Victoria University Of Bangladesh

Name :Shakib Islam Shawon

ID:1219480021
Batch: 48th
Semester : Spring -2020
Course Title: Strategic Marketing
Course Code: MKT -604

Chapter -6
Market Targeting and Positioning
[Link] and Thesis:
TERGETING AND POSITIONING Introduction •
In the previous chapter we saw how a firm can identify the wants and needs of various sectors
or segments of a market as being sufficiently distinct to warrant the offering of individual
products or services. Instead of offering one catch all product or service which is likely to have
broad appeal to people generally, it is strategically more beneficial to tailor products and
services to individual market segments
. • In this chapter the importance of market targeting in strategic marketing is examined and
the different approaches to target marketing are described. There is no single best strategy for
all firms to adopt, since businesses face different marketing opportunities and have different
ranges of resources, skills and competencies at their disposal.
» Positioning enables firms to place their products and services within chosen segments so that
they stand out form those of their competitors. examines to process of product positioning, both
for single and multiple brands, and concludes by examining the need to reposition from time to
time
Targeting
• A target market is the market or market segments which form the focus of the firm's
marketing efforts (Pass et al., 1991). Once segments have been identified decisions about how
many and which customer groups to target must be made. The options include the following.
1. Mass Marketing Strategy
• Offering on product / service concept to most of the market, across many market segments.
Although achieved, there is a risk that few customers will be adequately satisfied. assumption of
this approach referred to as undifferentiated customers in the market have similar needs and
wants and can therefore be satisfied with a single marketing mix - that is, a standard product or
service, similar price levels, one method of distribution and a promotional mix which is directed
at everyone. scale economies can be The underlying marketing, is that all

2. Single Segment Strategy • concerning on a single segment with a product / service concept.
This is relatively cheap in resources, but there is a risk of putting all the eggs in one basket - if
the segment fails the company's financial strength will rapidly decline. Rolex, for example,
targets relatively high income consumers with its prestigious wrist watches. When world
economies are buoyant, sales will be good but in times of economic recession even the better off
can change their spending patterns.
3. Multi- segment strategy
• Targeting a different product or service concept at each of a number of segments and
developing a marketing mix strategy for each of the selected segments. Although this approach
can reduce the risk of being over- committed in one area, it can be extremely resource -
demanding.
.

2 Main Points
STAGE OF PRODUCT -
MARKET MATURITY
• Segmentation strategies are most critical during the maturity stage of the product- market
because buyer's needs are different. At the introductory stage of the life cycle there are few, if
any, product competitors; however, competition occur among alternative product types. If
product type substitution exists, the new market entrant may benefit from targeting one ore
more segments in the existing product- markets. type can
EXTENT OF BUYER DIFFERENTIATION
• When buyer wants are similar throughout the product - market, there is less opportunity for
-expensive segmentation than in markets with buyers with different wants. A product - market
made up of a relatively small number of end-users is more suitable for a broad or relatively
strategy, particularly if the value of purchases of individual buyers is small. undifferentiated
targeting
CHOICE OF SEGMENT(S) Five factors govern the attractiveness of a segment (Doyle, 1994 , -.
68) » Segment size » Segment growth » Profitability of the segment
• Current and potential competition
• Capabilities of the business POSITIONING CONCEPTS The poșitioning concept may be
functional, symbolic, or experiential.
• The functional concepts is relevant to products designed to solve consumption related
problems for externally generated consumption needs. Toothpastes aiming to prevent cavities
ard banks offering convenient service fall into this category.
• The symbolic concept relates to the buyers internally generáted need for self enhancement,
role position, group membership, or ego satisfaction. relating to lifestyle, and clothes stressing
image or appropriateness of occasion, are examples of this Cosmetics
• The experiential concept is used to position products that provide sensory pleasure, variety or
cognitive stimulation. Documentary films and books, are example of this.

