Assignment Marketing Col Mba Semester 1

Assignment No. 1

MARKETING MANAGEMENT (5565) Executive MBA/MPA ZAHID NAZIR Roll.No. AB523655 Semester:Autumn2008

Question 1 Marketing emphasis consumer orientation as well satisfaction in order to maximize profit. However marketing concept is taken in terms of selling and advertising? Distinguish marketing with selling and advertising within the context of Pakistan environment. Marks: 20

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MARKETING When a question is asked from managers that what is marketing, most of them answered that marketing is selling and advertising. Although this is true but it is important to understand that marketing is much more than selling and advertising. The American Marketing Association define the marketing as: “ Marketing is the performance of business activities that directs the flow of goods and services from producer to consumer or user” There are some more definition of marketing. The better definitions are focused upon customer orientation and satisfaction of customer needs. “ A human activity directed at satisfying needs and wants through exchange processes.” Kotler. “Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably” The Chartered Institute of Marketing (CIM). The CIM definition looks not only at identifying customer needs, but also satisfying them (short-term) and anticipating them in the future (long-term retention). “The right product, in the right place, at the right time, at the right price” Adcock.

MARKETING CONCEPT : It is a fundamental idea of marketing that organizations survive and prosper through meeting the needs and wants of customers. This customer focused philosophy is known as the 'marketing concept'. Page 3 of 33

The marketing concept is a philosophy, not a system of marketing or an organizational structure. It is founded on the belief that profitable sales and satisfactory returns on investment can only be achieved by identifying, anticipating and satisfying customer needs and desires. Businesses do not undertake marketing activities alone. They face threats from competitors, and changes in the political, economic, social and technological environment. All these factors have to be taken into account as a business tries to match its capabilities with the needs and wants of its target customers. An organization that adopts the marketing concept accepts the needs of potential customers as the basis for its operations. Success is dependent on satisfying customer needs. “A need is a basic requirement that an individual wishes to satisfy.” People have basic needs for food, shelter, affection, esteem and selfdevelopment. Many of these needs are created from human biology and the nature of social relationships. Customer needs are, therefore, very broad. While customer needs are broad, customer wants are usually quite narrow. “A want is a desire for a specific product or service to satisfy the need.” Consider this example: Consumers need to eat when they are hungry.

What they want to eat and in what kind of environment will vary greatly. For some, eating at McDonalds satisfies the need to meet hunger. For others fast food (tikka boti) meets the need. Some consumers are never satisfied unless they have drink (Coke or Pepsi) with food. Consumer wants are shaped by social and cultural forces, the media and marketing activities of businesses. This leads to another important concept - that of customer demand: Page 4 of 33

“Consumer demand is a want for a specific product supported by an ability and willingness to pay for it”. For example, many consumers around the globe want a Mercedes. But relatively few are able and willing to buy one. Businesses therefore have not only to make products that consumers want, but they also have to make them affordable to a sufficient number to create profitable demand. Businesses do not create customer needs or the social status in which customer needs are influenced. It is not McDonalds that makes people hungry. However, businesses do try to influence demand by designing products and services that are • Attractive • Work well • Are affordable • Are available Businesses also try to communicate the relevant features of their products through advertising and other marketing promotion.

MARKETING , SELLING & ADVERTISING: One of the most misunderstood aspect of the marketing process is the distinction between marketing, advertising and selling. Marketing: is the overall collection of tools to build your product. Marketing has one overall objective i.e. identifying, anticipating and satisfying customer requirements profitably and building long term relation with customers. Some of the tools of marketing are: • Advertising • Public Relations • Direct Mail • Personal Sales • Internet • Print Promotions Page 5 of 33

