A Multivitamin and Minerals Company Value Min - Case Study Example

Introductory Marketing Introduction Value Min, a successful multivitamin and minerals company intends to introduce new brand of its products to the market. The new brand of products is aimed to reach the affluent end of the market, though the company is not up to speed with the segmentation and targeting process. This report seeks to elaborate into these concepts, and illustrate how these processes can be incorporated into Value Min Company to enable its market its new multivitamin range. Segmentation A business cannot satisfy the wants and needs of all the buyers and doing so can lead to massive drain in the organizations resources. This as a result necessitates the need for a company to segment its market. Segmentation is a fundamental aspect in marketing and it is important for marketers to first segment the market in order to ensure that the services or products’ being offered gets to the right individuals or firms. Essentially, segmentation refers to the classification of subsets of customers within a market who share related needs and show similar characteristics (Goldstein, 2007). For instance, if you are marketing a chocolate bar, it will attract younger generation compared to older generation, thus you have to target that particular cluster for enhanced results. According to Michel & Wagner (2000) segmentation is a form of crucial evaluation rather than a set system or process; therefore markets are segmented and defined in different ways. It entails finding out what kinds of buyers with diverse need exist in the market. For example, in the auto market, some buyers demand performance and speed while others are concerned with safety and roominess. This means that, a business cannot satisfy the needs of all consumers and experience has revealed that, companies that specialize in satisfying the wants and needs of one homogenous group of buyers tend to be more profitable. Businesses have to make tough choices during segmentation. Consumers can be divided into homogenous groups using various variables but it is always important to establish the most practical variables while differentiating these diverse groups of buyers. For instance, when grouping different kinds of soft drink buyers, we can consider such variables as preference for taste vs. low calories, willingness to pay vs. price sensitivity, preference for non cola vs. cola tastes and light and heavy consumers which are considered as the most relevant. These variables are then combined to obtain various segments. General criteria such as public or industry vs. private can be used while segmenting markets (Michael, 1994). Both consumer market segmentation and industrial market segmentation have similar goals, they are simply proxies for true groupings that do not always fit into suitable demographic boundaries. Consumer market segmentation is performed on specific product basis which provides a close match between the individuals and specific products. Requirements for market segmentation In order for firms to make certain that segments are practical, they should ensure that such segments are accessible, identifiable, substantial, durable, and have unique needs. A good segmentation will lead to segment members who are externally heterogeneous and internally homogenous. Research has revealed different methods of segmenting a market and they include a priori segmentation, usage segmentation, cluster analysis and attitudinal research, and needs based segmentation. The method of segmenting used by a firm depends on various factors including cost of conducting the research and strategy implementation and the business repercussion. Aims of segmentation The overall intention of segmentation is to categorize groups of similar and potential buyers, prioritize the groups to address, understand their behavior, and respond to them using suitable marketing strategies that meet the diverse preferences for every chosen segment. The globe comprises of many buyers with similar sets of behaviors and needs and segmentation aims at merging these buyers together for easier provision of services. Theoretically, there exist ideal market segments, but in reality, each company engaged in a market will develop various methods of imaging market segments, and there after create strategies for product differentiation meant to make use of these segments. A company can have temporary commercial advantage over other firms through the use of market segmentation and the consequent product differentiation strategy. Improved segmentation can lead to improved revenue levels and improved marketing efficiency (Gupta & Donald, 2005). Segmentation processes for business to customers (B2C) The process of segmentation consists of identification of segment, evaluation of segment, segment characterization and target selection. Application of segmentation analysis calls for marketers to adopt and enforce fixed parameters in order to attain maximum profits and best results. According to Michel & Wagner (2000) consumer markets can be segmented based on various consumer characteristics including geographic, demographic, psychographic, and behavioralistic. Geographic segmentation In this process, consumers are segmented based on regional variables such as region which is classified in terms of continent, nation, or state; population density classified as rural, urban or suburban; climate which is defined based on the weather patterns; and the size of metropolitan area divided based on population size. Geographical segmentation is used by marketers as buyers in different places may possess similar behaviors and features in that specific region. For instance, McDonalds internationally, sell burgers intended for the local markets, for example, burgers are made from lamb in India rather than beef due to religious beliefs while in Mexico more chilli sauce is added to the burgers. Demographic segmentation Demographic segmentation groups consumers depending on such factors as age, family size, gender, education, income, occupation, religion, nationality and social classes among others. Most of these factors have standard groupings for their values and most companies tend to use factors in segmenting their customers in order