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CHAPTER 2

THEORY AND CONCEPTUAL FRAMEWORK

2.1 Marketing Management

2.1.1 Definition of Marketing

According to K. Ramachandra (2010: 16), marketing has several definitions:

1. "Marketing is the process of planning and executing the conception, pricing,

promotion and distribution of ideas, goods and services to create exchange

that satisfy individual and organisational objectives." - American Marketing

Association

2. "Marketing consists of all activities by which a company adapts itself to its

environment-Creatively and profitably." - Ray Corey

3. "Marketing is so basic that it cannot be considered as a separate function. It is

the whole business seen from the point of view of its final result, that is, from

the customers point of view ... Business success is not determined by the

producer but by the customer." - Peter F. Drucker

4. "Marketing is a total system of business activities designed to plan, price,

promote, and distribute want satisfying goods and services to present and

potential customers." - William J. Stanton

5. "Marketing is the response of businessman to the need to adjust production

capabilities to the requirements of consumer demands". - E. Jerome

McCarthy

Also, Kotler & Keller (2016: 5) states that marketing is about identifying and

meeting human and social needs. One of the shortest good definitions of marketing is

"meeting needs profitably." When eBay recognized that people were unable to locate

some of the items they desired most, it created an online auction clearinghouse.

When IKEA noticed that people wanted good furniture at a substantially lower price,

it created knockdown furniture. These two firms demonstrated marketing savvy and

turned a private or social need into a profitable business opportunity.

The American Marketing Association offers the following formal definition:

Marketing is an organizational function and a set of processes for creating,

communicating, and delivering value to customers and for managing customer

relationships in ways that benefit the organization and its stakeholders. Coping with

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these exchange processes calls for a considerable amount of work and skill.

Marketing management takes place when at least one party to a potential exchange

thinks about the means of achieving desired responses from other parties. Thus we

see marketing management as the art and science of choosing target markets and

getting, keeping, and growing customers through creating, delivering, and

communicating superior customer value.

2.1.2 Marketing Management Process

The marketing management process consists of:

1. Organising the marketing planning process,

2. Analysing market opportunities,

3. Selecting target markets,

4. Developing the marketing mix, and

5. Managing the marketing effort.

2.2 Marketing Strategy

According to Don Sexton (2010: 15), marketing strategy is the blueprint for

how you will allocate your resources to achieve your business objectives. Without a

marketing strategy, there is no clear focus on which customers you will pursue.

Without a marketing strategy, there is no clear definition of what is special about

your organization’s products or services and why the target customers should buy

them. You need a marketing strategy to organize all your marketing efforts over

time. You also need a marketing strategy because people you will ask for money —

lenders, investors, donors — want to know what you will be doing with their money.

Organizations of any size need a marketing strategy. In fact, small organizations

especially need a strategy because they may need to concentrate whatever resources

they have against much larger opponents. In difficult economic times, you need a

marketing strategy to guide the allocation of your scarce resources.

A marketing strategy has four major components:

1. Target market: This is the specific group of customers who will be the focus

of your strategy.

2. Business objectives: These are the reasons you are in business. They are

usually stated in terms of financial results such as revenue, profits, or cash

flow, but also are stated as units sold or market share.

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3. Positioning: This is the one or two key benefits of your product or service

selected to be the core of the strategy. The positioning serves to coordinate all

the programs.

4. Programs: These are the actions you pursue to implement the strategy.

Sometimes called tactics or the marketing mix, these actions concern

activities such as advertising, personal selling, pricing, and distribution.

2.3 Market Segmentation and Market Targeting

2.3.1 Market Segmentation

According to Marilyn A.Stone (2007: 173), the process of classifying

customers into groups exhibiting different needs, characteristics, or behaviour is

called market segmentation. Consumers in a market are heterogeneous and can be

grouped in various ways. On the basis of Geographic variables (regions, cities,

towns) Demographic variables (sex, age, income. education), Psychographic

variables (social classes, life styles) and behaviouristic variables (purchase occasions,

benefits sought, usage rates) consumers can be grouped, Each of these groups should

be studied thoroughly and its attractiveness as a marketing opportunity can be

evaluated.

Segmentation involves an analysis of the nature and composition of a market

to identify groups of potential buyers who have similar needs or characteristics, or

display similar behavior. These groups are known as market segments. Each segment

seeks a unique set of benefits from the product or service purchased.

Theoretically the marketer’s choice of a segmentation base is related to

consumers’ needs for, uses of or behavior towards a product or service. The main

variables used as bases for segmenting consumer markets can be grouped under the

four headings below:

1. Geographical: e.g. region, urban/suburban/rural and population density.

Geography is also a basic, measurable segmentation variable. Clearly, a

company that does business only in certain geographic regions (such as a

local bank) would limit its target market to potential customers in that region.

Geographic segmentation also applies to creation of sales territories and

efforts to expand nationally or internationally, as well as to pinpointing

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potential markets by type of neighborhood, urban versus rural locales, single

or multiple locations for businesses, and the like.