• Education In Pakistan companies or organization like Shaukat Khanam, Edhi Welfare, DHL, Gourmet Bakers, Fazal Din Pharma etc are the good example of marketing focused companies. They use all the marketing tools to build their products or services. Advertising: can be defined as, “Advertising is paid form of non-personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, television or radio by an identified sponsor". Advertising is a method of mass promotion i.e. a single message can reach to large number of peoples. Advertising promotes the distinguishing features, benefits and advantages of product or service to a wide market. The goal of the advertising is to bring in the valuable leads for the selling process to take place. In Pakistan companies like Pepsi Cola, Lever Brothers, Mobile operators have more focus on advertising, covering large segments of people. Selling: can be defined as, “Selling is oral communication with potential buyers of a product with the intention of making a sale. The personal selling may focus initially on developing a relationship with the potential buyer, but will always ultimately end with an attempt to "close the sale" Once the advertising has attracted the potential buyer, the selling process begins. This is done either by personal sales or the use of point of purchase materials (i.e. store display, video demonstration etc). Selling should come into play after a prospect has been established to be right for the product or service.

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Start

Focus

Means

Ends

Profit Factory Products Selling & through Promotion Sales Volume (A)THE SELLING CONCEPT

Target market

Customer Integrated needs marketing

Profit Through Customer satisfaction

(B) THE MARKETING CONCEPT

References: http://www.pdfcoke.com http://tutor2u.net/business/marketing/marketing_concept.asp http://ezinearticles.com Marketing Management (AIOU)

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Question 2 Discuss the significance of marketing at macro and micro level for developing countries like Pakistan, Bangladesh and Sri Lanka? Marks: 20

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MICROMARKETING: The practice of tailoring products, brands (micro brands), and promotions to meet the needs and wants of micro segments within a market is called micromarketing. Micromarketing contrasts with mass marketing and targets the specific interests and needs of individuals by offering customized products or services.

MACROMARKETING: When the involvement of government in the marketing and distribution of ideas, essential goods and services is significant, it is called macro marketing. It is the study of marketing processes, activities, institutions, and results from a broad perspective such as a nation, in which cultural, political, and social, as well as economic interaction are investigated. It is marketing in a larger context than any one firm.

SIGNIFICANCE OF MACRO AND MICRO-MARKETING FOR DEVELOPING COUNTRIES: Marketing effort both on the part of the firm as well as state i.e. both at macro and micro level is relevant to the planned economic growth of the developing countries. Economic situation in a developing country is characterized by a scarcity of essential goods, services and ideas, price inflation and excessive unemployment. So marketing effort is needed at a minimal level in a developing economy so that most of the economic resources can be mobilized for additional production of ideas, goods and services resulting in greater employment. Governments in developing countries like Pakistan, Bangladesh and SriLanka are involved in the marketing activities like setting prices of food grains and industrial raw materials, setting maximum wholesale and retail prices of scarce goods, regulating the physical movement to ensure the smooth flow of essential goods and even influencing the decisions related to distribution and advertisement. Page 9 of 33

Marketing has major role in the planned economic growth of developing countries.

GENERAL ROLE OF MARKETING IN DEVELOPING COUNTRIES • The first and most important role of marketing is that it stimulates potential aggregate demand resulting in enlarged market size. It helps in the economic growth of the country through stimulation of demand, people are motivated to work harder and earn additional money to buy various ideas, goods and services being marketed. An additional advantage is the utilization of maximum resources. • Another important role of marketing is that it helps in the discovery of persons who organizes, operates, and assumes the risk for a business venture because marketing is a multiplier of managers and entrepreneurs. In Pakistan most of the industrialists began their business career as distributors and wholesalers, by the time they gained the experience and ventured into the more risk field of manufacturing and production activities. • Marketing at both levels also helps in sustaining and improving the existing level of employment. When a country advances economically, it requires more and more people to distribute goods and relatively less people to produce them. From the employment point of view, production is relatively less significant than marketing as marketing also have associated services like transportation, finance, communication, insurance etc. One of the excellent example how the macro marketing helps in improving the economy of a country is Grameen Bank Bangladesh. Grameen Bank is launched by Prof. M. Younas at national level and its objectives are: • extend banking facilities to poor men and women • eliminate the exploitation of the poor by money lenders • create opportunities for self-employment for the vast multitude of unemployed people in rural Bangladesh Today Grameen Bank is owned by the rural poor whom it serves. Borrowers of the Bank own 90% of its shares, while the remaining 10% is owned by the government. Page 10 of 33

