Marketing Essentials: Supply, Demand, Segmentation, and Competition
Marketing Fundamentals: Supply, Demand, and Competition
Supply and Demand Relationship
- S << D: High unmet demand. Marketing is less critical. Prices are supplier-driven.
- S = D: Balanced supply and demand. Focus shifts to production output, advertising, and promotion.
- S > D: Increased competition as supply exceeds demand. Marketing plans emphasize production and inventory management.
- S >> D: Marketing becomes a strategic imperative for the company.
Market Segmentation
Market segmentation involves dividing the overall market into smaller groups of customers with similar characteristics.
- Mass Marketing: Targeting the entire market with a uniform marketing plan (e.g., Coca-Cola in the 70s, Ford T).
- Segment-Based Marketing: Dividing the market into segments with homogeneous characteristics.
- Niches: Smaller, specialized segments (e.g., Steiner optical, Vairo, Tetra food).
- Individual Marketing: One-to-one marketing, personalizing offers.
Target Market
After segmenting the market, a target market should be selected based on its compatibility with the company’s resources and capabilities. Evaluate each segment’s attractiveness, define it clearly, and develop market coverage strategies.
Criteria for Evaluating Market Segment Attractiveness:
- Sales Potential and Stability: Segment size and profitability.
- Growth Rate: High-potential segments may attract competitors.
- Identification and Accessibility: Well-defined segments that are easy to reach.
- Differential Response to Marketing Actions: Differentiated and homogeneous segments.
- Resources Needed: The company’s investment capability to operate in the segment.
Competition
Competition arises when multiple suppliers vie for a limited number of customers, who are free to choose among them.
- Actual Competition: Suppliers in the same industry offering similar products (direct competition) and substitutes.
- Potential Competition: Threats from new entrants in markets with high growth rates, profitability, economic liberalization, and low entry barriers.
Competitive/Marketing Myopia
Focusing solely on current competition without recognizing latent/potential competition.
Differentiation and Product Positioning
Differentiation: The value proposition that sets a company apart from its competition for the target market (e.g., IKEA).
Product Positioning: The image created in the consumer’s mind, highlighting key attributes that distinguish the firm’s products from the competition.
A company can gain a competitive advantage by differentiating and positioning its products as offering superior value compared to competitors.