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Brian Ghilliotti

BES 218
Professor Brown
Chapter 11 Summaries
Marketing Issues
Week 9


Three Steps in Selecting a Market and Establishing a Position

The first step in selecting a target market is to initiate a study of the industry in which the firm
intends to compete and determine the potential markets for that firm. This in known as market
segmentation analysis. Markets can be analyzed by geographic regions, demographic types,
product types, behavior patterns, and market trends.
To test if you have successfully performed a market segmentation analysis, one should consider
the following questions:

Homogeneity of needs and wants are obvious within the segment

Heterogeneity of needs and wants are also obvious within the segment
Differences between identified segments should be relatively small
The identified segments should be distinct enough to be readily recognized
It should be easy to determine the general size of the market segments
It should be large enough for the firm to make profits

Once a firm has segmented the market, the next step is to select a target market. Usually the
firm will not target an entire market segment since many segments are too large to target
successfully. Instead, firms target a niche market within a target market, known as a niche
market. This is a place within a market segment that represents a narrow group of customers
with similar interests.
After selecting a target market, the firms next task is to establish a position" within the niche
that differentiates it from its competitors. One way to do this is by developing a product
differentiation map. This is done by creating an x and y graph that compares two market
demand variables (known as attributes) that are relevant for that market segment. For example,
in the retail industry, one differentiation map involves comparing the quality of goods at a higher
price compared to cheaper quality goods for the convenience of a lower price. Once the firm
has determined its differentiation from competitors within its segment, it needs to develop a
tagline, which summarizes the firms market niche specialization.
Branding (known as advertising) is the set of attributes, positive or negative, that people
associate with a firm or product. It is important for firms to maintain a positive branding image,
which is known as brand management. Negative brand management can hurt a firms ability to
generate sales.
Focusing too mush on features and benefits of a firms new product is a common mistake
entrepreneurs do when conducting brand management. Many journalists are skeptical when

entrepreneurs start talking about how great their products are relative to their competitors.
Journalists are more impressed by human interest stories that explain why a firm went into
business and why the start up firm is unique.
A strong brand name can be a very powerful asset for a firm. In surveys consumers say that
known and trusted brands are the biggest reasons why they buy products. An effective brand
name can increase a market value of a firm up to 50% to 75%. This increased valuation can be
important to a firm if it is acquired or merged with another firm. Brand equity is the term that
denotes the set of assets and liabilities linked to a brand and enable it to raise a firms valuation.
An effective brand name has the following attributes:

Invoking brand loyalty

Name recognition
Perceived quality
Brand associations related to quality (service support, etc)

III. Four Ps of Marketing for New Ventures

A firms marketing mix is a set of controllable tactical marketing tools that it uses to produce the
response it wants in the target market.
A firms product is the good or service that is offers to the target market. A product usually takes
a physical form, while a service is an activity or a consumer benefit that is intangible and does
not take a physical form.
As a firm prepares to sell its products, an important distinction should made between the core
product and the actual product. A core product may involve a software system that can help
manage database related information. However, the actual product may involve series of
features that organize the data in specific ways. It is one thing to sell a product on its core
aspects, but if the features that help support the core aspects of the product are faulty,
consumers will be disappointed and generate negative word of mouth advertising.
Some firms will use reference accounts when initially selling products to help manage these
issues. A reference account is an early user of a firms products who is willing to give a
testimonial regarding his or her experience with the product. Not only does this help identify
problems with a product early on, it can also be used as advertising for the product if the
testimonials are positive.
Price is the amount of money customers are willing to spend on a product. Cost based pricing is
determined by adding a mark up percentage to a products costs. Mark up prices may be
standardized by industry or determined by the entrepreneur. The only control in the later case
are market supply and demand variables. Value based pricing is based on estimating what
customers are willing to pay for a product and them backing off a bit to provide a cushion.
Sometimes a firm makes this determination by working backwards by testing to see what its
target market is willing to pay for its goods and services. Another variable in pricing is pricequality attribution, where consumers will associate a lower prices with poor quality, discouraging

Promotion refers to the activities the firm undertakes to promote the merits of its product. This is
primarily done with advertising. Advertising tries to:
Raise consumer awareness of product
Explain a products comparative features and benefits
Create associations between a product and a certain lifestyle
There are some drawbacks to advertising:

Low credibility
Possibility to ad viewers are not interested
Message clutter
Perception that advertising is intrusive

There are six steps in developing an advertisement:


Cleary identify the purpose of the intended ad

Determine the target audience
Select the medium, such as newspapers, radio, or television
Fulfill expectations
Select place and time for the ad to appear
Create the ad

Public relations is another cost-effective way to increase awareness of the products a firm wants
to sell. Public relations refers to efforts to maintain a companys image with the public,
promoting its sales. A cost effective way of maintaining public relations is through use of social
media. The key to maintaining a social media account is keep it fresh, informative, and fun.
Social media can be used to promote viral marketing, which facilitates and encourages people
to pass along a marketing message about a particular product.
Place or distribution encompasses all activities that move a product from its place of production
to the customer. The distribution channel is the route a product takes from the place it is made
to the customer or end user.
Many firms sell direct to customers. Controlling the process of moving their products from their
place of origin to the end user instead of using middle men is a major advantage of direct
selling. Other firms sell though intermediaries, which involves selling goods to wholesalers.
Once products are sold to wholesalers, retailers purchase these goods from them to sell to
consumers. Exclusive distribution arrangements give a retailer or other intermediary the
exclusive rights to sell a firms products.

IV. Sales Process and Related Issues

A firms sales process outlines the steps it goes through to identify prospects and close sales.
There are seven recognized steps to this process:
Gather sales leads
Make initial contact with prospect
Qualify the lead (determine if the sales prospect has real sales potential)
Make sales pitch
Meet objections and concerns (try to convince sales prospect to complete transaction by
helping them overcome reservations)
6) Close the sale
7) Follow up (see if sales prospect is happy with their product after it is used or consumed)