1-Using the attributes of “Segmentation,” describe a situation where segmentation is good, clear, and helps in the marketing effort. Also describe an example of a segmentation which is not as good, clear, or helpful. Make sure to explain “why”.
Market Segmentation is an important process for dividing the business market into groups of segments that have similar characteristics and consist of potential and existing customers. For every product, a sketch of the specific customer is needed to target the specific market. Every market is composed of different types of people, and thus not everyone needs a specific product or service.
Market segments show the people subgroups, which share similar characteristics compelling them to buy the same product or service. For instance, everyone needs to drink clean water; however, not everyone wants bottled water or a water purifier. Selling bottled water to everyone would end in the wasting of resources on the wrong segment of the market. Based on the individual market segments, separate targeted marketing campaigns can be carried out.
A good market segmentation example would be McDonalds, who originally targeted the market segment of late-snack and lunch customers. However, after research, they further targeted the market segments of people desiring a quick breakfast while going to work. New promotional campaigns were targeted and developed solely for Egg Muffins. Further products were added as per the geographic or demographic addition of the market segment targeted by McDonalds (Michman & Mazze, 1998, p. 48). The target market overall for McDonalds is urban, mostly aged from 8 to 45 years of both genders. Lower and middle-class income holders are mostly targeted who are mostly students, employees or professionals. All of the four attributes of segmentation are evident in the McDonalds segmentation. For being useful, it is necessary that each market segment should be measurable, substantial, differentiable, and accessible. The market size, purchasing power, and profiles of McDonalds are measurable. Similarly, the segments targeted by McDonalds are also substantial as it is profitable for McDonalds. The market segment is accessible, and McDonalds can easily reach its potential customers. Similarly, the market segment is easily differentiable as well, as with the change in the marketing mix, the segment responds differently as well. For instance, the change in price would affect the market segment response, affecting the sales volume.
An example of a market segment that has gone bad would be of “BIC Pen for Hers.” The target market that the company was targeting was already using Pens literally for literally so many years that changing it only to a higher priced and the pink colored alternative is certainly not an attraction point. The company tried to advertise the pens for women by adding feminine colors to the pens. The famous hostess Ellen DeGeneres also mocked the stupidity of this product and its market segmentation on her show, depicting the bad choice of the company is trying to gain the specific female market (Aramowicz, 2012). The Bic for her segmentation was, even though measurable and accessible; as its market size was easily measurable and reachable by Bic. However, it was either differentiable or substantial. It was not differentiable because the market did not respond to any changes made in its product, price or promotion of Bic for her, and the market segment was also not profitable for the company as it wasn’t a success.
2-Using the three principles of Brand Extension, describe a brand extension that is strong and one that is weaker. Explain why the extension is strong or weak.
Brand Extension is the extension of the brand which can be any distinguishing logo, word, symbol or mark given to any product or service all made less than one name to distinguish it from others. It happens when a company wants to leverage the goodwill of the existing brand and use it for the new product. For example, Snickers Ice cream is the brand extension of sinkers candy bars. Brand extension can be in the form of an extension of the customer or the target market in which the same customers are sold another new product. It is true for Snickers.
In another example, an entirely new product can be launched to a new market with the same name using its goodwill, like Samsung launches washing machines and cell phones. The company makes use of the perpetual fit as the new offerings of the company; cell phones are seen as congruent to its current offerings of electronics. Similarly, the company has the competitive leverage of larger resources, strong brand name, and vast supply chain which can be exploited in the new offering as well. Successful brand extensions need perpetual fit, competitive leverage and the transfer of benefit from one product to the new product. Dove and Samsung strong brand name; its supply chain is helping it in offering the new product as well. Dove has extended its brand to add deodorants, shampoo and body wash under its name which shows a successful brand extension (Aaker, 2017). On the other hand, a bad brand extension can be of Colgate Kitchen Items which could not be accepted by the market as a meal in place of its previous oral or personal care product image. The Buyers were not able to see the new Kitchen items congruent to the current offerings of Colgate (Myers, 2014). The company could not make use of the competitive leverage in the new products, and the benefit is not transferred. The perpetual fit has also not worked out as the customers could not accept the company as other than personal or oral care products.