2. Demographic: e.g. age, sex, marital status, socio-economic status, social

class, religion and education.

According to Evelyn Ehrlich (2012:17), financial institutions targeting

specific age groups are practicing demographic segmentation—the most basic

kind of segmentation. The great advantage of demography as a segmentation

variable is that it is based on observable, measurable characteristics.

Demographic variables in the consumer market can include age, sex, race,

religion, personal income, household income (HHI), marital status, number

and ages of children, home ownership, education, professional status (type of

job), language, ethnic group, physical disability, and sexual preference. In the

business market, demography can include size of business (by number of

employees, revenues, or other measures), type of industry, length of time in

business, ownership characteristics (public corporation, privately held),

management structure (hierarchical or flat), and so forth.

3. Psychographic: e.g. lifestyles, personality, self-image, value perceptions and

motives. In this research, lifestyle segmentation is used from the

psychographic variable. Lifestyle segmentation operates on the principle that

“birds of a feather flock together.” Similarities of interests, attitudes, and

activities are common among people who live in the same neighborhood—for

example, suburban soccer moms often read the same magazines, shop in the

same stores, and share political and social viewpoints with their neighbors.

The tools that are used to group customers and prospects into attitude and

behavioral segments include cross-tabulation analysis, data mining, predictive

modeling, cluster analysis, and other statistical techniques. The resulting

variables have many names, including psychographics, behavioral models,

values-based analysis, and lifestyle analysis. One common way of

determining the lifestyle characteristics of one’s customers is to overlay one’s

own database with a commercial “cluster analysis.” Cluster systems, such as

Neilsen Claritas’ PRIZM and P$YCLE, Experian’s MOSAIC, and ACORN

in the United Kingdom, use census and other quantitative and qualitative data

to divide countries into clusters, based on demographic and lifestyle

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similarities. Business customers can also be segmented by psychographic

criteria and buying behavior. For example, businesses can have different

types of personalities: entrepreneurial, buttoned down, consensus driven.

Decision-making styles can vary—in some businesses, decisions are made by

one individual while in others they are made by committee. Purchasing

decisions may be based on different personality factors: Some businesses

seek name brands or added-value services, whereas others look for the

cheapest solution. Some businesses are “innovators” or “early adopters,” that

like to be on the cutting edge. Others are followers or “laggards” in their

adoption of new technology. The sales force needs information about

important behavioral factors such as length of sales cycle, relationship

(preferred provider versus competitive bidder), and expectations for delivery,

maintenance, training, and other services.

4. Behavioural: e.g. use rate and volume, occasions when used, brand loyalty

and benefits sought. Behavioural segments address behaviour patterns which

include: usage (e.g. heavy or light users) and uses, the way a product or

service is used, in other words, the benefit enjoyed. Behavioral segmentation

can also help determine levels of service for current customers in order to

maximize profitability.

Benefits of market segmentation:

1. Improved customer relations. Segmentation enables customers to find

products that fit more closely with their physical and, in certain cases,

psychological needs. Customers are more likely to be loyal to suppliers with

products that are tailored to their needs.

2. Accurate marketing mix. Segmentation helps to define shopping habits (in

terms of place, frequency and volume), price sensitivity and required product

benefits as well as laying the foundations for advertising and promotional

decisions. Any decision concerning the 4 Ps is likely to be more accurate if a

clear and a detailed description of the target segment is available.

3. Resource allocation. Segmentation can help the organization to allocate its

resources more efficiently.

4. Competitor analysis. Any organization that wishes to compete must ask the

following questions: Who are the main competitors? At which segments are

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they targeting their products? The answers enable the marketer to identify the

most appropriate segments to target and the nature of the competitive

advantage that should be sought. Companies that have overlooked the way

the market is segmented risk competing head-on against larger organizations

with superior resources.

5. Strategic marketing planning. Dividing markets up allows marketers to

develop plans that give special consideration to the particular needs and

requirements of customers in different segments. The time scale covered by

the strategic plan can be structured to reflect those segments where change

occurs more frequently than others.

2.3.2 Food Industry Segmentation

According to L.E.Hollywood (2007) in his journal, Emerging consumer

trends within the food industry have increased the need to create market-oriented

products. In order to do so, a future strategy focusing on consumer behaviour and

segmentation should be utilised. By identifying how a consumer behaves throughout

the purchasing process a company can determine whether what they are offering

translates into what a consumer actually needs.

Segmentation provides the opportunity for a food marketer to better

understand their core consumer. However, traditional segmentation variables such as

geographic and demographic no longer provide enough insight into how a consumer

actually behaves. While conceptually segmentation is straightforward, specific

sectors such as financial institutions have been slower to capitalise on its potential

than some other industries (McKechnie and Harrison, 1995). Speed and Smith (1992)

highlight a research gap in understanding how segmentation strategies could be

implemented more effectively.