to meet their needs. As individuals become of age, their wants and needs also change. Companies develop certain products that are intended for a certain age group. In the current global competitive environment, products are produced and positioned within certain income, social class and occupation segments so as to maximize profits. Psychographic segmentation This process of consumer segmentation groups consumers based on their lifestyle. Some of the psychographic variables used to group consumers in this process include interests, activities, attitudes, opinions and values (Dennis, 2006). The general lifestyles and customer habits forms a great portion of this market segmentation criteria. Behavioralistic segmentation Customers respond differently to different products. Behavioralistic segmentation focuses on consumer behavior towards a particular product. This aspect of consumer segmentation includes such variables as brand loyalty, usage rate, readiness to buy, benefits sought and occasions. Behavioralistic segmentation uses variables that are closely linked to the product making it an effective process of consumer segmentation. Demand of various products increase at certain occasions while others are purchased in terms of how well they will improve consumer’s lifestyle. Segmentation processes for business to business (B2B) Business customers differ from consumers in that, they are fewer in numbers, purchase large quantities of products and decisions to purchase are made by several persons. Industrial markets include manufacturers, resellers, institutions and the government and can be segmented in terms of location, company type, and behavioral characteristics (Art, 2004). Location In certain circumstances, business location and the distance from the vendor are vital. Such costs as shipping costs are considered as purchase factor for heavy and bulk products, thus businesses can be segmented in terms of geographical location in order to lower such factors to make the products more affordable. In some cases firms tend to cluster together geographically, thus can have related needs within an area. Company Type Company type is another process of segmenting business customers. In this case, businesses are categorized according to the size of the company, the type of industry, purchase criteria and decision making unit. Some businesses are large scale thus tend to purchase in large quantities and the decision making are made by more than one person. Such firms can be segmented together to allow easier provision of services or products. Behavioral Characteristics Business customers can be grouped together in terms of their behavioral characteristic. Some firms posses similar purchase behavior. In industrial markets, behavioral characteristics include the usage rate, buying status and purchase procedures. In order to increase efficiency, business customers possessing such similar behaviors can be merged together in order to meet their needs more easily. Targeting Targeting can be defined as the process of identifying and prioritizing targets, and applying suitable actions to the identified targets in order to create certain desired outcomes that can help attain the company’s goals considering operational capabilities and requirements. It is the actual selection of the market segment a company wants serve and involves making something a target or an objective that has to be achieved. In marketing, targeting is considered as the second stage of this process (Aaker et al., 2000). The first stage, which is segmentation, involves dividing the market into different segments. The segmentation stage determines the type of customers that exist in the market. In the second stage, which is targeting, the marketer is mainly concerned with selecting which segment has to be served with its products depending on several factors. A basic concept in target marketing is that the targeted consumer segment should portray a brand loyalty to a specific product. Research in this field highlights that ethnic salience, racial similarity, labeling intensity of a particular ethnic identification, role congruence and shared knowledge all uphold positive outcomes on the targeted segment. This clearly illustrates that targeting strategies should represent the consumer’s presumptions of similarities in certain features in the advertisement, for instance the language used, source pictured and the lifestyle represented. This is because consumers are more attracted to advertisements that incorporate their forms of livelihoods. Factors to consider in targeting It is important to note that determining a target market is not an easy task since there are factors that need to be considered before coming to such a decision (Cohen, 2005). Putting such factors into consideration will help the marketer attain the most out of its available resources through a planned procedure for selecting its potential customers. The marketer has to first consider is how other companies serve the existing segments. It may be daunting to promote your products in a segment that is already being served by other manufacturers. The second element to consider is the scope of the segment and its expansion rate. In this case, it is important to note down that a downside market segment or a large segment that is rapidly expanding tends to be more competitive. The other factor to be considered is the company’s strength. This means determining the company’s strengths and ability to appeal to the targeted consumers to purchase its products. Other companies might have as well established a good reputation in your target segment, but then does the company have the ability to convince its target consumers that its product is better off compared to whatever is already offered in the market. Targeting strategies After successfully identifying a market segment, the next step a marketer considers is target the consumers in the identified segments with products that are closely related to the needs of its customers in the segments (Kurtz, 2010). The first targeting strategy is concentration marketing. This strategy concerns targeting one specific and well-defined group of consumers existing in the market. Small companies that have moderately small overheads and thus, do not