Category: Market Segmentation

Abstract

The breakdown of the ice cream market in Hong Kong is presented concisely and understandably in this report. It is possible to trace market segmentation back to Appolo Ice-Cream Company Limited, covered in-depth in this article. The company has been in operation for more than five decades since its inception in 1972. Ice-cream consumers understand how the products are marketed by their respective manufacturers and distributors. They understand how certain organizations, such as Appolo and Dairy farm international fulfil their marketing objectives through segmentation. Appolo Ice-Cream Company Limited is an example of a firm that can meet the demands of its clients in several ways by having tailor-made products that different consumers appreciate.

Introduction

Hong Kong’s thriving economy and low import tariffs make high-end drinks and foods a viable industry. Lifestyles, demographics, and concerns about food safety and quality impact culinary trends in Hong Kong. The low cost and tiny packaging of Hong Kong consumers explain why some are not brand loyal. A clean and green environment for food production and customer perception fuels competition in Hong Kong’s ice cream sector. A new product or service requires extensive market research. This report briefly overviews essential ice cream products and brands in Hong Kong, such as the Flamenco ice cream and the BlackJack Sea Salt Caramel. The split market and ice cream items competing with other commodities in Hong Kong will be better appreciated.

Ice Cream Market Analysis

Due to the reputation of ostentatiousness and excessive expense, advertising ice cream in Hong Kong is tough. Aside from its association with hot summers, some parents believed that ice cream was dangerous to children, making it difficult to sell in the winter. In Hong Kong, the negative perception of ice cream has changed. It has now been embraced as either a dessert or a snack. Children remain the core market, despite Hong Kong’s aging population. However, in Hong Kong, ice cream marketers focus on the middle-aged population, a potential luxury ice cream market (Wan & Kim, 2021). The average family’s income has risen, enabling them to purchase more expensive products and spend more time with their children.

The ice cream market saw a significant slowdown in 2020 due to the COVID-19 outbreak, with ice cream shops, cafés, and all-you-can-eat restaurants closing their doors. Aside from that, the decision to close schools negatively influenced the sales of water ice cream since there were few takeaway choices for ice cream and pastries during the closure period (Xu, Wang & LI, 2021). On the other hand, the shift from wholesale to retail sales served to mitigate some of the declines. Despite a slow but steady resurgence, the industry had remarkable growth by the end of 2021.

Ice Cream Market Segmentation in Hong Kong

The consumer’s behaviour and demographics have enabled the industry to thrive. The most significant demographic characteristics include customer retention, product qualities, price sensitivity, gender, age, race, and occupation. Choosing between flavours and brands is critical; people choose that which is popular rather than significant. Even though ice cream is highly valued in Hong Kong, rarely are consumers bothered by the price. Choosing the incorrect product for a specific demographic might hurt sales. Married folks would consider how many they need to share with their families. When discussing age groups, flavours are vital to consider. Unlike their younger counterparts, the elderly may choose smooth and sugar-free. Education values quality and class, while jobs value different things. A person who wants to produce ice cream enjoys a well-branded product.

When it is too hot outside, many people choose to forego going out for ice cream. As a result, distribution is vital to market segmentation since it is the only means producers may place items in the hands of buyers in the first instance. To ensure that the most significant number of people may enjoy ice cream, Hong Kong boasts approximately 700 ice cream parlours. These types of establishments are most frequently seen in supermarkets and chain businesses.

Marketing relies heavily on promotion mix, public relations, and advertising. When customers know a product, they are more likely to purchase it. Advertising is a method of promoting products to the public (Czinkota et al., 2021). The promotion mix lets consumers have a tangy flavour for a product before buying it. Appolo’s commercials are primarily focused on product quality and relevance. Presentations on the counter, effective brand strategy, and media advertisements have helped raise awareness of its superior ice cream brands like the Blackjack sea salt caramel, which has increased demand from high- and middle-income consumers alike.

Impact on Target Market

Appolo Ice-Cream Company Limited has invested heavily in the distribution sector to ensure it can match its competitors, such as Dairy Farm International, which controls a substantial sector in the industry. To advertise its goods, it relies on market research agencies. Every company’s marketing plan should include market segmentation (Czinkota et al., 2021). To boost profits, it calls for segmenting vast target markets. Businesses can segment consumers depending on the company or customer-oriented enterprise. Appolo focuses on the market for price and distribution. Through product awareness and processing quality brands, it hopes to gain a foothold in the industry and continue to expand its market share.

Positioning Strategy

The marketing mix technique used by Appolo has contributed to its success in the industry. A high-quality ice cream product, such as the Flamenco Swirl, targets senior clientele with a lot of spending power interested in the product’s nutritional component. As a quality signal for this population, the product package has a modern and fresh appearance. On the other hand, ice cream moon cake is aimed at price-conscious and traditional consumers, focusing on children and homemakers. There are ice cream cones for kids, novelty goods, fun sticks, handhold bars for middle- and upper-class people, and family packs for stay-at-home parents. Pricing points for different commodities and market segments are an essential marketing strategy in this company. Appolo is, therefore, a well-known brand due to its products that have smooth flavour, pleasant aroma, and high quality. It will appeal to affluent people who respect high standards and price-conscious consumers. In other words, they have tailor-made products for all varieties of consumers.

