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• Module overview
• 1. What is marketing?
  • 1.1 What is marketing?
    • 1.1.1 Different uses of the term 'marketing'
    • 1.1.2 Different levels of marketing
    • 1.1.3 A definition of marketing
  • 1.2 Clarification of the marketing definition
    • 1.2.1 Outputs
    • 1.2.2 Inputs
    • 1.2.3 Exchange
  • 1.3 Development of marketing
  • 1.4 Types of marketing
  • 1.5 What is a service?
    • 1.5.1 Characteristics of services
    • 1.5.2 A service definition
    • 1.5.3 Classifications of services
    • 1.5.4 Services: a growth sector
  • 1.6 Marketing in the maritime industry
  • 1.7 Towards social and ethical responsibility
    • 1.7.1 Common criticisms of marketing
    • 1.7.2 Social impact of marketing
  • 1.8 Summary

• 2. Strategic marketing management

  • 2.1 Introduction
  • 2.2 The environments
    • 2.2.1 External environment
    • 2.2.2 Internal environment
    • 2.2.3 Mission statements and objectives
    • 2.2.4 Resources
  • 2.3 Controllable factors
  • 2.4 The strategic marketing management process
    • 2.4.1 Planning
    • 2.4.2 Implementation and control
    • 2.4.3 Marketing plan
  • 2.5 Types of marketing strategies
    • 2.5.1 Strategic considerations for services
  • 2.6 Summary

• 3. Marketing research and information systems

  • 3.1 Introduction
  • 3.2 The marketing information system (MIS)
  • 3.3 Marketing research
    • 3.3.1 Scope of research
  • 3.4 The marketing research process
    • 3.4.1 Step 1: defining the problem
    • 3.4.2 Step 2: analysing the situation
    • 3.4.3 Step 3: obtaining problem-specific data
    • 3.4.4 Step 4: interpreting the data
    • 3.4.5 Step 5: solving the problem
  • 3.5 Summary

• 4. Consumer and B2B buying behaviour

  • 4.1 Introduction
  • 4.2 Consumer buying behaviour
    • 4.2.1 Psychological influences
    • 4.2.2 Cultural and social influences
    • 4.2.3 The decision-making process
  • 4.3 B2B buying behaviour
    • 4.3.1 Business buying processes
    • 4.3.2 Main types of business markets
  • 4.4 The buying of services
  • 4.5 Summary

• 5. Segmenting markets, targeting and positioning

  • 5.1 Introduction
  • 5.2 Market segmentation
    • 5.2.1 Dimensions used to segment markets
  • 5.3 Target markets
  • 5.4 Market positioning
  • 5.5 Summary

• 6. Product planning and decisions

  • 6.1 Introduction
  • 6.2 Product concepts
    • 6.2.1 The total product concept
    • 6.2.2 Product classifications
    • 6.2.3 The service offering
  • 6.3 The product mix
  • 6.4 Branding
  • 6.5 Packaging
  • 6.6 Product life-cycle
  • 6.7 Product development
  • 6.8 Summary

• 7. Pricing considerations

  • 7.1 What is the 'price' of a product?
  • 7.2 Pricing environments
  • 7.3 Pricing objectives
  • 7.4 Pricing policies
    • 7.4.1 Discount and allowance policies
  • 7.5 Price setting
    • 7.5.1 Cost-oriented price setting
    • 7.5.2 Demand-oriented price setting
    • 7.5.3 The price setting process
  • 7.6 Summary

• 8. Marketing logistics networks

  • 8.1 Introduction
  • 8.2 Definition of distribution
  • 8.3 Channels of distribution
    • 8.3.1 Selecting channels
    • 8.3.2 Main Australian channels
    • 8.3.3 Distributing services
    • 8.3.4 Managing channels
  • 8.4 Managing distribution
  • 8.5 Distribution and ports
  • 8.6 Summary

• 9. Integrated marketing communications

  • 9.1 Communication with a purpose
  • 9.2 Marketing communication process
  • 9.3 The promotional mix
  • 9.4 Managing advertising
  • 9.5 Managing publicity and public relations
  • 9.6 Managing personal selling
  • 9.7 Managing sales promotion
  • 9.8 Summary

