Destination Marketing Organizations: Bridging Theory and Practice - Essay Example

MARKETING ASSIGNMENT Market segments are small groups of highly potential s who share common characteristics and needs which can be differentiated from other high potential market segments. Identifying, targeting and defining of such groups provide the marketers with important data which can be further used in improving their product’s value offering, devise attractive marketing strategies, attracting the customers and efficiently penetrating their target markets in order to reach their core customers. Market segmentation can be regarded as an adaptive strategy which is concerned with partitioning or dividing the market into one or more segments which can be targeted by the organization for selling and marketing their products / services by developing marketing mixes which are specific to such market segments. Dividing a market into various parts / segments helps in configuration of a company’s value chain and gives a competitive edge to the organization as compared to its competitors1. Segmentation helps organizations in developing a market mix which caters to the specific needs and concerns of the customers belonging to a particular market segment and helps in offering higher value to their target customers. In economic terms, the process of segmentation can be viewed as creation of monopolistic or oligopolistic market conditions whereby organizations seek to realize the highest price that their target customers in the particular market segment are willing to pay. Targeting refers to targeting a product to a specified market segment which comprises of customers who are most likely to consume the company’s products. Targeting helps the organizations in achieving best return on their investments, reach their core customers, gain a wider market share and achieve strategic positioning in the industry. The targeting strategies available to the marketers include2: Undifferentiated marketing / Mass Marketing: This involves selling a single product to the entire (mass) market and is based on the assumption that the needs and demands of the consumers to whom the product is marketed are more or less identical. For instance, products such as Colas, Burger King, K – mart etc market and sell a unique product to a mass market. Differentiated marketing / Selective Marketing: It involves selling different products to different market segments in a way which is appealing to every set of customer according to their respective market segments i.e., the marketers try to match the product with the needs of the customers in each of the identified market segment. For example, airline companies offering different services to different categories of customers such as business class, economy class, frequent fliers, special services for children etc. Concentrated marketing / Niche marketing: It involves selling a product to a specified (relatively small) group of consumers / market segment. It is intended to provide a benefit to a group of consumers who are otherwise ignored by other companies in the industry. For example, Rolls Royce specializes in and caters to luxury automobiles, Toyota (Prius) – sells hybrid cars to environmentally conscious consumers etc. Aaker (1996)3 defines the term positioning as “the part of the brand identity and value proposition that is to be actively communicated to the target audience and that demonstrates an advantage over competing brands”. Gunter and Furnham (1992)4 suggest that strategists must develop positioning objectives, along with detailed marketing mix, once the target markets for their product / service is identified. There are various positioning strategies used by marketer for selling their product such as: Positioning away from the competitor, Positioning against a competitor, Positioning on the basis of benefits offered, Positioning by product attributes, Positioning by product categories, Positioning by usability / application, Positioning by class, and positioning by price / quality. 2. Ansoff’s growth matrix is one of the most widely used tools for analyzing organizational growth which compares developing of new products and new markets. It offers four main strategic alternatives such as instrumental strategy wherein existing products are sold to current customers as well as a revolutionary strategy wherein new products are sold to new customers. The four main strategic options offered by the Ansoff matrix are discussed below5: Market Penetration: The company, here, aims at selling more of the same product to same type of people i.e., the company aims at selling existing product to existing customers. In order to increase revenues, the company repositions the brand and launches new promotional campaigns to capture new markets and gain a competitive advantage while the actual product and the customer segments remain unchanged. Product Development The company sells new products to existing customers whereby the companies try to innovate in order to replace old and obsolete products with new creative and better products with better qualities and features and thereby cater to the needs of the customers by offering them the newly developed products. For instance, supermarkets which have evolved from selling ‘groceries only’ to a wide range of products under one roof. Market Development Here, the company markets the existing products to one or more new customer segments. The new segment, here, refers to untapped customer base which can be created by adding a new product quality or feature that is appealing to such new customer segments. For instance, Lukozade – a high energy drink which was originally sold and marketed as a cure for illness was later replaced and marketed as a high energy sports drink. Diversification This involves marketing of new products to new customer segments and is somewhat riskier than the other strategic options discussed above. Diversification can be either related or unrelated. In the case of the former, the company markets newly developed product to an existing / known market segment while in the latter case the companies tries to sell the new product in a new market segment or industry which was previously untapped. Porter’s Generic Competitive Positions6 Research carried out in the past suggested that firms with low market share are less profitable than those with a comparatively higher market share while those with an average market share were the