Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage.
Market segmentation is a concept in economics and marketing. A market segment is a sub-set of a market made up of people or organizations with one or more characteristics that cause them to demand similar product and/or services based on qualities of those products such as price or function. A true market segment meets all of the following criteria: it is distinct from other segments (different segments have different needs), it is homogeneous within the segment (exhibits common needs); it responds similarly to a market stimulus, and it can be reached by a market intervention.
The term is also used when consumers with identical product and/or service needs are divided up into groups so they can be charged different amounts. The people in a given segment are supposed to be similar in terms of criteria by which they are segmented and different from other segments in terms of these criteria. These can broadly be viewed as ‘positive’ and ‘negative’ applications of the same idea, splitting up the market into smaller groups.
The 4 P’s of Marketing
These are the basic elements of the MARKETING PLAN for any business:
The business has to produce a product that people want to buy. They have to decide which ‘market segment’ they are aiming at – age, income, geographical location etc. They then have to differentiate their product so that it is slightly different from what is on offer at present so that people can be persuaded to ‘give them a try’.
Customers have to be made aware of the product. The two main considerations are target market and cost. A new business will not be able to afford to advertise on national television, for instance and would not wish to because its market will be local to start with. Leaflets, billboards, advertisements in local newspapers, Yellow Pages and ‘word of mouth’ would be more appropriate.
The price must be high enough to cover costs and make a profit but low enough to attract customers. There are a number of possible pricing strategies. The most commonly used are:
- Penetration Pricing – charging a low price, possibly not quite covering costs, to gain a position in the market. This is quite popular with new businesses trying to get a ‘toehold’.
- Creaming – the opposite to penetration pricing, this involves charging a deliberately high price to persuade people that the product is of high quality. Luxury car makers often use this strategy
- Cost Plus Pricing – this is the most common form of pricing. Costs are totalled and a margin is added on for profit to make the total price.
The business must have a location that it can afford, and that is convenient and suitable for customers and any supplier.