Machauer and Morgner (2001) propose that a priori segmentation method

(Green, 1977) and post hoc segmentation methods (Gwinn and Lindgren, 1982)

currently employed reveal little of predictive use to marketers. In recognition of this

deficiency there is now a more pronounced focus on behavioural segmentation

(Elliott and Glynn, 1998; Soper, 2002). The behavioural approach contrasts with the

process of segmentation based on customer characteristics in that the focus is driven

by customer “needs”. It is argued that such a need identification approach is more

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robust than a classification of characteristics and that it is more probable that the

segments, which are consequently identified, will be ultimately more predictive of

purchase behaviour (Elliott and Glynn, 1998). Nunes and Cespedes (2003, p. 99)

argue that while demographic segmentation can still tell you what people buy,

demographics no longer tell you how people shop. The only rational basis is to

integrate buyer behaviour. In support of this approach, Smith (2004, p. 27) argues

that any approach to segmentation that is not focused in clustering customers

according to their motivations “is simply an approximation based on the assumption

that descriptors (i.e. characteristics) and motivations (i.e. needs/behaviour) are

closely aligned – usually they are not”. By identifying how a consumer behaves

throughout the purchasing process a company can determine what a consumer

actually needs and translate this into a product offering (Nunes and Cespedes, 2003).

Therefore, within a product purchase, investigating consumer motivations can

highlight the process by which underlying purchase needs can be satisfied (Solomon,

2004). In terms of directing behaviour motivations can guide consumers across

purchase decisions; persuade a consumer to purchase a certain product/service as a

means to satisfy their need; assist consumers in developing a criteria for evaluating

products and can affect a consumers determinants of perception, attitude and thought

processes (observations by Louden and Della Bitta, 1988). Through determining a

consumers decision-making style insight can be gained into how a consumer makes a

purchase decision to meet their preconceived need (Peter et al., 2005; Vermier et al.,

2002). Consumer buying behaviour theory views decision making as simply a

problem solving sequence in which the outcome is determined by how a consumer

processes information to direct them toward an end-goal of a product purchase (East,

1994 cited in Foxall et al., 1998).

2.3.3 Online Purchaser Segmentation

Ying Liu (2013) stated that there are several characteristics indicators of

purchase behaviour:

1. Preference for price level

Traditional economics point out that price is an important factor affecting

commodity trading. Generally speaking, price and trading volume are

inversely correlated, and the higher the price is, the lower the trading

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volumes. The rapid development of Internet significantly reduces information

search costs, and improves transaction convenience. From this perspective,

online price and dispersion degree of commodities would be lower than

offline, and price of commodities would tend to be consistent with the level

in competitive markets. Besides, it is argued that environment factors of

Internet have some inhibitory effect for consumers’ sensitivity for price

(Shankar et al. 1999). But, real E-commerce data does not support this

argument, and some literature pointed out that the price dispersion degree of

commodities in real E-commerce websites is usually bigger (Grewal et al.

2003). So in online trading, price is still an important determinant for

shopping decision. Xia and Monroe (2004) concluded that segmentation

strategies of price in E-commerce websites can improve the purchasing

intention and perceived value of shoppers. Therefore, we select price of

commodities recorded in transaction data as the indicator of reflecting

purchasers’ preference for price, which is denoted as “price” in this paper.

2. Preference for reputation

Trust plays an important role in maintaining the stability and persistence of

customers (Anderson and Weitz 1989). In order to build a long-term and

harmonious customer relationship, sellers must win consumers’ trust (Doney

and Cannon 19197). Comparing with offline shopping, online shopping is

lack of face-to-face communication, and can hardly judge the quality of

commodities due to lack of physical touching. From this perspective, it’s

argued that the information asymmetry between purchasers and sellers is

more serious, the trust for transaction is more important for the realization of

transactions in E-commerce websites, meantime, the trust would also improve

purchasers’ loyalty. Bart et al. (2005) argued that the factor of trust plays

different roles in different types of websites and different kinds of purchasers.

Chiu et al. (2012) pointed out that online purchasers’ trust degree has positive

effect on their repetitive purchasing activities. We select the reputation of

shops visited by purchasers in transaction data as the indicator of reflecting

purchasers’ preference for reputation, which is donated as “reputation”, and

the more purchasers tend to purchase commodities from high reputation

shops, the more attention the purchaser paid to the trust factors.

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3. Interpersonal communication

The consumer psychology theory points out that social interaction need is one

kind of psychological motivations which can cause purchasing behaviour.

Tauber (1972) believed that word-of-mouth communication among

consumers with same interests was an important part of social interaction

motivation. Alba et al. (1997) found that word-of-mouth interaction plays an

important decisive role in selection of online stores. As for the quantitative

study of word-of-mouth effects, some studies regarded online reviews as a

new indicator of word-of-mouth interaction among consumers, and related

empirical research indicates that online reviews have positive effect for

transaction volume. In 2010, the research report of McKinsey Consulting

about Chinese consumers pointed out, word-of-mouth had become an

important source for the dissemination of product information. By analyzing

the online reviews data in Amazon, Mudambi and Schuff (2010) found

commodity type has some moderate effect for the usefulness of online

reviews. So, we select the numbers of online reviews among transaction data

as an indicator for word-of-mouth interaction degree, and it is donated as

“reviews”.

