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MARKET SEGMENTATION
INTRODUCTION: - The market for any product is normally made up of several
segments. A ‘market’ after all is the aggregate of consumers of a given product.
And, consumer (the end user),
user who makes a market, are of varying characteristics
and buying behavior. There are different factors contributing for varying mind set of
consumers. It is thus natural that many differing segments occur within a market.
In order to capture this heterogeneous market for any product, marketers usually
divide or disintegrate the market into a number of sub-markets/segments and the
process is known as market segmentation.
segmentation
Thus we can say that market segmentation is the segmentation of markets into
homogenous groups of customers, each of them reacting differently to promotion,
communication, pricing and other variables of the marketing mix. Market segments
should be formed in that way that difference between buyers within each segment is
as small as possible. Thus, every segment can be addressed with an individually
targeted marketing mix.
The importance of market segmentation results from the fact that the buyers of a
product or a service are no homogenous group. Actually, every buyer has individual
needs, preferences, resources and behaviors. Since it is virtually impossible to cater
for every customer’s individual characteristics, marketers group customers to
market segments by variables they have in common. These common characteristics
allow developing a standardized marketing mix for all customers in this segment.
Through segmentation, the marketer can look at the differences among the customer
groups and decide on appropriate strategies/offers for each group. This is precisely
why some marketing gurus/experts have described segmentation as a strategy of
dividing the markets for conquering them.
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• ATTRIBUTES OF EFFECTIVE SEGMENTATION
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b. Accessible: The segments must be reachable through communication and
distribution channels.
d. Profitable: - There is no use in locating segments that are sizeable but not
profitable.
Segmentation is the basis for developing targeted and effective marketing plans.
Furthermore, analysis of market segments enables decisions about intensity of
marketing activities in particular segments.
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A segment-orientated marketing approach generally offers a range of advantages for
both, businesses and customers.
2. Higher Profits: -
Example of Ford: - Ford has gained useful insights through segmentation and
adapted its offer to suit the Indian target market. For the Indian segment Ford
made some changes in its cars in comparison to their European version.
Modifications such as: -
a. Higher ground clearance to make the car compatible to the rougher road
surface in India.
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b. Stiffer rear springs to enable negotiating the ubiquitous potholes on Indian
roads.
f. Location of horn buttons on the steering wheel. As Indian motorists use horn
far more frequently than the European where the horns are located on the lever.
4. Stimulating Innovation: -
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Segmentation brings benefits not only to the marketer, but to the customer as
well. When segmentation attains higher levels of sophistication and perfection,
customers and companies can conveniently settle down with each other, as at
such a stage, they can safely rely on each other’s discrimination. The firm can
anticipate the wants of the customers and the customers can anticipate the
capabilities of the firm.
8. Targeted communication: -
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• BASES FOR SEGMENTATION
Markets can be segmented using several relevant bases. There are huge number
of variables which leads to market segmentation. They comprise easy to
determine demographic factors as well as variables on user behavior or customer
preferences. Segmentation is done for consumer market and industrial market.
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c. Population density: - Segmentation on the basis of population
density such as urban / sub-urban / rural etc.
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Steel-1077SM01(for elder person and professional)
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Titan Sonata (Watch for the third segment)
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Maruti 800 (Budget Car Segment)
It lies between budget car and family car. Preferred price range is
between Rs 3 to 4.5 lakh. Maruti Zen, Fiat Uno, Tata Indica,
Santro, Matiz is some of the dominant players in this segment.
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Maruti Zen (Compact car segment)
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Daewoo Cielo (Family Car segment)
c. Occupation.
d. Gender (dominant factor):-Product can be segmented for male
and female.
e. Family Size.
f. Family life cycle.
g. Nationality.
h. Religion.
i. Education:-Primary, High School, Secondary, College,
Universities.
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Many of these variables have standard categories for their values.
For example family lifecycle often is expressed as bachelor,
married with no children, full-nest, and empty-nest or solitary
survivor.
a. Activities.
b. Interests.
c. Opinions.
d. Attitudes.
e. Values.
Values
Activities, Interests,
Interests and Opinions (AIO) surveys are one tool of measuring
lifestyle.
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The primary idea in buyer behaviour segmentation is that different
customer groups expect different benefits from the same product and
accordingly, they will be different in their motives in owing it and their
behavior in buying it. Variables of buyer behavior are:-
e. Readiness to buy.
f. Occasion:
Occasion - Holidays and occasion stimulate customer to purchase
products.