Sri Lanka's population has a literacy rate of 92%, higher than that expected for a third world country. Sri Lanka has one of the highest literacy rates of South Asia. This becomes possible due to the macro marketing about education at national level. Another example of macro marketing from SriLanka is Environmental Foundation Limited. EFL is a non-profit public interest law group, whose mission is the conservation and enhancement of the natural environment through legal means. EFL has established itself as a driving force in promoting environmental justice for the people of Sri Lanka, particularly poor and disadvantaged communities through the provision of mediation, representation and advocacy services, and legal and scientific support, in environmental matters. In Pakistan, significance of macro marketing is evident especially in health and agriculture sector. Vaccination programs, AIDS awareness, guidance for farmers at national level are examples. Now a days promotion of energy saver lights to conserve the energy is also part of macro marketing. So it is evident from the above examples that marketing has major role in the planned economic growth of developing countries.

Reference: Marketing Management (AIOU) http://www.grameen-info.org/index http://en.wikipedia.org/wiki/Education_in_Sri_Lanka

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Question 3 a). What are the 7 Ps of service marketing? Explain each element with the help of example? Marks: 10

b). Discuss image building features of products in detail? Marks: 10

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(a)

SERVICE MARKETING A service is the action of doing something for someone. It is largely intangible (i.e. not material). A product is tangible (i.e. material) since you can touch it and own it. A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly perishes. For example a person goes to a restaurant one day and has excellent service, and then returns the next day and have a poor experience. So marketers talk about the nature of a service as: Inseparable - It can not be separated from the provider of service and point where it is consumed. For example, you cannot take a live theatre performance home to consume it. (a DVD of the same performance is a product, not a service). Intangible – It does not have a real, physical presence like products. For example, motor insurance may have a certificate, but the financial service itself cannot be touched i.e. it is intangible. Perishable - in that once it has occurred it cannot be repeated exactly in the same way. Variability- As humans are involved in service provision, two services can not be completely identical, there must be variation in it. For example, returning to the same garage time and time again for a service on your car might see different levels of customer satisfaction, or speediness of work. Right of ownership - You cannot sell a service once it has been consumed, and do not take ownership of it. For example, an mechanic may service your air-conditioning, but you do not own the service, the engineer or his equipment.

MARKETING MIX The “Marketing Mix” is a term used to describe the combination of tactics used by a business to achieve its objectives by marketing its products or services effectively to a particular target customer group. It is also referred Page 13 of 33

to as the “4 Ps” i.e. Product, Price, Promotion and Place, or the “7 Ps” , the 4 Ps with the addition of People, Process and Physical Evidence. Why it is Important Basic objective of the marketing is to ensure that they are delivering: • The right product / service to • The right person at • The right price in • The right place and at • The right time • A real example is the launch of Wateen’s broadband service. We will discuss this example with each element of 7 Ps given below:

PRODUCT:

• • • •

Marketing is about identifying, anticipating and satisfying customer needs. There is no point in developing a product or service which nobody wants to buy. A successful company will find out what are the needs or wants of customer and then they will develop the right product with right quality to meet the customer’s present and future needs. The perfect product must have value in the eyes of customer. We must give our customer what they want, not what we think they want. A product does not have to be intangible - an insurance policy can be a product. There should be a system in place to have regular feedbacks from the customers about their product, supporting services etc to evaluate the changing needs of customer. Do not go too far with product quality i.e. don’t try to sell a BMV when the customer wants a Suzuki Mehran.

Example:

Due to the day by day increasing use of internet and cable TV, Wateen has decided to launch its broadband service including internet, telephone and TV service. Page 14 of 33

Initially this service was launched in Defence Lahore by identifying and anticipating the needs of customers living there. They are regularly getting feedback from the customers to improve the quality of their services. Before launching their service, they were very well aware of the same services provided by other companies.