Appolo’s brand is widely available in Hong Kong supermarkets and convenience stores. In response to the company’s choice to make its product more accessible, its market share has risen significantly. Their efforts serve to maintain a positive public image for the brand. Consumers’ understanding of high-end ice cream products was lacking in 1990 marketing research by a marketing agency. As a result, the price-conscious buyers do not bother about the benefits of premium products such as those found in Mango Nata De Coco Cone ice cream. Therefore, Appolo’s marketing team must strive to have products that take care of all the consumers’ needs, irrespective of their spending patterns.

Conclusion

It is evident from the research that those large sales may be achieved regardless of the brand when a firm implements the proper marketing methods. However, as the industry becomes segmented, even middle-class consumers begin seeing ice cream as a necessity, although from a different point of view. The most crucial aspect of the marketing mix is the requirement to fulfil and meet the needs of consumers. According to this paper’s findings, brand awareness is critical to marketing, and any distinction in promotional tools significantly impacts customer purchase decisions.

References

Czinkota, M. R., Kotabe, M., Vrontis, D., & Shams, S. M. (2021). Product and Service Decisions. In Marketing Management (pp. 341-397). Springer, Cham.

Wan, Y. K. P., & Kim, S. S. (2021). Intracultural differences in dining behaviour and preferences among Hong Kong and Taiwan tourists. International Journal of Culture, Tourism and Hospitality Research.

Xu, J., Wang, J., & Li, C. (2021). Impact of Consumer Health Awareness on Dairy Product Purchase Behavior during the COVID-19 Pandemic. Sustainability, 14(1), 314.

Market Segmentation

Creating conditions for a stable increase in profits through effective marketing approaches and solutions is a common practice in the sales market. One of the concepts that allow addressing the interests of the target audience and, at the same time, ensuring a steady demand for specific goods or services is segmentation. According to Liu et al. (2019), “market segmentation is a strategy that involves the division of a large market into segments of consumers with different needs, characteristics or behavior which might require separate marketing policies” (p. 2). About the considered situation of the need to increase ticket sales, this approach can be an effective solution to create sustainable demand. Online purchases are common today, and since football is one of the most widespread sports, utilizing a segmentation strategy to drive profits through an appropriate plan is a potentially successful step.

Principles of Using Market Segmentation to Increase Ticket Sales

The use of market segmentation as a mechanism to promote ticket sales is due to the real prospects for increasing profits. According to Sun et al. (2019), one of the practices that accompany this strategy is price differentiation, an approach that allows creating individual plans for the purchase of specific goods or services. About the sale of tickets, prices can be differentiated based on such criteria as the importance of games, the status of teams, and other factors that may affect the choice of tickets. As a result, this mechanism is one of the possible steps to increase profit in the next year.

Variables to Segment the Customer Market

Demographic Variable

To segment the target market, specific variables may be applied, which can help divide potential customers into individual categories. One of the variables is demographic; as Johansson (2017) states, it allows using such characteristics as gender, income, age, and other customer features. Applying this principle may contribute to creating unique promotional offers for different client groups and encouraging customers to use personalized criteria for selecting appropriate football tickets.

Geographic Variable

In football, the geographic variable is a valuable parameter to apply to implement a segmentation strategy successfully. According to this criterion, the target audience is divided by location and belonging to a specific community (Johansson, 2017). Consequently, football matches can be convenient for building a pricing policy based on such a variable. Games with teams from other regions or even countries cause a stir among fans, which, in turn, may be used to the advantage of organizers. The pricing of tickets based on a geographic principle is a common practice, but it is valid when mass events are involved.

Psychographic Variable

This variable implies taking into account customers’ purchasing decisions and motives. Johansson (2017) notes that personality traits, attitudes, and some other individual features are crucial factors to assess when compiling a segmentation strategy. For football ticket sales, customers’ lifestyles may be assessed, for instance, regular fans or occasional spectators. This separation can help create unique promotional offers, thereby increasing profit through more intense sales.

Plan to Segment the Market

Importance of Segmentation

Engaging a segmentation strategy to increase football ticket sales and profit is a valuable and important aspect to differentiate pricing while addressing individual customer needs. According to Scheuffelen et al. (2019), applying this approach creates a link between supply and demand and expands sales opportunities, which is the ultimate goal of any business. For online football tickets, segmentation can influence clients personally, thereby increasing their interest and enhancing customer loyalty.

Advantages/Disadvantages

The existing types of segmentation, based on the aforementioned variables, can have advantages and disadvantages that are critical to consider when making a plan for the case under consideration. Geographic segmentation, for instance, is useful because it narrows the spectrum of work down to a specific location. At the same time, according to Qi and Zhou (2020), this practice hinders the achievement of competitive advantage due to limited interventions, which is a negative aspect. Demographic segmentation is a convenient mechanism for categorizing potential customers into groups of personal criteria, thereby creating individual offers for each of them. However, as Scheuffelen et al. (2019) remark, demographic clusters can be too large, which requires many efforts to get actionable outcomes. For instance, football fans differ not only by age and gender but also by social status, income level, and other parameters.