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Many of the consumer market segmentation variables can be applied to
industrial markets. Industrial markets might be segmented on characteristics such
as:
1. Location.
2. Company type.
3. Behavioral characteristics.
1) Location In
industrial markets, customer location may be important in some cases. Shipping
costs may be a purchase factor for vendor selection for products having a high
bulk to value ratio, so distance from the vendor may be critical. In some
industries firms tend to cluster together geographically and therefore may have
similar needs within a region.
a. Company size:-Whether
size the company is a large scale industry / a small
scale industry. Large industry always tries to order in bulk commodities
while opposite for small scale sector.
b. Industry: - Whether the industry is manufacturing industry / service
industry. Also sometime differentiation is done between public sector
industry or a private sector industry.
c. Decision making unit.
d. Purchase Criteria.
3) Behavioral Characteristics
• Usage rate
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• Buying status: potential, first-time, regular, etc.
• Purchase procedure: sealed bids, negotiations, etc.
For example, a market can be segmented using the demographic base in the
first instance, followed by the psychographic base and the buyer
behavior/benefit base. Or, the market can be segmented using volume as the
base in the first instance, followed by the demographic/psychographic/buyer
behavior/benefit base. Assuming for example, that the firm first carries out
volume segmentation of its market, it can know who the heavy user of its
product are, but it cannot know the purpose for which they buy the product.
The firm can then pick up the heavy users and carry out a multi-level
segmentation, and continue its probe more deeply.
Since each of these bases has several sub-bases, the numbers of levels in
which a market can be segmented are indeed numerous. Actually, the aim
should always be to go as deep as possible in segmenting the market so that
segments that are most attractive and most suited can be chosen.
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from multi-level segmentation, he can obtain a deeper understanding of the
customers in each segment, their needs, buying motives and buying behaviour.
He can understand in what way each of the different segments want the
product to be, he can then tailor his product, marketing offer and promotional
appeal, to fit the individual segment; he can select the priced, distribution
method/channels, media vehicles, advertising massages and sales appeal,
which will be appropriate.
• APPROACHES IN SEGMENTATION
George Day (1980) describes models of segmentation as the top-down
approach:
approach In this approach “firms starts with the total population and divide it
into segments”. He also identified an alternative model which he called the
bottom-up approach.
approach In this approach,” firms starts with a single customer and
build on that profile”. This typically requires the use of customer relationship
management software or a database of some kind. Profiles of existing customers
are created and analysed. Various demographic,
demographic behavioural,
behavioural and
psychographic patterns are built up using techniques such as cluster analysis.
This process is sometimes called database marketing or micro-marketing. Its use
is most appropriate in highly fragmented markets. McKenna (1988) claims that
this approach treats every customer as a "micro majority". Pine (1993) used the
bottom-up approach in what he called "segment of one marketing". Through this
process mass customization is possible.
5. Helps crystallize the needs of the target buyers and elicit more
predictable responses from them ; helps develop marketing
programmes on a more predictable base; helps develop market offer
that are most suited to each group.
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8. Helps concentrate efforts on the most productive and profitable
segment, instead of frittering them over irrelevant, or unproductive, or
unprofitable segment.
9. Helps spot the less satisfied segments and succeed by satisfying such
segments.
10. Brings benefits not only to the marketer but also to the customer as
well.
1. Is it sizeable: -
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tonnes, the popular segment account for 80 percent and the premium
segment for the remaining 20 percent. If the firm wants a very large
volume, it has to think of the popular segment. At the same time, it has to
note that the premium segment too is sizeable, as it account for over
120,000 tonnes. In term of value, the premium segment is even more
sizeable, formerly nearly 30 percent of the total market. Clearly, the
segment cannot be ruled out as lacking in size.
2. Is it growing: -
Growth rate and likely future position of the segment will be the next
consideration in the evaluation process. Usually, business firms seek out the
high growth segments. Analysis will readily indicate to the firm that in bath
soaps, the premium segment happens to be the high growth segment. Whereas
the popular segment has been growing at 10 percent per annum, the premium
segment has been growing at over 20 percent annum. When this fact is taken
into consideration, the firm’s choice may tilt toward the premium segment.
The tilt will be particularly pronounced if the firm’s natural disposition is to
strive for a position in the high growth segment of the business.
3. Is it profitable: -
4. Is it accessible: -
The firm has to now consider whether the segments are accessible to it.
