Trang 1 CONTENT Explain market segmentation with suitable examples.In a large, wide and diverse market, it is difficult for company to connect allcustomers, but the market can be divide
CONTENT Explain market segmentation with suitable examples In a large, wide and diverse market, it is difficult for company to connect all customers, but the market can be divided into customer group or segment with different needs and expectations The Company needs to determine market segment that they can meet the needs effectively In this part, I will explain the market segmentation with suitable examples The market segmentation is the division of market into clear segments A market segment includes a customer group with the same needs and expectations The missions of the marketer are to determine the quantity and nature of market segment and to identify the target segments To have effective marketing, the marketer shall:- Identify give preliminary description of various buyers with different needs and expectations (market segment).- Choose one or more market segment to enter (market identification).- Create and transmit different benefits of products that the company release them to the market for each target segment (market positioning) There are different ways in market segmentation, but the most important thing is to have adjustment to promotion in order to identify the differences in customer The key differences in segmentation are demographics, geographics, psychographics, and product benefits We will give clearer explanation with example of beer customer segmentation in Vietnam market: - Demographics segment: the statistics by personal characteristics include: gender, age, income, education, ethnic and so on According to the gender, those who love drinking beer are male, about over 90% against female 10% For age, those who love drinking beer are at the age of 25 to 50 with higher percentage than the age of below 25 and over 50 Those who drink beer with the income from 3 to 5 million dong/ month accounts for higher percentage than those who have income of below 1 3 million dong/ month and above 5 million dong/ month For education, those who drink beer with high school level occupy higher percentage than those who have higher education level… - Geographics segment : the market segment by the geographics is customers in cities, provinces, domestic and international regions The Southern beer drinker accounts for higher percentage than the Northern and Central ones The beer drinker in Ho Chi Minh City has the highest percentage compared to other cities and provinces - Psychographics segment : the customer research by psychographics consists of attitude, value and lifestyle For example, the beer consumer segment by the level of utilization: a lot, a little or moderate; those who drink beer one a week occupies higher percentage than those who drink beer one time a long time, or one time in a several weeks - Product benefits: the segment by product benefits: for instance, those who drink bottle or can of beers accounts higher percentage than those who drink beer, black beer or normal beer The fact shows that many brands did not focus on a certain customer segment, so they suffered from miserable failure Take Miss Saigon for example, when it launched Miss Saigon Delux at the same class with CK, Channel, it did not get success The present customers will not accept the perfume at high price; the high- income people will not use Miss Saigon perfume because the brand “Miss Saigon” evokes the feeling of “cheap perfume” The solutions to this case are to make completely different name for products and not to let anything relate to Miss Saigon In order to develop the most effective marketing plans, the Company needs to understand what are the differentiation and prominence of market segments Identifying and satisfying the market segment is the key of successful marketing 4 “PLC as a tool for marketing strategy" justify 2 When a new product is released to the market, the Company wants its products to have a long and bright life cycle The products may be sold forever, but the Company wants to reach high sales in long run, and get profit in order to offset the efforts and threats They understand that every product has its own life cycle, and they are not sure of how long and what model its products are In this part, I would like to present product life cycle (PLC) as a tool for marketing strategy The typical life cycle of products is in form of sinusoidal and it is divided into stages as follows: We will make survey on major characteristics of every stage in the life cycle of products and according market strategies for such stages 1 Development and Introduction stage: It is the planned research and development stage (R&D), and the products are being released to the market Because the launch costs a little, the increase in sales is very slow In this stage, the profit may be negative or very low because the sales are low, and the distribution and advertising cost is high The familiar products such as soluble coffee, chilled orange juice and coffee cream maker took years to enter a new stage of rapid development In this stage, there are a few of competitors The Company concentrates on the customers who are the most willing to buy, who are usually high income customers The prices tend to be high because of high cost and relative low output; the technical problems in production can be still unfinished, and it needs to have 3 high interest rate to