In order for the business to be profitable, it is necessary to choose the right market or its segments. Enterprises that are engaged in production are required to analyze the environment and determine which audience will be targeted for the sale of goods. After this, an important stage is the choice of a sales coverage strategy, on which the company's income level directly depends.
Sales Analysis
In order to determine the most promising areas of the territory where the products will be sold, managers of the company carry out market segmentation, i.e. break down potential customers into groups with similar interests (segments) and then study their requests in detail. This process allows you to find the desired target audience. It is followed by a choice of a market coverage strategy that indicates how many groups will be covered by sales: one, several, or all buyers will be considered as the total mass of consumers. In order for the direction of the companyโs activity to be determined correctly, it is necessary to study the environment in which the offer will operate, the characteristics of the goods, and analyze the level of costs for manufacturing products. Only after that a decision is made, a marketing plan is developed, production and marketing of products is established.
Marketers divide the market into segments based on a number of criteria:
- demographic situation (age of consumers, gender, family composition, nationality, etc.; this indicator when choosing a market coverage strategy is the most common and affordable, because the necessary data is quite easy to obtain, and potential customers themselves consider such questions to be standard);
- socio-economic characteristics (reflect the status of buyers, their level of income, availability of property, etc.);
- behavioral models in relation to products (you can get these parameters by conducting market research, examining the data of customer services, websites; these resources include information about how often and what kind of product customers buy, how much money they spend on it, etc. P).
Possessing information about these factors, we can conditionally distinguish among all consumers the groups for which the companyโs offer will be interesting, and the advertising campaign conducted is quite effective.
Types of priority areas
When sales areas are defined, an action plan is selected. The following marketing coverage strategies exist:
- Mass (undifferentiated): with this organization of production and marketing of products, the market is not divided into segments, customers are offered one type of product, a single management system is used (only geographical features of the territory are taken into account). In these circumstances, the company sells products in all possible places. Her task is to sell as much as possible wholesale. Thus, the company earns a positive image. Here, the benefit is achieved by minimizing the cost of manufacturing the goods, so the offer of competitors is characterized by a higher cost. For the first time, this method was used by Henry Ford - the creator of the Model T car. This version of the vehicle manufacturer was once the only one. Such a car at an affordable price could be purchased by everyone. Over time, this type of activity has become the main strategy for market coverage, as earlier, mass production was launched by manufacturers. Today, the number of enterprises choosing this method of influence on the target audience has significantly decreased due to great competition, improved methods of promoting and selling goods, differentiating consumers' interests and the possibility of reducing costs by market segmentation.
- Differentiated marketing. This option of the market coverage strategy consists in the fact that several sections of the sales sphere (segments) are selected for the impact, for each of them a separate line of goods is developed and the corresponding methods of their promotion and sale. The company's work is aimed at attracting buyers of certain niches at controlled costs. This method is, in fact, a personalized approach to the consumer. It allows you to realize the needs of different population groups and make a profit by making different offers. This approach allows you to strengthen your market position compared with competitors, gain a good reputation, significantly increase product prices, which makes it possible to cover costs and make profit from sales.
- Concentrated. It is aimed at 1 segment, offers a unique product, advertises a brand and / or personal service.
These areas contribute to the definition of "their customer" and largely determine the success of the company.
Choosing a direction in business
In order for the production process to bring profit to the company, at the initial stage it is necessary to determine the ultimate goal and choose the direction in which the plan will be implemented. In this case, it is necessary to take into account all the advantages and disadvantages of the main strategies for market coverage, because unforeseen shortcomings can significantly affect the outcome of the enterprise. Consider the features of the above working methods in more detail.
Pros and cons of the overall scope of the implementation
With mass strategy, the market does not differentiate into individual segments, but acts as a single medium for the sale of goods. In such circumstances, the products are targeted at a wide range of consumers. As a rule, it has similar features in customer requests. In this case, competitiveness is achieved by improving the production process, which reduces the cost of manufacturing the goods, advertising campaign, service, etc. This is achieved by standardizing products and the development of wholesale, which leads to lower prices.
This market coverage strategy has its advantages: reduced production costs due to the mass production of goods, cost savings on marketing, a sufficiently large market size, optimal requirements for mastering the sales sphere due to low prices and great opportunities compared to competitors. But there are also disadvantages: for example, the introduction of technological innovations can increase cash costs, which means that the ratio between the cost of manufacturing products and the final price will not be optimal enough. Also, competitors can learn and copy methods of minimizing funds, then all changes will not be justified at all. And concentrating on the possible simplification of the stages of creating a product, you can be distracted and fail to notice in the market important changes that affect the business. It can also be quite difficult to develop a product that will be of interest to consumers.
Positive and negative sides of the selective approach
A differentiated market coverage strategy involves working with several market segments. For them, certain types of goods are developed (raw materials, characteristics, original packaging, advertising are selected), the necessary marketing is planned and carried out.
In this situation, the company takes a strong position due to the original offer to consumers in each segment. An individual approach to selected niches provides an increase in sales. In this case, manufacturers set higher prices.
This strategy has a number of positive aspects, including comparative simplicity when entering the market, more stable position when substitute goods appear, the ability to confidently implement a strategic plan, and experiment. Here, consumers are already guided by the brand and product quality, so they do not particularly respond to price changes. And the originality of the proposal makes it difficult for competitors to enter the market.
