Unit 2: Segmentation and product decisions
Marketing Management notes · PTU syllabus (MBA 203-21)
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Unit summary
Firms cannot serve every customer equally well, so they choose segments and design products for them. This unit covers market segmentation and targeting, differentiation and positioning, product mix, packaging and labelling decisions, branding and brand equity, new product development, the consumer adoption process, the product life cycle, and services marketing with the 7Ps.
After this unit you can
- Apply segmentation, targeting and positioning
- Explain product mix, branding, brand equity, packaging and labelling decisions
- Explain new product development and the adoption process
- Explain the product life cycle and services marketing
PTU syllabus topics
- Market segmentation and targeting
- product differentiation and positioning
- product mix/packaging/labelling decisions
- branding and brand equity
- new product development
- consumer adoption process
- product life cycle
- services marketing and the 7Ps
- 1. Introduction: Build awareness
- 2. Growth: Expand distribution
- 3. Maturity: Defend share
- 4. Decline: Harvest or drop
Topic 1
Segmentation, targeting, differentiation and positioning
Market segmentation is dividing a market into distinct groups of buyers with different needs, characteristics or behaviour who might require separate products or marketing programmes. Need: better understanding of customers, efficient use of resources, competitive advantage and tailored offers.
Geographic
Region, city size, climate, urban or rural
Demographic
Age, gender, income, occupation, education, family size
Psychographic
Lifestyle, personality, social class, values
Behavioural
Benefits sought, usage rate, loyalty, occasion
Requirements for effective segments: measurable, accessible, substantial, differentiable and actionable.
Topic 2
Product mix decisions and brand equity
- Product levels: core benefit → basic product → expected product → augmented product → potential product.
- Product mix: width (number of lines), length (total items), depth (variants per item), consistency.
- Brand equity: value added by a brand name — Aaker's model: brand awareness, perceived quality, brand associations, brand loyalty, other assets; Keller's CBBE pyramid: identity → meaning → response → relationship (resonance).
Topic 3
Branding, packaging and labelling
- Positioning: the place a product occupies in consumers' minds relative to competitors (Volvo = safety; Patanjali = natural/Ayurvedic).
- Branding: a brand is a name, term, sign, symbol or design identifying a seller's goods. Decisions: brand name, brand sponsor (manufacturer or private label), and brand strategy (line extension, brand extension, multibrands, new brands). Brand equity is the added value a brand gives a product.
- Packaging: protects the product, provides convenience, promotes and differentiates it.
- Labelling: identifies the product and gives information — in India the Legal Metrology rules require details such as MRP, net quantity, manufacturer, date of manufacture and expiry where applicable.
Topic 4
New product development
A product is anything offered to a market for attention, acquisition, use or consumption that satisfies a want or need. Levels: core benefit, actual product (features, design, brand, packaging) and augmented product (installation, warranty, after-sales service).
- 1
Idea generation
- 2
Idea screening
- 3
Concept development and testing
- 4
Marketing strategy development
- 5
Business analysis
- 6
Product development
- 7
Test marketing
- 8
Commercialisation
Topic 5
Consumer adoption process
- 1Awareness
Learns of the innovation
- 2Interest
Seeks information
- 3Evaluation
Considers whether to try it
- 4Trial
Tries it on a small scale
- 5Adoption (or rejection)
Decides to use it regularly
Topic 6
Product life cycle (PLC)
- 1. Introduction: Low sales, high costs, build awareness
- 2. Growth: Rapid sales growth, profits rise
- 3. Maturity: Sales peak, competition intense
- 4. Decline: Sales fall; modify, harvest or drop
| Stage | Strategy |
|---|---|
| Introduction | Build awareness, skimming or penetration pricing, selective distribution |
| Growth | Improve quality, add features, wider distribution |
| Maturity | Modify market, product or mix; price competition |
| Decline | Cut costs, harvest, or discontinue |
Topic 7
Services marketing and the 7Ps
- 1
Product
Core + supplementary service
- 2
Price
Value-based, demand-based
- 3
Place
Physical and electronic channels
- 4
Promotion
Communication that tangibilises
- 5
People
Staff and customers
- 6
Physical evidence
Servicescape, uniforms, brochures
- 7
Process
Flow of activities and delivery system
- People: front-line employees are the service in the customer's eyes; other customers also shape the experience (a noisy table in a restaurant).
- Physical evidence: the environment and tangibles that signal quality — a hospital's cleanliness, a bank's interiors, a website's design.
- Process: the actual procedures and flow — standardised (McDonald's) or customised (wealth management); online check-in in airlines.
Exam tip
Booms and Bitner (1981) added People, Physical evidence and Process to McCarthy's 4Ps — mention the names in an answer.
Key terms
- Segmentation
- Dividing a market into groups with similar needs
- Positioning
- Place a brand occupies in customers' minds
- Brand equity
- Added value a brand name gives a product
- Product life cycle
- Stages of sales and profit over a product's life
- Intangibility
- Services cannot be seen or touched before purchase
Quick revision
- STP: segmentation bases, targeting strategies, differentiation, positioning.
- Product mix: width, length, depth, consistency.
- Branding decisions, brand equity (Aaker, Keller); packaging, labelling.
- NPD stages; adoption: awareness, interest, evaluation, trial, adoption.
- PLC strategies; services characteristics and 7Ps.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Name four bases of segmentation.
- Q2.What is positioning?
- Q3.Define product mix width and depth.
- Q4.What is brand equity?
- Q5.List the stages of new product development.
- Q6.State the characteristics of services.
Long-answer questions
- Q1.Explain the process of segmentation, targeting and positioning.
- Q2.Discuss branding decisions and the concept of brand equity.
- Q3.Explain the new product development process and the consumer adoption process.
- Q4.Explain the product life cycle and the strategies at each stage.
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