offset high advertising cost to the extent necessary to achieve development” When introducing a new product to the market, the marketer can impose different levels on marketing factors: price, place and promotion If we consider price and promotion, there are four strategic solutions to pursue - Quick skimming strategy: is the strategy which releases the products to the market at initial high price and high level of promotion The enterprise imposes the high rate in order to ensure the gross profit on the products at the highest level The Company spends a lot of money on operations such as advertisement, promotion, etc in order to speed up the market penetration This strategy is often applied to the case in which the products are unknown to most potential markets; those who know products expect to have products and they are willing to pay high rate to have such products; the enterprise will face the potential competition; and the enterprise wants to create the brand preference - Slow skimming strategy: is the strategy which new products are launched at initial high price and low level of promotion The enterprise believes that the high rate will make high gross profit on the products, and the low level of promotion will keep the marketing cost low rate, and it will earn more profit in the market This strategy is used when the market has limited scale; most of market knows the products; the buyer are ready to pay at high rate, and the potential competition does not happen - Quick penetration strategy: is the strategy which new products are released to the market at high level of promotion and initial low price, with the hope to get quick penetration seed, and the largest market share This strategy is only appropriate when the market is large and it does not know the products; most buyers are sensitive to the price; the potential market has serious competition; the Company can gain high performance by scale and accumulate the production experience - Slow penetration strategy: is the strategy which launches new products at initial low price and low level of promotion The low price will encourage the customers to accept the products quickly, and the low promotion cost aims at gaining high net 4 interest rate This strategy is appropriate with the market with strong elastic demand by price, but less elastic by promotion factors; the market has a large scale, know products and have potential competition 2 Growth stage: The growth stage is marked by the quick increase in consumption The competitors penetrate the market because they are attracted by the opportunities of production expansion and high profit They release new natures of products and develop additional distribution stores The price is either fixed or reduced because the demand growth is very fast The Company still remains the promotion cost at the old rate or higher rate in order to deal with its opponents The quick increase in consumption reduces the promotion rate of sales The profit increases during the growth stage, whereas the advertising cost is calculated on the mass volume, and the production cost of every unit is also reduced thanks to “accumulated experience” In the end of growth stage, the pace changes from fast to slow The Companies shall track the starting slow pace to prepare for new strategies In this stage, the enterprise uses some strategies to extend the rapid growth of the market as long as possible:- the product quality improvement strategy, enhance new features and models for products.- penetration strategy into new market segments- Strategy of expanding existing distribution scope and joining new distribution channels.- Strategy of transferring the advertising objectives from introduction to confidence and interest.- Strategy of right time discount to attract those who are sensitive to price 3 Maturity and Saturation: it is the stage which the growth of sales is slow, because the products are widely accepted by most potential customers The profit may be whether fixed or reduced because the marketing cost increases to protect products from its enemies This stage often last longer than previous stages, which places the serious challenges for marketing managers Most of products are in maturity of life cycle and most of marketing managements are aim at dealing with problems of products in such maturity stage The growth rate of sales is lower causing the surplus of production in industry, and 5 making competition fiercer and fiercer The competitors often applies discount They boost the advertisement and strengthen the relationships with intermediate distribution and customer, add cost to research and development fund aiming to make better models for products Finally, these works will cause profits lower Some weak competitors started to withdraw from the market In the industry, there are only stable enterprises which their primary trends are to try to gain the competitive advantage In the maturity stage, the enterprises often remove low quality products and focus resources on products with high profit, and sometimes they look down on their old or present products The marketers need to systematically consider the market strategies, products and improvement of marketing – mix - Renovation of the market: The Company tries to enhance the consumption of exiting products in two directions: increase in user and increase in the use of every consumer - Innovation of products: Marketing executives can renovate the properties of products such as quality, features