Introduction to marketing

Helina Alemayehu

Submitted to:- Yibeltal A . Assistant professor

Segmentation

The first step of the STP marketing model is the segmentation stage. The main goal here is
to create various customer segments based on specific criteria and traits that you choose. The
four main types of audience segmentation include:

1. Geographic segmentation: Diving your audience based on country, region, state,

province, etc.
2. Demographic segmentation: Dividing your audience based on age, gender, education
level, occupation, gender, etc.
3. Behavioral segmentation: Dividing your audience based on how they interact with your
business: What they buy, how often they buy, what they browse, etc.
4. Psychographic segmentation: Dividing your audience based on “who” your potential
customer is: Lifestyle, hobbies, activities, opinions, etc.

Example
The Adventure Travel Company is an online travel agency that organizes worldwide adventure
vacations. It has split its customers into three segments, because it's too costly to create different
packages for more groups than this. Segment A is made up of young married couples, who are
primarily interested in affordable, eco-friendly vacations in exotic locations. Segment B consists
of middle-class families, who want safe, family-friendly vacation packages that make it easy and
fun to travel with children. Segment C comprises upscale retirees, who are looking for stylish
and luxurious vacations in well-known locations such as Paris and Rome.

Targeting

Step two of the STP marketing model is targeting. Your main goal here is to look at the segments
you have created before and determine which of those segments are most likely to generate
desired conversions (depending on your marketing campaign, those can range from product
sales to micro conversions like email signups).
Your ideal segment is one that is actively growing, has high profitability, and has a low cost of
acquisition:

1. Size: Consider how large your segment is as well as its future growth potential.
2. Profitability: Consider which of your segments are willing to spend the most money on
your product or service. Determine the lifetime value of customers in each segment and
compare.
3. Reachability: Consider how easy or difficult it will be for you to reach each segment
with your marketing efforts. Consider customer acquisition costs (CACs) for each
segment. Higher CAC means lower profitability. 

There are limitless factors to consider when selecting an audience to target – we’ll get into a few
more later on – so be sure that everything you consider fits with your target customer and their
needs.

Example

The Adventure Travel Company analyzes the profits, revenue and market size of each of its
segments. Segment A has profits of $8,220,000, Segment B has profits of $4,360,000, and
Segment C has profits of $3,430,000. So, it decides to focus on Segment A, after confirming that
the segment size is big enough (it's estimated to be worth $220,000,000/year.)

Positioning

The final step in this framework is positioning, which allows you to set your product or services
apart from the competition in the minds of your target audience. There are a lot of businesses that
do something similar to you, so you need to find what it is that makes you stand out. 

All the different factors that you considered in the first two steps should have made it easy for
you to identify your niche. There are three positioning factors that can help you gain a
competitive edge:
 1. Symbolic positioning: Enhance the self-image, belongingness, or even ego of your
customers. The luxury car industry is a great example of this – they serve the same
purpose as any other car but they also boost their customer’s self-esteem and image.
2. Functional positioning: Solve your customer’s problem and provide them with genuine
benefits.
3. Experiential positioning: Focus on the emotional connection that your customers have
with your product, service, or brand.  

The most successful product positioning is a combination of all three factors. One way to
visualize this is by creating a perceptual map for your industry. Focus on what is important for
your customers and see where you and your competitors land on the map.

Example

The Adventure Travel Company markets itself as the "best eco-vacation service for young
married couples" (Segment A).

It hosts a competition on Instagram® and Pinterest® to reach its desired market, because these
are the channels that these people favor. It asks customers to send in interesting pictures of past
eco-vacations, and the best one wins an all-inclusive trip.

The campaign goes viral and thousands of people send in their photos, which helps build the
Adventure Travel Company mailing list. The company then creates a monthly e-newsletter full
of eco-vacation destination profiles.

Distribution

Products reach customers through distribution channels. Distribution channels include product
displays and product delivery methods. Distribution channels also include the customer point
of purchase, such as retail stores, wholesalers and websites with sales capabilities. Similar to
communication channels, distribution channels are based on the shopping preferences of the
product’s target market. Changes to the distribution channel structure happen because the
product isn’t reaching the target market or because of shifts in available distribution channels,
such as retail store closings.

Communication

Communication channels present information to pools of potential consumers known as the

product’s target markets. Communication channels may carry a company’s advertisements,
other types of persuasive messages, and business correspondence. Examples of communication
channels include television, radio, magazines, newspapers, billboards, webpages, direct mailers
and email. Marketers structure communication channels around the media choices of the target
market. For example, a marketer attempting to target tech-savvy young adults might run an
Internet advertising campaign. Marketers modify the structure of marketing channels if the
communications aren’t reaching the target market and when attempting to reach new markets.

Marketing Channels

Definition: Marketing channel is a system which ensures the distribution of the merchandise

from the producer to the consumers by passing it through multiple levels known as middlemen. It
is also known as channels of distribution. Every product is different from one another and so are
their channels of distribution.

Functions of Marketing Channels

Initially, marketing channels are focused on the availability of products or services to prospective
customers. Intermediaries are the people or organizations that act as a bridge between the
manufacturer and the customers. They do various things to facilitate both the companies and the
customers.

