Marketing Mastermind: Complete Information for Strategic Planning and Control

Last updated: 24 April 2023

Increasingly competitive market conditions require strategic responses. Strategic decisions define core competencies as well as integrate activities. Strategic management recognizes the importance of implementing and managing change.

The concept of marketing is basically simple. Success in business through the process of understanding and meeting customer needs is called marketing. Few would argue with this basic principle, and even the most inexperienced business manager will intuitively see its meaning. Given this basic simplicity, why is something as complicated and time-consuming as a marketing strategy necessary?

Although the basic principles of business are simple, success involves many complex, interdependent or even conflicting functions. Such tasks are undertaken against a backdrop of increasingly intense competition, constant change and limited resources. Adding to the challenge, managers are often at the mercy of unexpected events and incomplete data. Often second guessing is left to the reactions of customers and competitors. For this reason marketing strategy has become a critical success factor. A well-thought-out, effectively implemented marketing strategy should go some way to alleviating the aforementioned problems and reducing the complexity of business operations. Strategy needs to restore simplicity to the art of management. In short, it is a series of tools and techniques that guide an organization to a marketing panacea. It also goes through the process of understanding and meeting customer needs successfully.

The modern business world now recognizes the importance of strategic issues as well as the contribution of strategic management to business success. Although this has many advantages, it also creates many problems. It can be argued that strategy or strategic is the most overused, misused phrase in business today. Everyone needs to have a strategy for everything. By attaching the word strategy to an activity, it somehow becomes more important, grander but actually doing very little!

Basically strategy is a three stage process which includes analysis, formulation and implementation. In the analysis phase, management must look both internally and externally. Understanding the broader business environment is fundamental. Then it is necessary to prepare a plan according to the present and future conditions. Finally, it is important to ensure that marketing plans are implemented. Managers should ensure that each of these stages is given due care and attention. Thus strategy becomes little more than rhetoric and becomes the practical reality of business life.

What is strategy?

Several definitions of strategy have been developed so far. A closer examination of such definitions converges on the following. Strategy deals with making major decisions that affect the long-term direction of the business, these major business decisions are strategic in nature and focus on some of the following:

Business Definition: A strategic fundamental is to define the business we are in. Organizations need to stay in touch with the external competitive environment and anticipate changes as well as adapt to them. Business leaders need to define the scope of the organization's activities, as well as determine the markets in which the organization will compete.

Core Competencies: Organizations need to be competitive now and in the future, so strategic decisions need to define the basis of sustainable competitive advantage. What skills and resources are required to thrive in defined markets and how can they be used to optimum advantage? It must be considered in the long term and aims to adapt the organizational capabilities to the desired goals and external environment. The process therefore often has major resource implications in terms of investment and rationality.

Integrated: The strategy has a broad impact, thus affecting all functional areas in the organization. An effective strategy is able to coordinate the activities of various functions in an organization to achieve common goals. By taking a whole organization view of the corporation, managers should be better able to target resources, create synergies and eliminate waste. Synergy occurs when the combined effect of task activities is greater than their individual contributions. In order to achieve an integrated approach, it is imperative that business leaders share a common vision and sense of purpose.

Consistency of approach: Strategy should provide consistency in approach and focus across the organization. Tactical activities can change as well as be easily adapted in response to market conditions but the strategic direction must remain constant. In addition, strategic management can provide general tools and analytical techniques for evaluating complex problems, situations, functional areas, enabling control.

The main objective of this process is to specify corporate goals and establish ways to achieve these goals. The intention is of course to influence the competitive environment for the benefit of the organization. Any such advantage must be sustained over the long term but flexible enough to adapt and evolve as needed.

Remember, a strategy and a corporate or strategic plan are not the same thing. Strategy defines general concepts of future competitive advantage and reflects intent, while strategic plan specifies the choices, sequence, timing, resources, and specific objectives required to achieve the strategy.

Towards Strategic Management

A period of about 30 years has seen the concept of strategy evolve. Aaker (1995) provides a historical perspective showing how this evolution has progressed and acknowledges that strategic activity over the years has been described as:

Budgeting: Early policy activities were concerned with budgetary and control mechanisms. Structured methods of monitoring, allocating and checking budget variances provided a means of managing complex processes. These processes were often based on past trends and these processes assumed incremental development.

Long Range Planning: Here more emphasis is placed on forecasting. Planning processes and systems extend current trends with varying degrees of sophistication and forecast factors such as profit, sales, and costs. Management can use forecasts of factors such as profit, sales and costs as a basis for decision making.

Strategic Planning: The 1970s to 1980s was the era of strategic planning. This strategic planning emphasized specifying overall direction and centralized control of planning activities. Much attention should be paid to understanding the business environment while basing it on forecasting and extrapolation of past trends. Managers hope to be able to predict events through detailed analysis of cause and effect relationships, as well as planning systems aimed at providing data and logic as a means of decision support. While increasing awareness of strategic issues in terms of the external environment, the process still focuses on creating a corporate-wide plan. This is often achieved in a highly bureaucratic and centralized manner.

Strategic Management: Currently we are in the era of strategic management. Strategic management is concerned both with formulating a strategy and how the strategy is implemented. More emphasis is placed on execution while still undertaking analysis and forecasting. Managing change and transforming an organization is a concern in an increasingly turbulent business environment.

Johnson and Scholes 1999 provide a useful model summarizing the key elements of strategic management. Policy issues can be viewed as having three distinct components. For the first analysis, we need to understand the business environment and resource capacity of the organization. This needs to be considered in the context of the organization's culture, stakeholders' aspirations and expectations. Anyone with a stake in the organization (eg customers, employees, suppliers, etc.) is considered a stakeholder. Second, managers need to make strategic choices. This is achieved through the process of evaluating, identifying and selecting alternatives. The organization needs to define the following: i) What is the basis of the strategy, the so-called generic strategy, ii) In which product/market area to operate, iii) Developing specific strategies to achieve corporate goals. Finally there is the issue of implementation to consider. Achieving strategic change requires planning actions, allocating resources and making appropriate adjustments.

It is important to remember that strategic management is not the orderly, logical sequence of programs/activities that managers wish for. Processes that are interconnected and overlapping are called practical realities. For example, strategic analysis does not stop, or at least should not stop, when other phases occur. Analysis is an ongoing activity. Similarly, turning analysis into successful strategy requires creativity, vision and leadership. Given the volatility in the business world, a contingency approach may be necessary. This approach provides flexibility by developing contingencies for a range of future scenarios.

Porter 1998) provides an interesting perspective and view of strategy: 

• Developing a unique position by choosing to perform differently from the opposition.
• Making trade-offs with other potentially competitive positions. Protect your competitive advantage.
• Integrating activities to fit and strengthen overall competitive position.
• Ensuring operational effectiveness in running activities.

DSL International launched TechGuys

DSL International owned leading electrical retailers such as Currys, Dixons and PC World. The company wanted to expand its service operations in the UK by launching TechGuys. The aim of the service was to provide rapid technical support to increasingly IT-dependent UK customers. Services include installation, upgrade and maintenance of computer and audio-visual equipment, regardless of where it is purchased. Chief executive John Clare says that 'calling an engineer to connect a laptop to the internet will become as common as using a plumber and electrician.' Support will be available on site, at a call center or over the Internet. DSL believes that demand for such services will grow rapidly and will be fueled by the upcoming switch to digital TV in the UK. The TechGuys concept will be implemented through several stand alone shops and TechGuy service points in existing PC World stores. DSL would invest £50 million in the venture and hoped to develop the initiative in other European markets. Research conducted by the firm revealed that nearly 80 percent of adults need technical support with regard to day-to-day technology.

Change-shaping strategy

Change is an accepted consequence of modern life. Indeed, change is the only certainty. Change has become a business mantra, with all organizations subject to increasing levels of change. This change can be seen in terms of cyclical change and evolutionary change. Cyclical change involves repeated and often predictable variations (eg, seasonal variations in demand or fluctuations in economic conditions). Evolutionary change involves more fundamental change, that is, can be a sudden innovation or a gradual creeping process. Either way, the result could have dire consequences for strategic development.

Strategic management is concerned with moving the organization to a desired future state, defined in terms of the corporate vision and corporate wide issues. As the concept of change has become an integral part of strategy, we can examine this concept in terms of the following questions:

• Which drives change?
• How does the change affect your market/business environment?
• What is the effect of the change in strategy of the organization?

Drivers of change

Consistently existing products and ways of doing things are being rapidly displaced by a combination of competitor actions as well as changing customer needs. This disparity is being driven by the following factors: political, economic, social (eg demographics) and technology. The so-called PEST analysis provides a useful analytical framework for studying the business environment.

Impact of change

Quite simply, change means you need to redefine your market. Rapid growth is still possible in some industries, but many will have to accept that the days of incremental annual growth are over. Differences in consumer habits, demographic patterns mean traditional markets are becoming more challenging. With change comes intense competition. This phenomenon of business globalization can only intensify. Increasingly short product life cycles and predicting the future are becoming increasingly difficult.

Result of change

There are two main results. First, change creates opportunity. Organizations that are flexible, in tune with customer needs are not only likely to survive, they are likely to thrive. Second is that past actions, practices and policies are no guarantee of future success. It is important to guard against complacency and ensure that the organization's strategic thrust does not deviate from the real needs of the market.

Balanced scorecard approach

As change pervades all aspects of business strategy, setting the right measures is critical to business success. A system that provides a holistic view of business success is essential, rather than relying on a few narrow financial measures. To this end, Kaplan and Norton advocate using a balanced scorecard approach. This involves taking both financial/non-financial measures and examining the benefits to all stakeholders of the organization. The balanced scorecard approach includes four measures:

1. Financial measures: This examines how investors and shareholders perceive us.
2. Customers: How do our customers see us?
3. Internal Activities: By examining key areas of customer satisfaction activities, we can identify where an organization needs to lag behind its competitors.
4. Innovation and Learning: To survive and thrive, all organizations must improve and adapt. Any business activity with the goal of continuous value creation can be viewed as a learning experience.

Performance indicators are established in each of these areas. These form an objective basis by which to evaluate and formulate policies. A winning strategy should address the above and offer a variety of initiatives for the future.

The role of marketing in strategy

As mentioned earlier, all organizations must make strategic decisions related to their external environment. Strategy should address issues such as customers, competitors and market trends. Rather than merely reacting to events, it must be proactive. Thus strategy can detect and influence changes in the business environment. Marketing by its very nature defines how an organization communicates with its market. Consequently, all strategic planning, to a greater or lesser extent, requires an element of marketing. In this way organizations can respond strategically to customer needs and business pressures. Indeed it is possible to see marketing as more than a functional activity. This can be adopted as a business philosophy. Here the organization adopts marketing orientation. Success comes through the process of understanding customer needs and meeting customer needs. Basically, a company's orientation defines the basic business philosophy, highlighting what is perceived as the primary path to success. Market orientations are now widely established in the business world (and often seen as the Holy Grail of marketers) but other business orientations are equally common.

Production Orientation: In Production orientation business success is attributed to efficient production. Emphasis is placed on mass production, economies of scale and cost control. A key concern of management is achieving volume and meeting production schedules. This philosophy has its place, but there is a risk of limiting operations to low added value assembly work.

Product Orientation: Belief that product innovation and design will drive buyers to our doorstep. Management's perception is that if their own products are so good, they will sell themselves. It has little, or no, effect on establishing exactly what the customer wants. A dangerous way! Obviously, product innovation is important but it must attract the market, otherwise it risks being innovation for innovation's sake.

Sales Orientation: Sales orientation considers sales volume as the main determinant of success. The focus is on aggressive selling that motivates customers to buy. Given that the process is driven by sales targets, a short-term approach prevails when it comes to building long-term relationships. Production orientation often occurs as management tries to create demand for unwanted products.

Market Orientation: Success comes from understanding and meeting customer needs. Market orientation is a process that starts with the customer and uses real customer demand to focus resources, so we provide what the market wants. Additionally, it is important to build long-term relationships with customers. Loyalty is strived for and consistently valued. Optimizing this process requires awareness of competitors' skills and strategies.

It is not our intention to condemn the product, product innovation or sales and they are important. However, a truly world-class organization understands how to marshal these factors into consistent market leadership. Creating this kind of focus will facilitate the sustainable competitive advantage needed to thrive.

How can one go about getting a market orientation? This can be summarized as follows:

Customer focused

Understand your customer base and respond to those customer needs. Treat loyal customers as assets. Also try to build ongoing and long-term relationships with customers. Monitor customer satisfaction and retention levels regularly. Remember, to achieve this we must: i) define our market, ii) effectively segment/target customers and iii) listen to customers.

Competitor focused

As for competitors, be alert and assess their goals, strategies, and capabilities. There is a need to benchmark their products, processes and operations against your own.

Integrate marketing into the business

Marketing should not be limited to the marketing department only. Every function and person in an organization has a role to play in creating value and achieving the goal of being a market leadership organization, which may require fundamental changes in culture and organization structure.

Strategic vision

Develop a long-term, market-focused strategic approach by viewing marketing as more than a series of promotional tools and techniques. It should be on the agenda of senior management, who should develop and implement a market-led strategy and define the future in terms of creating long-term value for shareholders.

Realistic expectations

You cannot be all things to all people. Expectations should be realistic and aligned with capabilities, resources and external circumstances. Trade-offs may need to be made to ensure that the focus is on value-adding activities.

What is Marketing Strategy?

In a strategic role, marketing aims to translate corporate goals and business strategy into competitive markets. Essentially, the concern is active/product differentiation by meeting customer needs more effectively than competitors. Marketing strategy can be characterized by: a) analyzing the business environment and defining specific customer needs, b) activities/products that match customer segments, and c) implementing programs that achieve a competitive position superior to competitors. Therefore, marketing strategy addresses three factors: customers, competitors, and internal corporate issues.

First, it is important to consider the customer. How is the market defined?, What segments exist? And who should we target? Second, how can we best establish a competitive position? Detailed information about your competitors in target market segments is a precursor to this. Finally, we need to match internal corporate capabilities to customer needs. Successful performance of these factors should enable the organization to develop and maintain a strong market position.

The marketing strategy aims to deliver the following:

Segmentation

This process divides the market into groups that share common characteristics, behaviors and attitudes. Basically, the purpose of this process is to understand needs and forecast response and/or demand.

Targeting

This includes evaluating and selecting market segments. The goal is to find opportunities that are sustainable, where we can build long-term relationships with customers.

Positioning

As mentioned earlier, a certain superior position is established compared to competitors. The competitive position adopted should be based on product attributes that match customer needs.

It goes without saying that the three major components of marketing strategy: customers, competitors, and internal corporate factors, are dynamic and constantly changing. Therefore, organizations must develop and deploy processes, procedures and techniques that ensure market strategy is: a) relevant to the current/future business environment, b) sustainable, c) creating optimal benefits for both the organization and the customer, and d) properly implemented, This is the core process of strategic marketing management.

Strategic marketing as a process has three distinct phases.

Strategic Analysis

To proceed, we must first answer the question; where are we This phase involves a detailed examination of the business environment, customers and internal review of the organization itself. Tools like portfolio analysis and industry structure models help management objectively assess the current state of the organization. Likewise, it is important to develop some perspective on future trends. This is achieved by forecasting and defining assumptions about future market trends.

Fairtrade: An Independent Consumer Label

Vendors are seriously aware of the importance of branding. The brand can be defined as:

Offer a specific product created for the purpose of separating the name, icon, design, packaging or different from their competitors.

From a marketing point of view, Fairtred provides customers a brand identity that independently guarantees that labelly produced products will give better deals to the developed producers of the world. Products are licensed by the FairRade Foundation, and the suppliers need to meet the factor in relation to the sustainable production costs and social or economic development.

Strategizing

Formulation involves defining strategic intent, what are your overall goals and objectives? Managers need to create a marketing strategy that creates a competitive advantage and effectively positions the organization's products. It must be based on core competencies to be successful. In this phase, product development and innovation initiatives are strategic activities, which offer the potential to enhance competitive position and further develop products and brands. Additionally, the formulation emphasizes the need to build relationships with customers and other businesses. Increasingly, we organizations are recognizing that they cannot do everything on their own and are looking to create joint ventures and partnerships.

The formulation phase ends with the development of a strategic marketing plan.

Implementation

Considerations need to be made while implementing the policy. Marketing managers will plan programs and actions that deliver on strategic goals. Such actions often focus on individual elements of the marketing mix. In addition, monitoring and control procedures are required. It ensures compliance and helps in decision making.

While providing an overview of the process of strategic marketing management, it also provides a template for the structure of this text. The three components make up a planning cycle (analysis, formulation and implementation) and are interactive in nature, providing information to enable review and revision of objectives and strategies. Finally, the process will establish the organization's marketing mix. Products, price, promotion and place, which support and express the marketing strategy.

Today's world recognizes the importance of business strategy, strategic management. Generally, any strategic process has three distinct phases: analysis, planning and implementation. Increasingly the importance of implementation is recognized as an integral part of the strategic framework, as strategy aims to define core competencies, understand the external environment and provide an integrated and coherent approach to decision making.

Any strategy is significantly affected by environmental change. Political, social, economic and technological factors bring about change and affect the organization. This results in a volatile and fiercely competitive market. Organizations must ensure that they fully embrace the opportunities that change brings, while guarding against complacency and strategic diversion. A balanced scorecard approach is therefore advocated. In this way the organization is encouraged to address broader strategic issues.

Marketing plays a role in the strategic process, i.e. marketing can also be known as a business philosophy. Marketing also sees business success as arising from the process of understanding and meeting customer needs.

Marketing strategy involves achieving a highly competitive position in a defined market, including segmentation, targeting and positioning. It needs to address customers, internal corporate entities and competitors. Strategic marketing management is a sustainable marketing strategy.

Strategic Analysis

• External analysis
• Customer Intelligence
• Segmentation
• Internal analysis
• Developing a future orientation

Conducting strategic analysis is a foundation on which strategic decisions are made. This article divides strategic analysis into three components: external analysis, customer analysis, and internal analysis. Undertaking analysis is not a linear process and there are areas of analysis that overlap. The goal of the process is to develop a detailed and holistic view of the company and its external environment to allow the organization to make informed strategic decisions.

An external analysis consists of an initial audit of the macro environment. The organization's microenvironment is then considered and an initial analysis of the company's competitive position is made.

Competitive Intelligence explores this increasingly critical task and examines how organizations can use such methodology to support and develop successful marketing strategies.

Segmentation examines the customer. Consumer behavior is explored to explain how changes in the external environment can affect consumers. Market segmentation techniques are then discussed.

Internal analysis describes internal processes. It looks at ways to identify an organization's assets and capabilities.

These four points illustrate the groundwork an organization needs before it can begin to embrace the future.