The disadvantages include: a big waste of time and resources for the manufacture of goods, thorough and serious marketing, the fight against competitors in each segment, the possibility of reducing the significance of the differentiated features of the goods in the eyes of consumers, and in the case of borrowing production methods from competitors, loss of originality of goods . But despite this, this approach provides a deep penetration into every niche and a stable position of the manufacturer.
Features of sales on one site
A concentrated marketing strategy is the manufacture of products for a specific category of customers in one market segment. It is mainly used by organizations with limited financial capabilities. As a rule, this is a unique offer, so manufacturers have the right to set the price of goods at their discretion (even very high).
Sometimes companies divide a niche into subgroups, differentiate goods and make an offer in each submarket (for example, options for minibuses or cars with a small engine capacity). A high level of income is ensured by such factors as low costs of production, marketing, marketing of products, uniqueness and originality of goods, etc. In this situation, marketing carried out by subgroups does not differ much in content and methods of activity.
Of the above types of market coverage strategies, this area does not require large advertising costs, has a stable position in the sales sphere, satisfies consumer needs, and therefore ensures revenue stability. At the same time, it is rather complicated in terms of conquering a segment, especially if there are competitors in it, and the limited nature of the site sets the framework for the production and sale of goods. This approach is the creation of a certain product for certain customers, therefore it provides for constant communication with consumers in order to understand their needs and convince how important each customer is for the company. It is recommended to start this type of activity with coverage of 20% of the market (according to the Pareto principle, it is such a share with proper marketing that will provide 80% of the result).
Important factors of the internal and external environment
To properly plan the development of the company, it is necessary to take into account some characteristics of production and reality. The following business components influence the choice of a market coverage strategy:
- company resources (if they are limited, then it is necessary to dwell on concentrated marketing);
- uniformity of products (if the product lines are similar, then mass marketing is suitable for production and sale, if it differs in packaging, type, functions, then differentiated);
- product life cycle (to determine the strategy for reaching target markets, it is very important how long the offer lasts from the moment it leaves until it completely disappears (the stages of appearance, growth, maturity and decline are taken into account), because this significantly affects the scale of marketing activities; only one variety - this will allow you to analyze the interest of customers in it, in which case mass or concentrated marketing is suitable, and when sales grow significantly, you can get it differentiated;
- homogeneity of consumer requests (if for the most part consumers are interested in the same product and marketing actions affect them equally, then a strategy of mass market coverage will be appropriate);
- ways of organizing the work of competitors (as a rule, the company needs to act differently: if the opponents have a common coverage of the sales sphere, then it should resort to differentiated or concentrated, if other manufacturers use the last two strategies, then the company will be able to offer good sales by offering the population goods mass production, satisfying the needs of a wide range of consumers).
It must be remembered that the accuracy of the decision will depend on the thoroughness of the analysis of the environment. Having studied the potential sales opportunities, knowing the pros and cons of marketing strategies for market coverage, interested parties will be able to properly plan their activities and get the maximum benefit.
Strategy Steps
The following steps precede the choice of a market coverage method:
- Market analysis and segmentation: it is carried out in order to determine niches in which the product will be most interesting to customers and it will be possible to ensure a high level of sales, study of segment volumes, their potential and acceptable sales growth, the number of possible buyers, their motives for making purchases.
- Definition of product lines of the manufacturer and customer groups to which they will be offered. In order to select a strategy for market coverage by an enterprise, it is necessary to study the purpose of the product, the degree to which this offer satisfies consumer demands, the conformity of products to state standards, the level of production costs of the product and the need for its modification in the future in connection with scientific and technical progress.
- Analysis of the work of competitors. The circle of the largest opponents is determined (3-4), the lines of their goods on the market, the features, quality, product design, prices, marketing programs, development of new products, etc. are studied. It should be borne in mind that if the segment has long been established, then it will probably be leading companies that need to be surpassed by making their offer more interesting and profitable.
- The choice of direction in the organization.
Fundamental Signs of a Decision Making
The criteria for choosing a market coverage strategy include:
- Measurability (this includes various characteristics of a niche: sizes, payment capabilities of consumers, scale of necessary marketing activities, etc.).
- Availability (as far as the company can reach a group of consumers and satisfy its needs).
- Significance (a segment is a group of buyers with similar interests, it must have sufficient purchasing power so that a program of marketing actions developed specifically for it justifies itself).
- Differentiability (provides for a uniform reaction of customers to the proposed unit of goods, on its basis the number of these customers is allocated in a single group).
- The possibility of active influence within the segment (involves the development of a program for introducing into a niche, active advertising and promotion of goods interesting to customers)
The importance of work priorities
All business organizations vary in specificity, goals, scope, and resources. But choosing the right strategy for reaching strategic market segments allows you to:
- reduce production costs;
- make advertising effective;
- rationally spend the available resources;
- properly plan further business expansion;
- by satisfying the interests of the consumer, ensure the maximum level of product sales;
- increase competitiveness;
- Become a sales leader in a market or in a specific segment.
Almost every company focuses on its โownโ customer, and marketing coverage strategies are a way to determine the necessary market niche, optimize production and make an offer to customers that will fully satisfy consumers' needs and provide a high level of organization revenue.