Market segmentation

• Mass market:

  • Biggest part of the market with many similar products offered by competitors
  • Dominated by one or a few large producers
  • Customer needs are less specific
  • Products are less specific and have high production output
  • Success in mass markets relies on low unit costs and economies of scale
  • Examples include Walkers crisps, McDonald's, Gillette razors, Heinz beans, and Cornflakes
• To be successful in a mass market, you need to target the widest possible customer base to achieve significant sales

  • Lower risk due to focusing on a large market with high returns potential
  • Achieving economies of scale and reducing unit costs is key to targeting a mass market profitably
• Niche market:

  • Smaller segment of a larger market with fewer customers
  • Customers have more specific needs and wants
  • Potential for higher profit margins and product/service differentiation
  • Specialist skills and knowledge can lead to charging higher prices and earning higher profit margins
  • More loyal customers can result from targeting a niche market
• Drawbacks of targeting a niche:

  • Less likely to benefit from economies of scale due to lower output
  • Less competition in a niche market compared to mass markets
• The marketing mix is now usually extended to include seven elements: product, price, place, promotion, people, process, and physical environment
• The classic four Ps of marketing are:

  • Product: the actual service or product that customers buy
  • Price: how much customers pay for the product or service and how it is determined
  • Place: where customers find the product, how it is distributed, and how they buy it
  • Promotion: how businesses discover and persuade customers to buy the product or service
• The three additional Ps in the extended marketing mix are:

  • People: particularly relevant in service industries, focusing on the individuals who make contact with customers and deliver the service
  • Process: closely aligned with operations or production, referring to the systems and processes that deliver products or services
  • Physical environment: elements of the environment where customers buy or experience the product, contributing to the overall marketing mix
• In the health and leisure industry, specifically in the budget gym sector, an example of the extended marketing mix can be seen in PureGym, the UK market leader
• Product:

  • Well-equipped gym with a focused product range of exercise equipment and classes
  • No-frills approach without swimming pools
• Price:

  • Low-cost strategy with dynamic pricing and flexible contracts to attract members at a low price
• Promotion:

  • Uses a variety of promotional activities including billboard and online advertising
• Place:

  • Occupies various locations including vacated office blocks
• People:

  • Employs freelance personal trainers who are key in delivering the product and service
• Process:

  • Leader in digitizing the fitness experience with features like booking exercise classes using an app and managing memberships online
• Physical environment:

  • Changing rooms are clean, modern, and different from luxury gyms like Virgin Active to shape a unique experience
• Consumer goods are bought by final consumers for personal consumption as households
• Consumer goods are divided into three types according to the AQA specification:

  • Convenience products: bought frequently with little effort, e.g., bag of crisps, toothpaste, can of coke
  • Shopping products: bought less frequently, e.g., clothing, household items like furniture
  • Specialty products: higher priced items requiring more time and effort in decision-making, e.g., cars, holidays
• Implications for the marketing mix of convenience products:

  • Low priced items
  • Widespread distribution
  • Mass promotion
• Implications for the marketing mix of shopping products:

  • Higher priced than convenience products
  • Less widespread distribution
  • Widespread advertising by producers and retailers
• Implications for the marketing mix of specialty products:

  • Higher priced items
  • Limited distribution, sometimes exclusive to specific channels
  • Promotion needs to be carefully targeted to specific consumers
• Industrial goods are bought and sold by businesses for further processing or conducting business
• Types of industrial products:

  • Parts for assembling components
  • Raw materials for manufacturing
  • Capital items like infrastructure, IT systems, servers
  • Services and supplies like security, outsourced telecommunications, customer service
• Marketing mix for industrial products:

  • Dealing with specialist buyers and sellers
  • Professional buyers within businesses
  • More time invested in buyer-seller relationship
  • Quality is crucial
  • More after-sales support may be needed
• Boston Matrix is a tool and model used by businesses to categorize the position of their products and brands
• Boston Matrix helps a business analyze its overall strategic position, especially with a portfolio of products or businesses
• Boston Matrix helps assess the portfolio of business units within the same or different industries
• Boston Matrix is a four-box model where products and brands are categorized into stars, question marks, cash cows, and dogs
• Stars have high relative market share and operate in high growth markets
• Question marks operate in high growth markets but do not have a high relative market share compared to competitors
• Cash cows have a high market share but operate in low growth or mature markets
• Dogs have a low market share and operate in unattractive markets with low growth rates
• Dimensions for categorization in the Boston Matrix:

  <|>Market growth rate: rate at which sales or revenues in the market are growing, indicating market attractiveness
• Relative market share: comparison of the product or brand's market share with the next biggest competitor, indicating competitive strength
• Strategies for each category:

  <|>Stars: invest to maintain market leadership, build barriers to entry, and enhance customer loyalty
• Question marks: be selective in investment, identify those with potential to increase market share, possibly through effective segmentation and positioning
• Cash cows: reinvest cash generated into stars and question marks, squeeze as much cash as possible from these businesses
• Dogs: phase out, find a buyer, or shut down products with low market share and operating in unattractive markets