4. Favorites adding frequency

Favorite saving behavior on website first appeared in the feature set of the

Web browser, enabling web visitors to put the websites they like into

Favorites, this feature can facilitate the future visits. Similar function can also

be found in E-commerce websites, which can be used to collect commodities

or shops that visitors like. For example, EBay allows visitors to put some

shops that they feel ok into their Favorite Seller List; In Taobao, purchasers

can also add their satisficed commodities to “Favorites menu”, and this

behavior indicates the willingness of repeat purchaser and purchase loyalty.

This paper selects purchasers’ favorites adding frequency as an indicator for

measuring favorite saving behavior, which is donated as “favorites”. We

assumed that the more products purchasers adding to favorite menu, the

stronger intention they will have to repeat purchase the products. We also

argue that these purchasers are loyal shoppers with high repurchase rate.

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5. Purchase duration

Online shoppers pay more and more attention to the convenience of saving

time in purchasing process (Reynolds and Beatty 2000). Novak et al. (2000)

pointed out that visiting time of online purchasers is highly correlated with

users’ experience of online shopping, which can reflect the effectiveness of

market sales. After analyzing click stream data, Rho et al. (2004) found that

there is some relationship between visiting time and their purchasing

intention. This paper selects the duration of purchase time as a behavior

indicator for distinguishing purchasing type, which is donated as “duration”.

This indicator reflects the length of the cognitive process purchasers used in

making decision. It is argued that the longer the duration time is, the less

clear the purchaser targets would be or the more cautious the purchaser would

be in making purchase decisions, and vice versa.

Online purchaser segmentation is the further research of shopper typology.

The goal of purchaser segmentation is to better understand purchasing behaviors and

the determinants of decision making of different types of purchasers, then design

targeted marketing plan to enhance repeat purchase rate.

Shweta Pandey and Deepak Chawla (2015) also stated some lifestyle-based

factors for online shopper segmentation:

1. Internet enjoyment and convenience: Items such as, ‘‘I enjoy buying things

on the Internet,’’ ‘‘I like having products delivered to me at home,’’ ‘‘I like

browsing on the Internet,’’ ‘‘I would love to shop sitting at home,’’ and so

on. These correspond to the dimensions of enjoyment and convenience.

Convenience as well as enjoyment orientations are also revealed across other

studies (Khare and Rakesh 2011; Brengman et al. 2005; Brown, Pope, and

Voges 2003; Donthu and Garcia 1999). In the Indian context, with working

couples and nuclear families on the rise especially in the urban areas, the

constraint upon time has escalated the need for convenience.

2. Internet distrust: Items such as, ‘‘I worry about my credit card number being

stolen on the Internet’’ and ‘‘I am afraid of buying on the Internet’’ point

toward the lack of trust on technology, security, and privacy aspects.

3. Internet self-efficacy: Items such as, ‘‘I do know much about using the

Internet’’ correspond to the lack of adeptness at using Internet for shopping.

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The in-depth interviews conducted also lent support to this feeling of

knowing much or enough about using computers for the purpose of shopping.

Another study done in the Indian context found consumer self-efficacy

impacting the perceived risk and thereby intention to purchase products

online (Dash and Saji 2007).

4. Internet logistic issues: Items such as, ‘‘Returning products purchased online

is difficult’’ relate to the delivery and return issues of online shopping. One

can correlate these to the impact of immediate delivery in the brick-and

mortar shopping scenario, which was also highlighted in the focus group

discussion. Srikanth and Dhanapal (2011) stated that challenges like delivery

on time and handling returns need further addressed in India.

5. Internet offers: Items such as, ‘‘I think Internet shopping offers better

selection than local stores,’’ ‘‘I think Internet shopping offers better quality

than local stores,’’ and ‘‘Internet sites provide offers not easily available at

the local stores’’ relate to beliefs about Internet sites offering better quality,

selection, and products which are not readily available in local stores.

According to Austin Rong-Da Liang and Wai Mun Lim (2011), food-related

lifestyle scale measures a consumer’s attitudes toward food, shopping and

consumption processes. The four factors are as follows.

1. Shopping Method is indicated by items such as, “To me the product

information is of high importance”,” I need to know what the food contains.”,

“I will compare product information labels to decide which brand to buy.”,

“Advertises information can help me to better decide if I should buy the food

product.”

2. New Experience is indicated by items such as, “I love to try out new

recipes.”, “Different culinary/tradition recipes give me new experiences in the

kitchen.” , “I try many different condiments in my cooking.”

3. Dining quality is indicated by items such as, “I enjoy a good meal.”, “I like to

buy fresh vegetables and meat more than frozen or canned food.”, “When I

am eating good food, enjoying the taste is important.”, “I like to try recipes

from another country.”, “Our family has a lovely chat when dining together.”