STEPS IN DETERMINING A POSITIONING PLAN

• Define the segments in a particular market, as discussed in Chapter 7 • Decide which segment
or segments to target which the firm thinks it can successfully exploit. • Understand what the
target customers expect and believe to be the most important factors or criteria when deciding
on a purchase. Develop a product / service or brand which caters specifically for these
spectations. • Evaluate the positioning and images, as perceiyed by the target market of
competing offerings in the selected market segment or segments. Positioning, is concerned with
how the brand will be perceived in the minds of users with respect to competing brands • With
the knowledge of a product / brand, the needs and expectations of the target customers, and
their perceptions of competing brands positioning, select and image which sets the products or
brand apart from the competing brands, ensuring that the chosen image matches customers.
the aspirations of the target • The marketer must communicate with the targeted customers
about the product element of the marketing mix - as well as making the product readily
available at the right price, along with the full marketing mix. - the promotional
POSITIONING STRATEGY
• Producers of goods and services attach their own label or brand to their particular market
offering. For instance, we talk of a 'Mars Bar' or a "Kit Kat' differentiating one offering from
another. In this particular case the products are made by different manufacturers but this does
not need to be the case. A single firm may put two or more brands into the brands into the
market which actually complete with one another. We will discuss this strategy below.
»A products positioning indicates what the product represents and how customers should
evaluate it.
» Positioning is accomplished through the use of the marketing - mix variables, particularly
through product design and marketing communications. product differentiation applies equally
to consumer and to industrial goods.
Cheaper than the existing product offering More economical than the existing product offering
Both cheaper and more economical , plus offering more features than the existing product .
Product features - such as the low calory content of some foods Product benefits - e.g. a
particular model of car being the most economical way to get to work by car → Associating the
product with a use or application e.g. the wine you have on special occasions User category
associating the product with a user or class of user e.g. the car for the business executive
POSITION A SINGLE BRAND:
In order to make the most out of a single brand , a firm should try to associate itself with a core
segment of the market where it can play a dominant role . In SO
1. the brand has to be positioned in the market place that it can stand competition from the
strongest rival brand .

2. its unique position should be maintained by creating the appearance that it is in fact a
different product BRANDS
POSITIONING MULTIPLE BRANDS •
Multiple brands are introduced to the market for two major reasons:
1. To achieve growth by offering varied products in different segments of the market.

2. To meet competitors' threats to a single brand.

3. My Personal Evaluation
MARKET TARGETING AND POSITIONING Introduction • In the previous chapter we saw how a
firm can identify the wants and needs of various sectors or segments of a market as being
sufficiently distinct to warrant the offering of individual products or services. Instead of offering
one catch all product or service which is likely to have broad appeal to people generally, it is
strategically more beneficial to tailor products and services to individual market segments. • In
this chapter the importance of market targeting in strategic marketing is examined and the
different approaches to target marketing are described. There is no single best strategy for all
firms to adopt, since businesses face different marketing opportunities and have different
ranges of resources, skills and competencies at their disposal.
» Positioning enables firms to place their products and services within chosen segments so that
they stand out form those of their competitors. examines to process of product positioning, both
for single and multiple brands, and concludes by examining the need to reposition from time to
time
Targeting
• A target market is the market or market segments which form the focus of the firm's
marketing efforts (Pass et al., 1991). Once segments have been identified decisions about how
many and which customer groups to target must be made. The options include the
following
MARKET MATURITY
• Segmentation strategies are most critical during the maturity stage of the product- market
because buyer's needs are different. At the introductory stage of the life cycle there are few, if
any, product competitors; however, competition occur among alternative product types. If
product type substitution exists, the new market entrant may benefit from targeting one ore
more segments in the existing product- markets. type can
EXTENT OF BUYER DIFFERENTIATION
POSITIONING STRATEGY
POSITION A SINGLE BRAND
POSITIONING MULTIPLE BRANDS

[Link] :
REPOSITIONING STRATEGIES
»A competitors new product or service has been changed • New customer preference clusters
have been identified that suggest promising opportunities
» The original positioning was incorrect.
1. Among existing users - by the promotion of more varied uses of a product this requires the 2.
Among new product to be presented with a different image to the people who have so far
rejected it. users
3. For new users - here one has to search for latent uses of

POSITIONING EFFECTIVENESS
Evaluating how successful one had been in positioning a product is of course an essential task.

COST ADVANTAGE »A positioning advantage comes about when an organization can offer, at a
lower cost, a bundle of benefits perceived as equivalent to those of the competition.

VALUE ADVANTAGE
» This kind of positioning advantage is based upon occupying a location in product attribute
space the represents for buyers combination of attributes and is one that is not currently
occupied by any competitor. the most preferred MANAGEMENT PERFORMANCE EXPECTATIONS
•
This considers the performance of a position. It takes account of whether a particular value
advantage is worthwhile in terms of revenues and costs. » In this respect, a successful
positioning strategy should be evaluated on a regular basis to identify shifting buyer
preferences and changes in competitor strategies.
 Pricing Strategy

Introduction
Price is the value that is put to a product or service and is the result of a complex set of
calculations, research and understanding and risk taking ability. A pricing strategy takes
into account segments, ability to pay, market conditions, competitor actions, trade
margins and input costs, amongst others. It is targeted at the defined customers and
against competitors.

High price is used as a defining criterion. Such pricing strategies work in segments and
industries where a strong competitive advantage exists for the company.

Price is set artificially low to gain market share quickly. This is done when a new product
is being launched. It is understood that prices will be raised once the promotion period
is over and market share objectives are achieved. Example: Mobile phone rates in
India; housing loans etc.