This may need further analysis. The market realities will have to be
taken into consideration. The popular segment will be accessible only to
the firm with a cost advantage, since price is a major determinant in this
segment. Premium segment will be accessible only to firms, which enjoy
a differentiation advantage, and which are also marketing savvy. Liril of
Hindustan Lever has a commanding position in this segment. At the
upper end of the segment, HLL’s Pears and Dove are well entrenched.
Several other brands of different companies are competing in the
segment. The firm has to take due note of this reality. At the same time,
analysis also reveals that new brands do keep entering the segment every
now and then, and some of them do manage to stay. So, the firm has no
reason to believe that the premium segment is not accessible to it, unless
it is convinced that it is very weak in marketing.
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Thus by this following analysis a firm can easily evaluate it market
segmentations and also can tackle its problem.
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MARKET TARGETING
INTRODUCTION: - There was a time when finding the best customers was like
throwing darts in the dark. Target marketing changed all that...Today's savvy
marketers know that finding their best prospects and customers hinges on well
thought out targeted marketing strategies.
The beauty of target marketing is that it makes the promotion, pricing and
distribution of your products and/or services easier and more cost-effective.
Target marketing provides a focus to all of your marketing activities.
Through segmentation, a firm divides the market into many segments. But all
these segments need not form its target market. Target market signifies only those
segments that it wants to adopt as its market. A selection is thus involved in it.
Choosing the target market is related to, but not synonymous with, market
segmentation.
Segmentation is the means or the tool; choosing the target market is the
purpose.
Segmentation can also be viewed as the prelude to target market selection.
Choosing the target market usually follows multi-level segmentation
using different bases.
Choosing the target market involves several other tasks in addition to
segmentation.
Looking at each segment as a distinct marketing opportunity.
Evaluating the worth of each segment (sales/profit potential).
Evaluating whether the segment is:
Distinguishable.
Measurable.
Sizable.
Accessible.
Growing.
Profitable.
Compatible with the firm’s resources.
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• FACTORS TO BE CONSIDERED WHILE TARGET MARKET
SELECTION
Target marketing tailors a marketing mix for one or more segments identified by
market segmentation. Target marketing contrasts with mass marketing, which
offers a single product to the entire market.
Two important factors to consider when selecting a target market segment are the
attractiveness of the segment and the fit between the segment and the firm's
objectives, resources, and capabilities.
capabilities
The following are some examples of aspects that should be considered when
evaluating the attractiveness of a market segment:
Note that larger segments are not necessarily the most profitable to target since
they likely will have more competition. It may be more profitable to serve one or
more smaller segments that have little competition. On the other hand, if the firm
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can develop a competitive advantage, for example, via patent protection, it may
find it profitable to pursue a larger market segment.
• Whether the firm can offer superior value to the customers in the segment
• The impact of serving the segment on the firm's image
• Access to distribution channels required to serve the segment
• The firm's resources vs. capital investment required to serve the segment
The better the firm's fit to a market segment and the more attractive the market
segment, the greater the profit potential to the firm.
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S1 S1 S1
S1 S1
S2 S2 S2
S2 S2
S3 S3 S3
S3 S3
P1 P1 P1
P1 P1
P2 P2 P2
P2 P2
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A firm that is seeking to enter a market and grow should first target the most
attractive segment that matches its capabilities. Once it gains a foothold, it can
expand by pursuing a product specialization strategy, tailoring the product for
different segments, or by pursuing a market
specialization strategy and offering new products to its existing market segment.
Choosing the target market is a part of marketing strategy formulation, the other
two parts being positioning and marketing mix formulation. Without right
targeting, the firm cannot formulate an effective strategy. It is through careful
segmentation and targeting that firm pick up right group of consumers. Also, it is
through this process that the firm gain vital knowledge about the need and buying
behaviour of the consumer in each segment and the differences between one
segment and the other. And, it is by using this knowledge that the firm develops
marketing programmes that match the specific requirement of different segments.
In other words, segmentation and targeting help the firm not only the
characteristics of each of the segments but also the ‘distinctive excellence’ that is
required for catering to the specific needs of the consumers in each of them.
Market maturity.
Diversity of buyers' needs and preferences.
Strength of the competition.