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Liebermann and Stashevsky (2009) have pointed out that the demographic

variables on online users may influence their online purchase behavior. According to

Austin Rong-Da Liang and Wai Mun Lim (2011) , the demographic variables are:

1. Gender

2. Delivery Method

3. Age

4. Online Experience

5. Average Monthly Income

6. Information Source

7. Hours of Online Time a Day

8. Buying Amount

Shweta Pandey and Deepak Chawla (2015) also stated some demographic

variables for online shopper segmentation:

1. Occupation

2. Age

3. Education

4. Gender

5. Marital Status

6. Annual Household Income

2.3.4 Segmentation Bases Used in The Research

Hence, the dimensions used for the market segmentation for PT. Boga

Pangan Sentosa are :

1. Demographic segmentation :

• Age

• Gender

• Average Monthly Income

• Hours of Online Time a Day

• Online Experience

• Occupation

2. Behavioural segmentation :

• Preference for Price Level

• Interpersonal communication

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• Purchase Duration

3. Lifestyle segmentation:

• Shopping Methods

• New Experience

• Dining Quality

• Internet Enjoyment and Convenience

• Internet Offers

• Internet Logistic

• Internet Self-efficacy

2.4 Market Targeting

2.4.1 Benefits of Targeting

According to Evelyn Ehrlich (2012: 17), targeting is picking the actual

market segments you want to go after. The benefits of targeting include the

following:

1. Targeting helps you identify the media that best reach your target segments.

When you’ve identified a particular segment (for example, young

professionals just starting out in practice), you can more easily determine the

media that best reach these markets (for example, law or medical school

alumni magazines and web sites).

2. Targeting helps build referral business. People tend to affiliate with people

who are similar in interests or demographics. They are also likely to refer

businesses to their friends and follow each other’s purchasing patterns,

whether through word of mouth, Tweeting, or other social networking.

3. Targeting specific market segments increases the potential return of your

marketing dollars. It might seem obvious that when you buy a mailing list,

you should limit it to people who have the ability to buy your product. Yet, at

least one bank, failing to cross-analyze its own customer list, sent a

solicitation for renters’ insurance to homeowners who had mortgages with the

bank! Targeting should help avoid such waste and irritation to customers.

4. Targeting helps you narrow the focus of your message, making it more likely

that the prospect will respond. Although the average direct mail offer today

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gets less than a 2 percent response, when the list, the offer, and the message

are narrowly targeted, response can go up to 10 percent or more.

5. Targeting enables organizations to build products designed for target

segments and to avoid market segments where no appropriate products exist.

An investment company that specializes in fixed-income funds is not going to

have much to offer day traders looking for fast profits and shouldn’t waste its

money seeking them. However, if a target segment, such as retirees, is

looking for a related product, like annuities, it may be sensible to investigate

offering such products.

Marilyn A. Stone (2007) also added that a company can choose to enter one

or more segments of a given market. It is advisable to enter a single segment and if

this proves successful, they can add segments and then spread vertically or

horizontally. The Japanese Companies provide a good example of careful planning

of market entry and domination. They enter a neglected part of the market, build a

name by satisfying customers, and then spread to other segments. That is how

Japanese have a global market shares in autos, cameras, watches, electronics, steel

and ship building. There are others who seek full market coverage. The General

Motors Co says that it makes a car for every "person, purse and personality".

2.4.2 Factors Influencing Targeting Strategy

Tony Proctor (2000:188) says that having looked at some of the ways of

targeting let us now consider the kind of factors which influence choice of strategy:

1. Stage of product-market maturity

Segmentation strategies are most critical during the maturity stage of the

product market, because buyer’s needs are different. At the introductory stage

of the life cycle there are few, if any, product-type competitors; however,

competition can occur among alternative product types. If product-type

substitution exists, the new market entrant may benefit from targeting one or

more segments in the existing product markets. Where there are no product-

type substitutes, a broad or relatively undifferentiated targeting strategy may

be appropriate at the introductory stage of the life cycle. This may amount to

attempting to identify a broad segment of potential buyers. The nature and

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intensity of competition at each stage of the product life cycle are important

in guiding market targeting decisions. Extent of buyer differentiation

When buyer wants are similar throughout the product market, there is less

opportunity for extensive segmentation than there is in markets with buyers

with different wants. A product market made up of a relatively small number

of end-users is more suitable for a broad or relatively undifferentiated

targeting strategy, particularly if the value of purchases of individual buyers

is small. In addition, the more complex that the product-market structure is

with respect to competing firms, variety of product-market offerings,

variations in user needs and wants, etc. the more likely it is that a useful

method of segmentation can be found.

2. Market position

A firm’s market share in an existing product market plays an important role

in determining the target market strategy that it uses. Low market share firms

have to compete in segments where their strengths are most highly valued

and where large competitors are unlikely to compete. The strength may be in

the type and range of products that are offered, the method by which the

product is produced, the cost and speed of distribution or the credit and

service arrangements. In these firms, management has to spend time

identifying and exploiting unique segments rather than attempting to serve

entire industries. When several firms are competing in an industry, selective

targeting is often an appropriate target market strategy. Such selectivity is

often essential for small firms in fragmented, transitional and global

industries. Large firms may be able to reap the benefits of extensive targeting

using a multiple segmentation strategy.

