Market Segmentation and Branding

Executive Summary

This report entails a comprehensive analysis of the concept of market segmentation. In the report, the researcher is aimed at developing a concrete understanding of how business organizations undertake market segmentation. Additionally, the report also involves an evaluation of how organizations apply branding in their operation.

The report is organized into two parts. In the first part, the researcher conducts a review of different elements of market segmentation. In this section, the report analyzes the process of market segmentation. This is achieved by evaluating the various steps that organizations undertake in their market segmentation effort. Seven steps are evaluated.

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The section also illustrates the various forms of market segmentation that are integrated by organizations. These include geographic segmentation, demographic segmentation, benefit segmentation, volume segmentation and psychographic segmentation. The researcher also evaluates the benefits associated with market segmentation. In the second part, the researcher evaluates the branding process in organization.

This part is composed of a number of sections. The first section entails an evaluation of the branding process. Six steps are evaluated. These include market analysis, brand architecture, the big idea, and market communication, employee involvement and brand measurement. The second part also entails an evaluation of the benefits of branding. Finally, a conclusion and a number of recommendations are outlined.

1. Introduction

1.1 Background to the study

The success of business firms in different economic sectors is dependent on the effectiveness with which they undertake their marketing activities (Baines, Fill & Page, 2008, p.76). To attain this, the management teams have to take incorporate various marketing concepts. One of these concepts is market segmentation.

According to Wedel and Kamakura (2000, p.3), market segmentation is a critical component of marketing. Brennan, Canning and McDowell (2011, p.171) asserts that firms have to be excellent market segmenters considering the dynamic and hypercompetitive nature of the business environment.

In the 21st century, globalization has become a common phenomenon thus presenting the consumers with a wide range of products offering to select from (Brennan, Canning & McDowell, 2011, p.171). As a result, firms should not only concentrate on offering high quality products.

However, firms should be committed at satisfying discriminating customers. This means that it is paramount for firms to shift from mass marketing and concentrate at aggressive marketing techniques. This can only be attained through integration of effective market segmentation strategies.

In addition, it is also paramount for organizations to integrate the concept of branding. According to Dunn (2004, p.3), branding is aimed at building a firm’s brand equity which is a key component in a firm’s effort to attain competitive advantage.

This increases the probability of firms surviving in the long term as going concern entities. Branding is also paramount in ensuring that the firm attains an optimal market position considering the competitive nature of the business environment. Through market segmentation and branding, a firm is able to establish a long-term relationship with its customers.

1.2 Aim

In this report, the researcher intends to conduct a comprehensive analysis of the concept of market segmentation. The report also entails an evaluation of how organizations apply the concept of branding.

1.3 Scope

The report is organized into two parts. The first part gives an analysis of market segmentation while the second part entails how organizations incorporate branding in their operation.

2. Part 1; Analysis

2.1 Market segmentation

One of the core objectives of business organisations is to maximise their profit (Brennan, Canning & McDowell, 2011, p.171). Attainment of this goal is only possible if is firm has integrated customer-driven focus. Over the past 2 decades, firms have increasingly considered the concept of market segmentation as an important element in their marketing success. Weinstein (2004, p.3) defines market segmentation as the process through which a firm partitions its market into small groups depending on the customers’ characteristics and needs.

According to Croft (p.2), firms intend to satisfy the consumer’s needs. Currently, adoption of mass marketing can lead into a firm failing. For example, a firm’s margin may be pushed downwards because some needs of a certain category of consumers are not wholly addressed.

This may also give the competitor a winning margin. According to Wedel and Kamakura (2000, p.3), market segmentation is based on the notion that a market is heterogeneous in nature. Therefore, it is possible for a firm to divide the market into small homogenous groups on the basis of the consumers’ desires and preferences. According to Dibb and Simkin (1995, p.10), market segmentation enables a firm to satisfy the diverse consumer needs while at the same time maintaining a certain degree of economies of scale.

2.2 Market segmentation process

For market segmentation to be effective, there are a number of steps that management teams should follow as discussed below.

2.2.1 Identification of target market

The first step in market segmentation entails identifying a specific target market that it intends to sell its products and services to. This is achieved by conducting a comprehensive consumer market research on the identified customer group.

The research should be aimed at establishing whether the identified customer group have common consumption behaviour (Madaan, 2009, p.75). According to Dibb and Simkin (1995, p.18), identification of the target market is important since it influences the effectiveness of the marketing strategies implemented.

2.2.2 Understand the expectations of the target audience

For a firm’s products and services to be successful in the market, they must meet the customers’ expectations. Through a consumer market research, a firm can be able to understand the customers’ interests and product requirements. For example, through a market research Kellog which is a firm in the hospitality industry was able to develop a product that targeted customers who intended to reduce their calorie intake.

2.2.3 Creating the subgroups

Organizations should ensure that they have a comprehensive understanding of the target market. This is attained by creating subgroups on the basis of various characteristics. One of the ways through which a firm can attain this is by integrating certain market variables.