PRICE: Only those products or services have worth for which a customer is prepared to pay. The price also needs to be competitive but this does not mean the cheapest. It is the only element of marketing mix that generates revenue, everything else represents a cost. • Think the price as a “cost” for customer; this will help to understand why it is so important. • Price positions you in the market – the more you charge, more will be the expectations of customer. • What your competitors charge. Look at your competitor’s web sites, or simply phone them and ask for a price list or quotation. Example:

Continuing the above example, Wateen has set very competitive price for their services keeping in view the target group of customers and looking at the prices of their competitors. Prices are neither too high nor too low but are very competitive with great quality.

PLACE: The place where customer buy a product and the means of distributing your product to that must be appropriate and convenient for the customer. The product must be available at the right place, at right time and in the right quantity while keeping the inventory to a acceptable level. • Customers survey has shown that delivery performance is one of the most important criteria is supplier’s approval. • Place also means the way you display your product for customers. This can be a shop window or via the internet.

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Example:

Wateen has opened their franchise outlets at prominent places like famous markets where the flow of target customers is excessive.

PROMOTION: Promotion is the way of communication that what they are offering to customers. It includes activities like branding, advertising, PR, sales management, special offers and exhibitions. Promotion must gain attention, be appealing and should give consistent message emphasizing why the customer should buy their product rather than someone else. • Promotion should communicate the benefits of product or services that a customer can obtain and not just the features of that product or service. • Whether your promotional material is a sheet or a complex brochure, folder or catalogue, it must grab the attention of customer. Should be easy to read and enable the customer to decide why he should buy that product or service. Example:

Wateen has promoted their service effectively through advertisements in print media and electronic media. They have also provided their free internet service at airports so that people can experience their service. In addition to this they also used direct marketing and personal selling to different companies and offices.

PEOPLE: Anyone who comes in contact with the customer will make an impression which is of great significance. The reputation of product or service rests in people’s hand. Therefore they must be properly trained, well motivated with positive attitude. • There should be right people for the right job. • Many customer can not separate the product or services from the staff members who provides it. This shows the importance of people.

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• The level of after sale service add value in the service provided. It is sometimes more important than the price for customers once they started using the service. Example:

Wateen has a highly trained pool of engineers for after sale service. They are always a phone call away from the customers. They have chosen the right people for their job. This adds a great value in their service and earns reputation for the company.

PROCESS: The process of giving the service and people dealing with are very crucial for customer satisfaction. Issues such as waiting, quality of information given and helping behavior are vial to keep the customer happy. • Customers are not interested how the business runs. What matters to them is how the system works. • Do customers have to wait? Are they kept informed? Are your people helpful? Is your service efficiently carried out? These are some important points which keep the customer happy. Example:

Wateen’s Process of giving the service is very simple and convenient. On a single phone call, the company’s engineer visits your site. All the process for getting the service is completed in a single visit.

PHYSICAL EVIDENCE: A service can not be experienced until it is delivered. It means that it is always a risk to buy a product which is intangible. This fear of customers can be reduced by providing the experience of their service before they buy it. Case studies and testimonials can also be helpful. Facilities such as clean, tidy and decorated reception area can also help to build customer confidence in the service.

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Example:

Wateen provides the opportunity to customers to feel the quality of their service before they buy it. Company has very well furnished offices and franchises which also help in building the customer’s confidence.

Each of the “elements” of marketing mix is key to the success. No one element can be considered in isolation. For example it is not possible to develop a product or service with out considering its price or how it will reach the customer. This process is called marketing planning.

Reference: www.cim.co.uk http://ezinearticles.com http://www.marketingteacher.com

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(b)

PRODUCT Product can be defined as: "Anything that is capable of satisfying customer needs" This definition includes both physical products (e.g. cars, Electronics, Households, etc) as well as services (e.g. insurance, banking, private health care). Products can be classified into two types i.e. i)

ii)

Consumer Products: these are used by ultimate consumers or households and can be used without further commercial processing. Industrial Products: these are sold primarily for use in manufacturing other products or for rendering some service.