Discusses the different approaches organizations can take to develop a view of what future developments may occur and affect their activities.

External analysis

External analysis is the first stage of the auditing process, this analysis creates the information and analysis needed to identify the key issues an organization needs to develop a successful strategy. External analysis explores the process of PEST analysis, industry analysis, competitor analysis and market analysis. Facilitating this process includes the use of various approaches, notably the five forces model and strategic groups.

The external environment is analyzed to detect evolving opportunities and threats, which the organization needs to address. A study by Diffenbach (1983) identified several positive outcomes that arise from conducting organizational environmental analysis.

The analysis of the external environment can be divided into three main steps, these analyzes become more specific to each organization. Analyzing the macro environmental influences facing the organization is the first step of external analysis. The competitive environment in which the organization operates is then examined. Finally a specific competitive analysis is done.

Awareness of environmental changes through management

• Enhanced ability to predict long-term problems.
• Senior management awareness of the range of possible futures and their impact on the organization.
• More inclined to act before changes.

Strategic planning and decision making

• Plans have greater flexibility and adaptability, as they reflect greater awareness of political events and economic cycles.
• Expanded scope of perspectives.
• Organizations have the ability to allocate resources to opportunities created by environmental change.

Relationship with government

• Improved understanding and relationship with government.
• Ability to be proactive on government legislation.

Industry and Market Analysis

• Improved market quality and product predictability.
• Identification of changes in buyer behavior as a result of changes in social trends.
• Ability to identify future needs, anticipate new products.

Diversification and resource allocation

• Ability to focus resources on business areas with long-term attractiveness.
• Guides the editing process.
• Move away from products exposed to greater social and political pressure (environmental issues, etc.) to other areas of the product portfolio.

Overseas business

• Ability to anticipate changes in overseas markets.
• Ability to anticipate changes in the way business is conducted in foreign markets.

Scanning

Environmental auditing relies on monitoring activities undertaken by the organization, a process commonly known as scanning.

According to Aguilar (1967) there are four types of scanning. They are as follows.

Undirected viewing: This activity relates to the viewer who is looking for information in general without having a specific agenda. Viewers are exposed to a wide variety of information but this is not an active search for a specific problem, just a broad effort to be aware of changed factors or areas.

Conditional viewing: Again this is not an organized search but the viewer is sensitive to information that identifies changes in a particular area of activity.

Informal Search: It is an organized but limited search for information to support a specific objective.

Formal Search: This type of search is actively pursued and specifically designed to obtain specific information.

Of course, this is unlimited information that can be scanned. As any organization can only scan a certain amount of this unlimited information, a balance must be struck between the resources allocated to this activity and the potential benefits. Better decisions cannot be made if there is too much information. Understanding the dynamics of the environment is an important aspect of this activity.

Managers seek information in five broad areas (Aguilar, 1967):

1. Market acumen
2. Technical intelligence
3. Acquisition Intelligence
4. Broad issues
5. other intelligence

Note: Aguilar uses the word tidings instead of intelligence.

The study found that 58 percent of managers rated market intelligence as the most important area for obtaining external information, three times more important than the next most important area, technical intelligence at 18 percent. In all functional sectors, the importance of market intelligence was true. The most important categories of information in this area are market potential, only 30 percent, and structural change, 10 percent. Another category that reached double figures was for the category of new processes, products and internal technologies for technical intelligence.

An important aspect of this activity where it underpins futures forecasting is detecting weak signals. That is, identifying pieces of information that indicate significant change, but whose potential impact is not generally understood. In particular, many organizations fail to recognize key signals in the environment.

Macro-Environmental Analysis

A macro environmental audit examines a wide range of environmental issues that may affect an organization, including political/legal issues, economic factors, social/cultural issues, and technological developments. This is commonly referred to as PEST (Political, Economic, Social and Technological) analysis, although some authors use the alternative abbreviation STEP analysis. The purpose of this analysis is to identify critical problems in the external environment, which may affect the organization.

Political/legal issues

A number of political associations must be considered when looking at the impact of audit on the political sphere. The structure of this political system defines the centers of political influence. A state with a federal political structure is different from a unitary political system. The UK has a Parliament for Scotland and an Assembly for Wales, as well as several decision-making areas that are still the responsibility of the Westminster Parliament. At the same time, there is also an increasing range of decisions, both political and legal, within the framework of the European Union. Political pressure groups such as Greenpeace can also influence the political agenda, so considering the political sphere of the environment requires a broader approach than just domestic national governments or legal processes.

Economic factors

Economic factors should be viewed from a broader perspective than the organization's domestic economy. In a global economy, domestic economic conditions are heavily influenced by events in other areas of the world. Economics deals with the allocation of resources. Therefore conservation of natural resources, energy consumption, cost of pollution and the entire field of natural resource management should be considered under this heading.

Social/Cultural Issues

Demographic changes are important and can be used as leading indicators in certain sectors such as health care and education. However, other critical areas such as social/cultural values and beliefs that are central to changes in consumer behavior are harder to predict and may be subject to more dramatic changes.

Technological development

There is much risk in using a particular technology to define an industry. In a risk environment where technology is advancing rapidly, it is important to understand the fundamental customer needs that an organization's technology currently serves. Identifying new technologies that can more fully satisfy customer needs economically is an important part of the technical field of analysis.

Selling clothes online

Online sales of clothing and shoes in the UK grew by 44 per cent to £1.4 billion in 2007. This represents a fivefold increase in online sales since 2001. Next Directory is the largest single operator in the clothing market. Research shows that one of the biggest reasons for shopping online is to avoid finding the right size on the clothing racks in traditional retail stores. Avoiding the high street retail experience was a secondary factor. An online retailer said sales in the sector have been growing at 50 per cent annually over the past few years. This is in line with internet retail sales which grew by 50 per cent in the 10 weeks to Christmas 2006 to £7.5 billion compared to £5 billion in 2005. In November 2006 internet sales reached £3.2 billion monthly for the first time. Sales had passed the £3 billion barrier. Several fashion retailers currently have no online clothing operations, including Zara, Selfridges, Matalan, Bhs and Primark, despite general evidence of high growth in internet sales and specific evidence of growth in the online clothing market.

The central role of this PEST analysis is to identify the major factors that cause environmental change. The objective is to establish how these key factors will affect the industry and the organization in particular.

Industry analysis

An organization needs to understand the nature of relationships within its industry to allow the enterprise to leverage existing relationships, as well as to develop strategies.

A useful framework that can be used when analyzing an industry is Porter's five forces model to establish industry attractiveness for a business. Industry analysis should be done at the level of individual strategic business units (SBUs) rather than at the level of the organization as a whole, otherwise the range of relationships that a multi-divisional company faces causes the focus of the analysis. Porter identified five main factors that affect the level of competition, thus the profitability of an industry:

Suppliers: The following are responsible for strong supplier power where:

• Concentrated control over supply lies in the hands of a few players.
• The costs of switching to a new source of supply are very high.
• If the supplier has a strong brand.
• Suppliers tend to be in industries with a large number of small disparate customers.

Buyers: Buyers where power is strong include:

• A few buyers tightly control a large percentage of the volume market. For example electrical and grocery retailers in the UK dominate the market, resulting in a very strong position vis-à-vis their suppliers.
• There are a large number of small suppliers. The meat industry in the United Kingdom has a large number of small farmers supplying a large number of large supermarket-dominated retail sectors.
• The cost to the buyer of switching to a new supplier is low.
• A supplier's output is relatively impermeable, effectively reducing barriers to alternative sources of supply.

Potential Entrants: The threat of potential entrants will be determined by several barriers to entry that exist in any industry:

• The capital required to enter an industry, investment can be very high in areas such as chemical manufacturing or electric power generation.
• A good competitor who is an early mover in an industry must establish cost advantages regardless of the size of their operations. They have had time to establish critical aspects of their operations such as best supply locations, effective sourcing and customer franchises.
• In some industries it may be necessary to achieve economies of scale in distribution, production and marketing.
• Access to good distribution channels can be difficult. Peugeot/Citroen acquired Chrysler's entire United Kingdom operations to gain an effective dealership network in Britain.
• Government policies and laws such as patent protection, state-owned monopolies, and trade relations with other states can all act to prevent entry by competitors.
• The possibility of adverse reactions by a well-established firm to a new competitor's entry into the market may be sufficient to act as a deterrent.

Substitution: Substitution can occur in several ways:

• New products and services can eliminate the need for previous processes. Also, insurance services delivered directly from manufacturers via the internet or phone are an alternative to the services of an independent insurance broker.
• A new product replaces an existing service or product. Cassette tapes replaced vinyl records only with compact discs.
• All products, services suffer from generic substitution to some extent. Consumers can opt to buy a car to purchase an expensive vacation.

Competitive Competition: The intensity of competition in an industry will be determined by the following several factors:

• Competitiveness will affect the stage of the industry life cycle. After the industry matures, natural growth reaches a plateau. The only way for an organization to continue to advance in an industry is to take away market share from its competitors.
• Relative size of competitors is a very important factor, in this industry competitors are of similar size. Also the competition is likely to be fierce in this competition as they strive for every dominant position. In industries where there are already clear dominant players, those players are less competitive.
• In industries suffering from high-fixed costs, firms will try to achieve the highest volume throughput possible, which can lead to competition based on price discounts.
• Competitive competition can create barriers that prevent firms from withdrawing from an industry. These machines may be those that are specialized in nature and thus cannot be transferred to other uses. Employees may have non-transferable specialist skills. Competition inevitably increases if an industry is maturing, moving towards decline, and competitors cannot leave the industry.

This model allows an organization to identify key strengths in an industry. This can be related to the critical factors identified by the PEST analysis, then several issues need to be considered:

• How likely is the nature of the relationship identified by the 'punch power' model to change given trends in the external environment? Are there ways to take advantage of these potential changes?
• What actions can the organization take that will improve its position against the current forces in the industry? Can a company peter or buyer increase its power? Can actions be taken to reduce competitive rivalry or are there ways to create barriers to discourage firms from considering entering the industry? Are there ways to make alternative products less attractive?
• The organization also has to consider their competitors. Given the power in the industry, what is the relative position of the organization's competitors? Does the situation favor a particular operator? Could the situation change in favor of a particular competitor? Considering the competitive position relative to competitors is an important aspect of the audit and now needs to be considered in more detail.

Competitor analysis

A five forces analysis examines the overall industry and is a starting point for assessing a company's competitive position. This is likely to be a broad definition of an industry, containing many firms that may not be direct competitors. Toyota is likely to have many natural direct competitors, although both companies are in the car industry, Aston Martin is unlikely to be one of them. While Toyota is global in scale and produces cars across the range, Aston Martin is a specialist, low-volume prestige sports car manufacturer. Firms that are direct competitors in terms of products, customer profile are seen as being in a strategic group. The car industry is composed of several strategic groups.

Strategic group

Strategic groups are composed of organizations in the same industry, these strategic groups are adopting equivalent strategies to target groups of customers with similar profiles. Aston Martin's strategic group is likely to include Ferrari, Lamborghini and Lotus among others. All these companies are following similar strategies. While all these companies are facing similar strategic questions, they are also targeting similar market segments. There are generally three strategic groups in the airline industry. The first group consists of airlines with regional operations that offer scheduled flights, competing on price. There are a bunch of big airlines. This group of airlines has operations globally. It also offers scheduled flights with quality ambience and service. A third strategic group offers charter services to a range of destinations.

There are a range of attributes used to identify strategic groups. Some examples are as follows.

• Size of the company
• Assets and Skills
• Scope of Operation
• Width of product range
• Choice of distribution channel
• Relative product quality
• Product picture

For many companies, analyzing every competitor in their general industry is a daunting task, both in terms of management time and company resources. Defining an organization's strategic group allows the company to focus its analysis on its direct competitors as well as examine them in more detail.

Tools like the value chain used to analyze the internal environment can be used to analyze competitors. An organization needs to establish as many following as possible for each competitor in their strategic group.

Objectives of competitors: Objectives of competitors can be identified by analyzing three important factors. They are as follows:

1. Is the competitor's current performance meeting their goals? Failure to do so may cause the competitor to change strategy.
2. Financial goals can indicate how likely the competitor is to invest more in the business. Investments are more likely to come from companies with objectives such as market share and sales growth, rather than organizations under pressure to generate short-term profits. It also reveals potential trade-offs that competitors are willing to make. If short-term profit is the main objective, the competitor must be willing to reduce market share in the short-term to achieve its profit target.
3. Possible future direction of competitor's strategy. An organization may have non-financial objectives such as achieving technology leadership.

A Competitor's Current and Past Strategies Three areas should be explored to establish a competitor's current activities. They are as follows.

1. Identification of existing markets or market segments in which the competitor currently operates. This will show the scope of the business.
2. Identifying the way a competitor has chosen to compete in that market. Is it based on service quality, brand image or price? This may be an indication of whether a low cost and differentiation strategy is being pursued.
3. A comparison between present-day strategies and those of the past can be instructive. First it can explain the direction of the competitor, in terms of product and market development, over time. It can also highlight strategies that the organization has tried in the past, which have failed. The opponent need not try these methods again without significant reservations.

Competitor's Capabilities: Analyzing competitor's assets and capabilities allows judgments about how well equipped they are to address the market, taking into account industry dynamics and trends in the external environment. An organization needs to examine several areas to assess a competitor's potential challenge:

Management ability: The background and past attitudes of leading managers in a competing company can provide clues to their possible future strategy. The level of centralization/decentralization of management decisions will also affect decision making. Promotion policies and recruitment, including compensation and reward schemes, all reflect the culture and style of the management team.

Marketing Capability: Analysis of competitor's actions, including marketing mix, reveals their marketing skills are superior and also reveals areas of vulnerability. Many questions can be asked such as: How good is the competitor's product line? Do they have a strong brand image? Is their ad effective? How good are their distribution channels? How strong are their relationships with customers?

Innovation Capability: Evaluating a competitor's innovation capability allows an organization to determine how likely a competitor is to introduce new products and services or even new technologies. Assessing the quality of a competitor's technical staff, their technical facilities, their investment in research and development will all help to indicate their potential capabilities in this field.

Manufacturing capabilities: The configuration of a competitor's manufacturing infrastructure may highlight areas that may place them at an advantage or may indicate problematic areas for the competitor. Such factors could be the geographical spread of plants, the level of capacity utilization or the level of vertical integration. Undercapacity utilization can lead to an increase in fixed costs per unit of output. On the other hand it gives competitive production capacity for new products. This is also an important point to identify the flexibility of the production workforce. Equally important is the flexibility and competence of employees in the service sector. Factors such as the ability to pull in additional employees on a temporary basis give a service company a significant capability.

Financial Capacity: An important area is the capacity to finance development. Competitors that have strong cash flows, or are part of a larger group, may have the ability to finance investments not available to other competitors.

Future Strategies and Reactions of Competitors: One of the objectives of competitor analysis is to gather information to establish possible future strategies of their competitors. It is important to assess potential competitor reactions to any strategic moves the organization may provoke. Organizational responses can be categorized into four main types of responses, they are as follows:

Definite Retaliation: The opponent is guaranteed to react aggressively to any challenge. Market leaders will typically react against any threat to their dominance. Companies with these leader-aggressive cultures can also fall into this category.

Failure to react: Competitors may be lulled into a false sense of security in an industry that has seen very little change over a long period of time. Under such circumstances firms may be very slow to react to competitive moves. British motorcycle companies had failed to react to the entry of Japanese manufacturers into the lower end of the market.

Specific reactions: Some competitors may react but only to competitive moves in a specific sector. For example, they may always react to any price cuts or sales promotions, because they believe they will have a significant impact on their business. But they fail to respond to the rise in competitor's advertising spend. The more visible the opponent's moves, the more likely the opponent is to respond to those moves. Activities that are less visible, such as support materials for the sales force/dealership, are less likely to receive a response.

Inconsistent responses: These firms' responses are not only predictable, but also respond aggressively at times but ignore similar competitive challenges at other times.

Second life

Second Life is a player-controlled computer environment where individuals create their own avatars (digital cartoon like images) and live in a cyberspace world. About three million people have experienced Second Life and 350,000 people visit regularly. Individuals can create virtual products, provide services, trade, buy real estate, all with the world currency Linden Dollar. Linden dollars can already be exchanged for US dollars at a rate of $275 to US$1 and will become convertible into euros. Over $600,000 changes hands every day in Second Life Avatars. The world has already produced a US dollar millionaire who made his money by buying blocks of land and building houses to sell to other avatars. Now commercial companies began to see the potential of this and other virtual realms, and many companies, including IBM, Nike, Adidas, and Sony, began operations in Second Life. IBM Chief Executive Sam Palmisano also hosted a virtual company meeting at Second Life. The company felt that the meeting was more interactive than having a meeting via conference call or video link. Mr. Palmisano says 3D worlds like Second Life are the next phase of the Internet's evolution, which he believes could have the same impact as the first phase of the Web revolution.

Problems in identifying competitors

Analyzing the members of a strategic group provides important information on which to base strategic decisions, as well as in the process of identifying the organization's competitors, there are risks and several mistakes should be avoided:

• Neglecting smaller competitors with overemphasis on larger visible competitors.
• Focusing on established competitors, ignoring potential new entrants.
• Focusing on existing domestic competitors and ignoring international competitors who may enter the market.

Competitive analysis allowed the organization to establish its relative position against competitors on several important criteria. An organization must judge itself and competitors against the market in which it operates. It is useful to establish a range of information about the market at the external analysis stage. Consumers and market segmentation are also considered under market analysis.

Market analysis

A market analysis will consist of a range of factors relevant to the particular situation under review but will typically include the following areas:

Actual/Potential Market Size: Estimating total market sales allows an organization to evaluate the realism of specific market share goals. Identifying the market's key sub-markets and potential growth areas (such as establishing whether any areas are declining) is important for developing a marketing strategy.

Trends: Analyzing general trends in the market identifies changes that have actually taken place, this can help to identify the reasons for these changes and reveal critical drivers in the market.

Customer: Analysis requires identifying who the customer is and what criteria they use to judge product offerings. Information on when, where, and how customers purchase a product or service allows an organization to begin to understand customer needs. Identifying changing trends in consumer behavior can indicate potential market opportunities and developments.

Customer Segments: Identifying current market segments, establishing the benefits each segment needs allows an organization to find out if it has the ability to meet specific customer needs.

Distribution Channels: Identifying changes in the importance of distribution channels based on cost, growth or effectiveness also allows the company to evaluate its current arrangements. Establishing key decision makers within the distribution channel helps inform strategic decisions.

The external audit process creates the information, analysis needed to identify key issues that an organization needs to develop a successful strategy. A PEST analysis reveals critical areas in the external environment that the organization needs to consider. Industry analysis revealed the composition of industry players, strengths that any strategy would need to address. Competitor analysis revealed the relative position of direct competitors within the strategic group, and finally market analysis began to explore current trend growth areas. The important thing is to create a picture of the customer.