3. Adequate resources

The possession of considerable resources can often place an organization in a

position where it can consider various target market alternatives. Where

resources are limited, however, a company may be forced to adopt a single

segment targeting strategy. The ability to analyse market capabilities is a

decided asset, particularly where the task of market segmentation is a

complex one. Thus possessing both resources and the capacity to undertake

such complex analyses provides firms with flexibility in choosing market

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targets. Production and marketing scale economies Choice of target market

strategy may be influenced by production and marketing scale economies.

The production process, for example, may require large-scale output to

achieve necessary cost advantages. The same may also apply to marketing

and distribution programmes. In such cases an extensive market coverage

strategy may be required in order to gain the sales volume necessary to

support large-volume production and distribution.

2.5 Positioning

According to Matthew Krawczyk & Zheng Xiang (2015), brand positioning

has been referred to as a firm’s strategic orientation in regards to constructing an

image that will be perceived favorably by its target market, as well as the ability to

be considered similarly to select rival firms, while still maintaining a unique niche in

the market (Brooksbank 1994). A brand is considered to be well-positioned when it

enjoys a competitive advantage based on strong core competencies (Aaker 1996). In

a lodging context, these may include customer perceptions of facilities, services and

value for price paid. To develop and maintain this brand position, firms are able to

employ a number of strategies, based on the type of product and/or service that

represents the brand best. These strategies can include focusing on offered physical

attributes, leveraging the position of successful competitors, or defining the firm by a

value or quality proposition (Aaker and Shansby 1982). Further, the type of

positioning strategy can depend on the preexisting segmentation of the market.

Brand positioning has been proposed to be constructed on three levels:

creating an image for the firm, differentiating the firm with respect to its competitors

and outlining the benefits to potential customers (Lewis 1981). Differentiation has

been recognized as a primary objective of a successful marketing strategy for many

years (Pechmann and Ratneshwar 1991). Achieving differentiation involves a firm’s

decision makers determining a niche within the market or industry and the rival firms

that define that space. The strategy then revolves around the level of distinction the

firm would like to maintain, balanced with remaining similar enough to competitors

to be considered by consumers during a purchase decision (Baum and Haveman

1997).

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Brian Ottum (2008: 205) said that the positioning of a new product is the

impression the company wants to create within the mind of the customer. It is a

succinct statement of the nature and benefits of the new product. The positioning

statement is a communication between the company and the customer. It needs to

satisfy both the needs of the company and the customer. The company needs the

positioning to be an integral part of its corporate and brand strategy. But the

customers won’t care about the new product unless the positioning resonates with

them personally.

Four factors are important in positioning a new product:

1. You must create and clearly communicate the positioning. Leave nothing

open to interpretation.

2. A positioning must be based on product factors that are important to the

customer. You position a new product by trumpeting features that customers

care about. These important factors should be uncovered using qualitative

research during the understanding phase.

3. Research has shown that new products must be unique and superior in order

to be successful. The positioning should proclaim the uniqueness and

superiority.

4. Holes in the perceptual map can point to opportunities for new product

positions. But, of course, the new product must live up to the promises.

T. Vukasovic (2011) mentioned that successful positioning requires four

important factors (Jobber, 1995):

1. Clarity: the idea of positioning needs to be clear, both in the aspect of

target market and in the aspect of competitive advantage.

2. Consistency: consumers are overwhelmed by large amount of messages

every day and therefore need a message that will be used consistently.

3. Credibility: the selected message of competitive advantage needs to be

credible for target consumers.

4. Competitiveness: the products need to have a competitive advantage.

They have to offer to consumers an added value which the competition

does not have.

Ron Karr (2011: 59) stated that there are three basic strategies to choose from

when it comes to tactical positioning:

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1. Positioning by Title

Positioning exclusively by title is a common mistake among salespeople. As

a group, salespeople can be highly creative when it comes to the job titles

they mention to prospects and customers. You have probably heard (and

perhaps created or been asked to adopt) your own fair share of these: account

manager, senior strategic account specialist, regional manager (for a

salesperson covering a region), and so on.

2. Positioning by Product or Service

3. Positioning by Resource

As a resource, you don’t put the emphasis on what you call yourself or on the

specific elements of the product or service you are offering. Instead, you

highlight the results your customers will realize from using your unique mix

of products and services.

N. Azad (2013) stated that there are several factors influencing product

positioning in food industry:

1. The first factor, marketing organization, pricing strategy is the most

important factor followed by product development strategy, supplying

necessary demand. In addition, consumer sensitivity on price changes is on

lower priority followed by imitating from previous successful products and

product discount.

2. The second factor, market analysis, consists of three sub-factors where,

awareness on other products offered on market is number one priority

followed by competitive advantage of firm and firm position on the market

comes last in priority.

