Principles of Marketing

Effective Segmentation

MEASURABLE: The size, purchasing power, and profiles of the segments can be measured.

ACCESSIBLE: The market segments can be effectively reached and served.

SUBSTANTIAL: The market segments are large or profitable enough to serve. A segment should be the largest possible homogeneous group worth pursuing with a tailored marketing program.

DIFFERENTIABLE: The segments are conceptually distinguishable and respond differently to different marketing-mix elements and programs.

ACTIONABLE: Effective programs can be designed for attracting and serving the segments.

Important:

The difference delivers a highly valued benefit to target buyers.

Differences to Promote

DISTINCTIVE: Competitors do not offer the difference, or the company can offer it in a more distinctive way.

SUPERIOR: The difference is superior to other ways customers might obtain the same benefit.

COMMUNICABLE: The difference is communicable and visible to buyers.

PRE-EMPTIVE: Competitors cannot easily copy the difference.

AFFORDABLE: Buyers can afford to pay for the difference.

PROFITABLE: The company can introduce the difference profitably.

Product Classification

Convenience product: A consumer product that customers usually buy frequently, immediately, and with a minimum of comparison and buying effort. Examples include impulse goods, staple goods, and emergency goods.

Shopping products: Less frequently purchased consumer products and services that shoppers compare carefully on suitability, quality, price, and style.

Specialty products: Consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort.

Unsought products: Consumer products that the consumer either does not know about or knows about but does not normally think of buying.

Product Life Cycle

Style: A basic and distinctive mode of expression.

Fashion: A currently accepted or popular style of design, color, or theme.

Fad: A temporary period of unusually high sales driven by consumer enthusiasm and immediate product or brand popularity.

Service Characteristics

Intangibility: A service cannot be seen, tasted, felt, heard, or smelled before purchase.

Variability: The quality of services depends on who provides them and when, where, and how.

Inseparability: Services cannot be separated from their providers.

Perishability: Services cannot be stored for later sale or use.

Pricing Strategies

Customer Value-Based Pricing

Setting the price based on buyers’ perceptions of value rather than on the seller’s cost.

• Design a good product
• Determine the costs
• Set prices based on costs
• Convince buyers of the product's value

Good-Value Pricing

Offering just the right combination of quality and good service at a fair price.

• Assess customer needs and value perceptions
• Set a target price to match customer-perceived value
• Determine costs that can be incurred
• Design a product to deliver at the target price

Cost-Based Pricing

Fixed costs: Costs that do not vary with production or sales level.

Variable costs: Costs that vary directly with the level of production.

Total costs: The sum of the fixed and variable costs for any given level of production.

Price Adjustment Strategies

Discount and allowance pricing: Reducing prices to reward customer responses such as paying early or promoting the product.

Segmented pricing: Adjusting prices to allow for differences in customers, products, or locations.

Psychological pricing: Adjusting prices for psychological effect.

Promotional pricing: Temporarily reducing prices to increase short-run sales.

Geographical pricing: Adjusting prices to account for the geographic location of customers.

Dynamic pricing: Adjusting prices continually to meet the characteristics and needs of individual customers and situations.

International pricing: Adjusting prices for international markets.