External analysis is the initial step in the process of establishing the major problems facing the organization, the next step is to examine the customers before establishing methods of market segmentation.

Competitive intelligence

Business success is determined as much by the actions of competitors as by the organization's own actions. As the success of Coca Cola is partly determined by the actions of Pepsi Cola. This topic explores the increasingly important practice of competitive intelligence and examines how organizations can use such practice to support/develop successful marketing strategies. Collecting, analyzing, and disseminating intelligence related to competitors' strategies, objectives, operations, and products greatly underpins competitiveness.

What is competitive intelligence?

Competitive intelligence (CI) has an image problem. The term competitive intelligence conjures up images of conspicuous activities involving private detectives, telephoto lenses, and hidden microphones. While such images are not entirely unpleasant, they are far from the truth. Simply put, CI is a structured, ethical and legal process designed to collect, analyze and disseminate data/information relating to current and potential, competitors. The key to successful competitive intelligence is the ability to transform basic raw data into actionable intelligence. Actionable intelligence involves providing timely and appropriate information to decision makers, information that facilitates action. In addition, competitive intelligence emphasizes the need to protect business activities from competitors' intelligence gathering operations.

The need for CI has always been recognized. Indeed, Sun Tzu's The Art of War, written in China over 2000 years ago, makes many references to competitive intelligence.

The saying that know the enemy and know yourself will save you a hundred battles is equally applicable to today's business world. Given the established business trends: a) globalization b) rapid technological development and c) mergers and acquisitions, CI is likely to be a strategic priority for most organizations. Currently management information falls into two categories. First, reporting and control information monitor what happened internally during any period of time. Secondly, information related to key performance indicators that provide measures of success/failure relative to pre-determined benchmarks (eg accounting ratios, profit and loss accounts, etc.). Such data is certainly necessary but managers need to look further ahead, competitive intelligence serves this purpose.

Competitive Social Networking for CI

The next generation of CI vehicles can leverage social networks as a powerful analytical tool.

Competitive, an innovative web-based service, offers clients the opportunity to collaboratively share and manage competitive knowledge. Co-founders Chris Rasmussen and Andrew Holt aim to provide tools that allow organizations to collectively build an ongoing knowledge base about competing companies or products. Effective use of such information enables users to identify threats, identify opportunities and plan future strategies. This concept can be thought of as a social networking that specifically focuses on the client's entire business environment.

Competitive intelligence can serve many useful functions in any organization. These can be summarized as follows:

Anticipating competitors activities: The most obvious benefit of CI is the provision of systems to consider the likely actions of specific competitors. The various strengths and weaknesses of the opposition can be considered and a framework established for anticipating and pre-empting the adversary's initiatives. Early warning of competitors' actions enables the organization to develop an appropriate response to judge the seriousness of the threat, this process can also reveal potential competitors who are going to target your existing customer base/industry activities.

Analyzing industry trends: It is possible to proactively establish emerging trends by examining the actions of groups of competitors within specific segments and/or market leaders. If management realizes the convergence of technology and procedures, it is possible to steal from competitors.

Learning and Innovation: The CI process offers enormous opportunities for learning. CI forces managers to focus externally. By constantly reviewing the opposition, they are better able to develop, adapt and innovate their own product offering. For example, reverse engineering is a process in which competitors' products are examined in detail. can provide a valuable insight into improving one's own products. Scenario planning exercises, which anticipate competitor actions, can enhance organizations' understanding of the competitive environment.

Improved Communication: The key principles of CI are: a) the delivery of concise, timely information to decision makers and b) the ability to share information across functional boundaries and provide wider access to knowledge. These common concepts do much to enhance overall corporate communication, encouraging teamwork. Properly applying the competitive intelligence concept can help employees overcome many of the problems associated with information overload.

The reality is that most organizations have some form of competitive intelligence, such as benchmarking exercises, commission market research or monitoring competitors' prices. CI offers the opportunity to bring together the various stands of information that already exist into a cohesive, practical system.

Competitive Intelligence (CI) cycle

Kahaner (1997) developed the concept of competitive intelligence cycle. This basic concept derives from government agency intelligence gathering operations (eg CIA: Central Intelligence Agency).

Planning and directing

The cycle begins with establishing intelligence requirements. Prioritizing information needs, setting appropriate schedules/reporting periods is important. This phase requires a detailed understanding of what business decisions are being made, how the information will be used. When prioritizing information it is important to distinguish between targeted intelligence gathered to achieve a specific objective, as well as awareness intelligence gathering general information that will be filtered to create a general picture of the competitive environment. Targeted intelligence is used to solve specific problems and awareness intelligence is designed to continuously monitor the competitive environment. Generally the planning process is concerned with achieving the right balance between the two.

Compilation

A collection strategy is developed based on established intelligence requirements. Pollard (1999) advocates translating key intelligence requirements into more specific key intelligence questions, then identifying and monitoring intelligence indicators. These intelligence indicators are detectable signals, likely to precede specific adversary actions.

Analysis

It has to do with converting raw data into useful information. However, the process involves evaluation, classification, combination and synthesis. Once the information is processed, an informed judgment can be established regarding the competitors intentions. The classification stage may involve tagging data: a) primary – facts directly from the source (eg interviews, annual reports, promotional materials etc.) and b) secondary – reported by third parties (eg newspaper commentaries, books and analyst reports). Data can be prioritized in terms of importance, triangulation can be used to confirm findings when necessary, including cross checking items against multiple sources. The CIA-Central Intelligence Agency (1999) provides the following guidelines regarding the classification of data/information:

Fact: A fact is something known to exist or to have happened.

Information: The content of reports is research and analytical reflection on an intelligence problem that helps analysts assess the likelihood of something being factual, thereby reducing uncertainty.

Direct Information: Information that can be considered factual as a rule due to the nature of the sources, direct access to information and immediately verifiable content.

Sourcing: Depicting the manner in which information is obtained to help evaluate potential factual content.

History teaches us the importance of taxation and valuation. Military political and commercial intelligence failures have resulted not from inadequate information collection, but from poor evaluation of available information.

Many analytical tools or techniques exist to facilitate management decision-making, and such techniques provide vehicles for predicting competitive intent. Common techniques included are as follows:

SWOT/Portfolio Analysis: Classic SWOT or portfolio analysis (eg, Ansoff Matrix, Boston Matrix, etc.) is applied to the competitors in question.

Behavioral Traits: Although not a perfect indicator of future action, it is true to say that organizational leaders repeat past successful behavior, avoiding past mistakes. Therefore, to some extent, future behavior is likely to be predicted. Understanding the reactions and behavior of competing corporate leaders can be elucidating future intentions.

War Gaming: In-house team workshops assume the simulated role of competitors for exercise. The team is provided with real data and asked to simulate the strategies they think competitors will follow. Their responses are then analyzed in a brief session, a process with many benefits. Such as: Identifying competitors weaknesses, enhancing teamwork, and identifying information gaps related to competitors knowledge.

Synthesis Report: A synthesis report combines information from numerous sources under a common main theme. It is possible to electronically scan large amounts of text and selectively extract/flag for key terms (eg brand names, patent applications, etc.). Techniques such as term, pattern analysis can identify underlying themes and trends.

Mission Statement Analysis: The main objective of the analysis is to predict what the competitor will do. It is therefore possible to analyze the competitors' mission statements to establish their values, goals and common strategies. It is very insightful to analyze how the interpretation of the mission state has changed over time. Rumors of potential activity can be checked against the competitor's stated mission, also looking at whether the rumors seem to align with overall corporate goals.

Dissemination

Competitive Intelligence must be built to meet user needs. Effective communication is based on clarity, simplicity, appropriateness to needs. Competitive intelligence should (if appropriate) form the basis of competitive action plans. A useful test is - What are the consequences of not passing intelligence? Thinking about it. If there are no real consequences, it is questionable whether it is necessary. Research shows that many CI projects fail at this stage, so the presentation of Competitive Intelligence is critical. Pollard recommends developing structured templates for reports such as:

• Information – bullet points, graphics etc.
• Analysis – interpretation of information
• Consequences – What can happen
• Action

Sources of competitive information

As described above data can be classified in many ways and the source is important to establish its reliability.

Competitive information comes from three general areas. First of all, public domain information is available to anyone. Many industries are heavily regulated, with any publicly listed company having a legal obligation to make certain information available. Additional promotional materials, product advertisements, annual reports and recruiting activities are, by nature, publicly available. Secondly, internal information. It is surprising how much information organizations already have on competitors. The problem is analysis and dissemination. The sales force and customer service personnel are the primary sources of competitive intelligence. They are well positioned to pick-up Competitive Intelligence from customers, suppliers and industry contacts. Organizations therefore need to establish mechanisms such as internal networks to facilitate this process. It is also possible to set up internal systems to monitor competitors (eg - monitoring competitor prices on a weekly basis.) Finally, third party information sources are not directly linked to the competitor (eg market research firms, media, credit rating agencies and consumer groups). Many electronic sources exist that provide powerful search engines that enable detailed inquiries. The Internet provides a wide range of free, paid information services. However, the problem is often dealing with the large amount of information that Internet searches generate.

Competitive Intelligence provides an increasingly important function, which underpins marketing strategy. This process provides several benefits to Competitive Intelligence, including anticipating competitors' actions, improving teamwork, fostering learning and innovation within the organization. CI is based on a four-step cycle. This cycle starts with planning, direction and then moves to collection, analysis, dissemination. Internally, electronic data sources have greatly increased the availability of data.

Segmentation

The segmentation process is an important aspect of strategic marketing. This article explores both consumer and organizational segmentation. Initially both consumer and organizational behavior are summarized from which segmentation criteria are developed. A thorough analysis of the segmentation is then performed, to provide the foundation for the targeting and positioning activities to be addressed next.

At a basic level an organization's marketing objectives become decisions about what products or services it will deliver to which markets, it follows that decisions about the markets to be served are an important step in formulating strategy. The segmentation process is therefore central to strategy and can be broken down into three distinct components: segmentation, targeting and positioning. It will examine the segmentation aspect of both consumer and institutional markets.

Successful segmentation depends on understanding the market. Knowledge of consumer behavior is an important foundation upon which market understanding is built. It will summarize both consumer and organizational buyer behavior as an introduction to market segmentation criteria.

Why segment?

Organizations split for several reasons:

Meet Customer Needs More Precisely: As customer demands in the general market will be different, an organization can provide better solutions to customers' needs by developing a distinct marketing mix for each customer segment.

Increase Profits: Different customer segments react to prices in contrasting ways, some being much less sensitive than others. Segmentation allows an organization to obtain the best price in each segment, effectively increasing average cost and increasing profitability.

Segment Leadership: Brands that have major market shares in any particular market are highly profitable. Market leadership gives them economies of scale, as well as access to distribution channels in marketing and production. Small firms or new entrants to the market may not gain leadership, they may command a dominant share of a particular market segment. This focus may allow firms to develop a specialized marketing mix to meet the needs of that segment of customers, while at the same time creating a competitive cost position relative to other firms in that segment.

Retain customers: Providing products/services aimed at different customer segments enables an organization to retain customer loyalty as their needs change. The needs in financial services will change as a person moves through life (for example - young singles may need minimum credit and banking facilities and car insurance, young families, however, will need life insurance policies and mortgages, in middle age these needs will shift to pension provision. .) If an organization can offer all these services, they can keep customers who would otherwise transfer to another brand.

An organization can use segmentation as a way to move customers from entry level products/services to products at the premium end of the market over time.

Focus Marketing Communications: This segmentation allows the organization to identify media channels that can specifically reach target groups. For example, young women interested in fashion are likely to read some fashion magazines. Instead of spending money on mass-market media that has a much wider reach than the target group, organizations can target their money and efforts by using media directly focused on their potential customer group.

The segmentation process

The segmentation process involves establishing criteria, an activity that allows groups of customers with similar needs to be identified. Criteria for the segmentation process should establish customer groups with the following characteristics:

• Consumers within a segment respond in their own way to a particular marketing mix.
• Customers in a segment have to react differently and distinctly from other customer groups.
• The group needs to be large enough to provide the return on investment required by the organization.
• It is imperative that the criteria used to identify segments are functional. A small company in the magazine market has recently identified a group of customers whose needs are clear. Foreign nationals living in the United Kingdom wanted to buy magazines from their home country. The organization's proposed marketing offer is to import magazines from abroad, shipping them directly to customers' homes. This is a group of potential customers who all respond similarly to the proposed marketing mix. They did a distinctly different job from other groups in the magazine market. The potential segment was large, potentially profitable, but the group was difficult to execute. Foreign nationals cannot be easily identified as no official body or foreign organization provides the names and addresses of foreign nationals. Identifying yourself as a foreign national is the only way to pursue this opportunity. This can be achieved by attracting customers to respond to a promotional campaign, allowing the organization to build a customer database. However, this was likely to be an expensive operation for a small organization and the idea was abandoned in favor of other options.

Given the fact that segments must exhibit these four characteristics, the next step is to examine the variables used to usefully segment the market (see Consumer Behavior section). An understanding of consumer buyer behavior theory is central to the successful development and application of segmentation criteria.

Consumer behavior

Customer buyer behavior is concerned with the end customer, the person who buys products and services for use by employees. This section of the chapter will summarize the main sources of influence on consumer buyer behavior to explain the influences that influence consumer purchase decisions. These influences can be divided into four major categories: social, personal, psychological, and situational.

Social influence

There are several social influences on consumer buying behavior such as:

Culture Influence: Behavior is largely learned so the traditions, values and attitudes of the society in which a person is raised influence their behaviour. Cultural norms create codes that guide behavior. Therefore, in informal cultures such as the United States of America or the United Kingdom, the use of first names may be acceptable in formal business meetings. In other cultures, such as mainline China, more formal behavior is the norm. Within a larger culture there are subcultures which may be based on religion, nationality, geographical area or ethnic groups.

Social Class Influence: A person's social class is seen as an important influence on consumer behavior. Individuals from lower social groups often appear to be more culture bound. Social class groups are largely dependent on the cultural background of the society. Some societies are more hierarchical than others, many with a few people in the upper and lower classes, with a majority in the middle. However some societies like Scandinavia, Japan have very flat structures. Some societies are more open than others, that is, individuals can move from one class to another in a free society, which is not possible in a closed society.

In Western societies social classification is recognized as a predictor of purchasing behavior. In the UK a family in a higher AB category, after paying for their children's mortgage and private school tuition, may have less disposable income than a lower category C2 or D family. There can be great disparity in shopping patterns among social groups. Individuals are also influenced by smaller social groups such as friends, family, and colleagues. These references can be classified into groups and families as follows:

Reference groups Influence: Reference groups can be formal (members of a professional association or society) or informal groups (social friends, etc.). These reference groups influence an individual's attitude/behaviour. Individuals exhibit purchasing behavior that is considered acceptable by their reference group. Group norms, the role a person plays in a group significantly influence their behavior. Recent research into the behavior of first-time mothers has illustrated the power of reference groups to shape their expectations of the quality of service experienced during a maternity ward stay. For individuals from low-income residential areas, information from doctors, midwives, and antenatal classes was less influential than children's friends, and more importantly, these reference groups influenced their subsequent behavior in terms of length of stay and treatment than did the individual's sister and mother. It also highlights the power of a dominant reference group and family.

Family Influence: The family is an important group not only because it is a primary reference group but also because it is a group into which individual shopping behavior is socialized. Attitudes, beliefs in general, and purchasing behavior in particular, are all learned initially from the family in which a person is born and raised (family of orientation).

Once a person starts having children of their own, they must establish their own family unit. This evolving family group also influences individual behavior, in addition to the purchasing decisions that the family makes as a unit that reinforces the family as the main primary reference group.

Personal influence

A person's personal attributes influence their buying behavior. Factors such as a person's age, occupation and economic situation, their personality, their family life cycle and their lifestyle in general affect the way they make consumption decisions. These factors are commonly used as criteria for classifying consumer markets and will be explored in more detail in the Consumer Behavior section of this chapter.

Psychological influence

Four major psychological factors: motivation, perception, learning, belief and attitude further influence consumer behavior.

Motivation: Individuals have basic biological needs such as the need to satisfy thirst, hunger and physical discomfort to psychological needs such as social recognition, esteem or belonging. These needs may be dormant at any given time, but once awakened to a high level of intensity, they become a driving force. Motive is the need that motivates a person to find ways to reduce his demands, there is a whole body of theory in this area that cannot be explored in this article, however it is worth summarizing the two most influential theories to illustrate their influence on marketing practice:

Freud's Theory of Motivation: It proposed that individuals are motivated by unconscious psychological factors. Also as a person grows older, they follow social norms that require them to suppress many passions and desires.

Point out that a person's consciously stated reason for purchasing a product may mask a more fundamental unconscious motive. A person proposing to buy an executive car may claim that the decision is based on the need for quality and reliability, however unconscious the desire may be for status quo.

Maslow's Theory of Motivation: It claimed that individuals have a hierarchy of needs. Individuals at the lowest hierarchical level are driven by basic physiological needs. When individuals are able to satisfy needs at one level, those individuals will be motivated by needs at the next level in the hierarchy. What the theory means for marketers is that people will seek out different services and products as they move up this hierarchy.

This theory is not universal, being biased towards Anglo-Saxon cultural values, particularly individualism and the need for self-development. While these requirements are not as important as in Japan or Germany, personal safety, conformity is given high priority.

Motivation theories are concerned with customer needs and satisfying customer needs is a central tenant of marketing, so these motivation theories have influenced the approach to market segmentation. It should be noted that although the theories of Freud, Maslow have been very influential in management and marketing theory and practice, they have been challenged for this reason. A psychological theory of this motivation research evidence supporting their usefulness is weak, however they are useful to marketers because they help classify customers into groups based on needs.

Perception: The way a person perceives an external stimulus affects their response, and the processes of selective attention, selective distortion, and selective perception can cause individuals to have different perceptions of the same stimulus:

Selective attention: Selective attention refers to the tendency of individuals to examine the vast majority of stimuli to which they are exposed, meaning that an individual cannot observe all possible stimuli in the external environment.

Selective bias: Individuals process information within the limits of their current attitudes, beliefs. This tendency of individuals to adjust their perceptions to fit their current mindset is called selective distortion.

Selective retention: Individuals do not remember everything they come across, being more likely to retain information that reinforces their attitudes and beliefs.

Perceptual behavior is related to the segmentation process as it relates to knowledge, attitudes, and beliefs.