Finally, psychographic segmentation is a convenient approach to identifying specific decision-making drivers for the target audience. For example, in the Ford case, Christen et al. (2001) view increasing tire size as a strategy to influence customer relationships, thereby dividing potential buyers based on their preferences. At the same time, this approach does not allow addressing consumer relationships comprehensively since only one segmentation criterion is applied. Therefore, each type has individual strengths and weaknesses to take into account.

Suitable Contexts

Each of the considered types of segmentation is relevant to a specific context. Applying the demographic type to increase ticket sales is convenient if teams of specific associations play, for example, college teams. According to the case presented by Lee et al. (2018), who look at the travel industry, demographic data provide the most accurate information on customer loyalty. When applied to the football tickets, the interests of boys and girls, adults and young people, and other groups can help ensure differentiated demand. The geographic segmentation principle is optimal when selling tickets for a match between regions or countries. These mass events often cause a stir, and this is the marketing department’s job to take advantage of this. Finally, psychographic segmentation is a technique that comes in handy when selling tickets to game connoisseurs who are good at football. This approach, taken in the Ford case, proves that true car connoisseurs can feel the difference between vehicles with old and tire sizes (Christen et al., 2001). Therefore, the segmentation of sales, for instance, according to the principle of the significance of the game for the championship, can stimulate additional profit.

Limitations

Using individual segmentation types in the case in question can be complicated by special constraints. For instance, in the psychographic approach, personal incentives may not be enough motivation to pay more for a particular ticket. From a demographic perspective, some characteristics, such as age, may not be an effective criterion due to the specific interests of a particular age group. As a result, the geographic type is the most stable since the confrontation based on the team’s belonging to a certain location always arouses public interest due to the prevailing sports disputes.

Conclusion

Implementing a segmentation strategy as part of increasing sales and profit in the next year can help achieve the stated goals with proactive approaches to engaging the target audience. Based on the analysis, the geographic type of segmentation is the most robust, although, in some contexts, demographic and psychographic types may also be acceptable. In case none of the approaches justify their strengths, special measures will have to be taken. In particular, the marketing department will need to analyze the dynamics of ticket sales for specific matches and compare the statistics of visits to the games reviewed. This will provide a relatively objective picture of customer preferences, thereby creating a background for successful segmentation.

References

Christen, M., Soberman, D. A., & Cothier, G. (2001). Ford KA (A): Breaking new ground in the small car market. Harvard Business Publishing. Web.

Johansson, R. (2017). Which market segmentation variables are most effective to determine new business potential? [Unpublished master’s thesis]. International Business Management with Nordic Focus.

Lee, T. H., Jan, F. H., Tseng, C. H., & Lin, Y. F. (2018). Segmentation by recreation experience in island-based tourism: A case study of Taiwan’s Liuqiu Island. Journal of Sustainable Tourism, 26(3), 362-378. Web.

Liu, J., Liao, X., Huang, W., & Liao, X. (2019). Market segmentation: A multiple criteria approach combining preference analysis and segmentation decision. Omega, 83, 1-30. Web.

Qi, X. F., & Zhou, L. H. (2020). Market segmentation and energy efficiency – An empirical study based on China’s provincial panel data. Energy Efficiency, 13(8), 1781-1797. Web.

Scheuffelen, S., Kemper, J., & Brettel, M. (2019). How do human attitudes and values predict online marketing responsiveness? Comparing consumer segmentation bases toward brand purchase and marketing response. Journal of Advertising Research, 59(2), 142-157. Web.

Sun, M., Tian, Y., Yan, Y., & Liao, Y. (2019). Improving the profit by using a mixed after-sales service as a market segmentation.Nankai Business Review International, 10(2), 233-258. Web.

Introduction

In defining market segmentation, one can say that it is a section of a market comprising of people or institutions with the same characteristics that cause demand for same products. A good segment should be able to meet its specific needs and be unique to other segments. In addition, another criterion that should be evident is being homogenous in that, it should have common needs of the market. Lastly, a good market segment should be responsive to the market stimulus and be accessible at any point in time (Nelson, 2001).

Kool-aid

This is a soft drink powder that is made using water; it is rich in Vitamin C and it is available in different fun flavors, which are good for kids as they keep them hydrated. Kool-aid retails at a third the cost of regular soda with a third less sugar content (Kool-Aid, 2011).

Market segmentation

In segmenting markets, there are important considerations that need to be in place which include

1. To better, the consumer needs through creating of different offers in each of the segments thus providing the customers with a variety of solutions that they can choose. In this regard, Kool-aid has a variety of different flavors that kids can choose.
2. Increased profit margin for the business; this is attributable to the fact that customers have different income disposal ways hence they become sensitive to the pricing of the products. Kool-aid has a pricing that is three times lower than most sodas thus making much more sales.
3. Improved growth opportunities; a good example to this is when customers are introduced to certain products and encouraged to them through their low price hence building on the business sales in return.
4. Helps in retaining customers; this can be done through marketing of products that appealing to the customers in different stages in life.
5. Helps in targeting market communications; this can be justified through reaching of more targeted customers more often at minimal cost (Doug, 2007).

