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You are here: Home > Current Topics > Mind your Business > 26 January 2004 |
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Market Research, Market Segments, Target Markets and the Tobacco Industry: As a consumer of a wide variety of products how do you think the producers of those products see you in terms of their marketing strategy? What would you like to be seen as? Part of the young trendy set? An 18-24 year old with sophisticated tastes and an understanding of quality, refinement and class? Or would you rather be viewed as a downmarket slob? A set of documents was put onto the Internet by NHS Health Scotland which gave a revealing insight to the way in which marketing companies identify target markets and attempt to link products to those markets to meet the needs identified - exactly what the definition of marketing would suggest! 
What market segment is represented here? © iStock.com NHS Health Scotland made these documents available after they were submitted to a House of Commons Health Select Committee investigating tobacco control. It should be noted at this stage that many of the documents came from advertising agencies working on behalf of tobacco firms rather than the tobacco manufacturers themselves. However, the information which they provided to tobacco firms enabled the latter to be able to develop marketing strategies that sought to target specific markets. The examples below highlight the way in which a marketing company might segment the market and seek to develop products that meet particular needs. The first concerns the Gallaher Group PLC, manufacturers of the Silk Cut King Size brand amongst others. The background to the marketing report was that the brand was suffering from competition from Marlboro - produced by Philip Morris, but seemed to be popular amongst 18-24 year olds. The marketing company were attempting to assess the attitudes of this group to smoking and the image of Silk Cut in relation to other brands. The research was carried out in 1994. The company divided the market into 4 segments as follows:
Each group was given a brief description that characterised their lifestyle and habits. Slobs were 'downmarket', likely to live with parents and would not have gone on to further education. They were seen as being unconcerned with diet, health, appearance or company promotions but wanted a 'strong' cigarette. Aspiring sophisticates were mainly 18-24 year old men. Less than a fifth of them would have gone on to higher education but would view their job as a career and were conscious of their image, enjoyed the pursuit of pleasure and viewed Marlboro as a 'trendy' cigarette that reflected their image. Conservatives were the least financially pressured of the segments; they were seen as being image and fashion conscious but had no distinct demographic or attitudinal characteristics. This group were looking for a mild tasting cigarette. Worriers were predominantly women who were health conscious and concerned about their financial state, the environment and the future but not concerned unduly with their image. The second example highlights the fact that the way in which these segments are seen may influence the type of approach to the marketing strategy the firm might adopt. When thinking of appropriate advertising that would engage the prospective customer, a variety of strategies can be used. But if, as was reported, you believe that the target market are 'rough, unfocussed, insecure, brazen, inarticulate' as a group of Nottingham females were described, then the advertising needs to be carefully considered. This is further highlighted by the view that some groups of smokers needed to have advertising that did not go 'over their head' because they were described as 'not rocket scientists' who get frustrated at advertising that may be thought of as 'too sophisticated' as is emphasised by the following quote:
Strategies can be devised that seek to bring the prospective consumer into the brand. In some cases this can be carried out in what may be considered a slightly 'underhand way'. For example, the offering of gifts, vouchers or coupons could be viewed as ways to give the brand added value and a competitive advantage over its rivals; alternatively it could be a case of giving the impression that the customer is actually getting more than they really are. In one case, a suggestion was made to 'trick' cigar smokers into applying for a free pack of a brand when the intention was to provide a new brand and in the process get the customers names for the database! Other aspects of the documents cover the packaging, targeting female smokers in particular (the so-called 'pink pound'), students, the use of major events and activities to get the brand noticed, peer group endorsement, developing massive databases of consumer details and so on. In addition, the availability, ease of purchase and awareness of the brand were suggested as being crucial in maintaining and developing the business for cigarette manufacturers. Source of information and quotes: Tobacco Papers (http://www.tobaccopapers.com) |
There are a number of theories related to this information - the following presentations highlight the key issues surrounding market analysis - the process of market research, segmentation and so on.
The other key issues relating to the methods of analysing such markets relate to value added and competitive advantage.
