MARKETING

Marketing is about customers. Customers are an essential component of a marketing

system. Each one of us is a customer in every area of human interrelation, from the
consumption of education and health care and the queue in the post office to flying in
a discount airline, and in every financial transaction, from the buying of biscuits to the
purchase of a mobile phone. Creating customer value and satisfaction is at the very
heart of modern marketing thinking and practice. Although we will explore more
detailed definitions of marketing later in this chapter, perhaps the simplest definition
is this one: marketing is the delivery of customer satisfaction at a profit. The goal of
marketing is to attract new customers by promising superior value, and to keep
current customers by delivering satisfaction.

Many people think that only large companies operating in highly developed
economies use marketing, but sound marketing is critical to the success of every
organisation, whether large or small, domestic or global. In the business sector,
marketing first spread most rapidly in consumer packaged-goods companies,
consumer durables companies and industrial equipment companies. Within the past
few decades, however, consumer service firms, especially airline, insurance and
financial services companies, have also adopted modern marketing practices.
Business groups such as lawyers, accountants, medical practitioners and architects,
too, have begun to take an interest in marketing and to advertise and price their
services aggressively. Marketing has also become a vital component in the strategies
of many non-profit organisations, such as schools, charities, churches, hospitals,
museums, performing arts groups and even police departments.

Today, marketing is practised widely all over the world. Most countries in North and
South America, Western Europe and Asia have well-developed marketing systems.
Even in Eastern Europe and the former Soviet republics, where marketing has long
had a bad name, dramatic political and social changes have created new opportunities
for marketing. Business and government leaders in most of these nations are eager to
learn everything they can about modern marketing practices.

You already know a lot about marketing – it is all around you. You see the results of
marketing in the abundance of products that line the store shelves in your nearby
shopping centre. You see part of marketing in TV advertising, in magazines and on
Internet pages. At home, at college, where you work, where you play – you are
exposed to marketing in almost everything you do. Yet, there is much more to
marketing than meets the consumer’s casual eye
 WHAT IS MARKETING?
What does the term marketing mean? Many people think of marketing only as selling
and advertising. Today, marketing must be understood not in the old sense of making
a sale – ‘telling and selling’ – but in the new sense of satisfying customer needs. Selling
occurs only after a product is produced. By contrast, marketing starts long before a
company has a product.

We define marketing as a social and managerial process by which individuals and groups
obtain what they need and want through creating and exchanging products and value with
others. To explain this definition, we examine the following important terms: needs,
wants and demands; products and services; value, satisfaction and quality; exchange,
transactions and relationships; and markets.

Individual and Groups

Each part of the marketing definition defines what marketing is and how it is
practised. In business-to-business marketing, where professional organisations
exchange products of value to each other, marketing can be an exchange between similar
individuals and groups. This contrasts with consumer markets where marketing is not
an exchange between similar individuals and groups. In consumer markets, for one group
marketing is a managerial process pursued to fulfil their needs and wants, while the other
group is just going through life fulfilling their needs and wants.

Need – Want - Demand

The most basic concept underlying marketing is that of human needs. Human needs
are states of felt deprivation. They include basic physical needs for food, clothing,
warmth and safety; social needs for belonging and affection; and individual needs for
knowledge and self-expression. Marketers did not invent these needs; they are a basic
part of the human make-up.

Wants are the form human needs take as they are shaped by culture and individual
personality. A hungry person in Brazil may want a mango, rice, lentils and beans. A
hungry person in Hong Kong may want a bowl of noodles, ‘char-siu’ pork and jasmine
tea. Wants are shaped by one’s society and are described in terms of objects that will
satisfy needs. As a society evolves, the wants of its members expand.

When backed by an ability to pay – that is, buying power – wants become demands.
People have narrow, basic needs (e.g. for food or shelter), but almost unlimited wants.
However, they also have limited resources. Thus, they want to choose products that
provide the most satisfaction for their money. Consumers view products as bundles
of benefits and choose products that give them the best bundle for their money.
Exchange, Transactions and Relationships
Marketing occurs when people decide to satisfy needs and wants through exchange.
Exchange is the act of obtaining a desired object from someone by offering something
in return.