Demographic segmentation

In demographic segmentation, division of markets into groups is done taking into consideration variables that are associated to the family setup. These variables form the most popular bases in market segmentation. This is due to the fact the customers’ needs revolves around variables like income and age. Another feasible reason is the availability of data for the process of demographic segmentation (Tutor2u, 2011)

Age

In order to market a product, one has to consider the consumer wants since they change with age. There is a need to design and market a product depending on the age group of the target market. Thus to this example in order to market the Kool-aid product in Australia, one has to consider that it is a product for kids hence should be suited for kids.

Gender

Segmentation in demographic view in terms of gender is widely applicable in marketing geared towards the consumer. This can be done by making the Kool-aid drink packages in pictures that reflect on gender parity.

Family size

This demographic segmentation variable considers how big the family size is. This affects the consumption or usage rate of a product. In a family with most members being kids, Kool-aid will be marketable in these families since the target market selection is right.

Income

In segmenting a market in terms of income, focus should be on the income of the consumer. When marketing a product, affluent consumers should be targeted with luxury goods and convenient services. Kool-aid can retail mostly in affluent families who like going for outings.

Education

This is marketing of a product based on the market segment depending on education level or status of the target market. In an example of the Kool-aid product, it can be designed to be educative since it is meant for kids.

Family life cycle

The consumers’ lifestyles or lifecycles adversely affects the demand of products in the market. In winning new markets, many marketing agencies design and advertise their products in many different styles and categories depending on the consumer needs.

Occupation

In segmenting a market according to occupation, the market is divided into different segments according to activities associated with the segment. Since kids like playing, Kool-aid is a good product for them since it is for fun.

Religion

This is done by grouping of market segments into different groups in regards to religious backgrounds of the target markets.

Nationality

Different nations use different products hence it is a good practice in marketing to know what type of products appeals to different nations.

Geographic segmentation

This type of segmentation divides the target market into different units according to geographical settings. Geographic segmentation is important when dealing with multi-national or global products. In the market niche required for a product, there is need for regional marketing programs depending on geographical units. In marketing Kool-Aid, consideration has to be on what different flavors appeal to each geographic region (Michman, 1991).

Region

This segmentation is done according to regions that can be an expanse of a country or an area such as a metropolitan city or town.

City size

This is done in regard to clusters in population. The segmentation considers population within a certain range or to a specific level.

Density

In this type of segmentation, consideration for the target market is on the population density within the area.

Climate

In segmenting a market in terms of climatic area, one should consider area such as northern area or southern area. This will enable marketing of the product easier and will reach more target market.

Psychographic segmentation

This type of segmentation is based on behavioral relationship of the customers towards a product and this gives insight on how to relate with the segments. The products and marketing of the products should be customized to appeal to the specific customers. In this scenario, Kool-aid packaging can be done in such a way that it can appeal to kids through making it more colorful and attractive (Gupta and Donald, 2005).

Life style

In terms of lifestyle, Kool-aid is generally for kids hence to reach this market segment there is need to include things like cartoons on the drink.

Personality

This type of segmentation covers the general personal traits of a customer in terms interests.

Status

This type of psychographic segmentation covers the customer social status in the market segment.

Socioeconomic

This type of market segmentation is all about combining market variables such as income, education, and occupation in deriving segments that can be easily reached.

Behavioral segmentation

In segmenting a market in terms of behavioral, the customers are divided into groups that are categorized depending on their response on a new product.

Occasions

A product is marketed depending on its time of consumption or purchase. This can be explained by example of cereals, which are traditionally marketed as breakfast product (Russell, 2001).

Benefit sought

This is an important base of segmentation in terms of behavioral segmentation. In this segmentation, the marketers need to understand the customers’ needs towards a product and what sort of benefit it has to them. An example to this is a market for toothpaste, which derives four main benefits. These benefits include economic, cosmetic, taste and medicinal. Thus in marketing Kool-aid consideration has to be on the benefits it offers to the target market (Yankelovich, 2006; Meer, 2006).

Loyalty status

In segmenting a market in terms of the loyalty status, more attention should be on the loyal customers as being of great value to the business. It is better to segment a market into groups of loyal customers who are easy to retain than those who rarely display loyalty to a product (Kaul andTomaselli, 1999).

Buyer-readiness stage

In segmenting a product, consideration has to on how ready the target market is for the said product.

Usage rate

This type of segmentation considers dividing the markets in regards to the ratings of the users of the product. This can grouped into light users, medium and heavy users.

Attitude towards product

This type of segmentation tends to justify how the customers react to products in the market. In case of the Kool-aid product, it can explain how the kids react to the drink (Biennial, 1997).

Conclusion

Market segmentation is a concept in marketing that is a broad idea and helps the marketers in applying more or their energy towards getting a market niche. In implementing market segmentation, a business can achieve brand positioning in the market for the products. Segmentation helps a business have a template for their product development. All these benefits put across justifies that market segmentation is a valuable asset to a business hence all businesses should be encouraged to practice market segmentation (Croft, 1994).

References

Biennial, F., 1997. Household Spending: Who spends How Much on What. Ithaca, N.Y: New Strategist Publications.

Croft, J., 1994. Market Segmentation: A Step-By-Step Guide to Profitable New Business. London: Routledge.