Learning, Attitudes and Beliefs: Learning relates to any change in a person's long-term memory and how information is processed. There are different approaches to learning, including social learning theory, conditioning, and cognitive learning theory:

Conditioning Learning Theory: Propose that individuals need reinforcement to develop attitudes and beliefs. By doing so, if a person has a positive experience with a particular product, it will reinforce their positive attitudes and beliefs about the brand. If the experience is negative, it is futile to even imagine that the customer will buy the product again. A negative attitude formed about a product can also affect a person's attitude towards other products and services offered by the company or associated with the brand.

Social Learning Theory: Learning can occur without direct personal reinforcement. Individuals can remember slogans associated with a brand name, forming an attitude toward its attributes without any direct reinforcement. A person can learn the recognition or rewards they receive by observing the behavior of others.

Cognitive Learning Theory: Cognitive Learning Theory In high involvement shopping a person can develop their attitudes and beliefs about a product by using their own cognitive reasoning.

Creating attitudes, beliefs about products effectively creates a position for a product or brand in the mind of the consumer vis-a-vis other products and brands. At the heart of product positioning is central to the successful implementation of a segmentation strategy.

Purchase conditions

The purchasing process through which a person makes purchasing decisions is influenced by the specific situational factors surrounding the activity.

High involvement purchasing refers to situations where the use of both information seeking and reference group consultation and post-purchase evaluation is extensive and occurs when the following factors are involved:

Self-image: Shopping has a major impact on a person's self-image, e.g. Buying a car.

Perceived Risk: Making the wrong purchase can dramatically affect consumers. Expensive purchases fall under this category, any mistake in this category can have a huge impact on the financial status of the person.

Social Factors: Social acceptance of an individual depends on the right buying decision.

Hedonic factor: Purchases are related to services or products, which are related to providing personal pleasure.

Consumer behavior theory is a complex field, only a brief overview is provided in this theory. Consumer behavior is central to the segmentation, targeting and positioning process, particularly when establishing useful segmentation criteria.

Customer segmentation criteria

Segmentation criteria can be divided into three major categories:

Profile variables: are used to characterize consumers but are not clearly linked or predicted to an individual's behavior in a particular market.

Behavioral Variables: Relates to consumer behavior. Thus behavioral factors such as perceived benefits, usage and purchase occasions all fall under this category.

Psychographic Variables: Identifying an individual's attitudes, opinions, and interests to create a lifestyle profile that includes consumer consumption patterns. Thus these profile variables are associated with specific buying behavior.

Segmentation is a creative process, a process that can be conducted using a range of different variables that bring a unique perspective to market dynamics. The air travel market can be segmented by in-flight benefit (value or status), or by occasion of use (business or vacation), or stage in the family life cycle (young and single or middle-aged, married with children). Although it is appropriate to use a single variable to segment a market, more often they are used in combination. For example, a potential market segment in the air travel market might be middle-aged consumers with children looking for status benefits for business travel. Innovative combinations of variables within a category can reveal new market segments, even in supposedly traditional markets.

These variables have no hierarchy. Marketers can use any variable as a starting point (first order variables) and then add further variables (second order variables) to give a clearer definition to the grouping. Thus a segment of consumers who demand physical fitness can initially be determined using benefit segmentation. Profile variables can then be added such as gender, age, geographic demographics, etc. to allow the company to develop specific media communication and distribution plans to more clearly identify customers.

Profile variables

This category includes a range of demographic, social, economic and geographic segmentation variables.

Demographic segmentation

Key demographic variables include gender, age, and family life cycle:

Age: Consumer buying decisions will vary with age. Older people are likely to be looking for different vacation benefits than younger people. Also age by itself may not be a sophisticated variable to help identify customer segments. Fuzzy grouping is used to identify consumer groups using individuals between the ages of 25 and 5 years. Women aged 25 to 35 will have different needs than men aged 25 to 35 in some markets. A 30-year-old woman who is single and has a professional job may have different needs than a 30-year-old woman who is married with three children and chooses not to work outside the home. So both requirements will be different for a 30 year old unemployed woman who is single with one child.

The issue of psychological age is also taken into account when using this variable, i.e. consumers may perceive themselves to be of a different age than their chronological age. So a product or service aimed at a 35-year-old can attract older consumers who still see themselves in this age range.

Therefore age alone is a limited method of segmenting the market into useful segments.

Gender: Gender, as a variable, has the same limitations as age. Clearly there are differences between consumer groups based on gender, however this variable itself undercuts the market by 50 percent. There are still big differences between genders, and young women may have different needs than older women. Cadbury's, when designing a box of chocolates called Inspirations, which was aimed at the female market, found that older women did not like the contemporary design used on the prototype, while younger women liked the modern packaging.

Obviously age and gender variables can be used to help define segments, so we might define segments in terms of women aged 25 to 35 or men aged 55 to 65. However, this still gives us a very broad consumer group that does not take into account the broader factors that may influence consumers in these particular age and gender groups. These drawbacks can be overcome through the customer life cycle.

Life cycle segmentation: The essence of family life cycle in life cycle segmentation is that consumers are likely to go through one of the alternative paths in the life cycle. A classic path would be for consumers to move from being young and single to young married without children, young married with children, middle-aged married with children, middle-aged married without dependent children, older married, finally as older single.

At each stage the consumer's needs and disposable income will change. Anyone who is young single has very few commitments so even though their real income is low, their disposable income is high. Once a person is married with children, the commitment is increased. They are likely to enter the housing market, and are now buying products for babies and children. The couple has started saving and taking an insurance policy to protect their children's future. In middle age, these couples will become more interested in pension arrangements. Obviously, as a person moves through these stages, their propensity to purchase certain types of products will change, so this approach is useful for identifying these consumer groups. There is speculation that the importance of the family as a unit is diminishing in Western cultures, and there is conflicting evidence on the matter. A 1985 report by the Center for Family Policy Studies (cited in Rice, 1993) looking at the UK claimed that:

• Nine out of ten people will get married at some point in their life.
• Nine out of ten of these married couples will have children.
• Two out of three marriages are more likely to end in death than divorce.
• Eight out of ten people are headed by a married couple.

There was an increasing tendency for individuals to go through more than one family group cycle, with individuals divorcing and remarrying. Therefore, both the parents of the family cannot be blood relatives of the children. Also, siblings may not be blood relatives. From the perspective of marketers it is a fact that the family group is still a prominent feature of society. So the family life cycle stages are still relevant for segmentation purposes.

Another trend identified by Lawson (1988) following his analysis of demographic trends in the UK is the change in both the length and importance of the phases.

Complete nesting periods, when young remain with their parents, are shorter because couples have fewer children and these children are born closer together. This means that individuals spend more time in bachelor and empty nesters, and there are more people in these groups.

As a result of this study, Lawson updated the family life cycle using the 1981 census, with Lawson claiming that this modern version covers more than 80% of the population.

18.69 percent of the families excluded from this table are young people living in joint families, families with residents other than the family and families with more than one family.

Sky TV

In 2004 around 7.4 million households contracted SKY for its subscription television channels, accounting for 43 per cent of the UK market. By 2010 SKY aims to increase this number to 10 million households with subscriptions. SKY's management believed that no house was beyond SKY's reach. To achieve their objective SKY had embarked on a comprehensive market research exercise to ascertain consumer perception of their product offering to develop targeted marketing campaigns to overcome consumer reluctance to subscribe to their channels. An interesting feature of SKY's subscriber profile is that only 21% of households that bought an independent newspaper had a SKY contract. This percentage of agreement was very low compared to any other group of national newspaper readers.

A useful way to look at social grouping is through families. Individuals sharing a flat have to participate in group decision making for products like electrical appliances, furniture etc. Lawson states that when discussing the 18.69 percent of the population that does not fit into the family life cycle, it is likely that households are a better unit for analyzing consumer behavior than families.

Socio-economic segmentation

Socio-economic segmentation uses factors such as educational background, occupation, place of residence and income to classify individuals into larger social class groups.

The traditional socio-economic classification system used for censuses in the UK since 1911 was originally known as the Registrar General's Social Class Classification. This classification system was first used in the 1911 UK census and every census thereafter until 2001 when it was replaced by the National Statistics Socio-Economic Classification (NS-SEC).

The Registrar General's social classification was based on the occupation of the household head and was divided into six categories: professional, intermediate, skilled non-manual, skilled manual, semi-skilled, and unskilled. This classification system provided a broad indication of an individual's social and economic status and was widely used for research and policy purposes.

It is worth noting that the NS-SEC, which replaced the Registrar General's Social Class Classification, is more detailed and provides a more nuanced understanding of social and economic status. However, the Registrar General's Social Class Classification was a widely used and well-known classification system that provided a useful indication of social class for many decades.

This is the result of major changes in the make up of the United Kingdom population. Currently, 60% of the population is considered middle class compared to 51% in 1984. The new categories also take into account the increased role of women in the workplace who now occupy 18% of all professional positions. Under the new system women were classified in their own right rather than according to their husband's occupation, the new classification was based on a survey of 65000 people in 371 occupations.

Despite this new classification, there are several problems with socio-economic approaches to segmentation for marketing managers:

• Social class is not an accurate measure of disposable income, and an electrician/plumber classified as social class C2 may have a higher income than a junior manager who would be classified as social class C1.
• In western society, women are increasingly inclined to work. While social classification uses head of household to define social class, it becomes more difficult to define head of household if both adults are working. It has also been seen at the beginning of this article that family structures have become more complex in the West. The new taxonomy attempts to address this problem, but how does the new taxonomy help predict family purchasing behavior? It is possible for individuals living in the same household to belong to two different social classes. Social class is generally determined by factors such as income, education, and occupation, and these factors can vary greatly even within the same family. For example, a household may consist of a high-earning professional from an upper-class social group and a low-earning service worker belonging to a working-class social group, both living together under the same roof.
• The diverse, changing nature of people's occupations makes it more difficult to consistently apply social class categories.

In today's society, social class is not as important a predictor of behavior as other methods of segmentation. Segmentation refers to the process of dividing a population into distinct subgroups based on shared characteristics or behaviors. Once social class was the primary segmentation factor, today factors such as lifestyle, values and interests have a greater influence on consumer behavior. This means that businesses and marketers may need to focus on segmentation methods other than social class to effectively target their audiences and predict their behavior. Regardless of one's social class, if they are interested in sports, they are more likely to purchase sports-related products and services than someone in the same social class who is not interested in sports. In other words, a person's interest in a particular activity or product may have a greater influence on their purchasing behavior than their social class. This is why it may be more important for marketers to identify individuals with a common interest (ie, sports) than to identify social class groups.

Divine Chocolate Ltd

Divine Chocolate Ltd has emerged as a major player in the Fairtrade chocolate market, experiencing significant sales growth over the past five years. In 2006, UK consumers spent £290 million on Fairtrade products, representing a 46% increase on the previous year's sales and a 40% increase on the year before. Today, more than 2,500 products bearing the Fairtrade logo are available on the UK market. Divine Chocolate Ltd has capitalized on this trend by developing its own Divine brand label, as well as supplying the Co-op with its own brand of chocolate. Despite sales of £9 million in 2006 representing only a small part of the total UK chocolate market, Divine Chocolate Ltd's success lies in its ability to operate in high-growth, niche markets with limited direct competition. In fact, the overall chocolate market in the UK is maturing and showing signs of slow growth. To expand its reach, Divine Chocolate Ltd. opened a new American operation in Washington in October 2006 to bring Fairtrade chocolate to US consumers.

Geographical segmentation

Geographical segmentation has previously been widely used to identify consumer patterns and regional differences in product sectors such as food and alcohol and markets such as the UK. However, these differences are diminishing due to widespread access to mass communication and travel. Nowadays, geographic variables are mainly used in combination with other factors to reflect broad cultural differences between markets. Geodemographic segmentation is an approach that combines household location information with specific demographic and socioeconomic data, relying on census returns. In the UK, census information on family size, household size, occupation and ethnic origin is used to group residential households into geographical areas that exhibit similar profiles. One of the most well-known geographical forms of classification in the UK is ACORN, which identifies six major categories which can be further divided into seventeen groups and twenty-four neighborhood types. This detailed profile allows for highly sophisticated targeting and can aid decision-making in various areas such as identifying suitable retail locations, direct mail campaigns, boundaries of specific sales territories, placement of poster sites and media selection. However, these geographic demographic systems are inefficient due to difficulties in linking census enumeration districts to postal codes and reflecting changes in households between each census. Despite these limitations, geospatial technology can be used to identify consumers with common characteristics at the European level on a large regional scale but residing in different countries. Using demographic, economic, cultural and geographic factors, six Euro-customer segments can be identified, which allows the identification of sub-segments within these larger groups and gives marketers the ability to target relatively large geographic segments that cross national borders.

Geographic segmentation is a marketing strategy that involves dividing a market based on the physical location of customers. Previously, this was a widely used variable, but regional differences are diminishing due to widespread access to mass communication and travel. However, where geographic variables are used, they can be useful when used in conjunction with other factors to reflect broader cultural differences between markets.

Geodemographic segmentation is an approach that combines household location information with specific demographic and socioeconomic data. It depends on information collected in the census returns, such as family size, household size, occupation and ethnic origin. In the UK, this approach is most famously represented by the ACORN classification, which identifies six major categories and 17 groups, which can be divided into 24 neighborhood types. Neighborhoods can be classified based on their demographic and socioeconomic characteristics using geographic segmentation techniques such as ACORN. For example, ACORN Category C, Group 7 includes two types of neighborhoods, one of which is labeled "Apartments, Young Professional Singles, and Couples." These types of neighborhoods are more prevalent in London and can be used to identify specific use patterns within neighborhoods.

Geographic segmentation can be used to aid decision-making in a variety of areas, such as identifying suitable retail locations, deciding on direct mail campaigns, determining the boundaries of specific sales territories, and selecting poster sites and media placement. However, this method has been criticized for its difficulties in linking census enumeration districts to postal codes and the difficulties in reflecting changes in households between each census.

There have been some developments to use and apply this approach on a larger regional scale. Geodemographic techniques can be used to identify consumers with common characteristics on a European scale but living in different countries. Using demographic, economic, cultural and geographic factors, six Euro-customer segments can be identified, allowing marketers to target relatively large geographic segments that transcend national borders. This approach explains that consumers from different countries may share similar characteristics and that consumers in segment 4, for example, show more similarities to each other than to other consumers in their own country. This allows for the identification of sub-segments within these larger groups and gives marketers the ability to target them effectively.

This approach enables marketers to identify specific patterns of neighborhood use by combining household location information with demographic and socioeconomic data such as family size, household size, occupation and ethnic origin collected through census returns. A popular geographical classification system in the UK is ACORN, which identifies six major categories and seventeen subgroups that can be divided into twenty-four neighborhood types. This level of detail allows for highly sophisticated targeting and decision-making, such as identifying appropriate retail locations, direct mail campaigns, sales territories and media choices. However, these geographic demographic systems have been criticized for being inaccurate because of difficulties in linking census enumeration districts to postal codes and because of difficulties in reflecting changes in households between each census. Despite these challenges, geographic techniques can be used to identify consumers with common characteristics at a larger regional level, such as the six Euro-customer segments that can be identified using geographic, demographic, e conomic, cultural, and geographic factors.

Behavioural variables

When segmenting a market, identifying customer behavior can be more effective than relying solely on individual attributes. Rather than being used to group consumer characteristics together, behavioral variables such as benefits, usage, and purchase occasions can be used to identify distinct market segments. These variables provide insight into how customers interact with a product or service, making it easier to understand their needs and preferences. By using these behavioral variables, businesses can tailor their marketing strategies to specific segments, resulting in a more targeted and effective approach.

Benefit segmentation

Benefit segmentation is a strategy that focuses on understanding the underlying motivations behind why customers purchase a particular product or service. Rather than relying on demographic or personal attributes, this approach seeks to identify what benefits consumers seek from a given product or service. By grouping customers based on shared desired outcomes, businesses can develop targeted offers that address specific customer needs. For example, in the education sector, benefit segmentation can be used to identify different groups of people seeking an MBA qualification. This market-focused approach enables businesses to better understand their customers and tailor their offerings accordingly.

MBA Benefits Section (Source: Based on Miaoulis G. and Kalfus, 1983)

Different people have different motivations and goals when it comes to pursuing an MBA. Some pursue high-quality education that will benefit them throughout their professional lives and lead to job advancement or career change. These "quality seekers" are willing to put in the time and effort to achieve their goals.

Others are "specialists" who want to study in a particular area of interest and become experts in their field. They look for institutes that offer focused courses in their field of interest.

Career changers are another group that pursues an MBA. They are looking to move to a new job or employer and believe that an MBA qualification will open up opportunities for career progression and mobility. These individuals usually have years of work experience and feel they are ready to make a career change.

Knowledge seekers are driven by a desire to learn and increase their knowledge, which they believe will increase their power and success in all aspects of life, not just in their careers.

For some, pursuing an MBA is a matter of status and the belief that it will increase their income and prestige. These "status seekers" are motivated by a desire to be recognized for their accomplishments.

Others pursue an MBA as a necessary step to be competitive in the contemporary job market. They are "degree seekers" who believe that a first degree is no longer enough and that an MBA is necessary to stand out in the job market. They are active, self-centered and independent individuals.

For "professionals," pursuing an MBA means climbing the corporate ladder, achieving professional advancement, and gaining higher pay and job flexibility. They aim to progress in their careers, focus on their future and are committed to building a successful career within an established corporate framework.

On the other hand, "avoidants" are looking for MBA programs that require minimal effort to complete. They believe that all business schools should provide the same education and are motivated by cost rather than quality.

"Convenience seekers" are interested in pursuing an MBA program that is close to their home or workplace and has an easy admission process. Any vocational school that offers a convenient location and an easy admission process while being affordable attracts their attention.

Finally, some individuals are "non-matriculators" who wish to pursue an MBA course without completing any formal application process. They are attracted to business schools that allow them to start MBA programs without any formal application.

Usage segmentation

Segmentation is an important aspect of marketing that enables businesses to divide their target market into different groups based on specific characteristics. One such method is usage segmentation, which involves analyzing customer usage patterns to identify different groups of customers. These groups generally include heavy users, moderate users, occasional users, and non-users of the product or service.

Identifying heavy users is particularly useful because they often account for a significant proportion of a company's sales. By targeting this group, businesses can identify new opportunities for growth and expansion. For example, managers relaunched their cleaning product sugar soap as a universal household cleaner after realizing that it was mainly used by professional house painters and decorators. By targeting this group, managers were able to tap into the 'do-it-yourself' market and reach a new set of customers.

A frequent flyer program is another example of usage segmentation. Airlines use these programs to retain their heavy users, who typically make up a significant portion of their revenue. Other companies in various sectors use incentives to retain these important customer groups.

Banks and building societies use charging scales on their accounts to encourage heavy usage and increase relative charges for light users. This approach helps them manage their costs while rewarding their most valuable customers.

