades that are used as replacements and the customers are committed to purchase on repeated occasions (Kotler et.al., 2010).
Concept of Positioning For Competitive Advantage
The term ‘Positioning’ refers to the creation of the product reflection in the minds of the target consumers, which helps in differentiating the offers from the similar products produced by them or their competitors. The marketers primarily implement the concept of positioning by targeting the customers, rather than emphasizing the products and hence, the tag lines set from them plays a very significant role. This can be clearly understood from the statement, “World's Best Small Sport Car”, which differentiates the brand image of Porsche from that of the other automobile or car manufacturing companies (Karadeniz, 2009, p. 99). The key objective of brand positioning is to gain a competitive advantage for the company, which in turn proves to be of great significance for communicating the product and distributing them among the target as well as the potential customers in the long run (Karadeniz, 2009). The business organizations also focus on the need to accomplish competitive advantages through effective positioning of its products and the brand as a whole within the potential strategic groups (Baraskova, 2010).
Selection of Target Markets Based On Evaluation of Potential Market Segments
Targeting the most appropriate market for the distribution of a product is actually the second phase of the Segmentation, Targeting and Positioning (STP) approach. This approach not only helps in outlining the strategies for segmenting the target market on the basis of certain characteristics, such as demography, psychology and behavior among others, but also helps in selecting required targeting strategy and positioning the product effectively among them. This approach can therefore be considered as the best option to select the target markets with proper evaluation of the potential segments of customers (Larsen, 2010).
Nicknames for Well-Known Brands
Mc. Donald’s nick name, as “Macca”, is not an exceptional case altogether, as there are also certain other brands to have selected a nick-name for them, such as Charles Shaw wine, which is mostly known among the target customers by its nick name “Two-Buck Chuck”. Another famous brand TARGET also prefers to be nick-named by its fans as “Tar-zhay”. Besides, the globally acclaimed brand names, such as Walmart, Starbucks and Microsoft are also known by their nick-names, Wally World, Four Bucks and Mister Softee respectively. The specialty of a company or a brand to possess a nickname of its own is that it helps largely in creating an emotional bond with its customers, thereby maintaining its cultural foundation in the long run (AOL., 2010).
In today’s world of immense competition, co-branding of the companies dealing in fashion products and high tech goods is considered the best option, as it is able to target a particular high profile segment of customers throughout the globe. In this case, the most expensive brand of luxury goods, Louis Vuitton can be co-branded with Apple Inc., which has the potential to dominate the consumer-tech industry in different parts of the world. This co-branding would prove immensely beneficial in the events to be organized by Louis Vuitton, which will be promoted by the technologically advanced operations of Apple Inc. Similarly, Apple Inc. will also receive continuous support and assistance in serving a varied range of customers with the packaging and promotional offers of Louis Vuitton.
Functions of Product Packaging
There are several essential roles of product packaging, which include physical protection and promotion as the most significant ones. Packaging can protect the products from damages such as dirt, insects, brakeage and dampness. Illustratively, biscuit companies utilize an extra plastic covers for protect the biscuits from brakeage and dampness. Moreover, packaging materials can be attractive for holding consumers’ attention and reminding about the products, which ultimately facilitates their sales prospects at large (Regattieri & Santarelli, 2015). For instance, electronic goods’ packaging can attract consumers by offering information printed on it, which can help give rise to a positive belief among consumers.
a) Price Ceiling
Price ceiling refers to the maximum value that the government sets for specific commodities and services, which can be sold at too high prices. To purchase such commodities, consumers require financial assistance from financial institutions. Price ceiling is quite likely to become a problem when it is set below the market equilibrium rate (Experimental Economics Center, 2006).
Figure: Price Ceiling
Source: (Experimental Economics Center, 2006)
Price floor refers to the minimum value that government sets for goods and services, which can be sold at too low prices. For the low price of certain goods and services, producers need some economic helps, which may only affect when it is set above the equilibrium rate.
Figure: Price Floor
Source: (Experimental Economics Center, 2006)
- It serves price range
- Attempt to find out price floor and price ceiling
- It serves customers’ demands
- Attempt find out price skimming, psychological pricing, price discrimination, penetration pricing, bundle pricing and value-based pricing
Source: (3Hearst Newspapers, LLC. 2016)
a) Channel Members’ Value Addition in Marketing System
- The value attributions make products and services more available and accessible
- Channel members can provide experiences, contacts and specializations
- Provide beneficial aspects by supporting the variable operations, such as promotion, funding, risk taking and physical possessions
Levels of Distribution Intensities
Intensive Distribution: The products can be gathered from producers and stocked in the outlets. Snacks and Cigarettes are examples of such products that intensively distributed.
Selective Distribution: This situation arises when the producers depend on mediators to transmit the products. Lowe’s utilizes selective distribution process.
Exclusive Distribution: This situation arises when the producers select a few mediators to rely regarding transmit the products. Gucci uses exclusive distribution process.
a) The Market and Environmental Indications for Skimming Pricing and Penetration Pricing
Skimming pricing is a strategy wherein a high introducing price is valued for an innovative and distinct product. The price range is changed and reduced after similar kind of product ranges hit in the market place. It is not utilized by every marketer, apart from the following situations, when:
- Product is unique and distinctive as well as its demand is inelastic
- The brand is capable to continue its uniqueness at a time
- Market segment has classic choice
On the other hand, penetration pricing refers to a particular strategic measure wherein the initial value of products are relatively low. The key goal of this strategy is to capture the large market region through low price. It is an attractive option for marketers, when certain conditions are followed.
- Substitution of product is available in market
- Demand elasticity is high
- Firm can increase the production
- Market segment is highly price sensitive
(Spann, Fischer & Tellis, 2009)
Comparison of Push and Pull Promotion
Promotional strategy that offers products to the consumers
Opposite of push, it attracts customers towards the products
Marketers push the products or services towards target customers
Marketers pull customers towards specific brands or products
Common sales tactics
Showrooms, retailers, point-of-sale displays
Mass media promotion, advertisements, word-of-mouth
It is able to increase visibility and short term sales
It is capable of creating loyal customer base
Source: (2Hearst Newspapers, LLC., 2016)
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Armstrong, G & Kotler, P 2005,. Marketing: An introduction, Pearson Education, India.
Baraskova, J 2010, ‘Strategic positioning and sustainable competitive advantage in food industry’, Aarhus School of Business, pp. 1-72.
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3Hearst Newspapers, LLC. 2016, The Differences between Value-Based Pricing & Cost-Based Pricing, Advertising & Marketing, viewed 10 October 2016, <https://smallbusiness.chron.com/differences-between-valuebased-pricing-costbased-pricing-23095.html>
4Hearst Newspapers, LLC 2016, Examples of Geographic Segmentation, Advertising & Marketing, viewed 10 October 2016, <https://smallbusiness.chron.com/examples-geographic-segmentation-61612.html>
Karadeniz, M., 2009, ‘Product positioning strategy in marketing management’, Journal of Naval Science and Engineering, vol. 5, iss. 2, pp. 98-110.
Kotler, P. et.al. (13) 2010, Principles of marketing: A South Asian perspective, Pearson Education, India.
Larsen, N 2010, ‘Market segmentation - A framework for determining the right target customers’, Aarhus School of Business, 1-29.
Spann, M, Fischer, M & Tellis, G, J 2009, ‘Skimming or penetration? Strategic dynamic pricing for new products’, Marketing Seminars, pp. 1-52.
Regattieri, A. & Santarelli, G 2015, ‘The important role of packaging in operations management’, InTech Operation Management, pp. 184-214.