Doug, G., 2007. What is Customer Segmentation. New York, NY: MindofMarketing.net.

Gupta, S. and Donald, L., 2005. Managing Customers as Investments: The Strategic Value of Customers in the Long Run. Upper Saddle River, NJ: Pearson Education/Wharton School Publishing.

Kaul, C. and Tomaselli, V., 1999. Statistical Handbook on Consumption and Wealth in the United States. Phoenix, Ariz: Oryx Press.

Kool-Aid, 2011. Affordable and fun to drink. Web.

Michman, R., 1991. Lifestyle Market Segmentation. New York: Praeger.

Nelson, C., 2001. Market Segmentation. Web.

Russell, C., 2001. Best Customers: Of Consumer Demand. Ithaca, NY: Strategist Publications.

Tutor2u, 2011. Market segmentation: Introduction. Web.

Yankelovich, D. and Meer, D., 2006. Rediscovering Market Segmentation. Harvard Business Review.

Introduction

Market segmentation is a method that is used to manage a larger market. It involves the division of the larger market into smaller subsets. These subsets have an internal homogeneity where the buyers within them have common needs for goods and services. They also show the same buying behaviour. Buyers in different subsets exhibit different needs and therefore it can be concluded that these subsets have an external homogeneity (Hutt & Thomas, 2002).

Different criteria can be used to divide the market into subsets. These may include geographic boundaries, demographic divisions or even psychographic profiles. The segments that are developed should be viable in such a way that they result in the profitability of an organization. They should also be accessible and measurable such that data can be obtained from them easily for analysis. This will ensure that their profitability is checked progressively.

Advantages and disadvantages of segmentation

When a company uses segmentation, it is bound to experience both its advantages and disadvantages. One of its advantages is that the needs of the customers are matched well. This is because segmentation may result in the division of the market according to the needs of the buyers. This will ensure that the needs of each subset are identified and therefore met in the best possible way. Another advantage is that it may also result in retaining more customers. Customers are dynamic in the way they interact with the market. The different subsets ensure that if such changes occur, the needs of a customer are still met by a different subset. This will ensure that the customers do not switch to other products (Malcolm & Ian, 2004). Segmentation also allows the company to know how it is viewed by its customers. This is important since it will enable the business to make changes where necessary to be able to satisfy its customers more. Another advantage is that it offers a platform for growth. When segmentation is carried out effectively, it increases sales and this will result in the growth of the company.

The disadvantages that are associated with segmentation include neglecting other segments in the market. This may be a result of concentrating on a particular segment. This results in the competitors taking advantage of the isolated segments and therefore losses for the company (Robert, 2006). Another disadvantage comes when the market is over segmented. This is by having very small segments such that they cannot be assessed in terms of their profitability to the company. This may also result in losses being incurred by the company.

Linking segmentation and other marketing mix elements

Segmentation can easily be linked with other marketing mix elements such as promotional activities. This is because the needs of the segments are identified beforehand. For example, if a segment consists of customers of a given age group, the advertisements that will be done within this particular segment will take into account their age. This ensures that the intended message is received and understood well and results in making the marketing of the products effective and easy. The intended message is also delivered to the intended recipients.

Conclusion

Segmentation is therefore important since when it is well carried out it results in the profitability of the company. It is seen that its disadvantages come about as a result of poor segmentation and not from its shortcomings. Therefore, it is advisable as part of the marketing structure to include segmentation as it will improve the profitability of the company. Its implementation should also be done carefully to ensure that the company does not suffer the shortcomings of poor segmentation.

References

1. Hutt, M. D., & Thomas, W. S. (2002). Business Marketing Management. Ohio: South-Western.
2. Malcolm, M., & Ian, D. (2004). Market Segmentation. London: MacMillian.
3. Robert, W. B. (2006). The White Paper Marketing Handbook. Ohio: Thompson.

STP framework consists of three components: segmentation, targeting, and positioning. Each of these elements plays a significant role in building organizations’ strategic value. Market segmentation is defined as a process of apportionment of a mass market into specific and recognizable segments, each of them having common features and demonstrating identical reactions to marketing actions (Baines & Fill 2014). With the help of this process, companies can choose particular target segments and establish marketing plans focused on satisfying the specific requirements of potential consumers. Determining the segments is regarded as an opportunity (Baines & Fill 2014).

Two major groups of variables are employed in segmentation: descriptive considerations (demographic, geographic, and psycho-graphic) and behavioral characteristics (customers’ responses to brands and benefits) (Kotler & Keller 2012). Descriptive features enable researchers to analyze customers’ responses to products. Behavioral considerations help to identify whether various features are related to each particular consumer-reaction segment (Kotler & Keller 2012).

Market segmentation is based on a principle that every consumer has different needs and purchasing behavior. With the help of this component of STP framework, companies can identify what segments should be targeted. Market targeting is defined as a set of consumers with similar characteristic features that an organization wants to serve (Zimmerman & Blythe 2013). Segments can be targeted in two ways: by evaluating the appeal of each sector and by scrutinizing the ability of a company to serve particular segments (Dibb & Simkin 2013).