and design aiming to attract more customers and gain better use - Improvement of marketing – mix: the marketing executives can stimulate the sales by improving some factors of marketing – mix: Price, Place, Promotion and Service Subject to specific situation of marketing – mix of every enterprise, we will improve factors in accordance with the market change They need to take notice that the improvement of marketing – mix is easy for opponents to imitate, especially the discount and additional customer services Therefore, the Company needs to have full analysis of market factors, the structure of marketing – mix of the Company and of its competitors in order to have possible and effective improvement 4 Decline stage: After a period of existence in the market, most products and labels will have lower sales The reduction in sales may be low or quick, either fixed at low rate in a long run, but it basically does not have profitability as before That is the expression of the decline stage 6 The selection of marketing strategy in the decline stage of the product depends too much on the relative attractiveness of the industry and competitive strengths of the Company in such industry For every product in the decline stage, the managers must make decision on which marketing strategy they should perform: maintaining, harvesting or removing: - The company can make decision on maintaining its performance by additional investment with the hope that its opponent will give up this industry - The Company can harvest the products or cut down on all types of cost (facility and equipment, maintenance, R&D, advertisement, number of salespeople) with the hope that the sales are still stable in a future If successful, this solution will increase the profit for the Company in the short run - Finally, the Company can remove products from its list of products, or sell them to other enterprises In the change of economic situation, the competitors launch new competition because a product experiences in new stages of interest and requirement by purchaser Therefore, the enterprise must propose next strategies in accordance with each stage in the life cycle of products Even when the Company knows that the products cannot last forever, it still hopes to increase the lifespan and profitability of such products 5 Explain process of selecting the final price Developing and managing the right pricing strategy are important in ensuring that the Company can penetrate and dominant the market as well as effective business operations The price is affected by a lot of factors: The formation and movement are very complicated The reasonable management of pricing strategy requests to deal with many general and synchronous issues Steps in pricing policy and planning are to select the pricing objectives; to determine the demand; to estimate the cost; to analyze the cost price and supply of competitors; to select the pricing method; and to chose the final price In this part, I will only explain the selection of pricing objectives 7 The enterprise will decide on where it should position its supply products in the market The clearer the objectives are, the easier the pricing is Five main objectives are penetration pricing, price skimming, product life cycle pricing, competitive-base pricing, temporary discount pricing 1)-Penetration pricing: the main goal of penetration pricing is to attract more customers at low price and then use different marketing strategies to keep them The Company wants to get the highest market share It believes that the higher sales will have lowest unit cost and higher long-term profit The conditions of this tactic are- The market is very sensitive to the price and the low price will promote the market growth- the production and distribution cost is reduced along with the accumulated production experience- The low rate will discourage the real and potential competitors Texas Instruments (TI) has applied this penetration pricing TI will build the plants, fix its price at the lowest cost and gain a large market share, witness the reduced cost and reduce the cost 2)-Price skimming: The main target of this strategy is to obtain profit quickly The Company imposes high price to recover the production and advertising cost quickly This strategy supposes that the Company captures the needs and costs, but it is, in fact, difficult to estimate If the Company appreciates the immediate achievements, it can cause the damage to long-term achievement because they ignore the impact of marketing variables, response of competitors and regulatory constraints on price When Philips, a Dutch electronic producers fixed the price of phonograph so that it is profitable for each piece, Japanese competitors fixed lower rate and establish the market share, and then reduce the cost afterwards 3)-Product life cycle pricing: A product will get through various stages by the cycle of the stages: Introduction, Growth, Maturity and Decline; called product life cycle The Company shall fix the product price by the stage of product life cycle For instance, in the introduction stage, the Company fixes the price by quick or slow 8 skimming strategy, or quick or slow penetration strategy This part will be specifically presented in the question 4 4)-Competitive-base pricing: the objectives of the Company are the survival It must face the surplus of capacity, fierce competition, or change in customer’s needs When the price offsets the variable and fixed costs, the Company still runs