Market Segmentation, Positioning, and Research

Posted on Aug 15, 2024 in Economy

Application: Segmentation and Market Positioning

Defining the Most Appropriate Market Strategy

Once the segments are analyzed and identified, the next step is to define the most appropriate market strategy. The company has the following alternatives:

  • Focus Strategy: Acting in a single segment with one product, used by highly specialized small businesses.
  • Strategic Market Expansion: Acting in several segments with one product, looking for growth through finding new markets for the product.
  • Strategic Product Expansion: Performing in a single segment with various products; the company specializes in a segment that it handles well and offers different products, usually of the same line.
  • Strategic Differentiation: Acting on multiple segments with different products, adapted by characteristics to each segment. This strategy requires great effort and can be dangerous due to the need to dispense many resources.

Marketing Strategies Based on Segmentation

Marketing strategies that can be applied based on segmentation are on a continuum where the extremes would be non-segmentation (offering the same product to the entire potential market) to consumer-to-consumer segmentation (offering products tailored to the needs of each consumer).

  • Mass Marketing: Used for products widely distributed, low-skilled, and low-involvement purchases.
  • Relational Marketing: Used for products or highly specialized services (e.g., financial company services).

Positioning in the Market

The last and final function of the segmentation strategy is to decide the market position before defining the company’s strategy.

Process for Developing Market Position

The position of the company, its brands, products or services, and competing companies are developed through the following process:

  1. Selection of the Market Segment: Choose the market segment where the company wants to position itself.
  2. Identification and Analysis of Direct Competitors: Identify and analyze who and what the closest competitors are.
  3. Establishment of Underlying Criteria: Determine the underlying criteria for determining the position (e.g., product dimension, brand).
  4. Analysis of Consumer Valuation: Analyze the valuation consumers place on the company and competition (via market studies) and compare the valuation with the product that the consumer considers most appropriate.
  5. Graphical Representation: Create a graphical representation of the valuation of the company and competitors on a positioning map.
  6. Determination of Strategic Positioning: Determine the company’s strategic positioning (the position the company wants to achieve in the market).

The SIM Concept and Structure

Decision-Making Approach

The development of a marketing decision-making approach covers the objectives to the last point of the sales process. For this process to be coherent, it must be based on precise, timely, and relevant data, which are obtained by a process scheme like the following:

  1. Need for Data: Determine the need for data for decision-making.
  2. Search for Relevant Data: Search for relevant, valuable, and timely data.
  3. Obtaining Information: Obtain the information.
  4. Treatment of Information: Process the information.
  5. Delivery of Processed Data: Deliver processed data to decision-makers (reports).

Marketing Information System (SIM)

The information obtained through a process where all the material and human means of the company are used to reach decisions is called the Marketing Information System (SIM).

Structure of a SIM

Analyzing the phases, a SIM structure can be determined as follows:

  • The need for data for decision-making is determined by the company’s management team.
  • The data is located by identifying internal or external sources.
  • Once the data sources are determined, it is necessary to choose, design, and implement data collection through fieldwork.
  • The information should be processed to draw conclusions.
  • The delivery of data to decision-makers must be performed accurately and easily understood through reports.

Features of Data

  • Relevant: Provide information that has a direct influence on the research problem.
  • Accurate: Its value must be easily identifiable and should not be ambiguous.
  • Timely: Be up-to-date and obtained in a timely manner.
  • Accessible: The information to be achieved must be possible in its breadth and accuracy at the time it is available.
  • Profitable: The cost of obtaining the information should be profitable in obtaining a competitive advantage or opportunity.
  • Secure: A security system must be implemented to protect data from both espionage and computer viruses.

Data Classification

Data can be classified according to various criteria:

  1. By their Nature:
    • Quantitative Data: Refer to objective data that can be measured.
    • Qualitative Data: Refer to subjective and difficult-to-measure questions.
  2. By the Source:
    • Raw Data: Obtained specifically for research.
    • Secondary Data: Already published or available.
  3. By Location:
    • Internal Data: Obtained from the same company.
    • External Data: Obtained from the environment.

