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Shedding the commodity mind-set
John E. Forsyth, Alok Gupta, Sudeep Haldar, and Michael V. Marn
No product really has to be a commodity. The trick is to know what services your customers want—and to charge more.
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ompanies that sell soap, perfume, candy bars, and other consumer products are expert at “decommoditizing” them: finding and capturing the value of intangible benefits and building strong brand names that can provide a kind of differentiation in the minds of consumers. But companies that sell products such as bulk chemicals, paper, and steel to businesses tend to be unsophisticated in these matters. Burdened by corporate cultures that emphasize operations and sales over marketing, many of these
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The company managed to increase its sales by 15 percent in a single year by determining which important attributes it was best at providing and focusing on the buyers that valued them most.
Conjoint analysis and needs-based segmentation
So many companies segment their customers by size and other such criteria because this approach is easy to carry out, and the companies falling into these gross categories do tend to have similar needs. But to have a truly actionable segmentation scheme, you must divide your customers into much more precise groupings based specifically on their needs.
SHEDDING THE COMMODITY MIND-SET
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In the business-to-consumer (B2C) market, this kind of segmentation is often quite hard to undertake because the obvious differences among customers—age, income, geography, and so on—usually don’t correspond to their preferences for, say, shampoos, books, or even clothing. To solve this problem, consumer goods companies have developed elaborate statistical mechanisms, such as dual-objective segmentation.1 But because these complicated algorithms are not typically used by business-to-business (B2B) suppliers, those companies divide their world by weak identifiers such as size and geography. The good news is that B2B companies don’t necessarily need to use elaborate and sophisticated methods; only a large consumer goods customer base— often comprising millions of individuals—demands them. In many B2B markets, 25, 15, or even just 10 customers
Different ways to segment a market would be demographics, geographics, psychographics, and behavioral. I think that it makes more sense to focus on just one segment rather than use more than one it would be more successful for the company.
Market segmentation as a term came up to describe the concept that all customers are not alike. Because in hospitality industry marketing money and resources are limited, it has to concentrate on specific groups of people, or target market, to avoid waste in time, money and quality. As a result, it’s ensuring the highest returns. [1 pp19] The reasons why segmentation is so important for hospitality industry are – more successful use of marketing money, clearer perceptive of the needs and wants of special customer groups, more effective developing of service, greater correctness in selecting promotional vehicles and techniques. [1 pp173]
Higher value can attract more customers or increase the profit margin for the value add benefit.
According to Horner and Swarbrooke (2005: 39), Segmentation may be defined as the process of dividing a whole market into subgroups or segments for marketing management purposes. Market segmentation is the division of the overall market for a service into various categories with common characteristics. In response to different segments, organisations facilitate the available resources to achieve greater efficiency, in order to satisfy specific needs of customers.
Below is a simple application of our segmentation based on our chosen demographics. We used a multi
Organizations usually employ market segmentation in competitive markets for appropriate targeting of customers. This paper provides an analysis of how market segmentation can be utilized for competitive advantage as well as the need for ensuring diversification for sustainable growth.
As Stephen King ‘s (1973) quote goes, “A product is something that is made in a factory; a brand is something bought by a customer.” My interpretation for the quote is products are commodities products as the final result of the manufacturing process, while brands are a harmonious combination of commodities and a series of emotional connections with customers. In johnson & johnson’s baby powder, the ingredients are talc and fragrance, while Walgreens’ baby power is made of talc and fragrance as well. However, the former price is $2 higher than the later. That’s the price customers paid for brand.
In this section, I will break down the common consumer in attempt to understand what sways him/her into purchasing certain goods—especially those that “they do not need” In addition, I will discuss how consumers determine a certain product to be “worth it”
The segmentation has been done on the basis of buying behavior of the customers. Knowledge of segment buying behavior can help redirect marketing resources for profit gain.
As every customer has unique needs and expectations towards certain products, the ultimate goal of market segmentation is to organize customers into groups which allows targeting of customers with similar needs of and response to the products. The key is to minimize differentiation within each segment
Airline customers are segmented in different groups: airlines must use the following criteria in order to target their specific customers: identifiability, size, accessibility, growth potential, and absence of vulnerability to competition:
‘Market segmentation represents an effort to identify and catergorise groups of customers and countries according to common characteristics’ (Keegan and Green 2016, p.228). For any business, it is crucial that they segment their market accordingly or they will risk forgoing sales opportunities. Fahy and Jobber (2015) identify the objective of market segmentation as distinguishing groups of customers with similar requirements so
Despite companies segmentation practices, customers decide for themselves what their required needs are, once this was realized by Dow Corning, evident from their self-audit, and 5 years of customer surveys and discussions with sales force. They reviewed their segmentation to a needs-based segmentation scheme (Xiameter Case Study).
The key to winning and keeping customers is to understand their needs and buying processes far better than the competitors do and deliver more values.
Through consumer behavior, we now understand the customers’ preferences and different groups they are in. Then we can decide which groups of customers to target with the help of STP. Segmentation helps to differentiate the many groups of customers. Each company has different capabilities to serve customers, and different customers react differently to different marketing strategies. Thus companies are encouraged to focus on one or more groups of customers who will really buy their products; they become more efficient and effective. Segmentation can be based on geographic – segmenting based on location of the customers, climatic condition and population density (ex: seasonal, desert, nation region); demographic – segmenting based on population values such as gender, age, family and ethnics; psychographic – segmenting based on social class, lifestyle or personality characteristics; and behavioral – segmenting based on the behavior towards the product. Companies can choose one or more distinguished target market and then create the proper