• 10. E-commerce and direct marketing

  • 10.1 Introduction
  • 10.2 Direct marketing
  • 10.3 Electronic commerce
    • 10.3.1 Successful e-commerce
  • 10.4 Online marketing
  • 10.5 Using customer databases
  • 10.6 Privacy issues
  • 10.7 Summary

• 11. Managing the service encounter

  • 11.1 Introduction
  • 11.2 Participants
    • 11.2.1 Customers
    • 11.2.2 Service personnel
  • 11.3 Managing the service encounter
    • 11.3.1 Role theory
    • 11.3.2 Script theory
  • 11.4 Process
    • 11.4.1 Operations management and services
    • 11.4.2 Manufacturing efficiency
    • 11.4.3 Improving services efficiency
    • 11.4.4 Matching supply and demand
  • 11.5 Physical evidence
    • 11.5.1 Types of physical evidence
    • 11.5.2 Space demarcation
    • 11.5.3 Atmospherics
    • 11.5.4 Servicescapes
  • 11.6 Summary

• 12. Customer relationship management

  • 12.1 Introduction
  • 12.2 Customer relationship management
  • 12.3 Customer satisfaction
    • 12.3.1 Benefits of customer satisfaction
  • 12.4 Service quality
    • 12.4.1 Conceptual model of service quality
    • 12.4.2 SERVQUAL
  • 12.5 Summary

5.2 Market segmentation

We can segment markets into many other, and much more homogeneous, smaller groups than just final consumers and business buyers. Each of those can be segmented into other groups in turn.

At each lower level of segmentation, we find greater homogeneity of needs and wants of customers, and we can be increasingly precise in targeting our market activities towards meeting those needs and wants.

However, before going any further we had better do a quick review to ensure we remember what a market is. The following reading will reinforce it for you by identifying the essential characteristics of a market. As well, the reading will define market segmentation and provide additional explanation of why organisations choose to segment the market.

In your text

Kotler et al. (2004) Chapter 10, pp. 342-345, 'Market segmentation, targeting and positioning', 'Markets', 'Market segmentation', Chapter 9, pp. 312-318 'Market analysis and applications' and 'Defining the market'.

If it wasn't obvious to you before, it will now be clearer that markets can be segmented in many different ways ¾ or not be segmented at all as is shown in Figure 5.1.

Figure 5.1 Segmentation
Source: adapted from Summers et al. (2003, p. 4)

As you might expect, the choices shown in Figure 5.1 reflect certain basic segmentation strategies. One basic segmentation strategy is undifferentiated marketing ¾ when you choose not to segment your market at all. This strategy is also known as mass marketing and is used less today. Differentiated marketing is used when the focus is on what is specific to buyers and different marketing mixes are used to reach different market segments. The following diagram, Figure 5.2, provides you with a visual example of differentiated marketing strategy.

The marketing organization

Several well-prepared marketing mixes

Primary target market segment

Figure 5.2 The differentiated marketing approach
Source: Zikmund and d'Amico (1995, p. 189)

Differentiated marketing is usually addressed as either concentrated segmentation or multiple segmentation.

When you follow a strategy of concentrated segmentation , attention is focused on a single segment only ¾ you use a single marketing mix directed towards a single target market.

A concept associated with concentrated segmentation strategy is niche marketing . When a market segment is very small it is often referred to as a niche or market niche. Niche marketing can be a very profitable strategy despite the small size of the market segment because it enables the marketer to establish a reputation as an expert or specialist in the area without having to be too much concerned about competitors who are interested in higher-volume markets.

In a multiple segmentation strategy, which your textbook refers broadly to as differentiated marketing, the focus is on multiple segments rather than a single segment of the market and different marketing mixes are developed for each of the different segments.

The following figure presents the three basic kinds of segmentation strategy to you in visual form and the subsequent Table 5.1 summarises key characteristics of the three strategies.