Nature of Information Flows

Information can be grouped into:

  • External Information Flow: Generated outside the company and is a valuable resource.
  • Internal Information Flow: Generated within the company and serves for internal consumption.
  • Interactive Information Flow: Information generated in the business from internal or external data that is projected outward to get more information.

Concept of Market Research

Market research is a group of actions related to the collection, processing, and analysis of data for the marketing mix to assist management in decision-making.

Objectives of Market Research

  • Understanding the Market: Aid in understanding the operating needs of the market and consumer behavior.
  • Problem Identification: Finding problems in any of the marketing policies developed by the company to propose alternatives for improvement.
  • Competitor Identification: Identify the most direct competitors.
  • Opportunity Identification: Identify business opportunities.
  • Evaluation of Marketing Decisions: Help evaluate marketing decisions to suit a more favorable situation.

Types of Market Research

Depending on the purpose:

  • Exploratory: Used to discover problems, often leading to less structured studies using secondary information.
  • Explanatory: Applied to further characterize a particular situation. These studies are very structured and can be done in two ways: static analysis (analyzing a specific situation) and dynamic analysis (repeating the same analysis over time).
  • Causal: Used to determine cause-and-effect. One variable is changed, and the effects on others are analyzed.

According to the techniques used:

  1. Quantitative: Quantitative data is used, the results are objective and can be transferred to other research. These include:
    • Panels: A representative sample of the universe is chosen, and the same analysis is performed on the same sample over time (dynamic study). This applies to consumers (consumer panel) and media audiences (audiometric test).
    • Surveys: Performed on a sample of the universe at any given time (static studies) and are usually carried out through surveys and observations.
  2. Qualitative: Qualitative data is used, the results are subjective and not applicable to other research. The most important are: in-depth interviews, group dynamics, and projective techniques.

Applications of Market Research

  • Market Structure:
    • Market segmentation, to differentiate the commercial offer.
    • Purchase behavior, to identify the skills of buyers.
    • Competition analysis, to determine the potential market and the target.
    • Market status, to know the current market and total market share.
  • Product:
    • Concept testing, to analyze the perception that potential consumers have of a product.
    • Positioning, to observe the idea that competitors and consumers have of our product.
    • Use forms, to know the different uses that consumers see in our product.
  • Price:
    • Own-price analysis, to evaluate the pricing strategy based on demand.
    • Price competition analysis, to evaluate the pricing strategy based on competition.
  • Distribution:
    • Structure of the distribution channel, to determine the influence of each component of the distribution channel (wholesalers and retailers).
    • Logistics, to evaluate the form of transport and storage.
    • Point of sale, to study the perceptions that the consumer has of the different sales points.
  • Communication:
    • Sales network, to identify the most suitable routes and assess the capacity of sellers.
    • Advertising, to determine the influence and number of impacts per campaign.
    • Sales promotion, to study the perceptions that users have of promotion activities.
    • Public Relations, to assess the social impact of the company’s activities.

Methodology Applied to the Process

The methodology answers the following questions:

  1. Type of Investment: Determine the right type of investment. If the objective is to identify a problem, an exploratory study will be conducted. If the intention is to describe any situation, a descriptive study will be conducted.
  2. Starting Assumptions: A hypothesis is a possible answer that the investigator hopes for each of the issues that arise.
  3. Appropriate Variables: Determine the type of variables most appropriate for the study. From the market research point of view, variables can be classified into:
    • Behavioral Variables: The use and consumption of the product or service.
    • Attribute Variables: Demographic characteristics (age), psychographics (personality), and socioeconomic (occupation).
    • Attitude and Opinion Variables: Beliefs, values, preferences, etc.
    • Motivation or Need Variables: Presentation of new needs.