Exchange is the core concept of marketing. For an exchange to take place, several
conditions must be satisfied. Of course, at least two parties must participate and each
must have something of value to offer the other. Each party must also want to deal
with the other party and each must be free to accept or reject the other’s offer. Finally,
each party must be able to communicate and deliver. And then the exchange takes
place through a transaction, taking something of value by giving another thing of
similar value in return.

Transaction marketing is part of the larger idea of relationship marketing.

Relationship marketing is the process of creating, maintaining and enhancing strong,
value-laden relationships with customers and other stakeholders.

Beyond creating short-term transactions, smart marketers work at building long-term

relationships with valued customers, distributors, dealers and suppliers. They build
strong economic and social connections by promising and consistently delivering
high-quality products, good service and fair prices. Increasingly, marketing is shifting
from trying to maximise the profit on each individual transaction to maximising
mutually beneficial relationships with consumers and other parties.

Value, Satisfaction and Quality

Consumers usually face a broad array of products and services that might satisfy a
given need. How do they choose among these many products? Consumers make
buying choices based on their perceptions of the value that various products and
services deliver.

The guiding concept is customer value. Customer value is the difference between the
values the customer gains from owning and using a product and the costs of obtaining
the product.

Customers often do not judge product values and costs accurately or objectively. They
act on perceived value. Customers perceive Mercedes-Benz to provide superior
performance, and are hence prepared to pay the higher prices that the company
charges. Customer satisfaction depends on a product’s perceived performance in
delivering value relative to a buyer’s expectations. If the product’s performance falls
short of the customer’s expectations, the buyer is dissatisfied. If performance matches
expectations, the buyer is satisfied. If performance exceeds expectations, the buyer is
delighted. Outstanding marketing companies go out of their way to keep their
customers satisfied. They know that satisfied customers make repeat purchases and
tell others about their good experiences with the product.

Market Offering – Products, Services, Information and Experiences:

Companies address needs by putting forth a value proposition, a set of benefits that they
promise to consumers to satisfy their needs. The value proposition is fulfilled through
a marketing offer – some combination of products, services, information, or
experiences offered to a market to satisfy a need or want. Marketing offers are not
limited to physical products. In addition to tangible products, marketing offers include
services, activities or benefits offered for sale that are essentially intangible and do not
result in the ownership of anything. Examples include banking, airline, hotel, tax
preparation, and home repair services. More broadly, marketing offers also include
other entities, such as persons, places, organisations, information and ideas.

MARKETING MANAGEMENT PHILOSOPHIES

There are five alternative concepts under which organisations conduct their marketing
activities: the production, product, selling, marketing and societal marketing concepts.

The Production Concept:

The production concept holds that consumers will favour products that are available
and highly affordable, and that management should therefore focus on improving
production and distribution efficiency. This concept is one of the oldest philosophies
that guide sellers.

The production concept is a useful philosophy in two types of situation. The first
occurs when the demand for a product exceeds the supply. Here, management should
look for ways to increase production. The second situation occurs when the product’s
cost is too high and improved productivity is needed to bring it down. For example,
in the early years of the Ford Motor Company, Henry Ford’s whole philosophy was
to perfect the production of the Model T so that its cost could be reduced and more
people could afford it.

The Product Concept

The idea that consumers will favour products that offer the most quality, performance
and features, and that the organisation should therefore devote its energy to making
continuous product improvements.

Some manufacturers believe that if they can build a better mousetrap, the world will
beat a path to their door. But they are often rudely shocked. Buyers may well be
looking for a better solution to a mouse problem, but not necessarily for a better
mousetrap. The solution might be a chemical spray, an exterminating service or
something that works better than a mousetrap. A product orientation leads to
obsession with technology because managers believe that technical superiority is the
key to business success.