Figure 5.3 Alternative segmentation strategies
Source: adapted from Kotler et al. (2004, p. 359)

Table 5.1 Contrasting target market strategies

Strategic factors:	Approaches:
Undifferentiated marketing	Concentrated marketing	Differentiated marketing
Target market	Broad range of consumers	One well-defined consumer group	Two or more well-defined consumer groups
Product	Limited number of products under one brand for many types of consumers	One brand tailored to one consumer group	Distinct brand for each consumer group
Distribution	All possible outlets	All suitable outlets	All suitable outlets ¾ differs by segment
Promotion	Mass media	All suitable media	All suitable media ¾ differs by segment
Price	One 'popular' price range	One price range tailored to the consumer group	Distinct price range for each consumer group
Strategy emphasis	Appeal to a large number of consumers via a uniform, broad-based marketing program	Appeal to one specific consumer group via a highly specialized, but uniform marketing program	Appeal to two or more distinct market segments via different marketing plans catering to each segment

Source: Evans and Berman (1992, p. 219)

As an example of segmentation strategies, let us examine how shippers decide which strategy to adopt.

Suppose the world demand for cargo space comprises the total market for shipping services. Do you think then that any one freight forwarder will be able to meet the demand? Obviously not, because not only does no one freight forwarder have the capacity to meet that much demand, but there are also quite different types of cargo to be carried. Therefore, an undifferentiated segmentation strategy does not work.

This means that a concentration segmentation strategy is more prevalent in the shipping world, as is exemplified in passenger shipping. For example, a large passenger-ship company may target one segment of older, rich people for its round-the-world cruises. Another company, of course, may target a younger, executive segment for short cruises to the tropics. A third company could target regular travellers between two or more countries, for example migrant workers.

Differentiated strategy means the use of different marketing mixes for different segments. Thus, a shipowner may have different types of vessels for different types of cargo, such as dry bulk, ro-ro, reefers and container. He/she may also have different sizes of the same type of vessel for different routes and offer different rates on them.

Consider this

Do you grasp the concept and how it can be applied to your organisation?

The following text reading reviews the basic segmentation strategies and importantly, also addresses the advantages and disadvantages of each. As well, two additional readings have been included that, amongst a number of marketing concepts, explain the segmentation of customers of shipyards building ferries and fans of Australian Football League (AFL) teams.

In your text

Kotler et al. (2004) Chapter 10, pp. 359-361, 'Selecting market segments'.

Reading 5.1

Hewitt, K. 1998, 'Successful marketing strategies for shipyards in the fast car ferry market', 14 th Fast Ferry International Conference , Copenhagen , 24-26 February.

Reading 5.2

Examiner, 2004, 'Social division found in fandom, Examiner , 27 March, p. 9.

Activity 5.1

Shipping examples have been provided above for undifferentiated, concentration and differentiated marketing. Write down your own examples for each of these segmentation strategies and for multiple segmentation and niche marketing.

We know from what we have covered so far that segmentation strategies can help us meet the needs and wants of our customers more directly and profitably, but what are the guidelines for successful segmentation strategy?

The question can be answered in terms of four key requirements: M easurability, A ccessibility, R esponsiveness (also referred to as actionability), and S ubstantiality. MARS is a useful acronym to help remind you of these four requirements. Each are explained in the next reading by Kotler et al. (2004).

The following diagram presents the requirements for successful segmentation strategy for you in visual form.

Figure 5.4 Determining whether a market segment is meaningful
Source: Zikmund and d'Amico (1995, p. 182)

Consider this

Note that the sequence in the diagram is different from that used in our discussion above. Think about it and decide for yourself whether this is important.

Now turn to the following reading to cover the requirements for a successful segmentation strategy.

In your text

Kotler et al. (2004) Chapter 10, p. 356, 'Requirements for effective segmentation'.

We have just noted that there are four key characteristics for successful segmentation and that, for the measurability requirement in particular, success will depend on the dimensions used to define the segments. Thus, it is appropriate now to talk about the groups of variables that are commonly used to segment markets.

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