its business The survival is the short-term objective In the long run, the Company must find ways to enhance the value; if not, it can be deleted Take a small paper company for example, it needs to fix the lower rate, or it is unable to sell for the paper box or Styrofoam cups used for fast food or out-door picnics, because the customers often buy at the lowest rate when there are minimal differences in products 5)-Temporary discount pricing: the objective of temporary discount is to increase the sales It includes the coupons, cents-off sales, seasonal discount and every volume purchase For instance, a small clothing manufacturer can discount (a buy- four-get-one-free promotion), or make seasonal discount after holidays in order to reduce the inventories The price is an important element of marketing This is the only component making revenue, and other ones make cost However, the decisions on pricing causes a lot of challenges in the change of economic context and technical environment 7 Explain the process of integrated Marketing communication Currently, many enterprises only depend on one or two communication tools However, in fact, there is segmentation of public market into a large number of small markets Each market needs to have its own marketing method; the increase in new mass media and the increasing complexity of consumers The diversity of communication tools, message and candidates forcing the enterprises to orient to integrated marketing communication In this part, I will explain the process of integrated Marketing communication (IMC) American Marketing Association defined the integrated Marketing communication (IMC) “It is a planning process designed to assure that all brand contacts received 9 by a customer or potential customer for products, services or organizations is suitable with such person and durable over the time” This planning process evaluates the strategic role of a series of communication- for instance, mass media, direct response, promotion, public relation- and it combines these industries cleverly in order to provide the clarity, consistency, and maximum effect through the seamless integration of the message Steps that the Company should make plan and implement IMC as follows: - Review of Marketing Plan: At first, the enterprise will assess on performing the existing marketing plan Review the objectives and plans of marketing, the role of advertisement and promotion, analyze the competition, and assess the effect of environment (SWOT) - Promotional Program Situation Analysis: For Internal Factors: Assess the organization and advertising capacity of the Company; Review the previous promotions by the company; evaluation of the Company or brand image and impact on promotion; Assess the strengths and weaknesses of the products/ services For external Factors: analyse customer; analyse competition; and analyse the environment - Analysis of the Communications Process: Analyze the response process of 10 recipient; analyze of resources, messages and factors of communication channel; establish the communication objectives - Budget Determination: Establish the communication budget and budget allocation - Develop Integrated Marketing Communications Programs: the communication tools include: advertising, direct marketing, interactive/internet marketing, sales promotion, publicity/public relations, personal selling Every tool needs to: set objectives of tools; determine the budget of the tool, and develop the strategy of tool: messages and means -Integration & Implementation of Marketing Communications Strategies: Integrate promotional mix strategies; Create and produce ads; Purchase media time and space; Design and implement direct marketing programs; Design and implement sales promotion program; Design and implement public relations/publicity programs; Design and implement interactive/internet marketing programs - Monitor, Evaluate & Control Promotional Program: Evaluate promotional program results and determine effectiveness; take actions to control and adjust promotional programs An example of IMC as follows: Dietrich Mateschiz established Red Bull in India and introduced the energy drink in Hungary in 1992 Initially, Red Bull did not use the communication advertisement as well as did not advertise its products via newspapers, panels, banners or Super Bowl, whereas it runs 01 minimum amount of advertisement on TV and cartoon spot Red Bull started to develop the buzz about the products through viral marketing tactics aiming at fashion shops, clubs, bars or stores When there was been a momentum in the bar, then it moved to the convenience stores near colleges, fitness, nutrition stores and supermarkets The marketing efforts of Red Bull focus on building up the brand image with authenticity, originality and communities in its own way Next, Red Bull combined itself with a variety of adventure sports, athletes, events and artists (music, dance and cinema) Red Bull’s website provided consumers with information and event of Red Bull, video as well as interviews with 11 athletes Red Bull bought traditional advertisement when the market was in growth stage and the Company needed to strengthen its brand towards the consumers The combination of integrated communication of Red Bull was so successful that the company made a brand new industry: energy drinks, and it became a brand worth billions of dollars between the competition of Coca Cola and Pepsi Within 20 years, Red Bull became the market-leading energy