2.2.4 Reviewing the target audience

The firm should conduct a continuous review of the consumption behavior of the identified subgroups. This will aid in determining the fluctuations in their product requirement and what triggers it. As a result, the firm will be efficient in adjusting its marketing strategies accordingly. According to Madaan (2009, p.75), consumer demand, interests and perceptions varies frequently. Reviewing the consumers’ behavior will increase the firm’s effectiveness in offering competitive products.

2.2.5 Naming the market segment

The firm should name the segments developed accordingly for the implementation to be easier. For example, the segments can either be on the basis of age.

2.2.6 Develop market strategies

According to Brennan, Canning & McDowell (2011, p.171), firms should devise strategies aimed at promoting its products in the specific segments. The promotion strategies formulated should contribute towards development of a connection with the target customers.

2.2.7 Determining the size of the market segment

This is an important step since it in that it enables a firm to plan its marketing mix strategies well. For this step to be successful, marketers should gather sufficient data from the market. Determining the size of the market will also will also increase the firm’s efficiency in sales planning and forecasting.

2.3 Forms of consumer market segmentation

According to Gitman and McDaniel (2009, p.299), there are 5 main bases upon which a firm can conduct its market segmentation. These include geographic, demographic, benefit sought, volume and psychographic basis.

2.3.1 Geographic market segmentation

This entails segmenting the total market on the basis of its geographic characteristic such as the size and region of the country, climate and market density. Market density refers to the population or number of businesses in a particular areal. Geographic segmentation enables a firm to meet the regional product preferences of the customers.

2.3.2 Demographic market segmentation

Demographic segmentation is one of the most commonly used market segmentation strategy. In demographic segmentation, there are different variables that a firm can use to differentiate its products and services offering. These include the consumer’s income, age, gender, education, and household size (Gitman & McDaniel, 2009, p.301).

Evaluation of the consumers’ demographics can aid in offering products that satisfy the target consumer group. A firm can acquire demographic information of the population from the census conducted by the government.

2.3.3 Benefit segmentation

This entails segmenting the market on the basis of the benefits sought by the consumers. Firms should understand the benefits that the consumers seek at attaining by purchasing a particular product. This will enable the firm to be efficient in its product development. For example, Sensodyne toothpaste is targeted at consumers who have highly sensitive teeth ((Brennan, Canning & McDowell, 2011, p.171).

2.3.4 Volume segmentation

This strategy entails segmenting the market on the basis of the quantity of goods purchased. This depends on the consumers’ product usage. According to Gitman and McDaniel (2009, p.301), consumers have varying usage habits which range from heavy, moderate, light to non users. This method of segmentation is best implemented if firms’ understand the consumers’ spending habits.

2.3.5 Psychographic segmentation

Consumers have different personalities and lifestyle which influence their consumption patterns. Psychographic segmentation involves categorizing the customers on the basis of their interest and opinions. According to Gitman and McDaniel (2009, p.301), psychographic market segmentation enhances demographic segmentation.

2.3.6 Benefits of segmentation

There are a number of benefits associated with market segmentation. According to Croft (p.4), segmentation enables a firm to develop a comprehensive understanding of the consumers. For example, it enhances a firm’s understanding of the consumers needs and their decision making process.

This makes it possible for a firm to influence the consumers purchasing patterns. This can be achieved by being efficient in the process of formulating marketing strategies such as promotion, distribution, pricing and product development. Additionally, market segmentation also enables a firm to be effective in adjusting its marketing strategies according to changes in the business environment. The resultant effect is that the firms’ performance is enhanced.

3. Part 2; Branding in organizations

Due to the hyper-competitive characteristic of the market, both large and small organizations are considering branding to be of high priority. According to Dunn (2004, p.3), branding is currently being considered as a financial and a marketing concept. Organizations have appreciated the fact that branding can contribute towards attainment of a long term competitive advantage. This arises from the fact that a long term relationship with the customers is established.

Branding is concerned with developing a desirable feeling or idea in the customers’ minds. In their marketing process, firms intend to appeal the consumers in through consumption of their products(Baines, Fil

l & Page, 2008). Currently, consumers are faced with a wide range of products to select from in addition to a shortage of shopping time. To differentiate their products from competing products, firms integrate the concept of branding. Dunn (2004, p.4) asserts that branding enables a firm’s products and services ‘to stand out’. Organizations are increasingly being committed at developing a strong brand.

3.1 The process of branding

In their branding efforts, firms take into consideration a number of steps.

3.1.1 Market analysis

The first step entails conducting a comprehensive market analysis. The analysis is aimed at understanding different market aspects such as the existing and emerging market trends. Additionally, market analysis also aids a firm to understand the competitive nature of the market. In branding a firm should ensure that it considers the customers as the core element.

Dunn (2004, p.5) is of the opinion that the most successful brands entail those brands which satisfy the customers’ wants and are easily accessible. To be able to conduct a concrete market analysis, a firm’s management team should conduct a review of the firm’s internal brand information. Trend analysis and evaluation of the current competitive information is also paramount.

3.1.2 Brand architecture

In formulating their brands, organizations should incorporate a number of building blocks. The building blocks are aimed at creating brand clarity. The initial step should entail building a product to supply in the market. The product should be relevant to the customers and differentiated. The firm should also have long term vision. For example, Wal-Mart was established with the vision of being the finest retailing firm.