Finally, purchase occasion is another form of segmentation where businesses identify different groups of customers when they purchase a particular product or service. For example, some products may be purchased as gifts or some may be purchased for formal social occasions such as weddings or New Year celebrations. Convenience stores are a good example of occasion segmentation, where customers can shop at the time and place that suits them.

Psychographic variables

The techniques discussed so far have used consumer characteristics or behavioral variables as a basis for identifying consumer groups. Psychographics is a recent approach that seeks to identify segments based on lifestyle characteristics, attitudes, and personality. Instead of focusing on single factors like age, gender, marital status, it tries to create a broad picture of consumers' lifestyles based on their activities, interests and opinions. This lifestyle is identified by asking a series of questions about customer activities, interests and opinions as well as product and service usage.

Several models have been developed using this method. These models have broad similarities. A range of these models are available, two will be discussed in more detail.

The VALs (Values and Lifestyle Survey) framework

The model was developed in the USA by asking 800 questions to 2713 people. The VALs framework identified nine lifestyle groups within the American population. The model also identifies three developmental stages that individuals can go through. Individuals typically move from one of the need-driven stages to an externally- or internally-directed stage. It is a hierarchical model and relatively few will reach an integrated stage.

The framework is divided into a series of sections:

• The needs-based segment identified by this model has relatively low purchasing power and is therefore of marginal interest to profit-making organizations. It is a declining group in Western society.
• Externally-directed groups are more affluent and interested in status products that other individuals notice. So they are interested in brand names like Rolex and Cartier.
• In contrast, inwardly directed individuals are more concerned with their personal needs rather than external values. This is an important area, as they are trend-setters. This group is also the fastest growing group in Western society.
• Very few individuals reach the integrated group.

Monitor framework

Taylor Nelson Research Institute prepared this plan. Similarly, consumers are classified into three primary segments, each with several sub-segments.

The benefits of this lifestyle are as follows:

• Apart from social status and class, it considers various other factors.
• Lifestyle profiles include shopping patterns.
• Well-defined communication channels can emerge as part of a lifestyle.
• Brand personalities can be created to appeal to specific lifestyles.

These models allow for a more rounded view of customer groups. Identifying the lifestyles of potential customer segments allows marketers to develop a sophisticated marketing mix that is linked to a specific lifestyle group. A lifestyle profile can highlight the types of retail outlets a consumer group is attracted to or the publications they are more likely to read. Thus allowing managerial decisions to be made regarding the distribution and promotional aspects of the mix.

A weakness of psychographical models is that they currently reflect Western social hierarchies and cultures. As a result these frameworks are not always easily transferable to different social settings. Cultural values may differ from aspirations espoused by Western values such as individualism, self-development, and social status. These models do not easily represent the flatter social class structures found in certain cultures such as Scandinavia.

Some critics of this approach would also argue that these broad lifestyle profiles are not accurate predictors of consumer purchasing behavior in any particular market segment. An externally-directed individual who, in general, may purchase status products may not purchase branded goods in markets where there is less risk of damaging their self-image. The soap powder they buy is unlikely to matter to them about themselves or the way others see them. However, the car they drive or the clothes they wear are likely to be more significant indicators of their status to themselves and others.

Lifestyle segmentation has led to a proliferation of acronyms to describe consumer groups.

Organizational/Industrial Segmentation Techniques

So far the article has focused on the segmentation of consumer markets. Obviously, many companies' core market is in the institutional or industrial sector. In these markets, companies have to sell products and services directly to institutional buyers. There are differences between the type of segmentation variables used in organization markets and those outlined so far for consumer markets. The difference in approach lies in the nature of organizational buyer behavior.

Organizational Buyer Behavior

An organization's purchasing decisions can be more complex due to the number of individuals and groups involved in the purchasing decision and the fact that the actual product/service is likely to be more expensive and sophisticated. All individuals participating in the decision-making process will have interdependent goals and share the same risks even though they may face different reward systems. A Decision Making Unit (DMU) is made up of all these individuals and groups. Individuals in the DMU will play one of six key roles:

Initiator: Identifies a problem that can be solved by purchasing a product or service. Someone at a retail company, for example, might identify a problem in the company's merchandising function that could be solved with a new piece of software. (The merchandising function develops purchasing plans for the retail company, monitors sales and product margins, among other things.)

User: This article will refer to the actual user of the product in the company's merchandising function. Although this role may be someone outside the user group, they may be the initiator.

Buyer: actually negotiates with potential suppliers. The brief for the technical requirements of the required software, however, is likely to come from one of DMU's other areas.

Influencer: Does not directly choose the product or supplier but has a major influence on the decisions made. In this article, a person from a computer services unit in an organization will outline the technical requirements of the software based on the need to integrate with the existing hardware system.

Decision Maker: This is the person who actually makes the purchase decision. This person may not have direct control over the merchandise or the IT area but occupies this role because of the power and influence over the area being investigated. This is a critical position within the DMU and yet may be the most difficult to identify as many individuals could potentially play this role. In this case it could be a commercial director, a finance director (many finance directors are responsible for the IT function) or a managing director.

Gatekeeper: Determines the flow of information within the DMU without directly participating in the purchase decision. They control whether a potential supplier gains access to other persons in the DMU. The flow of promotional material and supplier information is also under his guidance. The secretary is a very obvious gatekeeper but any person in the DMU could potentially play this role. A technical person may favor a particular supplier and only give their promotional materials to other members of the DMU.

The size of the DMU will depend to some extent on the type of purchase decision. Where a simple low-risk purchase is being made, one or two individuals may perform all roles in the DMU. A high-risk, expensive purchase can involve a large number of people from different functional areas within the company. Institutional purchases can be classified according to their level of risk as follows:

Routine Order Products: These are used and ordered regularly. The product or service is unlikely to cause any problems with its use or performance and is therefore low risk (eg office stationary).

Procedural problem products: Procedural problem products may involve some level of training in order for individuals to adopt them successfully. This will increase the company's risk associated with the successful introduction of a purchase (eg, a personal computer or word processor).

Performance Issues Products: Risk here involves the question of whether the product can perform at the required level to meet users' requirements. There may also be concerns about the ability of production to be compatible with firms' existing resources and current equipment (eg, introducing new technologies).

Political Problems Products: Political problems can arise where procurement takes away resources from other areas in the organization. A high investment in production for one area of the business may mean forgoing investment in another area. Political problems may also arise where it is planned that the same product will be used by several different units, each with their own requirements (eg a new information system).

Political pressures also arise in DMUs as individuals seek different attributes of a particular product, partly based on the operational needs of their department. Individuals also pursue self-interest, motivated by the formal rewards available to them. Individuals in different areas of the company can be incentivized in different ways. Buyers can be evaluated and/or incentivized to save the organization money. Product managers may be given quality and output targets. This can lead to strange results. Bonoma (1982) talks about an organization that lowered its list price below its competitors, but only offered a small discount to this list price. All competitors charged high prices but offered huge discounts. Although the company's prices were low, unions favored competitors. The main reason for this appeared to be that buyers were evaluated and incentivized based on the price concessions they could obtain during negotiations rather than the final price paid.

This shows how each unit can have its own reward. These different incentives can also lead to conflict within DMUs. Buyers may feel that they cannot save money because product engineers are setting technical specifications on a product that is too high. Alternatively, production engineers may not meet their production targets because the buyer has purchased a cheaper product from a supplier with less reliable delivery times.

This shows that organizational buying decisions are more complex than typical consumer buyer behavior. Frameworks have been developed to provide a more comprehensive view of the complex factors involved. These also serve as a foundation for developing meaningful segmentation criteria within organizational markets. Both the Webster-Wind and Sheth frameworks attempt to develop a logical model of this process.

The Webster-Wind Framework

This framework identifies four categories of variables that influence organizational purchasing decisions.

Environmental: It includes any factor in the external environment that may affect the purchasing behavior of the organization. This includes the political, economic, cultural, legal, technological and physical environment. The marketing actions of competitors are also considered to be in the external environment.

Organizational: There are many organizational factors that influence behavior. Company goals and objectives set parameters on activities. An organization's structure and resources act as constraints on their culture in terms of the type of policies and procedures they follow, all of which affect purchasing behavior.

Interpersonal: Relationships between individuals in the buying center are important determinants of how decisions are made. How alliances are formed and where loyalties lie within the organization will depend on these relationships.

Individual: risk-taking attitude, creativity, competitiveness, problem-solving style, and locus of control will all be unique to each individual. Individuals' personal goals, past experiences, and training will inform their approach. Each individual will influence the decisions of the DMU to a greater or lesser extent.

Each of these categories has two sub-categories of work and non-work-related variables. Task-related variables are directly related to the purchase decision; Non-task variables are not directly related to the purchase decision but still affect the decisions made.

Sheth Framework

The Webster-Wind framework identifies and helps evaluate key variables that influence an organization's purchasing decisions, but does not focus on any large-scale process. In 1973, Sheth proposed a model that shares similarities with the Webster-Wind framework, but places more emphasis on the psychological aspects of the decision-making process.

He identified the importance of four main factors influencing organizational buyer behavior:

• Expectations of members of DMU.
• Factors affecting the buying process.
• Characterization of the decision-making process.
• Circumstantial factors.

The model is designed to illustrate the flow of the actual decision-making process.

Expectations of members of DMU

The attitudes and unique backgrounds of individuals in a DMU will influence how they evaluate a supplier. An engineer uses different criteria to an accountant. Individuals' expectations will be determined by their educational background, their job or career orientation, and their lifestyle in general.

Individuals will also be influenced by information received from various sources. When a considered purchase involves a high level of risk to the organization, a rigorous process is likely to be followed to identify as many sources of information as possible. This information search is likely to be undertaken by professional buyers, and other members of the DMU may play an important gatekeeping role by choosing what information is disclosed.

Information provided, like any communication, will be subject to distortion of perception by individuals at DMU. A person's expectations will also be influenced by their past experience with the product or service.

Factors affecting the buying process

Two sets of factors described in the Sheth model will determine the purchasing process for a particular product or service. The first set of factors relates to production:

Perceived risk: If the purchase is high risk then detailed search for information will lead to more individuals entering the DMU. This can happen if the purchase is a large capital expenditure.

Time pressure: If a decision has to be made under time pressure, a small number of people will be brought into the DMU. Decisions can be made faster if fewer people are involved in the process.

Type of purchase: Regular repurchase of a product is likely to be done by the person entrusted with the responsibility.

Another set of factors that affect the purchasing process is related to the organization itself:

Organization Orientation: An organization can be either engineering or marketing oriented. To some extent, this approach will reflect the power dynamics of the DMU and significantly affect its approach to purchasing decisions. An organization with a strong engineering orientation will understand procurement using engineering values.

Organization Size: In a small organization only one person may be responsible for purchasing. This person can find all the information himself. Larger organizations are likely to involve more individuals in purchasing decisions.

Degree of Centralization/Decentralization: A central purchasing department will be common in a strongly centralized organization. A decentralized company will have a wide spread of individuals.

Characterization of Decision Making Process: Sheth's model identifies two types of decisions:

1. Autonomous decisions are made by an individual and are relatively straightforward.
2. Collective decisions are made by more than one person. As the model has already indicated that each individual has a specific set of factors that influence them and thus lead to some degree of conflict.

The resolution of these conflicts affects the final decision. The model outlines four approaches to decision making:

Problem Solving: This involves gathering information and using a systematic approach to weigh alternatives. The drawback of this method is that it always takes time to complete.

Persuasion: Everyone takes time to put organizational needs and goals ahead of individual programs. Again the disadvantage is that this can slow down the decision making process.

Bargaining: It is used to compromise. Trade concessions to individuals in the shopping center. This can lead to sub-optimal decisions. Individuals may be satisfied but the decision may not be in the interest of the organization as a whole.

Politics: Power and influence are used to coerce individuals to support majority positions in the DMU.

The model will suggest problem solving and persuasion as the most rational ways of decision making. As many practicing managers know, options for bargaining and politics are common in many organizations.

Circumstantial factors

Finally, the model emphasizes situational variables that are outside the organization's jurisdiction, but influence the DMU. These variables would be:

• A strike on a key supplier
• A competitor unexpectedly acquires a supplier
• Financial difficulties
• Product breakdown
• Changes in corporate taxation

These two models illustrate the complexity of the procurement process in organizations. They also provide some insight into potential factors that can be used to identify organizational market segments.

An approach to organizational market segmentation

Sometimes referred to as the macro level, characteristics of an organization can be used to segment organizational markets. Factors that will be analyzed at this level will be:

Industry Sector: The Standard Industry Classification Code (SIC Code) will identify the organization's primary business activity. Different industry sectors may have specific needs for a product or service. Retailers, financial services companies, and local governments will have different needs in the computer hardware and software markets.

Organization Size: This can be determined using several variables such as number of employees, volume of shipments, and market share. It is important to be careful when using this segmentation method, as the size of an organization does not necessarily correlate with their purchasing power for your product. However, larger organizations will differ from smaller firms by having more formal procurement systems and increased specialization of functions.

Geographical location: Traditional industries can cluster geographically, an example of this is the car industry in Detroit, USA. However, even emerging technologies tend to locate in the same geographic area. In central Scotland (Silicon Glen) and southern England, the UK computer industry has clustered itself mainly along the M4 motorway. There may be distinct regional differences in shopping behavior internationally, for example between Western and Eastern Europe.

End-use application: The way a company uses a product or service has a significant impact on the value of the organization. A truck used 12 hours a day by an excavation company can represent a lot of value. But for a construction company that uses the same piece of equipment for two hours a day, that may represent much lower value for money. Establishing end-use applications can help establish perceptions of value used in specific segments.

Micro segmentation related to DMU characteristics can also be used to segment organizational markets. Ingredients used include:

The structure of the DMU: The structure of the DMU is closely linked to the organizational buyer behavior model discussed earlier in this chapter. An organization's DMU may vary in terms of its size, complexity, and the type of individuals involved.

Decision Making Process: It can be short and straightforward or complex and time consuming. This will largely depend on the size and complexity of the DMU.

Structure of Purchasing Function: Purchasing function can be centralized or decentralized. Centralized purchasing allows the individual buyer to specialize in purchasing a particular product category. One person is responsible for purchasing a much larger amount per purchase compared to a decentralized structure. This allows them to negotiate for greater discounts. In centralized structures the professional buyer has more influence over technical consultants in DMUs than buyers in decentralized systems.

Approach to innovation: There may be specific characteristics that mark innovative firms. Identifying companies that exhibit this profile will allow establishing a segment at which new products can be initially targeted. There are organizations that have followers and innovators try out a product only after it has already been adopted. Identifying these companies can also be helpful for marketers.

Key criteria used in purchasing decisions: These may include product quality, price, technical support, continuity of supply and reliability of prompt delivery.

Personal Characteristics of Decision Makers: Factors such as age, educational background, attitude towards risk and decision-making style can be used to segment the market.

A systematic strategy for organizational market segmentation, known as the nested approach, has been developed. This method moves down through layers of segmentation variables starting from the population of the organization (macro level) to complex areas of situational factors and individual characteristics through increasingly more sophisticated levels. This approach effectively establishes a hierarchical structure within which the segmentation process is to be performed.

Balanced between the macro level which is usually inadequate when used in isolation, and the micro level which can be too time-consuming and expensive to establish and operate in markets with limited capacity.

This article explains how to successfully identify useful segmentation criteria requires an in-depth understanding of the behavior of both consumers and institutional buyers. This led to the discovery of a wide range of criteria that could be used to segment both consumer and institutional markets. This is the first step in the important strategic process of establishing the market segments available to serve the company. Companies have to evaluate the potential of these segments and choose which groups to serve (targeting) and on which competitive basis (positioning).

Frequently Asked Questions (FAQs)

What is strategy?

Strategy can be defined as a deliberate and structured approach aimed at achieving a desired result or objective over an extended period of time. It outlines the steps and resources needed to achieve the desired outcome and considers factors such as available resources, competition and potential barriers.

Why is policy important?

Strategy is important because it helps organizations focus their efforts and resources and make decisions that align with their overall goals. A well-crafted strategy can help organizations take initiative, use resources more effectively, and stay ahead of competitors.

What are the different types of strategies?

There are different types of strategy including corporate strategy, business strategy, functional strategy and operational strategy. Corporate strategy involves decisions about the overall direction of an organization, while business strategy deals with how a particular business unit will compete in its market. Functional strategy focuses on specific functions of the business, such as marketing or operations, while operational strategy is concerned with how day-to-day activities will be carried out.

How do you develop a strategy?

Developing a strategy typically involves several important steps, including defining an overall goal, conducting a SWOT analysis to identify strengths, weaknesses, opportunities, and threats, setting specific goals and objectives, developing an action plan, and establishing metrics to track progress and evaluate success. including doing .

How often should the strategy be updated?

The frequency with which a strategy should be updated depends on a variety of factors, including the pace of change in the industry or market, the growth trajectory of the organization, and the success of existing strategies. Some organizations update their strategy on an annual basis, while others may do so more frequently or less frequently depending on their specific circumstances. It is important to regularly assess the effectiveness of the strategy and make adjustments as needed to stay on track to achieve the organization's goals.

What is strategic management?

Strategic management is the process of formulating and implementing strategies to achieve the organization's long-term goals and objectives. This includes analyzing the internal and external environment, setting goals, developing strategies, and evaluating performance.

What is the importance of strategic management?

Strategic management is important because it helps organizations identify and capitalize on opportunities, mitigate risks, and remain competitive in their respective markets. It also helps align the organization's resources and activities with its overall goals and ensure that everyone in the organization is working towards the same goals.

What are the key elements of strategic management?

Strategic management consists of three main components, namely strategic analysis, strategic selection and strategic implementation, which together guide the organization to achieve long-term goals and objectives. Strategic analysis involves analyzing the internal and external environment to identify strengths, weaknesses, opportunities and threats. Strategic choice involves selecting the best strategy to achieve the organization's goals, while strategic implementation involves implementing the chosen strategy.

How can organizations develop effective strategies?

Organizations can develop effective strategies by adopting a structured approach, which includes conducting situational analysis, setting objectives, developing alternative strategies, selecting the best strategy, and implementing and evaluating the strategy. It is also important to involve key stakeholders in the strategy development process to ensure buy-in and support.

How does leadership contribute to the process of strategic management?

Leadership plays an important role in strategic management because it is responsible for setting the vision and direction of the organization, developing strategies to achieve that vision, and mobilizing the resources necessary to implement the strategy. Effective leadership involves communicating strategy to all stakeholders, monitoring progress, and making necessary adjustments to keep the organization on track to its goals.

What is change management in relation to shaping policy?

Change management is the process of planning, implementing and monitoring changes in an organization so that they are successfully adopted and integrated. In terms of shaping strategy, change management is important as it helps ensure that the organization is able to adapt to changing conditions and remain competitive.