drinks Now, Redbull sold 4 billions cans of Red Bull energy drinks in more than 160 countries The management and regulation of the whole of communication process request integrated marketing communication: make plan on marketing communication; recognize the added value of a comprehensive plan in order to assess the strategic role of a series of communication industry, and combine these industries aiming at providing the clarity, consistency and maximum impact via seamless integration of discrete messages 8 Explain “direct marketing" and its applicability with examples Today, many enterprises build up long-term relationships with customers They send small gifts, material and birthday greeting card to customers, which is called direct marketing The direct marketing is the use of direct channels connecting consumers to approach and provide goods and services for customers without using the intermediary marketers This part will explain “direct marketing" and its applicability with examples According to the definition of the American Marketing Association, Direct marketing is an interactive system of marketing, which uses one ore more advertising media, to impact on the response which is responded and measured at any where Forms of Direct Marketing are telemarketing, direct-mail marketing, catalog marketing, direct-response television marketing, kiosk marketing, online marketing and face-to-face marketing 12 There are two main features to distinguish between direct marketing and other marketing’s: firstly, it takes efforts to send the messages to the consumers It uses the form of commercial communication (direct mail, email, order via phone and so on) in order to send to customers or enterprises The second characteristic is to emphasize on positive feedbacks which can be tracked or measured from the customers For instance, if a marketer sends a million of letter of sale and there are twenty thousand of customers sending the feedback to Promotion, such marketer can say that the marketing campaign had response The advantage of direct marketing for sellers: it is easy to use this marketing; there is an interaction between the buyer and seller, the information is transmitted in two dimension, the relationship between purchase and sale is personalized, the ability to aim at high objective customers in order to aim at specific actions; thus marketing is flexible and it does not depend on other means and the ability to measurement is effective In addition, the supply and marketing strategy becomes closer than competitors The advantage of direct marketing towards buyers: build up the relationship with sellers for purpose of satisfying their needs such as personal fashion, convenience in purchase because the consumers lack time, and feel tired because of traffic and parking; buy goods at cheap price and efficiency in term of specialty items The disadvantages of direct marketing: lack the perception of customers, and the percentage of response is very low; the consumer are confused and annoyed by many messages and junk mail; especially marketing via phone making them difficult to figure out the products because of lack of image To apply the direct marketing effectively, the Company needs to develop the customer database and apply advanced information technology An example of direct marketing: the founder of Leon Leonwood of the brand L.L Bean came back after hunting in 1911 with cold and soaked feet and revolutionary idea He combined a part of leather hat with rubber boot to make a dynamic and comfortable pair of boots He sent hunters a brochure including three pages describing the benefits of new product and full warranty mode However, it was not successful at the first time Off the first 100 shoes, 90 pairs of shoes had torn-off 13 soles Under the commitment, he returned the whole amount of purchase and the problems were resolved L.L Bean has still kept the golden rule that he declared at the first time:” Selling good quality goods at reasonable profit, treating your customers like a human and they will come back to buy more” Today, L.L.Bean is a company worth 1.4 billion U.S.D In 2009, the firm made 49 different catalogues and got 11 millions of addresses of customers The website of the Company is one of the leading electric commercial websites In conclusion, the direct marketing is an interactive marketing system which uses one ore more mass media to meet or transact measurement at any place The direct marketing, especially e-marketing is booming REFERENCES 1 Keller, Kevin; Kotler Philip 2012, Marketing management, the 14th version, Labor and Social Publisher 2 Segmentation: market segment, dated May 13rd, 2014, from http://www.smartvietnam.com/ver/index.php? act=info&mode=detail&ifc_id=8&info_id=3&lang=vn 3 Do, Hoa 2011, what is the market segment and why to do segment? Dated May 02nd 2014, from http://www.marketingchienluoc.com/ph%C3%A2n-kh% C3%BAc-th%E1%BB%8B-tr%C6%B0%E1%BB%9Dng 4 Strategies by the product cycle life dated May 12nd, 2014 from http://p5media.vn/marketing-hien-dai/marketing-mix/cac-chien-luoc-theo-chu- ky-song-cua-san-pham 5 Pricing strategies in marketing mix dated May 12nd, 2014, from https://docs.google.com/file/d/0B0EW7P8lt82GMzNiblZDMW1q VGs/edit?pli=1 6 Nguyen, Hoang Sinh 2011, integrated marketing communication dated May 15th, 2014, from http://www.ou.edu.vn/qtkd/AnhHoatDong/IMC_SV.pdf 7 Direct marketing – Solutions to crisis dated May 13rd, 2014 from tp://mediapost.com.vn/tiep-thi-truc-tiep-qua-thu.html 14