The brand should also attain a position in the market. This entail the perception of the brand compared to competing products (Baines, Fill & Page, 2008). The brand should also target a specific and narrow target market. Firms achieve this by making a decision whether the brand is to be a local, regional or a global product.

Brand targeting can also be achieved through market segmentation. After this, the firm should decide on the name to call the product. The brand name enables customers to recognize the firm’s products. The brand name should be catchy, easy to pronounce and remember and unique.

Other aspects of branding which the firm should consider developing include brand identity, brand promise, brand emotion, brand quality, brand pricing, brand packaging, brand distribution, brand association, brand credentials and brand message. Brand identity and brand name entails developing a name, symbol or logo that can be used to differentiate a firm’s products. The brand should contribute towards attainment of a unique experience.

3.1.3 The big idea

The success or failure of a particular brand is dependent on the quality of the ideas which form its foundation. A firm should always have ideas that enable its brand to respond to market changes. The big idea enables a brand to move to the next level.

3.1.4 Integrated Marketing Communication

After successful development of a brand, a firm’s management team should be committed at ensuring that there is sufficient market awareness. This can be achieved by conducting a comprehensive market awareness campaign.

One of the ways through which firms achieve this is by incorporating Integrated Marketing Communication. According to Brennan, Canning and McDowell (2011, p.171), the strategy entails breaking away from the brick and mortar mediums of creating market awareness and integrating emerging market communication mediums.

Some of the marketing communication techniques that the firm should consider include use of public relations, advertising, direct marketing, and sponsorship. Some of the emerging mediums which the firm should consider include use of the internet. The market communication campaign ensures that that the consumers are continually aware of the brands existence in the market. Through IMC, a firm is able to create the intended synergy.

3.1.5 Employee involvement

Firms which are most successful in branding are those which consider the employees in their branding process. The employees should be educated about the brand’s overall architecture. For example, they should understand how to defend the brand image. Additionally, they should also understand how they can keep the firm’s brand relevant in the market. According to Dubb, employees form the first contact with a certain brand. As a result, they should be fully incorporated in the process of building the brand.

3.1.6 Brand measurement

This step entails monitoring the performance of the firm’s branding programs so as to determine their effectiveness. Some of the elements considered in the measurement include the products sales, market share and distribution.

To be efficient in measurement, a branding plan that stipulates how the firm intends the brand to be. Some of the brand intangibles that a firm should consider include brand awareness, brand preference, perceived value, customer satisfaction, intent to purchase, brand relevance, intent to purchase, perceived value and intent to repurchase.

3.2 Benefits of branding

According to Baines, Fill and Page (2008), a strong brand penetrates the market more easily and has the ability of influencing the consumers purchasing behavior. Additionally, branding also benefits a firm in that it can be able to incorporate a premium pricing strategy.

By developing a strong brand, a firm is able to enhance its brand equity. As a marketing concept, branding can be categorized as being a tangible and an intangible marketing ingredient that enhances a firm’s growth and ability to gain a high market share. Additionally, branding can prevent a firm’s market share from being eroded.

With regard to financial perspective, branding enables a firm to generate free cash flow. Developing a strong corporate brand improves a firm’s appeal to investors and financiers. This means that it becomes easier for a firm to source for financial capital externally (Gregory, 2009, p. 3). For example, over the years it has been in operation, Coca Cola Company has managed to develop financial stability as a result of branding.

The firm estimates that only 4% of its value is attributable to its machinery, locations and machinery. Ninety six per cent of the firm’s value is attributable to intangible assets one of them being its brand. Similarly, Intel which is one of the largest personal computer manufacturing firms in the world attributes 85% of its value to brand equity (Knox, 2004, p.106). By developing a strong brand, a firm can be able to introduce a new product in the market more cost-effectively.

4. Conclusion

From the analysis, the success of a firm is dependent on the effectiveness with which it undertakes its marketing. One of the concepts which management teams should consider incorporating is marketing segmentation. Through segmentation, a firm is able to address the consumers’ needs more effectively.

The resultant effect is that its competitive advantage is enhanced. Additionally, a firm’s survival in the long term as a going concern entity is also enhanced by its effectiveness in branding. Branding contributes towards development of a strong and a long term customer relationship.

5. Recommendations

For firms to survive in a market characterized by intense competition, it is vital for the management teams to consider integrating market segmentation and branding. To be efficient in their market segmentation and branding, firms should also consider undertaking a continuous market research.

The research should target both the customer and the competitor as the core variables. This will enable the firms to adjust their marketing strategies in accordance with market changes. Additionally, their branding process should include both the customers and the employees.

Reference List

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Dibb, S. & Simkin, L., 1995. The market segmentation workbook; target marketing for marketing managers. London: Routledge.

Dunn, D., 2004. Branding; the 6 easy steps. California: Cameron Street Press.

Gitman, L. & McDaniel, C., 2009. The future of business; the essentials. Mason, OH: South Western Cengage.

Gregory, J., 2009. The best of branding; best practices in corporate branding. New York: McGraw-Hill.

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