Targeting may be undifferentiated, differentiated, and concentrated. When a company uses undifferentiated targeting, it concentrates on similarities present in all segments but at the same time makes an effort to satisfy the whole market with a single marketing mix. This type of targeting most frequently occurs in the initial phases of a product lifecycle when consumers are bound to accept the product because they have no alternative (Zimmerman & Blythe 2013).

Undifferentiated marketing ends when competition appears. Differentiated marketing is employed when a company creates particular marketing mixes to serve every segment. The cost of this type of targeting is higher than that of undifferentiated marketing. The third kind of targeting – concentrated – is suitable for companies with limited resources (Zimmerman & Blythe 2013). When using this type of targeting, an organization can afford to focus on as little as one or several segments with the aim of building dominance in that sector.

The third component of STP framework is positioning. Positioning takes place when the processes of segmentation and targeting have been completed. Market positioning is defined as establishing a set of features and advantages that will help to single out the brand in consumers’ perception (Andaleeb 2017). The main members of any company’s audience are consumers and employees (Bruggerman et al. 2012). Therefore, positioning helps to suggest the products in a way that is most attractive for the audience.

Segmentation is the element of STP framework that bears the highest strategic value for organizations since it serves as a basis for targeting and positioning. An example of a company that successfully utilizes demographic segmentation is Victoria’s Secret (Kotler & Keller 2012). The brand focuses on female consumers, and its primary aim was to satisfy the US women with the lingerie shopping experience similar to the European one. The evidence of the organization’s use of key concepts presented in this week’s learning resources is in constant growth of its annual sales and popularity all over the world.

Reference List

Andaleeb, SS 2017, ‘Market segmentation, targeting, and positioning’, in SS Andaleeb & K Hasan (eds), Strategic marketing management in Asia: case studies and lessons across industries, Emerald, Bingley, UK, pp. 179-208.

Baines, P & Fill, C 2014, Marketing, 3rd edn, Oxford University Press, Oxford, UK.

Bruggerman, J, Grunow, D, Leenders, MAAM, Vermeulen, I & Kuilman, JG 2012, ‘Market positioning: the shifting effects of niche overlap’, Industrial and Corporate Change, vol. 21, no. 6, pp. 1451-1477.

Dibb, S & Simkin, L 2013, Market segmentation success: making it happen! Routledge, New York, NY.

Kotler, P & Keller, K 2012, Marketing management, 14th edn, Pearson, New York, NY.

Zimmerman, A & Blythe, J 2013, Business to business marketing management: a global perspective, 2nd edn, Routledge, New York, NY.

SWOT analysis

SWOT analysis is indispensable to the company’s planning and strategy forming system. This analysis is meant to assist the executives in choosing the most crucial issues facing the organization.

Strengths

The company’s distribution is one of its strongest points, and in the Kingdom of Saudi Arabia, it is handled by its fleet of chilled depots and delivery vans that supply food retailers with Almarai products. In addition, free Almarai branded refrigerators were given to bakalas – small local grocery stores. The fridges were to be used exclusively for selling the company’s products, and the shopkeepers covered the electricity costs. This strategy gave Almarai an essential outlet and proved so successful that competitors adopted it as well. Such a distribution system is necessary for the company’s best-selling product since fresh milk only has a shelf life of about a week and needs to be chilled.

Another one of Almarai’s strengths is its focus on quality and strong branding associated with it. The company put much effort behind its brand message, “Quality You Can Trust.” To stay true to it, Almarai even refuses to source milk from local farmers and only produces it at its facilities under strict control. This allows for impressively low bacteria levels that could not have been achieved with independent suppliers.

Weaknesses

High operation costs have not been a concern for Saudi companies since electricity was subsidized, and foreign labor was cheap. This changed with the shift in government policy, the establishment of a value-added tax, and increased costs associated with foreign labor. Before these changes, Almarai’s relatively high overhead costs and inefficient logistics were not a critical issue when it was still growing rapidly. In the crowded modern market, however, every extra percent makes a vital difference.

Furthermore, one of Almarai’s greatest strengths, proficiency in fresh milk production, is arguably also a weakness, as the native Saudis tend to prefer long shelf life alternatives like ultra-high temperature milk, or UHT, which the company only produces when they have an excess of fresh milk. This inclination appears to be rooted deeply in the people’s upbringing and is not easily affected.

Finally, IDJ, Almarai’s joined venture with PepsiCo, despite all its ambitions to cover the Middle East, Africa, and Southeast Asia has remained just in Jordan and Egypt, after 10 years of losses. Teeba, the Jordan part of this operation, has been facing harsh conditions in the mainly supermarket-focused segment, where its less flexible structure does not allow it to compete with local companies for prices.

Opportunities

The company has plenty of aspects it could improve, one of those is logistics. The way it uses separate vans for perishable and non-perishable products leads to some retailers being visited by up to three Almarai vehicles in a day: one with dairy, one with bakery, and one with poultry. Lately, Almarai has started to introduce more optimal delivery routes as well as new combined vans that could carry chilled and ambient temperature products simultaneously. While these optimizations did help improve efficiency, in the end, the company is still using a fleet of diesel trucks that burn large amounts of fuel and are costly to maintain. To alleviate those issues, it could employ electric vehicles, which, despite being more expensive upfront, tend to cost less in the long run.