Features that build the image of products in the eyes of customer are very critical and must be considered while introducing a new product. These features are: i).

Branding

ii).

Quality

iii).

Packaging

iv).

Labeling

v).

Positioning

vi).

People

vii).

Process

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i).

BRANDING One of the most important features which a product should have is its brand name. brand can be defined as: “Name, term, sign, symbol or design, or a combination of them intended to identify the products and services of one business or group of businesses and to differentiate them from those of other competitors” For example: The Nike brand name is known throughout the world, people can identify the name and logo even if they have never bought any of their products. This is an important feature of product because the objectives that a good brand will achieve are: a). Delivers the message clearly b).

Confirms your credibility

c).

Connects your target prospects emotionally

d).

Motivates the buyer

e).

Concretes User Loyalty

To succeed in branding one must understand the needs and wants of their customers and prospects. Some examples of brand are Nokia, Bata, Service, Nike, Gourmet, KFC, McDonalds, Pepsi, Coke, Macleans, Pentene shampoo etc.

ii).

PACKAGING Packaging is the art, science and technology of preparing goods for distribution, storage, sale and use. Packaging is an important feature of product as it performs the following functions.

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a).

Protection: Packaging gives protection to the enclosed object against temperature, moisture, compression, vibration etc.

b).

Appeal: Packaging should be good looking as it enhance the overall image of product in the eyes of customers. It plays major role in the product growth.

c).

Performance: Packaging must be able to perform the intended task for which it is designed. This aspect becomes very important in case of some packaging. For example in case of respiratory inhalers is not only a package but also an engineering device. If the package does not function, the product itself becomes totally useless.

d).

Convenience: Packages should have features which add convenience in distribution, handling, stacking, display, sale, opening, reclosing, use, and reuse.

e).

Cost Effectiveness: Packaging should be cost effective i.e. its cost should not be too high as this will increase the price of product nor it is too low that it doesn’t add any value in the final product.

iii). LABELING Labeling is any written, electronic, or graphic communications / instructions on the separate but associated label. This is an important feature as labels have instructions about usage and storage of product.

iv). POSITIONING Positioning is how a product appears in relation to other products in the market. This reflects the value of brand in the mind of customer. Therefore each brand should be “positioned” in a particular class or Page 21 of 33

segment. For example Honda Accord positioned as a luxury brand whereas Suzuki Mehran positioned as economic brand. The position of the brand has to be carefully maintained. Rolex watches are positioned as luxury items and becomes a symbol of accomplishment in life. If Rolex reduces its prices, it will reduce its brand cachet and sales.

v).

QUALITY The quality of product is very critical for some products. Failure in maintaining the quality will lead to customer dissatisfaction. In the manufacturing industry it is commonly stated that “Quality drives productivity.” Improved productivity is a source of greater revenues, employment opportunities and technological advances.

vi). PEOPLE Anyone who comes in contact with the customer will make an impression of product which is of great significance. The reputation of product or service rests in people’s hand. Therefore they must be properly trained, well motivated with positive attitude and there should be right people on the right job.

vii). PROCESS The process starts from the manufacturing to delivery to the customers. There must be assurance of continuity of supply.

References: http://www.tutor2u.net/marketing/default.html http://marketing.about.com/cs/brandmktg/a/whatisbranding.htm http://en.wikipedia.org/wiki/Packaging_and_labelling Marketing Management (AIOU) Page 22 of 33

Question 4 A product passes through specific sequences of stages corresponding to the life phases of infancy, growth, maturity and decline. Explain each stage of product life cycle by quoting an example of a product that you think has passed through different stages of PLC? Marks: 20

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THE PRODUCT LIFE CYCLE (PLC) Product is defined as “Anything that is capable of satisfying customer needs” This definition includes both physical products (e.g. cars, mobiles, electronics etc) as well as services (e.g. insurance, banking, doctors, telecommunication services). The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted (Introduction), it begins to sprout/grow (growth), it shoot outs leaves and puts down roots as growing to adult (maturity), after an long time the adult plant begins to shrink and die out (decline). Same is true in case of products as after product development it is introduced or launched into the market, it gains more and more customers as it grows, eventually market stabilizes and product becomes mature, then after a period of time the product is overtaken by development and the introduction of superior competitors, its goes into decline and eventually withdrawn. Product Life cycle can be defined as “The stages through which individual products develop over a period of time is called Product Life Cycle”. The classic product life cycle has four stages i.e. i). ii). iii). iv).