3-Using the principles of Push and Pull marketing, describe a product or service where Push is more appropriate, and describe a product where Pull is more appropriate. Make sure to explain.
There are two kinds of promotional strategies: the Push and the Pull marketing strategy. The Push marketing strategy is the one which the company uses to make use of the sales force of the company. The company pushes the demand for the product it has created by taking the customer to the product. The customer is aware of the product when he or she is buying it. The producer or manufacturer of the product pushes the product to the wholesalers who promote the products to the retailers to promote it to the ultimate end consumers. An example of push marketing strategies can be making use of trade shows or by using direct selling. Nokia Phones can be used for the example of Push strategy as these mobile phone manufacturers promote it via retailers and offer subsidies on the phones to promote the retailers to sell it in higher volumes (O’Reilly, 2013). Nokia makes use of the Push strategy by trying to push the demand for its products in the market. It has used this strategy by using the trade shows and an experiential showcase of the company photo-taking ability to its market since its launch of Lumia 1020 in 2014 in New York (O’Reilly, 2013). Furthermore, the product has to be in its early stage, which is also evident in Nokia as its new Lumia phone is going to be launched. The push strategy involves B2B buyers; this is also evident in Nokia, as the company sells its phones to retailers. The company has limited funds as compared to its competitors like Apple and Samsung which is another reason for Push strategy.
The other marketing promotional strategy is Pull strategy which is often used by companies committed to investing high spending on consumer promotion and advertising for building the demand of the product. The customer, in this case, comes with the product. Consumers in this marketing strategy ask for the product from the retailers who then ask for it from the wholesalers who ask the producers. Promotions, referrals, discounts and electronic, print, social media advertising can be used for this type of marketing. One such example of the Pull marketing strategy would be of Apple iPhone. The company has been investing in huge media promotions, and through word of mouth the Apple, iPhone has become a luxury product which everyone wants to possess. This pulls strategy prepares the customer to make the buying decision even months before its actual launch (Shaughnessy, 2012). Usually, companies use a combination of both strategies. The Pull strategy requires the customer purchase decision to have a strong emotional attachment which is visible for Apple phones. The anticipation of the launch of the new phones from Apple is evident in its market. Pull strategy is implemented when there is favorable demand for the product which is true for Apple iPhones. The company product has significant differentiation in the market as well with a different iOS and product design.
4-BlahBlahCar is a French ride hailing service that links city-to-city drivers and riders in Europe. (The link below describes BlaBlaCar) This is not a US launch, as the company strategists believe the US cities are too far apart, and US gas is too cheap. Using the principles of Marketing Warfare (Trout and Reis):
A- Is this a good strategic model?
The Principles of Warfare show the marketing strategy which suits any company is dependent on its market position. The authors show that marketing should not be consumer-centric, but more competitors centric. The business model presented by Blahblahcar is based on the consumer-centric approach which shows the weakness in its strategy. The company has identified a good market; however, Uber is already the market leader in this area. Therefore, the company cannot just offer a better service as the customers already consider Uber as the best service provider. The French Ride-hailing service can use the principles of flanking warfare. It would be better if it narrows down an uncontested area as it does not have the strengths of the market leader, Uber. The element of surprise would have to be well kept, and the follow through of the strategy would also be needed (Bisserbe & Landauro, 2014).
B- How should Uber react?
In terms of Uber, the market leader, the company can work on defensive warfare strategy. The company, Uber, can make its products better by providing more services or by cutting down prices. Discounted offers can also be made to loyal customers. Uber can also start a monthly package for frequent users to improve its services. All these steps would reduce the chances of losing its market to its competitors (Ries & Trout, 1997). Thus, Uber, being the market leader, should adopt the Defensive warfare strategy as it has already attained the position of the market leader in the minds of the consumers. The best defensive strategy is attacking themselves. It implies developing products better than the existing ones. Furthermore, Uber should also work on blocking the French service provider by cutting down its costs or offering discounts.
