Having evaluated different segments, according to Philip Kotler the company can consider Àve patterns of target market selection which can be explained as follows:
Single-Segment Concentration
Many companies concentrate on a single segment: Volkswagen, for example, concentrates on the small-car market, while Porsche concentrates on the sports car market. Through concentrated marketing, the firm gains a thorough understanding of the segment’s needs and achieves a strong market presence. Furthermore, the Àrm enjoys operating economies by specializing its production, distribution, and promotion; if it attains segment leadership, it can earn a high return on its investment. However, concentrated marketing involves higher than normal risks if the segment turns sour because of changes in buying patterns or new competition. For these reasons, many companies prefer to operate in more than one segment.
Selective Specialization (Multi-segment Coverage)
Here the Àrm selects a number of segments, each objectively attractive and appropriate. There may be little or no synergy among the segments, but each segment promises to be a money-maker. This multi-segment coverage strategy has the advantage of diversifying the Àrm’s risk. Consider Radio Nepal that wants to appeal to both younger and older listeners using selective specialization. Similarly, television station offers different program such as cartoon, sports, news, etc.
Product Specialization
Another approach is to specialize in making a certain product for several segments. An example would be a microscope manufacturer that sells microscopes to university laboratories, government laboratories, and commercial laboratories. The Àrm makes different microscopes for different customer groups but does not manufacture other instruments that laboratories might use. Through a product specialization strategy, the Àrm builds a strong reputation in the speciÀc product area. The downside risk is that the product may be supplanted by an entirely new technology.
Market Specialization
With market specialization, the Àrm concentrates on serving many needs of a particular customer group. An example would be a Àrm that sells an assortment of products only to university laboratories, including microscopes, oscilloscopes, and chemical Áasks. The Àrm gains a strong reputation in serving this customer group and becomes a channel for further products that the customer group could use. However, the down- side risk is that the customer group may have its budgets cut. In Nepal, most of the private school provides not only education but also clothing, books and stationery, transportation, canteen facilities etc.
Full Market Coverage
Here a firm attempts to serve all customer groups with all of the products they might need. Only very large Àrms can undertake a full market coverage strategy. Examples include IBM (computer market), General Motors (vehicle market), and Coca-Cola (drink market). Large firms can cover a whole market in two broad ways: through undifferentiated marketing or differentiated marketing. In undifferentiated marketing, the firm ignores market-segment differences and goes after the whole market with one market offer. Focusing on a basic buyer need, it designs a product and a marketing program that will appeal to the broadest number of buyers. To reach the market, the Àrm uses mass distribution backed by mass advertising to create a superior product image in people’s minds. The narrow product line keeps down costs of research and development, production, inventory, transportation, marketing research, advertising, and product management; the undifferentiated advertising program keeps down advertising costs.
Presumably, the company can turn its lower costs into lower prices to win the price-sensitive segment of the market. In differentiated marketing, the firm operates in several market segments and designs different programs for each segment. General Motors does this with its various vehicle brands and models; Intel does this with chips and programs for consumer, business, small business, networking, digital imaging, and video markets. Differentiated marketing typically creates more total sales than does undifferentiated marketing. However, the need for different products and marketing programs also increases the firm’s costs for product modification, manufacturing, administration, inventory, and promotion. (Kotler, 2012) Because differentiated marketing leads to both higher sales and higher costs, we cannot generalize regarding this strategy’s proÀtability. Still, companies should be cautious about over segmenting their market. If this happens, they may want to use counter segmentation to broaden their customer base.
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