Selection of Target Market - Bikram Adhikari

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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