Here is the complete explanation of these functions:

· Sorting- First of all, the middlemen buy goods from different manufacturers and sort the
products that are similar in quality, features, and size.

· Accumulation- Marketing channels make sure that there is a regular supply and circulation
of goods in the market and because the middlemen are involved in the process, they are
responsible for maintaining the required stock in enough quantity.

· Allocation- It is a known fact that goods are manufactured in bulk quantities but the
customers prefer to purchase less quantity. Here again, the role of the middlemen comes who
breaks the volume into small packages per the needs of customers.

· Assorting- The customers can get a large variety of goods because middlemen purchase
goods from different manufacturers or suppliers located in different places and make them
available to the customers in a single place.

· Product Promotion: The middlemen involved in the channel of distribution sometimes in a

direct way or indirect way promotes the sales of a particular item through a special display,
loyalty programs , discounts or sale, etc.

· Negotiation- the middlemen bargains with the manufacturers and the consumer both for the
product's price, proportion, quality, guarantee, after-sale service, etc.

· Risk-Taking- Generally, the middlemen like the wholesalers and the retailers have to bear
the risk associated with any product from expiry, damage, breakage, and spoilage, etc. These
risks even include issues related to transportation and warehousing.

Designing marketing channels

Designing marketing channels is a process that requires making a sequence of choices and
decisions related to the structure of marketing channels, channel procedures, the choice of
intermediaries, organization of relationships and activities of all channel members and conflict
resolution.
Concept of promotion mix

Definition: The Promotion Mix refers to the blend of several promotional tools used by the
business to create, maintain and increase the demand for goods and services.

The fourth element of the 4 P’s of Marketing Mix is the promotion; that focuses on creating the
awareness and persuading the customers to initiate the purchase. The several tools that facilitate
the promotion objective of a firm are collectively known as the Promotion Mix.

The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion, Public
Relations and Direct Marketing. The marketers need to view the following questions in order to
have a balanced blend of these promotional tools.

Elements of promotional mix

1. Advertising: The advertising is any paid form of non-personal presentation and

promotion of goods and services by the identified sponsor in the exchange of a fee.
Through advertising, the marketer tries to build a pull strategy; wherein the customer is
instigated to try the product at least once. The complete information along with the
attractive graphics of the product or service can be shown to the customers that grab their
attention and influences the purchase decision.

2. Personal Selling: This is one of the traditional forms of promotional tool wherein the
salesman interacts with the customer directly by visiting them. It is a face to face
interaction between the company representative and the customer with the objective to
influence the customer to purchase the product or services.

3. Sales Promotion: The sales promotion is the short term incentives given to the
customers to have an increased sale for a given period. Generally, the sales promotion
schemes are floated in the market at the time of festivals or the end of the season.
 Discounts, Coupons, Payback offers, Freebies, etc. are some of the sales promotion
schemes. With the sales promotion, the company focuses on the increased short-term
profits, by attracting both the existing and the new customers.

4. Public Relations: The marketers try to build a favorable image in the market by creating
relations with the general public. The companies carry out several public relations
campaigns with the objective to have a support of all the people associated with it either
directly or indirectly. The public comprises of the customers, employees, suppliers,
distributors, shareholders, government and the society as a whole. The publicity is one of
the form of public relations that the company may use with the intention to bring
newsworthy information to the public.

E.g. Large Corporates such as Dabur, L&T, Tata Consultancy, Bharti Enterprises,
Services, Unitech and PSU’s such as Indian Oil, GAIL, and NTPC have joined hands with
Government to clean up their surroundings, build toilets and support the swachh Bharat Mission.

5. Direct Marketing: With the intent of technology, companies reach customers directly

without any intermediaries or any paid medium. The e-mails, text messages, Fax, are
some of the tools of direct marketing. The companies can send emails and messages to
the customers if they need to be informed about the new offerings or the sales promotion
schemes.

E.g. The Shopper stop send SMS to its members informing about the season end sales and extra
benefits to the golden card holders.

International marketing

Simply, the International Marketing is to undertake the marketing activities in more than one
nation. It is often called as Global Marketing, i.e. designing the marketing mix (viz. Product,
price, place, promotion) worldwide and customizing it according to the preferences of different
nation people.
The foremost decision that any company has to make is whether to go international or not, the
company may not want to globalize because of its huge market share in the domestic market and
do not want to learn the new laws and rules of the international market.

Marketing information system

Definition: The Marketing Information System refers to the systematic collection, analysis,

interpretation, storage and dissemination of the market information, from both the internal and
external sources, to the marketers on a regular, continuous basis.

The marketing information system distributes the relevant information to the marketers who can
make the efficient decisions related to the marketing operations viz. Pricing, packaging, new
product development, distribution, media, promotion, etc.

Every marketing operation works in unison with the conditions prevailing both inside and
outside the organization, and, therefore, there are several sources ( viz. Internal, Marketing
Intelligence, Marketing Research) through which the relevant information about the market can
be obtained.