intend to attain larger volume of sales can apply the strategy. However, one main disadvantage of concentration marketing strategy is that the potential for economies of scale and sales growth may be limited and a decline in sales may affect their survival. The second strategy is the undifferentiated or mass marketing and deals with selling a particular product or service to the whole market. The assumption in this strategy is that customer’s needs tend to be identical (Cohen, 2005). The main advantage of this strategy is that a large-scale company can benefit from the low units of production costs through economies of scale. The lower costs can then be passed on to the customers in form of cheaper prices, and although the profit margins obtained in each item sold be minimal, the high volume of sales in the end will generate large profits for the organization. Its disadvantage is that it is becoming irrelevant in today’s markets since consumers are no longer interested in standardized products, but prefer to pay best prices for products that satisfy their particular needs. The other strategy, which is referred to as selective or differentiated marketing concerns targeting each of the identified segment with a product or service with its specific marketing mix that matches the specific needs of the consumers within the identified segment. Designing products that meet the specific needs of the consumers provides satisfaction to the consumers’ hence building consumer loyalty. This strategy allows companies to spread risks such that a decline in demand in one segment will not affect the whole company. However, its major disadvantage is that it can confuse customers since dozens of brands are being offered. The company may also have to incur additional costs since it has to advertise more than one brand. Most of the markets targeting theories however, claim that a company trying to make entry into a new market must target a suitable and most attractive segment (Kurtz, 2010). This will in turn enable the company acquire a foothold in the market as well as customer credibility. After gaining customer credibility, the company can now expand to other segments through a strategy known as market specialization and develop more products for the same segment as well as other segments using the differentiated strategy. After becoming well established in various segments, the company can now apply a strategy known as full market coverage (Kurtz, 2010). How to segment and target the market for the new multivitamin range Operating a business without the knowledge of your target market will definitely prevent you from attaining your objectives (Linda & Jerry,1997). However, it is important to identify a cost effective means of marketing that will not incur loses for the company. The first step Value Min company needs to undertake is to identify its potential customers for the new multivitamin range. In this case, the company can either decide to target individual customers, or other businesses that can help in distributing this product, or both. The next step is to conduct a market research in order to obtain information about the customers’ perspective about the new multivitamin range. Value Min can either use the internet or hire a marketing expert to carry out this study. The objective of carrying out a research is to identify the most profitable markets for the product, identify markets where the company’s competitors are presently serving and to locate markets where selling opportunities exist. Value Min company will then have to identify a target market. From the data collected, the company can then carry out an analysis to segment the target market in order to reach its potential buyers. It is important to ensure that the segments the company chooses contain potential buyers for its new multivitamin range. Then find a way to lure customers to buy the product such as offering small giveaways or discounts (Peter & Rebecca,1995). The company then needs to build outward from its target segment and reach out to other segments. However, it is important to compile a customer profile to help guide its sales effort. It will enable the company to have an overview of its real customers are. Conclusion In order to achieve business objectives, it is necessary for firms to know the needs and wants of their target market and deliver the desired satisfaction. Businesses should always anticipate the needs and wants of the buyers and satisfy them better than their competitors. This report focused on Value Min, a multivitamin and minerals company and sought to discuss market segmentation, segmentation processes, targeting and how the company can segment markets and target in order to increase efficiency. The company should segment markets and target these segments more efficiently in order to give it more commercial advantage compared to its competitors. References Aaker, J., Brumbaugh, A., & Grier, S. 2000. Nontarget Markets and Viewer Distinctiveness: The Impact of Target Marketing on Advertising. Journal of Consumer Psychology (Lawrence Erlbaum Associates), 9(3), 127. Art, W., 2004. Handbook of market segmentation: strategic targeting for business and technology firms (3rd Ed). London: Routledge. Cohen A., 2005. The Marketing Plan. New York: John Wiley & Sons, Inc. Dennis, J., 2006. Lifestyle market segmentation. London: Routledge. Goldstein, D., 2007. “What is Customer Segmentation?” Mind of Marketing.net. New York: NY. Gupta, S. and Donald, R. 2005. Managing Customers as Investments: The Strategic Value of Customers in the Long Run (“Customer Retention” section). Upper Saddle River, NJ: Pearson Education/Wharton School Publishing. Kurtz, D., 2010. Contemporary Marketing Mason, OH: South-Western Cengage Learning. Linda, P., and Jerry, J., 1997. Target Marketing: Researching, Reaching and Retaining Your Target Market, New York: Dearborn Trade Michael J., 1994. Market segmentation: a step-by-step guide to profitable new business. London: Routledge. Michel, W. and Wagner, A., 2000. Market segmentation: conceptual and methodological foundations (2nd Ed). New Mexico: Springer. Peter F., and Rebecca, P., 1995. Capturing Customers: How to Target the Hottest Markets of the '90s, New York: American Demographics Books Read More