No-frills price. Margins are wafer thin; overheads like marketing and advertising costs
are very low. Targets the mass market and high market share. Example: Friendly wash
detergents; Nirma; local tea producers.

Skimming strategy: high price is charged for a product till such time as competitors
allow after which prices can be dropped. The idea is to recover maximum money before
the product or segment attracts more competitors who will lower profits for all
concerned. Example: the earliest prices for mobile phones, VCRs and other electronic
items where a few players ruled attracted lower cost Asian players.

Penetration pricing is the practice of offering a low price for a new product or service
during its initial offering in order to attract customers away from competitors. Penetration
pricing is most commonly associated with a marketing objective of increasing market
share or sales volume, rather than to make profit in the short term.

Key Points:
1.     New-Product Pricing Strategies

2.      Product Mix Pricing Strategies

#1. New-Product Pricing Strategies

Pricing structure usually changes over time as a company's products move through their
life cycles. When a new company is bringing a new product to market, it is presented
with the challenge of setting prices for the first time. In this situation, a company can
choose between two broad strategies, market-skimming pricing or market-penetration
pricing.

Market-Skimming Pricing
Market skimming is a strategy that works for a new product that is also a new type of
product: One that has no copycat competitors or substitutes, yet. Companies that create
innovative new products can set high initial prices allowing them to “skim” revenues
from the market. But, market-skimming pricing only works under certain conditions:
 Condition #1: The product’s quality and image must be strong enough to
support its high price, and enough buyers must want and be willing to buy
the product at the high price.
 Condition #2: Costs involved in producing a smaller volume of the product
cannot be so high that they "eat up" the advantage of charging more.
 Condition #3: It cannot be easy for competitors to enter the market and
swiftly undercut the high price.

With market-skimming pricing, the goal is to siphon off maximum revenues possible
from the market prior to the introduction of substitutes or copycat offerings. Once the
market has been skimmed, the company is free to lower the price drastically, to capture
low-end buyers while rendering competitors unable to compete on price.
Market-Penetration Pricing

Achieving an initial high volume of sales, with a new product, is the primary objective of
market-penetration pricing. Instead of setting a high price to skim off small but profitable
segments of the total market, a company can choose to use market-penetration pricing.
Although this strategy calls for a product to be widely promoted, it allows the setting of a
low initial price enabling the company to penetrate the market quickly and deeply. Using
the market-penetration strategy, the company can attract a large number of buyers
quickly while it also captures a large share of the market. There are conditions that must
be met, however, for market-penetration pricing to work:

 Condition #1: The market for the product must be highly price sensitive so
that a low price produces more market growth.
 Condition #2: The market must be large enough to sustain low profit margins,
and production and distribution costs must fall as sales volume increase.
 Condition #3: The low price must help keep out the competition.
 Condition #4: The company must be able to maintain its low-price position—
otherwise, the price advantage will be only temporary. Once competitors
enter the market, they may also lower prices.

 
#2. Product Mix Pricing Strategies
When a company produces a line of products and/or services, they have what is called
a "product mix." A company's objectives, when setting prices for a product mix, is
somewhat different from setting prices for a single product or service. In pricing for a
product mix, the company is seeking a set of prices that will allow it the most profit
potential from selling a mix of products. There are five basic product-mix pricing
strategies, including: Product-line pricing; optional-product pricing; captive-product
pricing; by-product pricing, and product-bundle pricing.
 
Product-Line Pricing
Product quality, real or perceived, is used in product-line pricing. When a company
offers a line of products, product-line pricing is used to separate market offerings by
price gaps between categories. The price gaps are used to alert interested buyers to
real or perceived differences in the quality of offerings. Established price points of
competitive offerings are often used in the setting of different prices for different
products in the line. Retailers use this approach to separate goods into cost categories
as well, so that customers can see distinctions in levels of quality of merchandise.

Optional-Product Pricing

This method allows a company to set a low price for its most basic product or service,
while offering desirable/needed add-on accessories or services that are costly. This
method allows the company additional ways to profit. Companies/industries using
optional-product pricing include airlines and cell phone companies. Using optional-
product pricing, the company's challenge is to determine what to include along with the
price of its base offer, and what to present as optional.
Captive-Product Pricing

This method is used by companies that market their own supplies for a main product,
when the main product is sold separately. Using this method, the company will usually
set prices low for the main product, but will have high mark-ups on the supplies needed
for use. For example, makers of computer printers use this method by offering printers
at relatively low prices, with printer ink cartridges being offered at substantial prices.
Products such as computer software, staples, and razor blades, also provide good
examples of this method. In the case of services, the captive-pricing method is called
two-part pricing. Part one is a fixed fee for a basic service (for example, a leased
automobile, or copier machine). Part two of the service is a variable usage rate (usage
rate, in the example of leased auto, would be based on mileage; for the leased copier,
on the number of copies made). Using this method, it is up to the service firm to decide
what the pricing should be for use of the basic service and the variable usage rate.