3. The third factor, past perception strategy, consists of four sub-factors, where

understanding consumer’s preferences is number one priority in this factor

followed by learning more about consumer behavior, market segmentation

based on consumer’s needs and consumer perception from previous product

is the last priority in our survey.

4. The fourth factor, product presentation, consists of two sub-factors where

product packaging is number one priority followed by market diversity and

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paying more attention on product life cycle. In this part, design perspective

comes at last in terms of priority.

5. The fifth factor, brand loyalty, consists of three sub-factors, where customer

satisfaction from brand is the most important items followed by brand name

and customer loyalty to products.

6. Finally, the last factor, dynamic organizational structure, consists of three

sub-factors where new market achievement is number one priority in this

group followed by inside organization coordination as well as taking

advantage of economic change.

2.5.1 Perceptual Mapping

Indroneil Ganguly, Ivan Eastin, and Douglas MacLachlan (2011) explained

about perceptual mapping:

1. Overview and theoretical background on perceptual maps

Perceptual mapping falls within the genre of graphical representation

known as biplots where the variables and the observations are represented

together in a way that elucidates their joint relationship. A biplot is usually

represented as a two-dimensional display (Gabriel 1971; Gower and Hand 1996);

however, the prefix “bi” in biplot refers to the two kinds of objects presented in

the graphs and not the dimensions (Jacoby 1998). What makes some perceptual

maps distinctly different from biplots is the presence of a third kind of object in

the mapping space: the ideal points (or ideal zone or ideal vector). The ideal point

model assumes that each individual’s evaluation of, or preference for, any

particular product depends on that product’s perceived distance from an

individual’s ideal point (Johnson 1998). The figure below represents a commonly

used version of perceptual maps.

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Figure 2.1 Perceptual map.

Source: NRC Research Press, 2011

The perceptual aspect of product positioning and differentiation is well

established in the marketing literature. Any particular brand or product is

characterized by the perception it carries in the customer’s mind relative to other

brands or products (Ries and Trout 1981). The perceptual differences in product

attributes are instrumental in creating “brand images” (Dickson and Ginter 1987).

The general assumption used in developing and interpreting perceptual maps is

that a small number of common perceptual dimensions exist that effectively

differentiate among the products available in the market (DeSarbo and Rao

1986). Hence, all competing products have a specific location in this perceptual

space, and the level and nature of differentiation between the products may be

observed by their distance and direction of separation (Chaturvedi and Carroll

1998).

2. Analytical techniques for developing perceptual maps

The primary purpose of perceptual mapping is to investigate the various

cognitive dimensions that customers use to differentiate among competing

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products in a product category. The data used to develop the maps are determined

by the characteristics of the market, the desired outcome, and the multivariate

technique used for creating the maps. The nature of the data also depends on

specific managerial objectives such as product positioning, demand estimation,

optimal new-product design, and pricing strategy. The selection of specific

mapping models may also be influenced by the ease of managerial interpretation

of the dimensions of the map and the use of diverse cross-validating methods.

The two major forms of data typically used for perceptual mapping are

“similarity scaling” data and “attribute ratings” data. Also, the major analytical

methods for generating perceptual maps are multidimensional scaling, factor

analysis, and multiple discriminant analysis.

Multidimensional scaling requires similarity scaling data, whereas

discriminant analysis and factor analysis require attribute rating data. Although

similarity scaling data collection is difficult and expensive, some researchers

suggest that similarity measures are more accurate measures of customer

perceptions than are direct attribute ratings, largely because they do not depend

on correctly predetermining the attributes on which people make their perceptual

judgments. However, Hauser and Koppelman (1979) showed that the attribute

ratings based methodologies in general, and factor analysis in particular, have

superior predictive ability, managerial interpretability, and ease of use compared

with similarity-based mapping approaches. Moreover, Summers and MacKay

(1976) noted the lack of reliability and validity of direct similarity judgments as

measures of individual perceptions. The choice of which multivariate technique

to use when one has attribute ratings data depends on the nature of the problem

being investigated. Multiple discriminant analysis has been deemed appropriate

when the objective is to examine relationships among sampling units naturally

partitioned into groups (Kenkel et al. 2002) and is recommended for perceptual

mapping over factor analysis (Wittenschlaeger and Fiedler 1997). The use of

canonical analyses and combinations of cluster and multiple discriminant

analyses has gained popularity in examining the multivariate predictor–criterion

relationships between adopter characteristics and usage behavior (Schaninger et

al. 1980).

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2.6 Marketing Mix

(Charles Doyle, 2011) The idea of a ‘marketing mix’ was introduced in the

belief that a company ought to coordinate and integrate its various marketing

programmes in order to maximize their impact and effectiveness. Different mixes are

required for different objectives. There are multiple marketing mix models, each with

different ingredients. The most famous and popular mix of all has become known as

the 4 Ps model, the key ingredients being product, price, promotion, and place (or

distribution), which was developed by E Jerome McCarthy. Since its inception this

model has been much debated and much contributed to. There are alternatives that

talk of 6 Ps (to include politics and public relations). Various academics have

proffered an alternative: the 4 Cs, which takes a buyer's view of the market (in

contrast to the 4 Ps that takes a seller's view of the market). These 4 Cs are: customer

value (rather than the features and benefits of a product alone), cost (to customer),

convenience (to consumer), and communication with customers (preferred to

products being promoted to them).