Introduction Growth Maturity Decline

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Sales and Profit

The Product Life Cycle (PLC)

Introduction

Growth

Maturity

Decline

TIME

INTRODUCTION STAGE In the introduction stage companies try to build awareness and develop a market for the product / service. The impact on the marketing mix is a follows: • Product branding and quality level is established and intellectual property protection such as patents and trademarks are obtained. • Pricing may be low to build market share rapidly or it may be high to recover the development costs. • Placing is selective until consumer shows interest in the product. • Promotion is targeting innovators and early adopters. Marketing communication tried to build the product awareness and to educate potential consumers about the product.

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GROWTH STAGE In the growth stage, the companies tried to build brand preference and increase market share. This stage is characterized rapid growth in sales and profit. • Product quality is maintained and additional features and support services may be added. • Prices remains constant as company enjoys increasing demand with little competition. • Distribution channels are added with increased demand because of the customer acceptance for the product. • Promotion is aimed at broader audience.

MATURITY STAGE At maturity, the strong growth in sales decreases. There will be more competitions with the same products. The primary objective at this point is to defend the market share while maximizing profit. • Product features may be enhanced to differentiate the product from other competitors. • Prices may be decreased to stay in the competition. • Distribution become more intensive and incentives may be offered to attract the customers. • Promotion mainly emphasizes product differentiation.

DECLINE STAGE: As sales decreases the companies have several options. • Maintain the product by adding more features and by finding the new uses of product. • Harvest the product, reducing costs and offering it to the selective segments. • Discontinue the product.

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LIMITATIONS OF PRODUCT LIFE CYCLE • In reality very few products follow such a prescriptive cycle. The length of each stage varies significantly. • The decision makers can change the stage, for example from maturity to decline by price cutting. • Not all the products go through each stage, some go from introduction stage to decline. It is not easy to tell which stage the product is in.

Examples: Below are the some examples of products that are currently at different stages of Product Life Cycle: INTRODUCTION

GROWTH

MATURITY

DECLINE

Blue Ray CDs

DVDs

CDs

Tape cassettes

Hard disc movie cameras Third generation mobile phones E-Conferencing or Tele Conferencing

DVD cameras

Digital cameras

Film based cameras

Portable DVD players

Personal Computers

Typewriters

E. Mails

Faxes

Hand written letters

References: http://www.quickmba.com http://www.netmba.com http://www.marketingteacher.com

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Question 5 How market segmentation differs from product differentiation? What are the factors that a firm should consider while selecting its segments? Marks: 20

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MARKET SEGMENTATION AND PRODUCT DIFFERENTIATION Product Differentiation is the process of describing the differences between products and services with their competitors and to make it more attractive to a particular target market. This is done to publicize the unique features of your product and to create a sense of value. Successful product differentiation leads to monopolistic competition. The major sources of product differentiation are: • Differences in quality, resulting in price difference. • Difference in the physical features i.e. design and packaging. • Sales promotion activities specially advertising. • Differences in availability. Market Segmentation is the identification of portions of the market that are different from one another, sharing similar needs and who demonstrate similar buyer behavior. The marketing concept is all about understanding and satisfying the customers need better than the competitors. But different customers have different needs, and it is rarely possible to satisfy all customers by treating them alike. Segmentation aims to match groups of customers with the same set of needs and similar behaviors. Such a group is known as a 'segment'. Market segmentation recognizes the diversity of customers and does not try to please all of them with the same offering. The first step in target marketing is to identify different market segment and their needs.

SELECTION OF MARKET SEGMENTS Before selecting market segments, following two types of factors should be considered: i). ii).