The Selling Concept

Many organisations follow the selling concept, which holds that consumers will not
buy enough of the organisation’s products unless it undertakes a large-scale selling
and promotion effort. The concept is typically practised with unsought goods – those
that buyers do not normally think of buying.

Most firms practise the selling concept when they have overcapacity. Their aim is to
sell what they make rather than make what the market wants. Such marketing carries
high risks. It focuses on creating sales transactions in the short term, rather than on
building long-term, profitable relationships with customers.

The Marketing Concept

The marketing management philosophy which holds that achieving organisational
goals depends on determining the needs and wants of target markets and delivering
the desired satisfactions more effectively and efficiently than competitors do.

The selling concept and the marketing concept are frequently confused. The selling
concept takes an inside-out perspective. It starts with the factory, focuses on the
company’s existing products and calls for heavy selling and promotion to obtain
profitable sales. It focuses on customer conquest – getting short-term sales with little
concern about who buys or why.

In contrast, the marketing concept takes an outside-in perspective. It starts with a well-
defined market, focuses on customer needs, coordinates all the marketing activities
affecting customers and makes profits by creating long-term customer relationships
based on customer value and satisfaction. Under the marketing concept, customer
focus and value are the paths to sales and profits.

The Societal Marketing Concept

The idea that the organisation should determine the needs, wants and interests of
target markets and deliver the desired satisfactions more effectively and efficiently
than competitors in a way that maintains or improves both the consumer’s and
society’s well-being.

The societal marketing concept questions whether the pure marketing concept is
adequate in an age of environmental problems, resource shortages, worldwide
economic problems and neglected social services. It asks whether the firm that senses,
serves and satisfies individual wants is always doing what is best for consumers and
society in the long run. According to the societal marketing concept, the pure
marketing concept overlooks possible conflicts between short-run consumer wants
and long-run consumer welfare.

Three considerations underlying the societal marketing concept

Consider the fast-food industry. Most people see today’s giant fast-food chains as
offering tasty and convenient food at reasonable prices. Yet certain consumer and
environmental groups have voiced concerns. Critics point out that hamburgers, fried
chicken, French fries and most other foods sold by fast-food restaurants are high in
fat and salt. The products are wrapped in convenient packaging, but this leads to
waste and pollution. Thus, in satisfying consumer wants, the highly successful fast-
food chains may be harming consumer health and causing environmental problems.

MARKETS

Consumer Markets
All marketing ends with consumers. Commercial organisations survive when enough
people exchange enough of their assets for the product or service that an organisation
offers. Often the asset is money, but it could also be debt to a credit company or
products given in part exchange. This transaction gives suppliers the revenue they
need to survive, and without it marketing has failed, but marketers are involved in
streams of decisions, actions and behaviour before and after that transaction. The same
is true for marketers in non-profit organisations, although in those cases an action,
such as visiting a doctor or not drinking and driving, is the pivotal point.

To develop marketing strategies and plans, and to get ideas for new offerings,
marketers explore the whole of consumer behaviour from well before to well after the
pivotal trans- action. Buyer behaviour starts with a consumer’s social position,
lifestyle and preferences even before there is a glimmer of a need or want for the
product being marketed. Then, even if the purchase is as simple as a drink, there is a
process of awareness of a product, interest in some more than others, desire for a
particular form of need fulfilment, and only then, action. During this same process,
consumers make decisions about where to get the drink. The cold water tap, the fridge,
a convenience store or a bar? Marketers can fail anywhere in this process.

The richness of marketing stems from its central involvement in two of the most
complex entities that we know of: the human brain and the society in which we live.
In trying to understand consumers, marketers draw on all sources of knowledge: from
psychology in understanding how we perceive objects to physics in understanding
how we can make drink containers we can use on the move; from sociology in
understanding how our friends influence our purchases to semiotics in understanding
how we respond to symbols.