The 4 Ps model is now regarded as too simplistic for current marketing

conditions, as well as being too focused on traditional consumer product marketing.

For generations of new marketers, however, it has served as a useful mnemonic of

basic marketing planning and programming and has encouraged the idea of mixed

programmes rather than discrete functional silos.

An illustration of the 4 Ps model of the marketing mix is shown below:

1. Price can include list pricing, discount pricing, special offer pricing, credit

payments, or credit terms;

2. Product can include the quality, features, benefits, style, design, branding,

packaging, services, warranties, guarantees, life cycles, investments, and

returns;

3. Place can include direct or indirect channels to market, geographical

distribution, territorial coverage, retail outlet, market location, catalogues,

inventory, logistics, and order fulfilment;

4. Promotion can include advertising, external communications with the media,

direct selling, and sales promotions.

In this research, the author designs the promotional plan of te variable

promotion from the marketing mix, which is based on the segmentation, target

market and positioning that is to be determined.

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2.7 Promotional Plan

(Peter. J. Patsula, 2011) A promotional plan covers all phases of

communication between the seller and the potential customers. It addresses

advertising, sales tactics, and other promotional activities. It might outline, for

example, how you plan to coordinate your billboard promotions to draw attention to

your new spring catalog.

The Three Basic Components of a Promotional Plan

Although proportions vary depending on the nature of the business, there are three

basic components of a promotion plan:

1. Advertising

Includes newspaper, magazine, radio, television, billboard, subway, DM,

flyer advertising, and the like.

2. Personal selling

For retail firms, personal selling begins once a shopper enters the store.

However, for service, manufacturing and wholesale firms, customers have to

be found. Propsecting outside the company is necessary.

3. Sales promotion

Sales promotion is a composite of activities of activity that round out the

advertising and personal slling components of you company’s promotion

mix. The primary aim of sales promotion is to assist wholesalers and retailers

in moving products. Sales promotions aides include catalogs, reprints of

advertisements, special displays and display fixtures, banners, and signs,

tradeshows, etc.

A promotion plan is needed to:

1. Acquaint customers with new products.

2. Capitalize on the seasonal nature of the product.

3. Change or establish a company image.

4. Emphasize quality of products and services.

5. Increases store traffic.

6. Inform customers of special services available, such as delivery service,

alterations or credit plans.

7. Introduce new employees to the public.

8. Keep the business name and location before the public.

9. Offer get-acquainted incentives.

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10. Promote consumer awareness of the business and its products or services.

11. Promote special events, such as a clearance sale, a new location or the

opening of a new business.

12. Stimulate sales.

13. Tie in with a suppliers’ national promotions.

2.8 Conceptual Framework

Figure 2.2 Conceptual framework

Source: Author, 2017

2.9 Previous Studies

Table 2.1 Previous studies

Journal Authors and Year Summary

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Journal Authors and Year Summary

Online purchaser

segmentation and

promotion strategy

selection: evidence

from Chinese E-

commerce market

Ying Liu, Hong Li ,Geng

Peng ,Benfu Lv & Chong

Zhang

(2013)

Online purchaser segmentation is the

further research of shopper typology.

The goal of purchaser segmentation is

to better understand purchasing

behaviors and the determinants of

decision making of different types of

purchasers, then design targeted

marketing plan to enhance repeat

purchase rate.

Dimensions used:

• Preference for price level

• Interpersonal communication

• Puchase duration

Online Shopper

Segmentation Based

on

Lifestyles: An

Exploratory Study in

India

Shweta Pandey and Deepak

Chawla

(2015)

Lifestyles are helpful in

understanding customer psyche and

therefore can be used as basis for

communicating and marketing to

them. In favor of measuring consumer

lifestyles and not just demographics

for predicting both online and offline

consumer shopping behaviors.

Consumer purchases are impacted by

how individuals adopt specific

behavior patterns as represented by

their lifestyles, and thus the need to

understand influence of lifestyles is

imminent.

Dimensions used :

• Internet enjoyment and

convenience

• Internet offers

36

Journal Authors and Year Summary

• Internet logistic

• Internet self-efficacy

• Occupation

Exploring the online

buying behavior of

specialty food

shoppers

Austin Rong-Da Liang,

Wai Mun Lim

(2011)

Food producers are experiencing a

fast-growing need to use the Internet

to enhance competitive advantage.

Past researchers have urged the need

to understand market segmentation

mechanisms as applied to different

consumer behavior models to better

understand the online buying behavior

of consumers.

Dimensions used:

• Age

• Gender

• Average Monthly Income

• Time spent online a day

• Online experience

• Shopping methods

• New experience

• Dining quality

Source: Author, 2017