Exam Question and Answer on Market Segmentation

QUESTION AND ANSWER ON MARKET SEGMENTATION Salim Brommer is the selling repointor of Ashkol Furniture Supplies, a medium-sized go with which specializes in manuf operateuring single- valued function furniture. The companionship gos its intersections in India, so benefiting from relatively low labour follows. However, it has recently experient intense competition from suppliers who ready even lower cost bases. Salim has contumacious that his company will benefit if he focuses on those customers who can pull up stakes higher profit margins. He has decided to cigarette domestic customers in Europe.Increasingly, cloak-and-dagger households, particularly those with computers, are converting spare rooms into office-style areas. Additionally at that place has been a noniceable trend towards fakeing from home. This saves employers incurring the costs of office provision, and also employees save on travel and can also work at times convenient to themselves. However, Ashkol ha s no experience of bring ining with these types of customers. The company now needs to develop a suitable trade outline to succeed in this smart area and maintain a sustainable competitive advantage.Required a. Using a suitable model of your choice, develop a merchandising approach which Salim might use to enter this new securities indus humble. b. formulate how Salim could select appropriate target securities industrys and position his ingatherings so as to name and sustain competitive advantage. Suggested Answer Salim needs to develop a foodstuffing strategy for entry into the domestic market in Europe. This can be achieved by looking at the factors that understand up the marketing blend in product, cost, place and promotion. Choosing a marketing mixThe design of the marketing mix should be decided on the basis of management intuition and judgment, together with info provided by market research. Elements in the marketing mix partly act as substitutes for each other and they must be integrated. The product needs to be positioned to appeal to the target customer. For example, Ashkol would struggle to develop a high animateness brand image if they set price at a low, keenness level. Product The physical product needs to be appropriate for the private household market.Office furniture whitethorn prolong a very variant style to household furniture, so a different approach may need to be taken to the design of the product in entrap to make it appealing for the domestic buyer. A customer will completely buy one of Salims products if they get a better deal from buying it than from buying any of the alternatives. This highlights that the nature of the products in the new align will need to meet the demands of the new target market. Areas to consider present are design (size, shape) and features. For example, it may need to be smaller and do of better quality material.The space available in domestic alteration is likely to be quite restrict ed, so around standard items may not sell well simply because they are too large. Multi-purpose items, such(prenominal) as desks that incorporate filing drawers and PC monitor stands may be commandd. Place Place deals with how the product is distributed, and how it reaches its customers. Establishing a suitable diffusion system is going to be one of Salims largest tasks. His products are immense and will therefore have to be transported by ship from India to Europe, credibly in freight containers, which will impose a minimum stinting scale of shipment.Distribution Channels Serious consideration will have to be given to how customers will be able to scene, order and receive language of the products. Furniture showrooms are necessarily large areas and need to be in areas where customers will be attracted. Even if selling is by direct get amodal value or over the Internet, there will be probably have to be a warehouse to receive bulk shipments from India, break them trim and d ispatch individual orders. All this has major cost implications perhaps offsetting the cost savings from cheaper labour.These considerations alone may push Salim towards a co-operative venture with a European agent who knows the market and is prepared to take on the selling and distribution task. Promotion involves arousing attention, generating interest, inspiring desire and initiating action. Marketing communication mingled in this could be advertising, public relations, direct selling or gross sales promotion. A furniture showroom would be part of this but a wider approach will be needed. The target market is people working from home and the promotional methods used should be appropriate to this market.Types of promotion * Direct promotion via mailing lists may be appropriate, although because Salim has no experience in this market, he would probably have to buy the list which may make this an expensive option. * There are numerous home style magazines in which adverts can be placed. * The Internet is a vital part of the life of people working from home and its authorisation for promotion should be full utilized, perhaps by setting up a dedicated website. Organising and designing the marketing communication effort will almost certainly require input from someone familiar with the European market.Price is the final element of the marketing mix and is an important signal to customers more or less the product. It is important that the price should be competitive so Salim should investigate the prices being charged by competitors who have similar product ranges. Price should also indicate the quality of the product so Salim will need to decide if he wants to produce a deluxe range or a more staple model. Discounts and remuneration terms need to be considered as a potential government agency of attracting customers especially in the initial start up phase of the new product line. Part (b)Because of limited resources, competition and large markets, organi sations are not usually able to sell with equal efficiency and success to every(prenominal) market department. It is necessity to select target markets. A target market is a particularly attractive plane section that will be served with a distinct marketing mix. While Salims products may have some application for commercial users, he intends to sell then to customers, who will view them as shopping goods. These goods have a higher unit value than convenience goods and are bought less frequently, usually after some cerebration and consideration have been expended.Salim should try to specify the instalment of the customer market into which he wishes to sell his products with some care, since this will influence important decisions about all the elements of the marketing mix, including such things as product design, marketing communications, price and distribution methods. Kotler determine six steps Step 1- Identify cleavage variables and segment the market Step 2- Develop segme nt profiles Steps 1 and 2 are in part Step 3- Evaluate that attractor of each segment Step 4- Select the target segment(s)Steps 3 and 4 are in targeting Step 5- Identify location concepts for each target segment Step 6 Select develop and communicate the chosen concept Steps 5 and 6 are in positioning Segmentation variables fall into a small number of categories. Geographical air division is very simple, but can divine servicefully be combined with socio-demographic segmentation. Psychographic segmentation is not base on objective data so oftentimes as how people see themselves and their subjective feelings and attitudes towards a particular product or service, or towards life in general.The behavioural approach segments buyers into groups based on their attitudes to and use of the product, and the benefits they expect to receive. Both of these methods are most utilizable for convenience goods and are not, therefore likely to be very useful to Salim. Probably, the best seg mentation approach for Salim is socio-demographic segmentation, which is based on social, economic and demographic variables such as education, income, occupation, family size and social class.Much work has already been make on this approach, in the ACORN system, for example, and Salim would be able to buy in the basic information he needs. Segment Validity A market segment will only be valid if it is worth designing and exploitation a unique marketing mix for that specific segment. Salim will have to be sure of several things about his chosen target market Is it large enough to be profitable? Does this segment respond other than in the marketing mix than another segment? Can he reach the potential customers? Can the segment be reached profitably?Is the segment stable enough to justify resources being spent on it? testament it enable him to build on the companys strengths? Internal depth psychology It is important to assess company strengths when evaluating attractiveness and tar geting a market. This can help determine the appropriate strategy because once the attractiveness of each identified segment has been assessed it can be considered along with relative strengths to determine the potential advantages the organization would have. In this way, preferred segments can be targeted. Product PositioningIt is tall(a) that Salim will be able to identify a market segment where there is no direct competitor, so it will be necessary to position the product line in such a way as to create of some form of product differentiation. The aim is to make the customer perceive the product as different from its competitors. An aid to this is to try to identify gaps in the market by considering the mix of the product attributes such as price, applications, users, occasions for use and specific aspects of quality may be drawn to refine knowledge of product position.