The volume of sales required for profitability.
profitability
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• DECIDING THE SIZE OF TARGET MARKET
After selecting the target market it is important for marketers to decide the size
of the target market. Is the target market large enough to sustain a business
which will provide products or services to them? A target market has to be of at
least a minimum size to be viable. Suppose a firm chooses food processing and
food packaging as its target market. In fact, they might be too large, and it might
be wise to find a niche within those target markets. Therefore, the firm must then
focus on a particular type of food market, such as a food production firm who
wants to package its products for selling. Thus by targeting its product for its
targeted market, the firm can decide its size on the basis of it.
Thus the choice of target marketing for a given industry can decide the fate of
the industry in the market. This is because firms differ in their competencies,
resources, objectives, and strategies.
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POSITIONING
The position of the brand has thus to be carefully maintained and managed.
Example: when Malboro cut down its prices, its sales dropped immediately, as it
began being associated with the generic segment. Watches like Rolex are
positioned as luxury segment watches, thus they being one of the most expensive
have become a symbol for accomplishment in life. If Rolex reduces its prices, it
loses its perceived image and hence is in danger of losing its customers. This
differs slightly from the context in which the term was first published in 1969 by
Al Ries and Jack Trout in the paper "Positioning" is a game people play in
today’s me-too market place" in the publication
Industrial Marketing, in which the case is made that the typical consumer is
overwhelmed with unwanted advertising, and has a natural tendency to discard
all information that does not immediately find a comfortable (and empty) slot in
the consumers mind. It was then expanded into their ground-breaking first book,
"Positioning: The Battle for Your Mind",
Mind in which they define Positioning as "an
organized system for finding a window in the mind. It is based on the concept
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that communication can only take place at the right time and under the right
circumstances."
• Functional positions
Solve problems.
Provide benefits to customers.
Get favorable perception by investors (stock profile) and lenders.
• Symbolic positions
Self-image enhancement.
Ego identification.
Belongingness and social meaningfulness.
Affective fulfillment.
• Experiential positions
Provide sensory stimulation.
Provide cognitive stimulation.
• APPROACHES OF POSITIONING :-
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• The use or application approach.
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Head & Shoulder positioned as both anti-dandruff & anti-hairfall shampoo
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Rado Original Chronograph
Priced at USD 6516.00
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mobiles as music phones with enhanced memory and multimedia
capabilities.
4. The product user approach:- In this approach, the brand identifies and
determines the target segement for which the product will be positioned.
Many brand uses a model or a celebrity to position their product. The
expectation are that a model or a celebrity is likely to influence the product’s
image by reflecting their own image to it. For example:- Dabur
Chyvanprash is positioned for all age groups.
5. The product class approach:- This approach is use so that the brand is
associated with a particular product category. This is generally used when a
category is too crowded. For example:- HLL has positioned Dove toilet soap
as a cleansing cream product for young womwn with dry skin and its is
positioned as a premium segment toilet soap.
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6. The cultural symbol approach:- The positioning strategy is based on
deeply entrenched cultural symbol. The use of cultural symbol can help to
differentiate the brand from competitors brands. For example:- The
positioning technique of Marlboro cigarettes use the image of typical
American cowboy .
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1. Economy:- Product positioned toward a particular segment keeping in mind
it economy.Example-Maruti 800, Tata Nano, Nirma detergent powder etc
are positioned for the economy segment
3. Gender:-
Gender: Product positioned for a particular segment. Example- Scooty
Pep, Titan Raga.
Raga
5. Fashion for elite class:- Product positioned for fashionable elite class or
member of the society, who always want to stay ahead in term of fashion
and demands exclusive products only. Example Peter England, Van
Heusen, Raymond etc.etc
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6. Technology and value added features:- Positioning of a product
according to its technological advancement and value added features.
Example:- Microsoft’s positioning of its recent operating system
Windows Vista as the advanced operating system, Sony with various
elecronic goods, LG etc
• POSITIONING PLANNING
Positions are described by variables and within parameters that are important to
the customers. Common examples are price, supporting services, quality,
reliability, and value for money. Often, customers position a product in relation to
a brand or product that is especially visible to them. This could be the market
leader or any other offer with a high media exposure and an above average
marketing budget. Therefore, it is advisable to use in-depth market research to
determine relevant parameters in order to understand how customers rate
different products and marketing variables.
The number of relevant parameters is normally low. Most often, they can be
described with a two- or three-dimensional matrix. This tool to visually depict
customers’ perceptions of a product and its position is called perceptual mapping.
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Normally, most suppliers in a market or in a market segment will be positioned
along the diagonal. This diagonal is called the Value-Equivalence-Line (VEL),
since value and price are balanced there.