Another opportunity for Almarai lies within its turnaround segments: poultry and baby formula. Now, the poultry business has become profitable after a total investment of over $1 billion, but the other one is still struggling. The infant nutrition market is simply too crowded with strong competitors like Danone, Nestlé, and Abbott. Despite all the efforts, Almarai’s baby formula just does not sell well, and the company could save money by selling that division.

The relatively successful Egyptian part of IDJ, Beyti, has a practice that could be adopted in other divisions – the El Kasseeb program. Essentially, this program allows entrepreneurs to finance the purchase of a chilled van on the condition that they deliver Beyti products exclusively. This enables Beyti to develop its logistics without investing as many funds into a fleet of its own, an excellent strategy for expanding into new markets, which is what Almarai is trying to do.

Threats

Perhaps the most pressing threat for Almarai is the changes in Saudi Arabia’s economy, which both increase the costs associated with running a large-scale business and decrease the buying power of consumers. As shown in exhibit 1, the sales of dairy products in general and drinking milk products specifically through traditional outlets have been declining steadily in the last decade, while modern outlet sales have been growing.

This is also apparent from the neglected state of some bakalas, contrasting with the well-maintained modern supermarkets that provide a cleaner and more upscale shopping experience, and at the same time, appeal to less affluent shoppers with coupons and discounts. Moreover, as estimated by an Almarai manager, some 3000 bakalas closed in 2017, and another 3000 were expected to close in 2018, with an anticipated sales drop of 5%. The company could focus more on supermarket sales; however, this would come with its own set of problems, such as having to do regular promotions, which is not easy to achieve with the increasing costs.

Another significant issue is the competition, which increased dramatically, when Almarai’s two closest rivals, Nadec and Al Safi Danone, announced their merger in March of 2018, with Nada Dairy possibly seeking to join the merged entity as well. The newly merged company will be able to grow quicker and improve its quality to be at Almarai’s level. Almarai needs to prepare to match the competitors’ prices when their products become closer in terms of value.

Market segmentation

Target Demographic selection and Market segmentation are done using geographic approaches, demographic approaches, and behavioral approaches.

Geographic segmentation

Almarai operates in Saudi Arabia, the United Arab Emirates, Oman, Kuwait, Egypt, Qatar, Bahrain, and Jordan, and its market segmentation caters to the specific features of these countries. In the more economically developed countries, it produces its milk and invests in high-end processing equipment as well as extensive logistics to provide the best quality product without compromises. In less developed countries that do not have a reliable infrastructure and electricity, Almarai focuses on more flexible strategies such as purchasing a local company and sourcing raw materials from farmers. Their products also reflect this policy, as the company tends to lean towards less logistically complicated options like ultra-high temperature milk or powder milk, which do not require refrigeration.

Demographic segmentation

In the Kingdom of Saudi Arabia, the major demographic groups relevant to the dairy sector are the native Saudis and the foreign residents. The majority of locals tend to choose the more utility-oriented UHT milk, which Almarai makes as a means of dealing with unexpected spikes in raw milk production. At the same time, expatriates have a strong preference for the taste and nutritional qualities of fresh milk – the company’s core product. It is important to note that with the decreasing number of foreign works in the country, the company’s consumer base is also shrinking, and in the future, it might need to put more emphasis on UHT milk to maintain its market share.

The Saudi demographic is also divided according to their income and outlet of choice. The more price-sensitive customers tend to shop at modern supermarkets since they find their coupons and frequent promotions appealing. Higher-income households are attracted by the convenience of traditional bakalas. Overall, though, the income variance does not have as strong of an effect on the market segmentation in Saudi Arabia, as does upbringing and origin. Almarai’s target demographic in this country is the consumers who are willing to pay more for a higher quality product and an established brand name.

In countries like Jordan and Egypt, where the general financial status of consumers is much less fortunate, income has a direct effect on the choice between UHT and the more expensive fresh milk. Relatively high-income consumers who have access to reliable refrigeration purchase fresh milk, while the majority of the population buys UHT products, both groups shop in modern retail outlets. Contrary to its domestic market, in these countries, Almarai targets the more modest buyer, and significantly alters its production schemes and logistics to reduce costs; the El Kasseeb program mentioned above is a brilliant example of this.

Behavioral segmentation

As far as behavior is concerned, there is one difference between dairy buyers. Bakala customers often use the store’s credit system, where they can take the goods now and pay later, which makes traditional sales more stable through the month. Those who prefer modern outlets tend to buy more right after receiving their salaries, so the sales are more changeable in this segment, the supply numbers need to reflect that.

Exhibits

Market overview

Packaged cookie market in the US is in two categories: cracker and cookie manufacturing. This market was estimated at $3.3 billion in 2008 by AIB International.