How can organizations effectively manage change?

Organizations can effectively manage change by creating a structured approach that includes communication, stakeholder engagement and training. It is important to communicate the need for change, involve key stakeholders in the process and provide training and support to help employees adapt to the new way of working.

What are the different types of changes?

There are many types of change, including incremental change, transformational change, and revolutionary change. Incremental change involves making small adjustments to existing processes and practices, while transformational change involves making more significant changes to an organization's strategy, structure, or culture. Revolutionary change involves fundamentally rethinking the organization's purpose and approach.

How can organizations use change to shape their strategy?

Organizations can use change to shape their strategy by recognizing that change is an opportunity to reassess their goals and direction and identify new opportunities for growth and innovation. By incorporating change into their strategic planning process, organizations can become more responsive to new challenges and opportunities.

What are the common challenges of change management?

Common challenges of change management include resistance to change, lack of stakeholder involvement, inadequate communication, and insufficient resources or support. It is important for organizations to anticipate and address these challenges to ensure the success of a change initiative.

What is the balanced scorecard approach?

The Balanced Scorecard approach is a strategic management framework that helps organizations measure and manage their performance across a range of key performance indicators (KPI) related to their financial, customer, internal process and learning and growth objectives. This approach emphasizes the importance of balancing the different areas of an organization's performance and aligning these areas with its overall strategy.

How is a balanced scorecard developed?

To develop a balanced scorecard, an organization must first define its overall strategy and then identify the KPIs most relevant to achieving that strategy. These KPIs are then organized into four categories – financial, customer, internal processes and learning and growth objectives – and weighted according to their relative importance. Finally, goals and initiatives are developed to help the organization achieve its strategic goals.

How does the Balanced Scorecard approach provide benefits or advantages to organizations?

The Balanced Scorecard approach offers several benefits, including:

• Improved alignment of the organization's goals and objectives with its overall strategy
• Greater clarity and focus on key performance indicators that are most important to the organization's success
• Improved communication of strategy and objectives to stakeholders
• Increased accountability for performance and results
• Good understanding of the impact of non-financial factors on the performance of an organization

How can the balanced scorecard approach be implemented?

To implement a balanced scorecard approach, an organization must first gain buy-in from its leadership team and other key stakeholders. It should then develop a clear understanding of its strategic objectives and identify the KPIs most important to achieving those objectives. The organization should also establish a system to collect and analyze data on its performance and track progress toward its goals. Finally, the organization should use a balanced scorecard approach to decision making and performance improvement across the organization.

What are some examples of companies that have successfully used the balanced scorecard approach?

Many well-known companies have successfully used the balanced scorecard method to improve their performance, including:

• Ford Motor Company, which used a balanced scorecard approach to focus on customer satisfaction and employee engagement, resulted in improved financial performance.
• Coca-Cola, which used a balanced scorecard approach to improve supply chain operations, resulted in cost savings and increased customer satisfaction.
• Ritz-Carlton Hotels, which used a balanced scorecard approach to focus on employee training and development, resulting in increased customer satisfaction and revenue.

What is the role of marketing in the company's overall strategy?

Marketing plays an important role in a company's overall strategy by helping to identify and understand customer needs, wants, and behaviors. Through market research and analysis, marketing teams can develop strategies that meet these needs and ensure that the company's products or services are preferred by consumers.

How does marketing support the company's strategic goals?

Marketing supports a company's strategic goals by helping to increase revenue and profitability. By understanding customer needs and developing targeted marketing campaigns, companies can increase their market share and differentiate themselves from competitors. Marketing can also help build brand awareness and loyalty, which can increase customer retention and lifetime value.

What are the major challenges marketers face in aligning their efforts with a company's overall strategy?

One of the major challenges marketers face is ensuring that their efforts align with the company's overall strategic goals. This requires a deep understanding of the company's target market as well as the competitive landscape and broader market trends. In addition, marketers must be able to measure and demonstrate the ROI of their efforts, which can be challenging in the rapidly changing digital landscape.

How can marketers ensure that their efforts align with the company's overall strategy?

By regularly communicating with other departments, including sales, product development, and finance, marketers can ensure that their efforts are aligned with the company's overall strategy. This can help ensure that marketing campaigns are developed with a holistic view of the company's goals and priorities. Additionally, marketers can use data and analytics to measure the effectiveness of their efforts and adjust their strategies accordingly.

What are some benefits of integrating marketing into a company's overall strategy?

Integrating marketing into a company's overall strategy can yield many benefits, including increased revenue and profitability, improved customer engagement and loyalty, and a stronger brand identity. By working closely with other departments and having a deep understanding of the company's goals and priorities, marketers can develop targeted campaigns that have a meaningful impact on the bottom line. Additionally, integrating marketing into strategy can help ensure a company's messaging and branding is consistent across all channels and touchpoints.

What is Marketing Strategy?

A marketing strategy is a long-term plan of action that guides a company's marketing activities. This includes defining target markets, understanding customer needs and behaviors, and differentiating a company's products or services from competitors and developing strategies to meet customer needs.

Why is marketing strategy important for a company?

A marketing strategy is important to a company because it helps ensure that marketing activities are aligned with the company's overall goals and objectives. It also helps differentiate a company's products or services from competitors and build brand awareness and loyalty.

What are the key components of marketing strategy?

Key components of marketing strategy include market research and analysis, defining target markets, developing positioning and messaging, identifying marketing tactics and channels, setting goals and objectives, and measuring and evaluating results.

How is marketing strategy different from marketing strategy?

Marketing strategy refers to the overall plan of action that guides a company's marketing activities, while marketing strategy refers to the specific actions taken to implement the strategy. Strategies include things like advertising, public relations, content marketing, social media, and email marketing.

How can a company develop an effective marketing strategy?

To develop an effective marketing strategy, a company must begin by conducting market research and analysis to gain a thorough understanding of its target market and the competitive landscape. From there, it can develop positioning statements and messaging that propose the unique value of its products or services. The company must then identify marketing strategies and channels that will help it reach its target audience and achieve its goals and objectives. Finally, the company must measure and evaluate the results of its marketing efforts and adjust its strategy as necessary to ensure continued success.

What is strategic analysis?

Strategic analysis is the process of analyzing a company's internal and external environment to identify strengths, weaknesses, opportunities, and threats. This includes assessing the company's resources, capabilities and competitive position as well as analyzing market trends and the competitive landscape.

Why is strategic analysis important for a company?

Strategic analysis is important for a company as it helps identify areas where the company can improve its competitive position and take advantage of new opportunities. It also helps identify potential threats and areas where the company may be vulnerable.

What are the main components of strategic analysis?

The main components of strategic analysis include the analysis of the company's internal environment (including its resources, capabilities and core competencies), the analysis of the external environment (including market trends, customer needs and behavior and the competitive landscape) and the identification of strategic options and alternatives. .

What are some tools and techniques used in strategic analysis?

Various tools and techniques are used in strategic analysis including SWOT analysis, Porter's Five Forces analysis, PEST analysis, scenario planning and market segmentation analysis. These tools can help companies gain a deeper understanding of their internal and external environment and identify strategic options and alternatives.

How can a company use strategic analysis to inform its strategy?

A company can use strategic analysis to inform its strategy by using the insights gained from the analysis to identify strategic options and alternatives. For example, if an analysis reveals that a company's competitive position is weak in a particular market segment, it may consider developing new products or services that better meet the needs of that segment. In addition, analytics can help a company prioritize resources and investments based on areas likely to yield the highest returns.

What is external analysis?

External analysis is the process of analyzing a company's external environment to identify opportunities and threats. This includes examining factors such as market trends, customer needs and behavior, and the competitive landscape.

Why is external analysis important for a company?

External analysis is important for a company as it helps to identify new opportunities and potential threats in the market. It also helps ensure that the company is aware of changes in the competitive landscape and can adjust its strategy accordingly.

What are the main components of external analysis?

Key components of external analysis include analyzing market trends, identifying customer needs and behaviors, analyzing the competitive landscape, and assessing regulatory and legal factors that may affect the company.

What tools and techniques are used in external analysis?

External analysis uses a variety of tools and techniques, including PEST analysis (which examines political, economic, social, and technological factors), Porter's Five Forces analysis (which analyzes an industry's competitive forces), and SWOT analysis (which examines both internal and external examines the elements).

How can a company use external analytics to inform its strategy?

A company can use external analytics to inform its strategy by using the insights gained from the analytics to identify market opportunities and threats. For example, if the analysis reveals a new market segment that is growing rapidly, the company may consider developing new products or services to target that segment. Additionally, analysis can help a company understand the competitive landscape and adjust its strategy to improve its position against competitors.

What is external analysis scanning?

External Analysis Scanning is the process of gathering and analyzing information about a company's external environment. This includes monitoring market trends, analyzing customer needs and behaviors, and studying the competitive landscape to identify opportunities and threats affecting the company's performance.

Why is external analytics scanning important for a company?

External analysis scanning is important for a company as it helps ensure that the company is aware of changes in the external environment. By regularly monitoring and analyzing the external environment, a company can adjust its strategy to better position itself against competitors and take advantage of new opportunities.

What are the main components of external analysis scanning?

Key elements of external analysis scanning include gathering and analyzing data about market trends, customer needs and behavior, and the competitive landscape. It also involves studying the regulatory and legal factors affecting the company.

What are some of the tools and techniques used in external analysis scanning?

External analysis scanning uses a variety of tools and techniques, such as conducting surveys, analyzing data from social media and other online platforms, attending industry conferences and trade shows, and regularly reviewing industry publications and reports.

How can a company use external analytics scanning to inform its strategy?

A company can use external analysis scanning to inform its strategy by regularly monitoring and analyzing the external environment to identify opportunities and threats. For example, if the analysis reveals a new market trend or emerging technology, the company may consider developing new products or services to take advantage of the trend. Additionally, analysis can help a company adjust its strategy to improve its position against competitors in the market.

What is Macro-Environmental Analysis?

Macro-environmental analysis is the process of analyzing the broader social and economic factors that may affect a company's operations and strategy. It involves examining factors such as political, economic, social, technical, environmental and legal (PESTEL) factors.

Why is macro-environmental analysis important for a company?

Macro-environmental analysis is important to a company as it helps ensure that the company is aware of changes in wider social and economic factors that may affect its operations and strategy. By understanding these factors, a company can adjust its strategy accordingly to take advantage of opportunities and mitigate potential threats.

What are the main components of macro-environmental analysis?

The main components of macro-environmental analysis include examining the political, economic, social, technological, environmental and legal factors that may affect the company. This includes studying the impact of government policies, economic indicators, demographic changes, technological advancements, environmental factors and legal frameworks.

What are some of the tools and techniques used in macro-environmental analysis?

Macro-environmental analysis uses various tools and techniques, such as PESTEL analysis, scenario analysis and trend analysis. A PESTEL analysis requires examining how factors in the political, economic, social, technological, environmental and legal domains can influence a company. Scenario analysis involves developing alternative scenarios based on various macro-environmental factors to identify potential threats and opportunities. Trend analysis involves examining historical data to identify trends and patterns.

How can a company use macro-environmental analysis to inform its strategy?

A company can use macro-environmental analysis to inform its strategy by understanding the broader social and economic factors that may affect its operations and strategy. For example, if the analysis shows demographic changes affecting the demand for the company's products or services, the company can adjust its strategy to target different customer segments. In addition, analysis can help a company identify potential risks and opportunities in the market and adjust its strategy accordingly.

What is Industry Analysis?

Industry analysis is the process of analyzing the competitive environment of a particular industry. This includes examining market structure, industry trends, competition and key success factors that affect the performance of firms operating in the industry.

Why is industry analysis important for a company?

Industry analysis is important for a company as it helps to identify key success factors that enhance performance in the industry. By understanding these factors, a company can develop strategies to improve its competitive position in the industry.

What are the main components of industry analysis?

Key components of industry analysis include analyzing the market structure, industry trends, competition and key success factors that affect the performance of companies operating in the industry. It also includes examining the regulatory and legal framework governing the industry.

What are some tools and techniques used in industry analysis?

Various tools and techniques are used in industry analysis such as Porter's Five Forces Analysis, SWOT Analysis and Value Chain Analysis. Porter's Five Forces analysis examines competitive intensity in an industry. In a SWOT analysis, a company's strengths, weaknesses, opportunities, and threats are evaluated. Value chain analysis examines the various activities involved in the production of goods and services in an industry.

How can a company use industry analysis to inform its strategy?

A company can use industry analysis to inform its strategy by understanding the key success factors and competitive dynamics in the industry. For example, if the analysis shows that product innovation is a key success factor in the industry, the company may consider investing in research and development to improve its product offering. In addition, analysis can help a company identify potential risks and opportunities in the market and adjust its strategy accordingly.

What is Competitor Analysis?

To conduct competitor analysis, it is necessary to identify and evaluate the strengths and weaknesses of companies competing in the same market as the analyzed company. This includes examining the competitive environment, including the strategies, tactics, and resources of rival firms.

Why is competitor analysis important for a company?

Competitor analysis is important for a company because it helps identify the strengths and weaknesses of its competitors, which can inform the company's own strategy. By understanding the competitive landscape, a company can develop strategies to improve its competitive position in the industry.

What are the key components of competitor analysis?

Key components of competitor analysis include analyzing competitors' strengths and weaknesses, strategies, tactics, and resources. It also involves examining the competitive dynamics of the industry, including the threat of new entrants, the bargaining power of buyers and suppliers, and the intensity of competitive rivalry.

What tools and techniques are used in competitor analysis?

Competitor analysis uses various tools and techniques, such as SWOT analysis, benchmarking and market mapping. A SWOT analysis examines the strengths, weaknesses, opportunities, and threats of a company's competitors. The benchmarking process involves comparing a company's performance with that of its competitors. Market mapping involves visually representing an industry's competitive landscape.

How can a company use competitor analysis to inform its strategy?

A company can use competitive analysis to inform its strategy by understanding its competitors' strengths and weaknesses and developing strategies to exploit competitors' weaknesses and counter their strengths. For example, if the analysis reveals that one of the company's competitors is offering a similar product at a lower price, the company may consider lowering its own prices or developing a new product with better features to differentiate itself from the competitor. In addition, analysis can help a company identify potential risks and opportunities in the market and adjust its strategy accordingly.

Why might a company have difficulty identifying its competitors?

The complexity of the market and the existence of indirect competitors may make it difficult for a company to identify competitors. Indirect competitors are companies that provide alternative products or services that may satisfy the same customer needs.

What is an example of an indirect competitor?

An example of an indirect competitor is a pizza restaurant that competes not only with other pizza restaurants, but also with fast-food chains that offer burgers and fries, because they are substitute products that can satisfy the same customer needs.

How can a company identify its indirect competitors?

A company can identify indirect competitors by conducting market research, analyzing consumer behavior and preferences, and examining industry trends.

What are some other challenges in identifying competitors?

Other challenges in identifying competitors may include market changes or the emergence of new technologies that disrupt traditional business models, as well as difficulty in obtaining accurate and reliable market data.

How can a company overcome challenges to identify competitors?

To overcome the challenges of identifying competitors, a company can leverage technology and data analysis tools to collect and analyze market data. Additionally, building strong relationships with customers and suppliers can provide insight into the competitive landscape. Finally, participating in industry events and conferences can help a company stay up-to-date on industry trends and emerging competitors.

What is market analysis?

Market analysis is a process that involves identifying, evaluating and understanding the characteristics, trends and dynamics of a particular market. This typically involves examining the target market, competition, consumer behavior and industry trends.

Why is market analysis important?

Market analysis is important because it provides market insights, which can help businesses make informed decisions about product development, pricing strategies, and marketing campaigns. It also helps businesses identify opportunities and potential barriers to market entry.

What are some key components of market analysis?

Key elements of market analysis include market size, growth rate, customer segments, market trends, competitive landscape, and regulatory environment.

How can a company analyze the market?

A company may conduct market analysis by collecting and analyzing data from a variety of sources, including market research reports, surveys, focus groups, and industry publications. It may also collect data through online sources such as social media, web analytics and search engine data.

What are some common techniques used in market analysis?

Some of the common techniques used in market analysis include SWOT analysis, Porter's Five Forces analysis, customer segmentation, and trend analysis. These techniques help businesses identify opportunities and threats, understand consumer behavior, and develop effective marketing strategies.

What is competitive intelligence?

By gathering and analyzing information on competitors, market trends, and industry developments, businesses can make informed decisions through a process known as competitive intelligence. This includes identifying key competitors, monitoring their activities and performance, and using that information to improve the company's own strategies and tactics.

Why is competitive intelligence important?

Competitive intelligence is important because it helps companies stay ahead of the competition and make better-informed decisions. By understanding the strengths and weaknesses of their competitors, companies can identify opportunities to differentiate themselves and gain a competitive advantage. In addition, competitive intelligence helps companies stay up-to-date on industry trends and changes, which can inform strategic planning and risk management.

What are some common sources of competitive intelligence?

Common sources of competitive intelligence include public financial statements, industry reports, trade publications, market research studies, social media, and online reviews. Additionally, some companies use specialized tools and software to collect and analyze data from these sources.

What are some best practices for conducting competitive intelligence?

Some best practices for conducting competitive intelligence include:

• Defining the scope of the research and the specific questions or objectives to be addressed.
• Identifying the most relevant sources of information and developing processes to regularly monitor them.
• During the data collection process it is important to verify that the information obtained is accurate and reliable.
• Analyzing contextual information and using it to inform strategic decision making.
• Upholding ethical and legal standards by avoiding unethical or illegal information collection practices.

Who is responsible for organizing competitive intelligence in the company?

In many companies, competitive intelligence is the responsibility of a dedicated team or individual within the organization, such as a market research analyst or competitive intelligence manager. However, all employees can contribute to competitive intelligence by sharing insights and observations about competitors and industry developments. Ultimately, it is the responsibility of senior leadership to ensure that the company is effectively leveraging competitive intelligence to inform strategic decision-making.

What is a CI cycle?

The CI cycle, also known as the competitive intelligence cycle, is a systematic process of gathering and analyzing information on competitors, industry trends, and market developments to support business decision-making. The CI cycle typically includes the following phases: planning and direction, collection, processing, analysis, and dissemination.

What is the purpose of the planning and direction stage of the CI cycle?

The planning and direction phase of the CI cycle includes defining the scope of research, identifying key research questions, and determining appropriate research methods and resources. The purpose of this stage is to establish clear goals and objectives for the competitive intelligence process and ensure that it aligns with the broader business strategy.

What happens during the compilation phase of the CI cycle?

In the collection phase of the CI cycle, information is gathered from a variety of sources, including primary research (such as interviews and surveys) and secondary research (such as public records, market research reports, and news articles). The purpose of this stage is to gather as much relevant and reliable information as possible to support the analysis stage.