least profitable. Porter explained this phenomenon with his theory which suggested that the firms with a high market share were able to enjoy high profitability since they followed the cost leadership strategy, while those firms which had a low market share enjoyed profitability since they relied on market segmentation and concentrated on the niche market, however the firms with a moderate market share were least profitable since they lacked a viable generic strategy. The key strategic options put forward by Porter, represent the generic strategies that can be applied to all the products / services across the industry. These key strategies include: cost leadership, differentiation and focus. Cost Leadership Strategy: This strategy suggests that firms can enjoy high profitability by producing large number of standardized products the firms can cater to a larger market, thus gaining a competitive hold over a sizable portion of market share, reduce cost of production and achieve economies of scale. The product being marketed is usually a ‘no frills’ product i.e., it is produced in large scale, with low cost of production with an intention to making it available to a large customer base. For example, airlines such as Easy Jet, which offers a no frills, service to a large customer base. Firms which follow this strategy gain by increasing market share by lowering prices or gain higher profitability by maintaining average prices. Differentiation Strategy This strategy involves developing a product having a unique quality, or feature which is expected to offer superior value benefits to the end consumer, in order to penetrate a niche market. Since this type of product is unique and not easily available in the market, the consumers tend to buy the product irrespective of the price and hence improves and increases brand loyalty, and reduces brand switching. Although this could ensure capturing a sizeable market share, differentiating a product from those of its competitors usually requires additional product cost which has to be compensated by applying the premium pricing strategy. Firms which follow this strategy achieve a significant market share and hence considerable and loyal customer base, by offering a unique unparallel product. Focus Strategy: In this strategy the firms choose to concentrate on a selected set of niche markets and try to tailor and develop their product to suit the needs of the consumers who fall within that selected target markets. Focus strategy is not successful on its own hence firms must choose differentiation strategy or cost leadership strategy alongside this strategy to gain competitive advantage. The firms may select target segments which are relatively less vulnerable to substitute products and focus on effectiveness rather than efficiency. The firms which adopt this strategy achieve market leadership and higher profitability since they have a unique mix of focus strategy and differentiation or cost leadership strategy which is difficult to implement and emulate by its competitors. 3. Communicating the ideas and generating awareness about the new product is of utmost significance since the level of awareness determines the success of the product and affects the attitudes of the consumers towards it. Some of the problems faced while setting market awareness include insufficient publicity, lack of exposure, inappropriate methods used for product promotion, inappropriate target market selection, and improper product positioning etc. while problems related to low sales objectives include inefficient demand forecasting, low level of technical knowledge about the product, problem in identifying appropriate target market and failure to set a clear distinction between general marketing objectives and setting of clear sales objectives etc. A good product with bad marketing fails to attract customers and hence implementing proper marketing techniques helps in generating adequate sales revenues and satisfy the organizational sales objectives. For instance, BMW succeeded in introducing an inexpensive two door car in the U.S. market by properly positioning it as a concept that stood for sheer pleasure. The company was able to successfully communicate the basic idea behind the brand / product which was easily identifiable by the target customers. Also the target market segment was clearly and appropriately defined. Similarly, Sanka – a brand, selling decaffeinated coffee as a primary benefit / product offering failed to establish its mark since the basic intended benefit of the product was lost and could not be properly communicated to the target customers and hence fade away from the market. The business objectives and goals of a company should be taken into consideration before planning a new product launch since it sets the overall direction of future profitability of the company. A marketing strategy should be consistent with the organizational goals and objectives since it would help the firm in creating adequate interest and awareness about its products among its target customers. One of the most important elements of a marketing strategy is to communicate the core product benefits to the customers and how it would create a differential advantage over its potential competitors. This requires a thorough study of the markets and the needs and desires of the customers. In order to attain the sales objectives of the organization, the management must identify the target market, divide it into smaller and precise segments, and conduct a marketing analysis which includes planning implementation and control to evolve the best possible marketing mix which is most appropriate for the firm. There are various methods available today for generating and enhancing product awareness, especially with the rise in ecommerce and use of internet based models. Some of the technological methods to enhance product / brand awareness include banner ads, interactive marketing campaigns, online ads, etc. Internet is fast becoming one of the most widely used methods of promoting one’s product / services because of its sheer reach and potential. It is relatively less expensive and has higher proliferation rate as compared to conventional marketing strategies. Product awareness can be increased by conducting primary and secondary research. It helps the marketing management to ascertain the prospective market demand for the product and co-ordinate the promotional and advertising strategies