5-You are the VP of Real Estate for a supermarket company. You have a site in Blacksburg that achieves $600,000 per week in volume. A new commercial site is being developed in Christiansburg that will support a new supermarket. Your analysts tell you the new site will generate $475,000 per week but will cannibalize $90,000 from the sister unit in Blacksburg. You build a pro forma income statement to analyze the decision, and the results are the project needs to generate $450,000 in net-new volume to have a positive cash flow.
Here’s the rub: Your primary look-alike competitor does not have a store in Christiansburg. They’ve been trying to find a location in Christiansburg for years. They will have no cannibalization issues. You are quite sure the competitor will take the Christiansburg location if you don’t.
A- Do you build the new store in Christiansburg or not? What are your primary arguments?
I would say that as VP of Real Estate for the Supermarket Company, I would say yes to building a new store in Christiansburg. The arguments in favor of this decision would be.
- Being competitor-centric, it is needed that the company expand into Christiansburg as our competitor is going to open a store there anytime soon. It does not mean that it should be done only to make the competitors stop opening it at the same location. It means that we should not vacate the market for the competitors. It is in line with the marketing warfare principles in which the competitor-centric focus is emphasized.
- The Proforma statements showing the estimates for cash flows depict that $450,000 in the net are needed to generate positive cash flow while the new location is expected to generate $475,000. Even though cannibalization would cause the supermarket loss in its first year; it would certainly improve in the future coming years.
- Cannibalization is a natural phenomenon which happens to companies like Apple as well. Apple has to launch its iPhone, which cannibalized its iPad sales. However, it did not stop it from launching it. On the contrary, it was a good decision in terms of its overall profits.
- After the opening of the store in Christiansburg, the company would get the competitive advantage of entering the market earlier than its competitor which will help it establish its reputation in the non-presence of its competitor.
B- You are preparing for what you expect will be a contentious meeting to discuss this project. You expect there will be a couple of people who will disagree with you. What will be their primary arguments?
It is expected that the arguments which will be made against the decisions will be.
How is the supermarket expecting to recover the Cannibalization of the existing store volume by $90,000? Furthermore, with the overall loss in the first years, it is likely that the investors would not allow the opening of the new site. Moreover, the company could also lose its growth on both sites as a result of this decision.
References
Aaker, D. (2017, June 13). What We Can Learn from Dove’s Brand Portfolio Growth. https://www.prophet.com/2017/06/doves-brand-portfolio-growth/
Aramowicz, J. (2012, November 9). ‘Bic For Her’ hilariously bad marketing strategy. https://www.kstatecollegian.com/2012/11/09/bic-for-her-hilariously-bad-marketing-strategy/
Bisserbe, N., & Landauro, I. (2014, December 25). France’s BlaBlaCar Gains Traction. https://www.wsj.com/articles/carpooling-service-expands-across-europe-1419538372
Michman, R. D., & Mazze, E. M. (1998). The Food Industry Wars: Marketing Triumphs and Blunders. London: GreenWood Publishing Group.
Myers, D. (2014, March 29). 6 Hilarious Food and Drink Product Fails. https://www.huffpost.com/entry/6-hilarious-food-and-drin_n_5055465
O’Reilly, L. (2013, July 16). Nokia hopes Lumia 1020 campaign will make it ‘famous’ again. https://www.marketingweek.com/2013/07/16/nokia-hopes-lumia-1020-campaign-will-make-it-famous-again/
Ries, A., & Trout, J. (1997). Marketing Warfare. New York: McGraw Hill Professional.
Shaughnessy, H. (2012, October 31). What’s Really Going On At Apple? https://www.forbes.com/sites/haydnshaughnessy
/2012/10/31/whats-really-going-on-at-apple/#454fc15d411c
