competitors in the eyes of customers. Examples of tangihle differences might be product
features, performance, endurance, location, or support services, to name but a few. Chrysler
once differentiated their product by offering a 7-yearI70,OOO-mile warranty on new mod-
els. Pepsi has convinced mallY consumers to try their product because they assert that it
really does taste better than Coke. Offering products at a lower price or at several differ-
ent prices can be ar: importanl distinguishing characteristic, as demonstrated by Timex
watches.
Some products are in fact the same, and attempts to differentiate through tangible fea-
tures would be either futile or easiy copied. In such cases, an image of uifference is created tlu'ough intangible means that may have little to do with the product directly. Soft drink
companies show yOJ how much fun you can have by drinking their product. Beer compa-
nies suggest status, enjoyment, and masculinity. Snapple may not taste the best or have the
fewest calories, but may have the funniest, most memorable commercials. There tends to
be a heavy emphasis on the use of mass appeal means of promotion, such as advertising,
when differentiated through intangibles. Note the long-term use of Bill Cosby by Jell-O to
create an image of fun. Microsoft has successfully differentiated itself through an image
of innovation and exceptional customer service.
There are certain risks in using product differentiation. First, a marketer who uses
product differentiation must be careful not to eliminate mention of
appeals or
that the consumer expects from the product. For example . differen:iating a brand of bread
through its unique vitamin and mineral content is valid
long as you retain the core fresh-
ness feature in your ad. Second, highlighting features that are too different from the norm
may prove ineffective . Finally, a product may be differentiated on a basis that is unimpor-
tant to the customer or difficult to understand. The au tomobile industry has learned to avoid
technical copy in ads since most consumers don' t understand it or don't care.
However, there is a flip-side to product differentiation, an approach toward the mar-
kct called market segmentation.4
The Segmented Market
While
differentiation is an effective strategy to distinguish your brand from com-
petitors', it also clifferentiates your own products from one another. For example, a com-
pany such as Franco-American Spaghetti has differentiated its basic product by offering
various sizes, flav0rs , and shapes. The objective is to sell more product, to more people,
more often. Kraft has done the same with their salad dressings; Xerox with its multitude
of office products. The problem is not competition; the problem is the acknowledgement
that people within markets are different and that successful marketers must respond tc these
differences.
This premise of segmenting the market ther01zes that people and/or organizations can
be most effectively approached by recognizing their oiffeiences and adjusting accordingly.
By emphasizing a segmentation approach, the exchange process should be enhanced, since
a company can more precisely match the needs and wants of the customer. Even the soft
drink manufacturers have moved away from the undifferentiated approach and have intro-
duced diet, caffeine-free, and diet-caffeine-free versions of their basic preduct.s
While it is relatively easy to identify segments of consumers, most finn s do not have
the capabilities or the need to effectively market their product to all of the segments that
can be identified. Rather, one or more target markets (segments) must be selected. In real-
ity, market segmentation is both a disaggregation and aggregation process. While the mar-
ket is initially reduced to its smallest homogeneous components (perhaps a single individual).
APPROACHING THE MARKET
35
business in practice requires the marketer to find common dimensions that will allow him
to view these individuals as larger, profitable segments. Thus, market segmentation is a two-
fold process that includes: (1) identifying and classifying people into homogeneous group-
ings, called segments, and (2)
which of these segments are viable target markets.
In essence, the marketing
of segmentation analysis are:
1. To reduce risk in deciding where , when, how, and to whom a product, service, or
brand will be marketed
2. To increase marketing efficiency by directing effort specifically toward the des-
ignated segment in a manner consistent with that segment's characteristics
Segmentation Strategies
There are two major segmentation strategies followed by marketing organizations: a con-
centration strategy and a multisegment strategy.
An organization that adopts a concentration strategy chooses to focus its marketing
efforts on only one market segment. Only one marketing mix is developed. For example,
the manufacturer of Rolex watches has chosen to concentrate on the luxury segment of the
watch market. An organization that adopts a concentration strategy gains an advantage by
being able to analyze the needs and wants of only one segment a,ld then focusing all its
efforts on that segment. This can provide a differential advantage over other organizations
that market to this segment but do not concentrate all their efforts on it. The primary dis-
advantage of concentration is related to the demand of the segment. As long as demand is
strong, the organization's financial position will be strong. But if demand declines, the orga-
nization's financial position will also decline.
The other segmentation strategy is a multisegment strategy. When an organization
adopts this
it focu ses its marketing efforts on two or more distinct market segments.
The organization does so by developing a distinct marketing mix for each segment. They
then develop marketing programs tailored to each of these segments. Organizations that fol-
Iow a multisegment strategy usually realize an increase in total sales as more marketing
programs are focused at more customers. However, the organization will most likely expe-
rience higher costs because of the need for more than
marketing program.6
Bases of Segmentation
There are many different ways by which a company can segment its :narket, and the cho-
sen process varies from one product to another. Further, the segmentation
should
be an ongoing activity. Si nce markets are very dynamic, and products change over time,
the bases for segmentation must likewise change. (See Figure 2.2.)
MARKETING CAPSULE
•
1. Defining the market
c. Institutional markets
a. The market is people
d. Reseller markets
b. The market is a place
3. Approaching the market
c. The market is an economic entity
a. The undifferentiated market
aggregation)
2. Types of markets
b. Product differentiation
a. Consumer markets
c. The segmented market
b. Industrial markets
1. Strategies: concentration, multisegment
36