according to the response of the target customers. Awareness measures allows the marketing management take informed decisions on the basis of the results derived from them, such as low level of awareness indicates that more efforts are required to reach the target customer which can be done by changing the promotional and advertising campaigns. Low level of product awareness does not necessarily indicate a need to reposition the product. It can be ascertained from the consumer behavior as observed from the existing customer database by studying factors such as repeat ration, satisfaction, brand loyalty etc. A market with low awareness requires larger number of print advertisements and large hoardings to attract customers who are not aware about the product. Whereas those markets where the awareness is falling or steadily declining, does not necessarily mean that there is a problem with the product it rather indicates that there might be certain market specific problems such as increased competition and availability of cheaper substitutes. Such problems require tailor made market plans to suit the specific requirement of the target customers; a slight increase in investment for product promotion for a short duration till the market stabilizes. Thus, these methods help in analyzing and understanding customer behavior in the identified market segments and help the management in taking appropriate steps to increase market share and ultimately improve its competitive positioning in the industry7. 4. Organizations require different marketing strategies for different market segments since factors influencing such segments change over time, for instance economic cycles, competitors, launch of new products, and a shift in consumer’s tastes and preferences. An appropriately designed marketing strategy can help the management in attracting and retaining customers. The marketing mix helps in describing all the aspects of a business / firm post production such as, product strategy, merchandising, pricing, promotion, advertising, sales, and distribution etc which unify to market that product. These factors are grouped together to form the 4 Ps of marketing mix i.e., product, price, promotion and place. A combination of these four factors can help in attracting the target customers and differentiating the product from its competitors. Market segmentation is an adaptive strategy which involves dividing the market into proper segments which helps the organizations in targeting the identified segments by developing appropriate market mixes which can easily adapt to the specific needs of the market. The marketing management can amalgamate the marketing mix variables to form a market offering which is appealing to the target market segments and help in improving the firm’s overall competitive positioning in the industry. Product Delivering the right type of product to the identified market segment ensures high level of customer satisfaction. While targeting a product to a particular market segment, management must ensure that the product is properly differentiated from that of its competitors, it is appealing and translates into something of value / benefit to its customers, is functional, reasonable and meets the expectations and needs of the desired market segment. For example, Toyota, markets a range of products to different market segments. Airline companies target customers on the basis of service provided, such as Virgin Atlantic for instance, offers different services for different market segments depending on the type of service needed, such as frequent fliers, business class, economy class etc. Price A product or service can be marketed to different market segments on the basis of price. However, differentiation on the basis of price is highly critical aspect since products such as retail goods in particular and other products which have close substitutes are vulnerable to price elasticity. Thus the demand for such products might change if there is a change in price of its substitute products. Thus in order to maintain a competitive positioning in the market firms should continuously seek to retain costs. Example, a change in price of Starbucks Coffee would lead to a shift of consumers to its competitors such as McDonalds, or Dunkin Donuts or Caribou Coffee. Promotion Product promotion refers to marketing of product to two different sets of customers i.e., the existing group of customer, with a view to retain existing customer base and a new group of customers or market segment, so as to expand the customer base and increase profitability and revenue inflows. Thus the promotional strategies adopted will be different for each set of customers i.e., old and new. Promotion of a product largely depends on the needs of the customers and the advertising is accordingly changed and aimed to suit the customer’s basic needs and demands. It comprises of variables such as sales promotion, advertising, sales force, direct marketing and customer relations. Place Place refers to the distribution strategies adopted by a firm for delivering the product or service to the end customer. Place plays a major role in determining a marketing strategy for a given product or service since the usability of a product largely depends on the geographical location, climate, cultural aspects, tastes and preferences of the customer of that location etc. The same type of product or service must be made available and marketed to different market segments so as to increase and expand existing customer base and improve the firm’s profitability and revenue inflows. Clothing for example, is heavily influenced by geographical location and climate changes, thus sale of warm clothes may be affected in places which experience extreme heat waves. References Aaker (1996) in Pike, S., (2004). Destination Marketing Organizations: Bridging Theory and Practice, Elseivier, Pp. 111 Egan, C., (1995). Creating Organizational Advantage, Butterworth – Heinemann Publishers, Pp. 146 Gunter, B., Furnham, A., (1992). Consumer Profiles: An Introduction to Psychographics, Routledge, Pp.3 Hood, P., Lowy, A., (2004). The Power of the 2x2 Matrix, Pp. 140 – 144, John Wiley & Sons Hiebing, R. G., Cooper, S. W., (2003). The Successful Marketing Plan: A Disciplined and Comprehensive Approach, McGraw-Hill Professional Publication, Pp.79 Kotler, P., (2003) Marketing Insights from A to Z: 80 Concepts Every Manager Must Know, John Wiley and Sons, Pp. 162 Read More