By-Product Pricing

Sometimes, the manufacturing process results in production of a useful, and therefore

marketable, product. When there is a market for the by-product, by-product pricing is a
method that can allow a manufacturer to obtain a competitive advantage by charging a
lower price for the main product (since making the product produces something else of
value). By-products can be of no, little, or great value. When they are of value,
marketers can accept a price that offers little more than the cost of storing and
delivering them, or, they can have significant value. Some examples of profit-making by-
products include, lanolin (comes from the cleaning of wool); whey (from cheese
manufacturing), and asphalt (from the refining of crude oil).
 
Product Bundle Pricing

This method calls for the "bundling" of several products which are offered for sale as a
combined unit. The price of each item inside the bundle is usually reduced from what
the price would be for the item, if purchased separately. Purchasing the bundled unit
allows buyers to get each item in the bundle at a reduced price. This method allows
marketers to include in a bundle some items that, alone or separately, might not be as
popular with consumers as other items in the [Link] price must be low enough,
however, for the "package deal" to be attractive to consumers. Cable television,
telephone/telecommunications services companies, and fast-food marketers use bundle

pricing often and effectively.

There are many different and complex ways that pricing can be approached, however,
the bottom-line rules of pricing are simple and straightforward. When it comes to pricing,
the most important thing to remember is that prices must be set in a way that will cover
costs and profits. With this in mind, pricing must be flexible, because prices should
always be in line with changing costs, consumer demand, competitive pricing moves,
and profit goals. When the time comes that there is a need to lower prices, the company
should first find a way to lower costs, because pricing should always be done in a way
that will assure sales and profit.

Personal Observation
Managers should start setting prices during the development stage as part of strategic
pricing to avoid launching products or services that cannot sustain profitable prices in
the market. This approach to pricing enables companies to either fit costs to prices or
scrap products or services that cannot be generated cost-effectively. Through
systematic pricing policies and strategies, companies can reap greater profits and
increase or defend their market shares. Setting prices is one of the principal tasks of
marketing and finance managers in that the price of a product or service often plays a
significant role in that product's or service's success, not to mention in a company's
profitability. Generally, pricing policy refers how a company sets the prices of its
products and services based on costs, value, demand, and competition. Pricing
strategy, on the other hand, refers to how a company uses pricing to achieve its
strategic goals, such as offering lower prices to increase sales volume or higher prices
to decrease backlog. Despite some degree of difference, pricing policy and strategy
tend to overlap, and the different policies and strategies are not necessarily mutually
exclusive.
After establishing the bases for their prices, managers can begin developing pricing
strategies by determining company pricing goals, such as increasing short-term and
long-term profits, stabilizing prices, increasing cash flow, and warding off competition.
Managers also must take into account current market conditions when developing
pricing strategies to ensure that the prices they choose fit market conditions. In addition,
effective pricing strategy involves considering customers, costs, competition, and
different market segments.
Pricing strategy entails more than reacting to market conditions, such as reducing
pricing because competitors have reduced their prices. Instead, it encompasses more
thorough planning and consideration of customers, competitors, and company goals.
Furthermore, pricing strategies tend to vary depending on whether a company is a new
entrant into a market or an established firm. New entrants sometimes offer products at
low cost to attract market share, while incumbents' reactions vary. Incumbents that fear
the new entrant will challenge the incumbents' customer base may match prices or go
even lower than the new entrant to protect its market share. If incumbents do not view
the new entrant as a serious threat, incumbents may simply resort to increased
advertising aimed at enhancing customer loyalty, but have no change in price in efforts
to keep the new entrant from stealing away customers.
 
 
 

Conclusion
Pricing strategy is the policy a firm adopts to determine what it will charge for its
products and services. Strategic approaches fall broadly into the three categories of
cost-based pricing, competition-based pricing, and value-based pricing. Pricing strategy
is a key variable in financial modeling, which determines the revenues achieved, the
profits earned, and the amounts reinvested in the firm's growth for its long-term survival.
A number of pricing strategy options are available, including markup pricing, target
return on investment pricing, perceived value pricing, competition-based pricing,
penetration pricing, and skimming pricing. The choice of pricing strategies adopted by
the firm will depend on the overall corporate strategy, buyer expectations and behavior,
competitor strategy, industry changes, and regulatory boundaries. Other factors
affecting the nature of pricing strategies are corporate image, geography, price
discrimination, and price sensitivity. Future trends in pricing policies are likely to focus
on information-based optimization through cost reduction of inefficiencies in the supply
chain, the reduction of trade allowances, an increase in responsiveness to changes in
market conditions, greater pricing flexibility, and a reduction of pricing disparity across
different channels.