• Change the relation of price and quality for the existing brand; e.g. product
relaunch with improved characteristics
• Change the relation of price and quality by introducing a new brand; e.g.
introduction of clone under a ‘cheap’ brand or a retailers own brand
• Alter believes about the brand; e.g. image campaign, creation of a ‘hype’
• Alter believes about competitive brands; e.g. comparing advertisements
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• Alter customers’ rankings of important factors; e.g. focus on additional
features and characteristics (example: car manufacturers focus on very
different product characteristics in their commercials, for instance security,
fuel consumption, image, luxury interior, fun)
• Introduction of new or neglected attributes; e.g. product relaunch with new
features that are new for the whole market segment.
Dibb et al recommend the following steps for determining and implementing the
positioning of a product. Although they focus on new product development, these
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steps are applicable to a relaunch with new features or for a repositioning of an
existing product too.
4. Develop a product (or products) that cater specifically for these needs and
expectations.
6. Evaluate the market leader’s position; leading brand that occupies a special
position in the consumer‘s mind (cadbury’s in chocolates); other brands have
to necessary relate themselves in some wayto the leaders position; they cannot
ignore the position of the leader, nor wish it away.
7. Select an image that sets the product apart from the competing products, thus
ensuring that the chosen image matches the aspirations of the target customers.
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• ISSUES IN PRODUCT POSITIONING
The main issues in product positioning are:
1. Where is the new offer going to compete? As what?
2. Which product function/customer need is it trying to meet?
3. What other product categories serve this need? In other words, what are the
substitute products that serve the same need?
4. Where the real gap is, where is such a new offer welcome and wanted by the
market?
5. What are the company’s competencies to fight here?
In fact, these are the issues the firm agitates in target market decision selection
too. The linkage is only natural because in product positioning, the firm is
actually bridging the product offer with the right target market.
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• CRITERIA’S FOR SUCCESSFUL POSITIONING
Certain
Cer criteria are needed to be fulfilled for successful positioning are:-
a. Clarity: - While positioning its brand the firm must be able to position itself
in both distinct value, proposition, and to its target audience.
b. Consistency: - Consistency in positioning means keeping the positioning
plank/bases intact for longtime. Planks should be carefully chosen while
positioning. But it does not mean that the firm must change its positioning
bases even though its survival is at stake. The firm must be flexible to the
changing environment.
c. Credibility: - The firm must deliver trustworthy and believable value
proposition. There should be perfect match between promise and action.
d. Competitiveness: - For surviving in this competitive and changing
environment innovative resources, talent pool, competitive advantage, strong
financial backup etc are very important.
• REPOSITIONING
Repositioning involves changing target market or distinct positioning
claim/differences advantages or both to bring the saturated attention of the
existing customers back into the limelight once again to survive safely and
happily in the market. In some cases, the products that are faring well are
repositioned. This is done mainly to enlarge the reach of the product offer and to
increase the sale of the product by appealing to a wider target market. The
product is provided with some new features or it is associated with some new
uses and is repositioned for existing as well as new target market.
Example of Maruti Omni repositioning can be citied as important case in
repositioning strategy. When Maruti Omni was launched it was positioned as the
low priced, spacious van. But in the market as the time passed, Maruti Omni
cannot acquire a dominant position. The major competing brands are more
spacious, though higher priced. Thus Maruti decided to take the path of
repositioning. The features that were after repositioning are:-
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1. Most cars do not have any fifth door in the car. Maruti Omni had the boot-
latch at the back of the car which can be used both for entering and also for
keeping goods.
2. In the new car there is around 7.5 cubic meter of space. This gives the
advantage of more space for luggage and more people.
3. For having a pleasant driving experience Maruti Omni the instrument panel is
sleek, the steering columns just positioned just right, seat are adjustable with
control lever and gear shaft at hand-touch distance.
4. Engine was improved from the previous one. It is more fuel efficient and
delivers higher performance.
5. Safety features are standard.
6. A coolant system that eliminates daily chores of filling water in the radiator
was introduced.
As a result of repositioning the whole perception of customer has changed
toward Maruti Omni. Many people start taking it as a family car. The company
found a positioning theme”the most spacious car at lowest price”.
Once the organization has decided which customer groups within which market
segments to target, it has to determine how to present the product to this target
audience. This allows to exactly addressing the needs and expectations of the
target groups with a tangible marketing mix that consists of product
characteristics, price, promotional activities and places to present the product.
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