What is the analysis phase of the CI cycle?

The analysis phase of the CI cycle involves reviewing and interpreting data collected during previous phases to identify trends, patterns, and insights about competitors and the market. The purpose of this stage is to interpret the data and draw meaningful conclusions that can inform business decisions.

What is the propagation stage of the CI cycle?

The dissemination phase of the CI cycle involves sharing the results of the analysis with stakeholders in the organization who are involved in decision making. This phase may include preparing reports, presentations, or other materials to communicate key findings and recommendations. The purpose of this stage is to ensure that the insights gained from the competitive intelligence process are used to inform strategic decision-making.

What are the primary sources of competitive information?

Primary sources of competitive information are sources that provide original and first-hand data about a company's competitors. Examples of primary sources include interviews with key players in the industry, customer and employee surveys, and site visits to competitor locations.

What are secondary sources of competitive information?

Secondary sources of competitive information are sources that provide data already collected by others. Examples of secondary sources include industry reports, market research studies, and news articles.

What is the importance of social media as a source of competitive information?

Social media has become an important source of competitive information because it provides real-time data about consumer sentiment, product feedback, and industry trends. By monitoring social media channels, companies can gain valuable insight into their competitors' strategies, customer engagement, and marketing campaigns.

What are some specialized tools and software that can be used to gather competitive information?

There are many specialized tools and software that can be used to gather competitive information, including web scraping tools, social media monitoring platforms, and competitive analysis software. These tools can help automate the data collection process and provide real-time insight into competitor activity and performance.

How can companies ensure that the competitive information they collect is accurate and reliable?

To ensure that the competitive information they gather is accurate and reliable, companies should use a variety of sources and verify information through multiple means. They should also use reputable sources and avoid relying solely on information from a single source. In addition, companies should have a process for reviewing and validating information before using it to inform decision-making.

What is Segmentation in Marketing?

Segmentation is the process of dividing a large market into smaller groups of customers who share similar needs, preferences, or characteristics. This helps companies tailor their marketing efforts and product offerings to the specific needs and desires of each segment, rather than taking a one-size-fits-all approach.

Why is segmentation important in marketing?

Segmentation is important in marketing because it allows companies to better understand their customers and tailor their marketing efforts to specific segments. By doing so, companies can improve customer engagement, increase sales, and increase customer loyalty.

What are some common types of partitioning?

Common types of segmentation include demographic (e.g. age, gender, income), geographic (e.g. location), psychographic (e.g. lifestyle, personality) and behavioral (e.g. purchase behavior, brand loyalty) segmentation. Companies can also use a combination of these segmentation types to gain a more complete understanding of their customers.

How can companies use segmentation to improve their marketing efforts?

Companies can use segmentation to improve their marketing efforts by tailoring their messaging and product offerings to each segment's specific needs and desires. By doing so, they can create more personalized and relevant marketing campaigns that resonate with their target audience, resulting in increased engagement and sales.

What are the common challenges companies face when implementing segmentation?

Common challenges that companies face when implementing segmentation include the difficulty of identifying and defining segments, the potential for segments to overlap or change over time, and the resource and cost implications of implementing segmented marketing strategies. In addition, companies may face challenges in measuring the effectiveness of their segmentation efforts and ensuring that they are providing value to their customers.

Why do companies need to segment their markets?

Companies need to segment their markets to better understand their customers and tailor their marketing efforts to specific segments. It helps companies to increase customer engagement, sales and customer loyalty.

What are the benefits of segmentation for companies?

Segmentation allows companies to create more personalized and relevant marketing campaigns, resulting in increased engagement and sales. It helps companies better understand their customers' needs and preferences, which can lead to improved product development and customer satisfaction.

How does segmentation help companies gain competitive advantage?

Segmentation helps companies gain a competitive advantage by targeting their marketing efforts to specific segments, rather than taking a one-size-fits-all approach. This can help companies differentiate themselves from their competitors and better serve their customers' needs.

What are some common approaches to partitioning?

Common approaches to segmentation include demographic (e.g. age, gender, income), geographic (e.g. location), psychographic (e.g. lifestyle, personality) and behavioral (e.g. purchase behavior, brand loyalty) segmentation. Companies can also use a combination of these segmentation types to gain a more complete understanding of their customers.

How can companies ensure that their segmentation efforts are successful?

To ensure that their segmentation efforts are successful, companies should conduct thorough market research to identify their target segments and their specific needs and preferences. They should also have a clear understanding of their brand's positioning and value proposition and ensure that their marketing efforts align with them. Additionally, companies must continuously monitor and evaluate their segmentation efforts to ensure they are delivering value to their customers and driving business results.

What is Segmentation Process in Marketing?

The segmentation process in marketing involves identifying groups of customers who share similar needs, preferences, or characteristics and dividing them into smaller, more specific segments. This process helps companies better understand their customers and tailor their marketing efforts to specific segments.

What are the steps involved in partition process?

The segmentation process typically involves several steps, including market research to identify customer needs and preferences, development of segmentation criteria, segmenting the market based on these criteria, and evaluating the potential of each segment.

How do firms decide which segmentation criteria to use?

Companies can use a variety of criteria to segment their market, including demographic (eg age, gender, income), geographic (eg location), psychographic (eg lifestyle, personality) and behavioral (eg buying behaviour, brand loyalty) criteria. The choice of criteria depends on the objectives of the company and the characteristics of their target market.

How can companies ensure their segmentation efforts are effective?

To ensure that their segmentation efforts are effective, companies should conduct thorough market research to identify the needs and preferences of their target customers and develop segmentation criteria that are relevant and meaningful to these customers. They must continuously monitor and evaluate their segmentation efforts to ensure they are delivering value to their customers and driving business results.

What are some common challenges that companies face when implementing a segmentation process?

Common challenges that companies face when implementing a segmentation process include the difficulty of identifying and defining segments, the potential for segments to overlap or change over time, and the resource and cost implications of implementing segmented marketing strategies. In addition, companies may face challenges in measuring the effectiveness of their segmentation efforts and ensuring that they are providing value to their customers.

What is consumer behavior?

Consumer behavior can be defined as a set of actions and choices made by individuals or households when purchasing products or services. It studies the factors that influence consumer choices, such as their motivations, attitudes, and preferences.

Why is consumer behavior important?

Understanding consumer behavior is essential for businesses as it helps them design products and marketing strategies that meet the needs and wants of their target market. By understanding consumer behavior, businesses can create products that are more likely to be purchased and develop advertising and promotional messages that resonate with their audience.

What are the types of consumer behavior?

There are many types of consumer behavior, including habit buying behavior, variety seeking behavior, dissonance reducing behavior, and complex buying behavior. Habitual buying occurs when consumers buy products out of habit or routine, while variety seeking behavior occurs when consumers switch brands to avoid boredom or monotony. Incongruity-reducing behavior occurs when consumers have doubts or regrets about a purchase and feel certain, while complex buying behavior occurs when consumers make a high-involvement purchase, such as a car or a house.

What factors influence consumer behavior?

Individual factors (such as age, income, and lifestyle), psychological factors (such as motivation, perception, and education), and social factors (such as family, culture, and social class) are factors that influence consumer behavior. ). Other factors that can influence consumer behavior include marketing messages, product attributes, and past experiences of consumers.

How can businesses use consumer behavior research to improve their marketing strategies?

Businesses can use consumer behavior research to develop marketing strategies that are more effective in reaching and resonating with their target audiences. For example, by understanding the motivations and preferences of their customers, businesses can create advertising and promotional messages that are more likely to be noticed and remembered. Additionally, by understanding the factors that influence consumer decisions, businesses can create products and services that are more likely to be purchased and enjoyed by their target market.

What is customer segmentation criteria?

Customer segmentation refers to the process of dividing a large and heterogeneous market into smaller, more homogeneous groups that share similar needs, preferences, and characteristics.

Why is customer segmentation criteria important?

Customer segmentation criteria are important because they enable businesses to better understand and target specific groups of customers who are likely to be interested in their products or services. By segmenting the market, businesses can create more targeted marketing messages and tailor their products and services to meet the specific needs and preferences of each segment.

What are common customer segmentation criteria used by businesses?

There are many common customer segmentation criteria used by businesses including demographics (age, gender, income, etc.), psychographics (personality, values, lifestyle, etc.), geographic (region, city, climate, etc.) and behavioral. (use rate, loyalty, leverage, etc.) factors. Businesses can also use a combination of these criteria to create more targeted and effective segmentation.

How can businesses determine the most effective customer segmentation criteria?

Businesses can determine the most effective customer segmentation criteria by conducting market research and analyzing data on customer behavior and preferences. They can also use customer feedback and surveys to better understand the needs and preferences of their target market.

What are the benefits of using customer segmentation criteria?

Using customer segmentation criteria has many benefits for businesses, including improved customer satisfaction, increased sales and revenue, better targeting of marketing messages and promotions, and more effective use of resources. By understanding the needs and preferences of specific customer segments, businesses can create more tailored products and services that better meet their customers' needs, leading to higher levels of customer loyalty and satisfaction.

What are profile variables?

Profile variables refer to demographic and other characteristics of individuals or families, such as age, gender, income, education level, occupation, and geographic location.

Why are profile variables important in market research?

Profile variables are important in market research because they help businesses understand the characteristics of their target market and tailor their products and marketing strategies to better meet the needs of their customers. By analyzing profile variables, businesses can identify trends and patterns in customer behavior and preferences.

How are profile variables collected in market research?

Profile variables are typically collected through surveys, questionnaires, and other market research methods. These practices can be conducted in person, online, or over the phone.

How do businesses use profile variables in marketing?

Businesses use profile variables to develop targeted marketing strategies that are more likely to resonate with their target audience. For example, if a business is targeting young adults, they can use social media and other digital marketing channels to reach this demographic. Alternatively, if a business is targeting older adults, they can use print ads and other traditional marketing channels.

Can profile variables change over time?

Yes, profile variables can change over time. For example, a person's income level may increase or decrease over time as they progress in their career or experience changes in their financial circumstances. Additionally, demographic trends can change over time due to changes in social attitudes and behavior. For example, the average age of first-time parents may increase or decrease over time, depending on cultural and social factors.

What are behavioral variables?

Behavioral variables refer to the actions and behaviors of individuals or households, such as their purchasing habits, consumption patterns, and responses to marketing messages.

Why are behavioral variables important in market research?

Behavioral variables are important in market research because they provide insight into how consumers interact with products and services. By analyzing behavioral variables, businesses can better understand what motivates consumers to buy, how often they use a product or service, and how they respond to marketing messages.

What are some common behavioral variables used in market research?

Common behavioral variables used in market research include purchase frequency, brand loyalty, usage rate, purchase volume, and response to marketing messages. Other behavioral variables that can be analyzed include the reasons for purchasing a product or service, the time and place of purchase, and the role of social influence in the purchase decision.

How can businesses collect data on behavioral variables?

Businesses can collect data on behavioral variables through a variety of methods, including surveys, focus groups, online analytics, and transactional data analysis. By collecting data from multiple sources, businesses can gain a more comprehensive understanding of consumer behavior and preferences.

How can businesses use behavioral variables in marketing?

Businesses can use behavioral change to develop more targeted marketing strategies that are more likely to resonate with their target audience. For example, if a business knows that its customers are highly loyal to a particular brand, it can use brand-specific messaging in its marketing campaigns. Alternatively, if a business knows that its customers shop at certain times of the day or week, it can use time-specific messaging to reach its target audience. By using behavioral variables to inform their marketing strategies, businesses can increase the effectiveness of their advertising and promotional efforts.

What are psychographic variables?

Psychographic variables refer to personality traits, values, attitudes, interests, and lifestyle characteristics of an individual or household.

Why are psychographic variables important in market research?

Psychographic variables are important in market research because they provide insight into consumers' underlying motivations and preferences. By analyzing psychographic variables, businesses can better understand the emotional and psychological factors that drive customer behavior and preferences.

What are some common psychographic variables used in market research?

Common psychographic variables used in market research include personality traits, values, attitudes, interests, and lifestyle characteristics. For example, businesses can analyze consumers' values and attitudes toward environmental sustainability to better understand their preferences for environmentally friendly products.

How can businesses collect data on psychographic variables?

Businesses can collect data on psychographic variables through surveys, focus groups, and other market research methods. They may also use social media analytics and other digital tools to gain insights into consumer interests and lifestyles.

How can businesses use psychographic variables in marketing?

Businesses can use psychographic variables to develop more targeted marketing strategies that are more likely to resonate with their target audience. For example, if a business knows that its target audience values health and wellness, it can use messages that emphasize the health benefits of its products. By using psychographic variables to inform their marketing strategies, businesses can create more personalized and effective advertising and promotional efforts that better meet the needs and preferences of their target audience.

What is Organizational/Industrial Segmentation?

Organizational/industry segmentation is the process of dividing a business-to-business (B2B) market into different groups or segments based on shared characteristics such as industry, company size, or purchasing behavior.

Why is the organizational/industry divide important in B2B marketing?

Organizational/industry segmentation is important in B2B marketing because it allows businesses to develop targeted marketing strategies that are more likely to resonate with specific market segments. By understanding the needs and preferences of different segments, businesses can tailor their products and marketing efforts to better meet the needs of their target audience.

What are some common organizational/industry segmentation techniques?

Common organizational/industry segmentation techniques include segmenting markets by industry, company size, geographic location, purchasing behavior, and decision-making unit (DMU) characteristics. Other segmentation techniques may include segmenting the market by a specific product or service or by a company's position in the supply chain.

How can businesses collect data for organizational/industry segmentation?

Businesses can collect data for organizational/industry segmentation through a variety of methods, including market research surveys, customer interviews, and analysis of sales and transaction data. Businesses may also use third-party data sources to gather information about specific industries or companies.

How can businesses use the organizational/industry divide in marketing?

Businesses can use organizational/industry segmentation to develop targeted marketing strategies that are likely to match specific segments of the B2B market. For example, if a business is targeting a specific industry, they can use industry-specific messaging and advertising channels to reach their target audience. Alternatively, if a business is targeting large corporations, they can use account-based marketing (ABM) strategies to personalize their marketing efforts for individual companies. By using the organizational/industry segmentation to inform their marketing strategies, businesses can increase the effectiveness of their B2B marketing efforts.

What is Institutional Buyer Behavior?

Organizational buyer behavior refers to the actions and decision-making processes of businesses and other organizations when purchasing goods and services for their operations.

How does organizational buyer behavior differ from individual buyer behavior?

Organizational buyer behavior differs from individual buyer behavior in many ways. Institutional buyers typically purchase goods and services on behalf of their company or organization rather than for personal use. Organizational purchases are also typically more complex and involve multiple decision makers, while individual purchases are often made by a single person. Additionally, organizational procurement involves a more formal procurement process with specific policies and procedures.

What Factors Affect Organizational Buyer Behavior?

Many factors can influence organizational buyer behavior, including internal factors such as company culture, objectives, and purchasing strategies, as well as external factors such as market conditions, competition, and supplier relationships. Other factors that can affect organizational buyer behavior include the personal preferences and decision-making styles of the members of the decision-making unit (DMU).

What is the role of DMU in institutional buyer behavior?

The decision making unit (DMU) plays an important role in the behavior of organizational buyers. A DMU includes individuals within an organization who are involved in the purchase decision, including those who initiate the purchase, those who influence the decision, and those who ultimately make the decision. Understanding the dynamics of the DMU and the individual roles and preferences of its members is essential for businesses to effectively market their products or services to organizations.

How can businesses effectively market to institutional buyers?

To market effectively to institutional buyers, businesses need to understand the unique characteristics of the B2B market and the specific needs and preferences of their target audience. This may include developing targeted messaging and advertising strategies that speak directly to the issues and challenges facing organizations in a particular industry or sector. Businesses may also need to develop relationships with key decision-makers and influencers within the organization to build trust and credibility. Additionally, offering customized solutions and superior customer service can help differentiate businesses from competitors and build long-term relationships with institutional customers.

What is the Webster-Wind Framework?

The Webster-Wind framework is a model that outlines the factors that influence consumer behavior. The framework developed by Yoram Wind and Robert Webster includes four main elements: environment, buyer's black box, buyer's response, and marketing stimulus.

What is environment in the Webster-Wind framework?

Environment in the Webster-Wind framework refers to external factors that influence consumer behavior, such as economic, cultural, and technological factors. These external factors can affect consumer attitudes, preferences and behavior.

What is the buyer's black box in the Webster-Wind framework?

The buyer's black box in the Webster-Wind framework refers to internal factors that influence consumer behavior, such as attitudes, motivations, and perceptions. These internal factors are invisible to marketers and may be difficult to measure, but they are critical to understanding why consumers make certain purchase decisions.

What are buyer responses to the Webster-Wind framework?

Buyer responses in the Webster-Wind framework refer to observable outcomes of consumer behavior, such as purchase decisions, brand loyalty, and product satisfaction. These responses are the result of interactions between the environment, the buyer's black box, and marketing stimuli.

What are marketing incentives in the Webster-Wind framework?

Marketing stimuli in the Webster-Wind framework refer to factors that influence consumer behavior that are controlled by marketers, such as product features, price, advertising, and promotion. These marketing stimuli are designed to influence the buyer's black box and ultimately elicit the desired buyer response.

What is Sheth Framework?

The Sheth Framework is a theoretical framework developed by Professor Jagdish Sheth to understand consumer behavior. It consists of four main elements: culture, social class, reference group and family.

How does Sheth Framework work?

Sheth's framework works by identifying various factors that influence consumer behavior, such as cultural values, social class, and the influence of reference groups and family. By understanding these factors, marketers can better tailor their marketing strategies to meet the needs and preferences of their target audience.

What is the importance of Sheth framework in marketing?

The Sheth framework is important in marketing because it provides a structured approach to understanding consumer behavior. By understanding the various factors that influence consumer behavior, marketers can better design their marketing strategies to meet the needs and preferences of their target audience, thereby increasing sales and customer satisfaction.

How has the Sheth framework evolved over time?

The Sheth framework has evolved over time to reflect changes in society and consumer behavior. For example, Professor Sheth has extended the framework to include factors such as technology and the changing role of women in society.

How can the Sheth framework be applied in practice?

The Sheth framework can be applied in practice by conducting market research to understand cultural values, social class and reference groups that influence consumer behavior. Marketers can then use this information to develop targeted marketing strategies tailored to the needs and preferences of their target audience. Additionally, the framework can be used to analyze consumer behavior in different markets and identify trends and growth opportunities.

What is Organizational Market Segmentation?

Organizational market segmentation is the process of dividing the market for business-to-business (B2B) products or services into smaller groups based on shared characteristics such as industry, company size, and purchasing behavior.