Most sales are made through:

• Grocery stores
• Convenience stores
• Drug stores
• Mass merchandisers

This presentation will cover the following areas:

• Major firms in the market
• Their positioning within the market overall segmentation
• Strategies for used in the marketing

Firms in the market

• There are 56 manufacturers of chocolate chip cookies at the national and regional level
• Market is fairly saturated and therefore prospect for new firms entering the market low
• The market leader is Nabisco with its Chips Ahoy brand and sales of approximately $1,309,852 in US and Unit sale of 441,833,000.
• Nabisco is followed by Kebbler with Chip’s Deluxe brand cookies and sales of $392,136,100 and unit sales of 139,049,100 in 2008.
• The third largest cookie maker is Pepperidge Farm with the soft baked brand cookies and sales of $233,647,500 and unit sales 72,670,210.

Segmentation of the market

• This industry is driven by impulse purchasing of consumers and therefore, marketing strategy that is appealing very is important.
• Also 80% of purchases of cookie are made by women but children are the end consumers who have a strong influence on the brand to be bought.

Target consumer

• These are children of 12 years and below from families with different demographic, personality and value beliefs.
• This provides a broad segment.

12 years and under segment

• They buy through their parents and their wants are a sweet and tasty cookie while the parents wants portability and satisfaction of their children’s wants.

12-24 years segment

• They tend to be loyal to products consumed as children
• They are also sensitive to price.

25-55 year segment

• Have wants of quality taste and nutrition value of the cookie products.
• They may be buying for themselves and children therefore buy multiple products.

55 years and over segment

• Have wants of quality taste. They use the product as desserts or as an accompaniment for coffee. They tend to consume cookies in social setting where they are shared.

Market positioning of the firms

Nabisco

• It positions itself as a leader in sales and market share for packaged cookies.
• It uses price segmentation measure with the middle income families where it positions itself as moderately priced with a moderate above moderate taste.

Keebler

• Also positions itself as a leader in sales and market share for packaged cookies using price segmentation measure as with Nabisco.
• Also positioning as premium taste moderately priced option.
• Their prices are lower than Nabisco which creates a perception that it is less desirable than its competitor.

Pepperidge Farm

• It Positions itself as a premium alternative to its two competitors above.
• Products are at a higher price with a perceived quality addition to the product.

Marketing mix

Place

• All three companies have similar products and packaged the same way.
• They also have same distribution channels: grocery stores, convenience stores, drug stores and mass merchandisers.
• All the products are put in shelves at the same place in these stores and in the check out counter in small packages.

Price

• It is different for the three companies, which influences demand.
• Nabisco tries to maintain the prices above those of generic products while remaining competitive with the moderately priced brands.
• Keebler uses the same pricing strategy with Nabisco and tries to compete with it on prices.
• Pepperidge Farm uses price differentiation as a way of competing with Keebler and Nabisco.
• It uses higher prices to detach itself from generic cookies and imply a higher quality than its two major competitors

Promotion

• Nabisco currently spends $18.8 million in advertising its Chips Ahoy brand cookies in advertising in the media while Keebler uses $3.3 million for its Chips Deluxe brand cookies.
• In relation to market share of the entire industry, Chips Ahoy has 9% and Chips Deluxe a 3.4 % share.

Market strategy

Nabisco

• It mainly targets children 12 years and under.
• They market by offering moderate prices so as to make them insignificant to parents who buy them.
• It also relies on its strong brand name for the parents; advertisements targeting children which puts emphasizes on taste; and children video games free from the Nabisco website make them more attractive to children.
• Glossy packaging meant to catch the eyes of younger consumers are also used.
• Chips Ahoy products are also available in different packaging meant to suite different needs of portability.
• Brand loyalty strategy is used on adult market segments.

Keebler

• They primarily target children of 12 years and under like Nabisco in shiny brightly colored packaging.
• Prices offered are point moderate but still higher to distinguish from generic cookies
• The also use the Keebler Elf or Elves icon in advertising portrayed as making cookies better. This is to create a special mentality on their products.

Pepperidge Farm

• Mainly targets the adult segments of 25-55 and 55 and over.
• Uses high prices to differentiate it and soft baked cookies as premium products.
• Soft backed cookies are portrayed as an indulgence product.
• Uses their web also in marketing where a quiz is provided for determining the customer taste in cookies and best drink pairings.
• This puts soft baked cookie on the high end market where consumers are quite refined.

Perceptual mapping

This helps in building a marketing and positioning strategy for a brand. This uses the price and quality dimension. Choice of cookie in US is determined by the taste preference and price of the cookie.

In our study we have considered the following cookie brands:

• Soft baked cookies from Pepperidge Farm
• Chips Ahoy from Nabisco
• Chips Deluxe from Keebler’s
• Little Debbie from Mckee Foods
• Grandma’s cookie from Frito-lay’s
• Consumers perceives Pepperidge cookies as high quality and high price than the rest of the products.
• Nabisco ranks lower position in perception of high quality and price which makes its products more desirable.
• Keebler is viewed by consumers as providing a higher quality as well as higher price.
• Mckee Fods is viewed as a high quality low price due to its association with homemade formula.
• Frito-lay is perceived in the class of Nabisco of high price and high quality.

Conclusions and recommendations

• Packaged cookie market is stable but lack in growth and therefore a new firm has low possibility of entering.
• The existing products have considerable loyalty from consumers
• There exists an untapped market of young adult between ages 16-24 consisting of high school and college youths.
• The only shortcoming with this is product short cycle as “fads” influence the target consumers a lot.