General Factors Specific Factors

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i).

GENERAL FACTORS

• • • • •

ii).

Following are some general factors which must be considered by a company before selecting the segments. Company Thrust: Company should have a clear vision that what they are going o achieve from the selected segment and how to achieve. Size and Growth Potential: Present size of the target market as well as the future growth potential must be considered. It is difficult to assess potential growth, therefore it requires careful consideration. Investment Needed: Investment needed to cover the target market is another factors to be considered. This includes investment on launch the product as well as cost to maintain the market share. Profitability: Profitability is associated with investment decision i.e. how much is going to be invested and what will be the profit margin and how this profitability will be maintained in the target market. Competition: Before selecting a segment, present and potential competitors must also be considered. Segment may be large but it might be served already by several competitors. SPECIFIC FACTORS Specific factors that should be considered are as follows:

• Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified. • Accessible: the segments must be reachable through communication and distribution channels. • Substantial: the segments should be sufficiently large to justify the resources required to target them. • Unique Needs: to justify separate offerings, the segments must respond differently to the different market mixes. • Durable: the segments should be relatively stable to minimize the cost of frequent changes. Good market segmentation will result in segment members that are internally homogenous and externally heterogeneous i.e. as similar as possible within the segment and as different as possible between segments. Page 30 of 33

BASES FOR SEGMENTATION IN CONSUMER MARKETS Customers markets can be segmented on the following customer characteristics: • Geographic • Demographic • Psychographic • Behavioralistic GEOGRAPHIC SEGMENTATION. The following are some examples of geographic variables often used in segmentation. • Region: by continent, country, state, or even neighborhood • Size of metropolitan area: segmented according to size of population • Population density: often classified as urban, suburban, or rural • Climate: according to weather patterns common to certain geographic regions DEMOGRAPHIC SEGMENTATION Some demographic segmentation variables include: • Age • Gender • Family size • Family lifecycle • Generation: baby-boomers, Generation X, etc. • Income • Occupation • Education • Ethnicity • Nationality • Religion • Social class

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Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children, full-nest or empty-nest. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the children. PSYCHOGRAPHIC SEGMENTATION Psychographic segmentation groups customers according to their lifestyle, Activities, interests, and opinions. Surveys are one tool for measuring lifestyle. Some psychographic variables include: • Activities • Interests • Opinions • Attitudes • Values BEHAVIORALISTIC SEGMENTATION Behavioral segmentation is based on actual customer behavior toward products. Some behavioralistic variables include: • Benefits sought • Usage rate • Brand loyalty • User status: potential, first-time, regular, etc. • Readiness to buy • Occasions: holidays and events that stimulate purchases Behavioral segmentation has the advantage of using variables that are closely related to the product itself. It is a fairly direct starting point for market segmentation.

BASES FOR SEGMENTATION IN INDUSTRIAL MARKETS In contrast to consumers, industrial customers tend to be fewer in number and purchase larger quantities. They evaluate offerings in more detail, and the decision process usually involves more than one person. These Page 32 of 33

characteristics apply to organizations such as manufacturers and service providers, as well as resellers, governments, and institutions. Many of the consumer market segmentation variables can be applied to industrial markets. Industrial markets might be segmented on characteristics such as: • Location • Company type • Behavioral characteristics LOCATION In industrial markets, customer location may be important in some cases. Shipping costs may be a purchase factor for vendor selection for products having a high bulk to value ratio, so distance from the vendor may be critical. In some industries firms tend to cluster together geographically and therefore may have similar needs within a region. COMPANY TYPE Business customers can be classified according to type as follows: • Company size • Industry • Decision making unit • Purchase Criteria BEHAVIORAL CHARACTERISTICS

In industrial markets, patterns of purchase behavior can be a basis for segmentation. Such behavioral characteristics may include: • Usage rate • Buying status: potential, first-time, regular, etc. • Purchase procedure: sealed bids, negotiations, etc. References: en.wikipedia.org http://www.netmba.com http://www.marketingteacher.com Page 33 of 33