What are the different approaches to organizational market segmentation?

There are many approaches to organizational market segmentation, including geographic, firmographic, behavioral, and needs-based segmentation.

What is geographic segmentation in organizational market segmentation?

Geographic segmentation in organizational market segmentation is the process of segmenting a market based on geographic factors such as location, climate, and cultural factors.

What is Firmographic Segmentation in Organization Market Segmentation?

Firmographic segmentation in organizational market segmentation is the process of segmenting a market based on company characteristics such as industry, company size, and financial performance.

How can needs-based segmentation be used in organizational market segmentation?

Needs-based segmentation in organizational market segmentation is the process of segmenting a market based on the specific needs and preferences of customers. This approach can be used to identify customer pain points and develop targeted solutions that address their unique needs, thereby increasing customer satisfaction and loyalty.

Further reading on related topics

Business & Career - (Finance, Marketing, Leadership, Economic, Time management)

Business & Career

Business is a type of economic activity that is done to earn money or livelihood. Business is an economic activity involving the production, purchase, sale, exchange More

Finance

• Finance
• Capital Markets and Capital Market Theory
• Financial Management
• Investment Management
• Financial System
• Financial Assets
• Difference Between Debt and Equity
• Role of Financial Markets
• Role of Financial Intermediaries
• Maturity Intermediation
• Risk Reduction via Diversification
• Reducing the Costs of Contracting and Information Processing
• Regulating Financial Activities
• How many types of financial markets are there?
• It is the lowest maturity money market instrument
• Functioning of capital markets
• What is Derivative in Financial Markets?
• What is primary market in finance?
• What is the secondary market in finance
• Among the important characteristics of market efficiency is…
• Characteristics of an economic system that create economic opportunity
• Domestic Non Economic Sectors
• The Government Sector
• The Federal Government
• Government-Owned Corporations
• Government-Sponsored Enterprises
• State and Local Governments
• Designated non-financial businesses and professionals
• Distribution of gross domestic product (GDP) among economic sectors
• Depository Institutions - Depository institutions are the most diverse type
• Bank Services
• Bank Funding
• Bank Regulation
• No depository Financial Institutions
• Domestic financial insurance companies
• Financial investment companies
• Regulated Investment Companies
• Open-end funds
• Closed-end funds
• Unit Investment Trust (UIT)
• Exchange Traded Fund Companies
• A hedge fund is a type of investment that involves investing
• Separately Managed Accounts
• Pension Fund Investment Management
• What do investment banks do?
• Private Placement of Securities
• Trading Securities
• Advising on mergers, acquisitions and financial restructuring
• Merchant Banking
• Securities, Finance, and Prime Brokerage Services
• Asset Management
• Financial sector of foreign investment

Finance - Complete information

Finance is the disciplinary study of money, currency and capital assets. Finance is related to economics but not the same as economics. The study of the production, distribution and consumption of money, assets, goods and services combines finance More

Financial Analysis - Complete Information

The Evolution of Financial Analysis, Bookkeeping, Modern Finance, Department, silos and analysis, IT System Landscape More

Money management skills

Extent of money management skills, Understanding Your Financial Brain, Managing money with life cycle theory, Basic investment, Main financial instruments More

Financial Management

Financial management itself is sometimes called business finance or corporate finance. Corporate finance is a specialized field of More

Capital Market and Capital Market Theory

Many important topics covered in this specialized area of finance i.e. price efficiency of financial markets, role of players in financial markets, investment behavior, structure of financial markets, best practices of regulators, measurement of risk More

Investment Management

Investment management is a specialized field of finance concerned with the management of individual or institutional funds. Other terms commonly used to describe this area of finance are More

Financial System

Our country's financial system consists of institutions that help facilitate the flow of funds from those who have funds to those who need More

Financial Assets

An asset is a resource that we expect to provide future benefits, so it has economic value. Property can be classified into two main More

Difference Between Debt and Equity

We can classify a financial instrument according to the type of claim the investor has on the issuer. A financial instrument in which the issuer agrees to pay the investor interest, as well as More

Role of Financial Markets

Investors exchange financial instruments in financial markets. A more popular term used for the exchange of financial instruments is trading. Financial markets operate on three main More

Role of Financial Intermediaries

Despite the important role of financial markets in attracting those who have funds to invest and efficiently allocating funds to those who need them, they may not More

Maturity Intermediation

In commercial bank example, you should note two things. First, the maturity of deposits is usually short term. Banks have deposits that are payable on More

Reducing Risk Through Diversification

If a mutual fund invests the funds received from investors in the stocks of a large number of companies, the mutual fund is diversified and its risk is reduced. Diversification means reducing the risk of More

Reducing the Costs of Contracting And Information Processing

Investors who purchase financial assets must develop the necessary skills to assess their risk and return. After developing the necessary skills, investors can apply More

Regulating Financial Activities

Most governments around the world regulate various aspects of economic activity because they recognize the important role played by More

How many types of financial markets are there?

Another sector of the country's financial market is the external market. It is a market where securities are traded with the following two distinctive features: 1. At issue, securities are offered simultaneously to investors in several countries. More

It is the lowest maturity money market instrument

The money market is the sector of the financial market that includes financial instruments with a maturity or redemption date of one year or less at the time of issuance. Money market instruments are generally debt instruments and include More

Functioning of capital markets

The capital market is the sector of the financial market where long-term financial instruments issued by corporations and governments are traded. Here long term refers to financial instrument with original maturity of more than More

What is Derivative in Financial Markets?

The primary role of derivative instruments is to provide a transactionally efficient vehicle for protecting investors and issuers against various types of risk. Derivative instruments, or simply derivatives, include futures, forwards, options, swaps, caps and floors. A discussion of these important financial More

What is primary market in finance?

When the issuer first issues a financial instrument, it is sold in the primary market. Companies raise new issues by selling them in the market. Hence it is the primary market whose sale generates income for the issuer of More

What is the secondary market in finance?

A secondary market is one in which financial instruments are resold to investors. Issuers do not raise new capital in the secondary market, the issuer of the security does not receive money from the sale. Trading takes place among More

Among the important characteristics of market efficiency is…

In a weak form of market efficiency, current asset prices reflect all past prices and price movements. In other words, all the useful information about a stock's historical prices is already reflected in today's price. An investor cannot use More

Characteristics of an economic system that create economic opportunity

Financial crises are very difficult to predict. While each episode of financial instability seems to have unique aspects, two scenarios are common in such events. First, major crises usually involve financial institutions or More

Domestic Non Financial Sectors

The government sector includes federal government, state government, and local government. Also government sector includes government owned and government sponsored enterprises. Federal Government, Government Owned Corporations, More

Designated non-financial businesses and professionals

Non-financial businesses are enterprises formed by individuals and other businesses to engage in activities for profit, where the activities are not primarily those of financial intermediaries such as commercial banks. These businesses issue debt and More

Distribution of gross domestic product (GDP) among economic sectors

Financial sectors include the institutions and regulators that provide the framework to facilitate lending and borrowing. These activities can be classified into different sectors, depending on the type of More

Financial sector of foreign investment

The sector known as foreign investors includes individuals, non-financial businesses and financial institutions not domiciled in the United States, as well as foreign central governments and supranationals. A foreign central bank is the monetary authority of More

Domestic financial insurance companies

Insurance companies play an important role in the economy as they are risk carriers or risk underwriters for a wide range of insurable events. Moreover, beyond that risk-bearing role, insurance companies are major participants in More

Depository institutions are the most diverse type

Depository institutions include commercial banks and thrifts. Thrifts include savings, savings banks, credit unions and credit unions. As the name suggests these institutions accept deposits which represent the liabilities of More

Financial investment companies

Investment companies also known as asset management companies. These companies manage the funds of individuals, state local governments and businesses. Also the companies are reimbursed for the fees charged by More

Exchange Traded Fund Companies

As an investment vehicle, mutual funds ie open end funds are often criticized for two reasons. First being the price of their shares and being able to trade only at the end of the day or at the closing price. In particular, transactions such as More

A hedge fund is a type of investment that involves investing

The Securities Act does not provide a definition of a pool of investment funds run by asset managers known as hedge funds. The term can also be defined by considering characteristics commonly associated with More

Pension Fund Investment Management

A pension scheme fund is established for final payment of post-retirement benefits. A scheme sponsor is the organization that sets up the pension scheme. The two basic and widely used pension plans are defined benefit plans and defined contribution plans. In addition, a hybrid type of plan called More

What do investment banks do?

Like commercial banks, investment banks are highly leveraged institutions that play an important role in both the primary and secondary markets. This includes investment banking activities. The first role is to assist in raising funds by corporations government agencies, state, local governments and More

Advising on mergers, acquisitions and financial restructuring

M&A - Investment banks are active in mergers and acquisitions, LBOs - leveraged buyouts, restructuring of companies, recapitalizations, restructuring of insolvent and distressed companies. These companies operate in one or more of the following ways More

Marketing

• Introduction to marketing strategy
• What Is Business Strategy?
• Towards Strategic Management
• Change The Business Shaping Strategy
• Summary of Marketing Strategy
• External Analysis of Marketing
• Macro Environmental Analysis
• Industry Analysis
• Competitive Analysis of Marketing (Strategic groups - 1 & 2)
• Problems in competitor identification in strategic analysis
• Strategic analysis of the market
• Summary of Strategic Analysis
• What is competitive intelligence in marketing
• CI - Competitive Intelligence Cycle
• What are the sources of competitive information?
• Why and how businesses segment their markets
• Briefly describe the steps in the segmentation process
• Implementing Behavioral Marketing And Customer Segmentation
• Segmentation criteria for consumer markets
• Complete information about profile variables in marketing

Summary of Marketing Strategy

Today's business world knows the importance of marketing strategy and marketing strategic management. Generally any strategic process consists of three distinct phases: analysis, planning More

External Analysis of Marketing

External analysis of marketing is an important and first stage of the auditing process. It creates the information and analysis necessary to identify the key issues an organization needs to More

Macro Environmental Analysis

A macro-environmental audit examines a wide range of environmental issues that may affect the organization. Macro environmental analysis will include economic factors, political/legal issues, social/cultural issues More

Industry Analysis

An organization needs to understand the nature of relationships within its industry to allow the enterprise to develop strategies to leverage existing relationships. A useful framework to use in this analysis is More

Competitive Analysis of Marketing

The analysis examines the overall five forces of the industry and is a starting point for assessing a company's competitive position. This is likely to be a broad definition of an industry More

Problems in competitor identification in strategic analysis

Analyzing the members of a strategic group provides important information on which to base strategic decisions. However, there are risks in the process of identifying the organization's competitors and several mistakes should be More

Strategic analysis of the market

A market analysis will consist of a range of factors relevant to the particular situation under review, but this range typically includes More

What is competitive intelligence in marketing

CI - Competitive Intelligence has an image problem. The term conjures up images of conspicuous activity involving private detectives, telephoto lenses, and hidden microphones. Although such images are not entirely unpleasant, they are far from the truth. Simply put, CI is an ethical, structured, and More

CI - Competitive Intelligence Cycle

The CI cycle begins with establishing intelligence requirements. It is important to prioritize information needs and set appropriate schedules/reporting periods. This phase requires a detailed understanding of what business decisions are being made and More

What are the sources of competitive information?

Competitive information comes from three general areas. First is public domain information - this information is available to anyone. Many industries are heavily regulated and any publicly listed company has a legal obligation to More

Why and how businesses segment their markets

There are several reasons why organizations are divided: Meet customer needs more precisely, Increase Profits, Segment Leadership, More

Briefly describe the steps in the segmentation process

The segmentation process involves establishing criteria by which groups of customers with similar needs can be identified. These criteria require establishing customer groups with the following characteristics:

1. Customers within a segment respond similarly to a particular marketing mix.

2. Consumers within a segment tend to react distinctly differently from other consumer groups. More

Implementing Behavioral Marketing And Customer Segmentation

Consumer buyer behavior relates to the end consumer who purchases products and services for employee use. This section will summarize the main sources of influence on consumer buyer behavior to explain the influences that More

Segmentation criteria for consumer markets

Customer segmentation criteria can be divided into three main categories: Profile variables, Behavioral Variables More

Complete information about profile variables in marketing

This category includes a range of demographic, socio-economic and More

Strategic Marketing - Behavioural variables

Benefit segmentation uses the underlying reasons why a person buys a particular product or service, rather than trying to identify specific personal attributes of that person. Benefit segmentation is based on the concept that the main More

Leadership

• Renewal of strategic planning
• A conceptual model and methodology for leadership
• The phenomenon of leadership
• The precarious position of leadership in higher education
• Patterns in Leadership
• A case study about leadership
• Relation to the Phenomenology of Leadership
• Leadership as agency
• Leadership as fundamental
• Leadership as relational
• Leadership as Sense Making
• Ethical leadership
• Leadership, Conflict and Change
• Difference between leadership and empowerment
• Positions of leadership and authority
• Insightful articles on transactional and transformational leadership
• Implications for contemporary concepts of leadership
• Implications for higher education

Renewal of strategic planning

The leadership literature suggests that teams at the top of an organization face much greater challenges than other teams. A team leading an organization must deal with failure and More

The phenomenon of leadership

The precarious position of leadership in higher education

When it comes to institutions of higher education, there are many paradoxes about the phenomenon of leadership, such as - the field of study, the mission of education More

A conceptual model and methodology for leadership

Renewal of strategic planning needs to be done within a deeper conceptual framework than is usually the case. By shifting the ideological register from management to leadership, we can achieve much of More

Patterns in Leadership

Leadership scholars have developed schools, categories, and classifications of leadership and leadership theories to distinguish between different approaches and concepts. To get a bearing on this More

A case study about leadership

To understand the changing definitions of the phenomenon, it is useful to look briefly at the findings of an influential analysis of business leadership, Jim Collins's widely read book Good to Great, which attempts to More

Relation To The Phenomenology Of Leadership

Without claiming to be anything like a comprehensive explanation of the ever-growing body of knowledge and inquiry, it is still possible to find common themes and parallel findings, especially regarding the More

Positions of leadership and authority

These comments on empowerment illustrate an important theme about empowerment that has important implications for the exercise of leadership in higher education institutions. Educational professionals carry a lot of authority and More

Insightful articles on transactional and transformational leadership

While continuing to explore the molecular components of interpersonal leadership, it would be good to pause on the important distinction between transactional and transformational leadership. The concept of transformative leadership has become More

Contemporary concepts of leadership and education

For many contemporary commentators, these ideas lead to the conclusion that leadership is understood as a form of service to others and shared values. A new moral principle is emerging which holds that the only right worthy of one's loyalty is that which is freely and knowingly given by More

Economic

• Why is the study of business and economics important?
• What is the importance of economics analysis in our daily life
• What is going on in capitalism in the present era?
• Questions essential for learning economics
• what is the economy and how does it work
• Contribution Of Entrepreneurship To Economy And Society
• What is economics and why is it important
• Relationship Between Economics And Politics
• Measuring the level of economic activity of an economy
• The best economy of our country

Why is the study of business and economics important?

Many people think that economics is a technical confusing and even mysterious subject. Economists are best left to experts. But in reality the economics should be quite straightforward. Economics is how we work, what we produce and More

What is the importance of economics analysis in our daily life

Whether in universities or in the real world, most economists firmly believe that competitive inequality and private wealth accumulation are central, natural, and desirable features of a vibrant, efficient economy. This value system provides their analysis More

What is going on in capitalism in the present era?

Capitalism has certain characteristics and forces that need to be recognized in order to understand how it works. To understand what is going on in capitalism right now, we need to recognize and study its More

Questions essential for learning economics

The economy must be a very complex, volatile thing. Mind-blowing stock market tables, charts and graphs, GDP figures, foreign exchange rates are what appear on the business pages of newspapers. No wonder the media turn to economists, the high priests of More

What is economics and why is it important

Economics is not a physical science, economics is a social science. Many economists are confused on this point! They foolishly attempt to describe human economic activity as physicists describe the behavior of atoms. Economics is the study of More

What is the economy and how does it work

The economy is at once mysterious and straightforward. We all know the experience of economy very well, everyone participates in it. The forces and relationships we examine along the way are more important to economic life than the meaningless ups and More

Contribution Of Entrepreneurship To Economy And Society

Economy is fundamentally a social activity. No one does it all by themselves. We depend on each other and we interact with each other during our work. It is common to compare the economy with private or individual wealth, profit and selfishness, so it More

Relationship Between Economics And Politics

Economics and politics are intertwined. Because economics and politics are intertwined, the first economists named the discipline political economy. The relationship between economics and politics partly reflects the importance of More

Measuring the level of economic activity of an economy

Gross domestic product (GDP) is the most common way to measure an economy. But one should be careful about this as it is a very dangerous solution. GDP adds up the value of all the various goods and services produced for More

The best economy of our country

Economics tries to explain how and in what manner the economy works. But economists are just as concerned with trying to do better. This requires economists to make judgments about which type of economy is more desirable. Unfortunately, most economists are More

Time management

• Understanding Time Management
• Misconceptions about time
• Symptoms of poor time management
• Thieves who steal time
• The importance of planning every moment of your workday
• Monochronic and polychronic views of time
• Five time zone concepts
• Time Management Matrix
• Orientation to time management
• Overcoming barriers to effective time management

Understanding Time Management

Good time management skills control one's time, stress and energy levels. One can maintain a balance between work and personal life. One finds the individual flexible enough in time to respond to surprises or More

Misconceptions about time

We all have many misconceptions about time. They affect everyone, including those who are considered successful and influential. Following are some of the misconceptions identified by More

Symptoms of poor time management

Poor time management is characterized by a combination of specific cognitive symptoms. Managers would do well to detect and reflect on whether they are subject to any More

Thieves who steal time

Lack of understanding of the value of planning and impatience to complete something are the causes of poor planning. Absence of an action plan is likely to lead to false starts, resulting in unproductive use of More

The importance of planning every moment of your workday

Classifies managers into different personality types based on certain patterns of behavior that frustrate people's efforts at effective time management and recommends the More

Monochronic and polychronic views of time

A monolithic approach to time management is essentially objective and emphasizes promptness, speed, brevity and punctuality. It is a very efficient and focused way of managing work and life. Monochronic time managers thrive on detailed More

Five time zone concepts

To accelerate their ability to manage time, managers need to strike the right balance between the monochronic and polychronic aspects of More

Time Management Matrix

Each of a manager's activities can be identified as one of four types, represented by the four quadrants of the time management matrix. Categorizing a manager's activities into these quadrants helps him identify More

Orientation to time management

To better manage their time, managers should answer the following questions More

Overcoming barriers to effective time management

Delegating authority and responsibility is an ideal way to control telephone interruptions. Designating specific time slots for socializing and business will help managers effectively reduce More