Value Added is defined as the difference between the value placed on a product by the consumer and the cost of the resources used in producing it. For many businesses this factor is very important in helping them to widen their profit margins. In the case study above, tobacco manufacturers might be able to charge higher prices, if consumers associate the brand with higher quality, by using more appropriate packaging, i.e. packaging that reflects the image they desire, or if they think they are getting something that other brands are not offering - gift coupons and so on. In such cases, consumers may be prepared to pay slightly more than another brand - even if the reality is that the two products are actually identical. The key to value added therefore is tapping into the consumer's perception of the product and the marketing strategy may well be vitally important in cultivating that perception. For some products, the process of building that perception can take a great deal of money and time. In such cases, the cost of establishing the perception of value added of a brand helps to explain why many firms jealously guard their brand and seek to take action against those using the brand to help sell rival products.
Competitive advantage is closely linked with value added. Competitive advantage refers to methods used by a business to improve the appeal and demand for its product in a market over that of its rivals and how it emphasises the individuality, identity and distinctiveness of the product or service. As a result, the firm achieves a profit level that is above the industry average. Competitive advantage can be viewed from a cost perspective where the firm provides the same benefits as its rivals but at a lower cost or from a resource perspective where it provides benefits over and above those of its competitors.
There are a number of sources of competitive advantage which could include some or all of the following:
Some of these advantages might also be viewed as potential barriers to entry to new firms and as such help to protect the market power of the firm. Both competitive advantage and value added can be seen as being key strategies in many businesses. For the tobacco industry the fact that the opportunities for advertising are now so limited suggests that they have to be even more astute in finding ways to compete and to attract customers. When faced with those who comment on the fact that tobacco companies actually contribute to killing 50% of its customers such a task is not easy!
Using the case study and the information above, choose a product or service with which you are familiar. Consider yourself in the position of marketing agency acting on behalf of the company concerned.
The aim of the task is to assess your understanding of the principle of competitive advantage and value added and, in addition, your ability to be able to apply your knowledge and understanding of market research, market segments and market analysis.
It is suggested that you choose a product or service that is easily available and relatively high profile as it will make life easier for you. At first sight, your product might appeal to a wide range of different people and of course will not be bought by only one group! Consider that in the case study, the marketing company were not assuming that only 18-24 year olds smoke Silk Cut. However, it did identify that this particular brand was popular amongst that group. The analysis that you conduct as to the nature of the segments and the characteristics of that segment will obviously depend on the product you have chosen. Reference to the Tobacco Papers documents will give you a number of clues as to the type of behavioural characteristics and attitudes that marketing companies might be interested in identifying as a means of targeting particular groups. In short you are looking for lifestyle, attitudes about themselves and their peers, how they dress, how they live, where they live, how they spend their time, how they spend their money, how often they go out, where they shop, what they drink, eat and so on.
Your next task is to take your knowledge of competitive advantage and value added and think about how these could be applied to the product or service you have chosen. The sources of competitive advantage in the theory section above should provide you with a number of clues but you will have to apply them appropriately to the product or service chosen. Not all of them are likely to be relevant therefore.
Once you have decided on the source of competitive advantage you are in a position to pen a report to your client company's managers seeking to assess the success of the strategies you propose. The higher order skills being assessed here imply that you need to make judgements about the circumstances under which the strategies will work and what the limiting factors might be. To give an example to highlight the skills necessary, take the 'worriers' segment in the case study. This group tended to be female and live predominantly in Wales and the South West of England. Developing your products packaging to appeal to the female market or re-designing the product to appeal to that market (for example make the cigarette, in this example, slimmer, longer, have a pink filter or whatever) and you might have some success in tapping into this market. The limiting factors are that this group is concerned about health, the environment and finance. You might need to consider price therefore and how you could counter the welter of negative information about your product and its effects on health and how the company itself might neglect its environmental responsibilities! Such factors are going to have a counter force to the positive aspect of your strategy but you need to make a comment about how strong this counter force is in terms of the likely success of the business strategy. This is the process of evaluation and is where you are going to score high marks in such a task.