Business-to-business Markets (B2B):

All marketing ends with consumers, yet most marketing and sales are from business
to business. The reason why business-to-business markets are greater than consumer
markets is the number of stages a product goes through from being a raw material or
produce to the final consumer. Even a simple product, such as a magazine bought at
a kiosk, has passed through several stages. Foresters sell logs to a paper maker; the
paper maker sells to a printer working under contract to a publisher. The magazines
then go to a specialist wholesaler who delivers them to the retailer. Until the final
purchase, all the transactions are business-to-business.

THE MARKETING MIX

The marketing mix is the set of controllable tactical marketing tools that the firm
blends to produce the response it wants in the target market. The marketing mix
consists of everything the firm can do to influence the demand for its product. The
many possibilities gather into four groups of variables known as the ‘four Ps’: product,
price, place and promotion.

Product:
Product means the totality of ‘goods and services’ that the company offers the target
market. The product is the subject of the three chapters in Part Five of this book. The
Honda Civic ‘product’ is nuts, bolts, spark plugs, pistons, headlights and many other
parts. Honda offers several Civic styles and dozens of optional features. The car comes
fully serviced, with a comprehensive warranty and financing that is as much a part of
the product as the exhaust pipe. Increasingly, the most profitable part of the business
for car companies is the loan that they offer to car buyers.
Price
Price is what customers pay to get the product. It is covered in this book’s Part Six.
Honda suggests retail prices that its dealers might charge for each car, but dealers
rarely charge the full asking price. Instead, they negotiate the price with each
customer. They offer discounts, trade-in allowances and credit terms to adjust for the
current competitive situation and to bring the price into line with the buyer’s
perception of the car’s value.

Place
Place includes company activities that make the product available to target
consumers. Place is covered in the final Part Eight of this book. Honda maintains a
body of independently owned dealerships that sell the company’s cars. They select
dealers carefully and support them strongly. The main dealers keep a stock of Hondas,
demonstrate them to potential buyers, negotiate prices, close sales, arrange finance,
and service the cars after the sale.

Promotion
Promotion means activities that communicate the merits of the product and persuade
target customers to buy it. Part Seven of this book devotes three chapters to marketing
communications. Honda spends millions on advertising each year to tell consumers
about the company and its products. Dealership salespeople assist potential buyers
and persuade them that a Honda is the car for them. Honda and its dealers offer
special promotions – sales, cash rebates, low financing rates – as added purchase
incentives.

THE ENVIRONMENT
The external environment consists of those factors and forces outside the organization that
affect the organization’s performance.

SPECIFIC ENVIRONMENT:
The specific environment includes those external forces that have a direct impact on
managers’ decisions and actions and are directly relevant to the achievement of the
organization’s goals. The specific environment is unique and changes with conditions.
Following are the main constituencies of specific environment.

1. Customers
Customers obviously represent potential uncertainty to an organisation. Their tastes
can change, or they can become dissatisfied with the organisation’s products or
services. Of course, some organisations face considerably more uncertainty as a result
of their customers than do others.
 2. Suppliers
When we think of an organisation’s suppliers, we typically think of firms that provide
materials and equipment. But the term suppliers also includes providers of financial
and labour inputs. Shareholders, banks and insurance companies etc. Managers seek
to ensure a steady flow of needed inputs at the lowest possible price. Because these
inputs represent uncertainties – that is, their unavailability or delay can significantly
reduce the organisation’s effectiveness – managers typically go to great lengths to
ensure a steady, reliable flow.

3. Competitors:
All organisations have one or more competitors. Managers cannot afford to ignore the
competition. Competitors – in terms of pricing, new products developed, services
offered, and the like – represent an important environmental force that managers must
monitor and to which they must be prepared to respond.

4. Pressure Groups
Managers must recognise the special interest groups that attempt to influence the
actions of organisations. These group may not have any interest in the product and
service of the organization. It can include any NGO or Social Movement Group like,
to protect interests of minorities, children or women. It can also be a group concerned
with animal rights. They may threaten the normal functioning of the organization.

GENERAL ENVIRONMENT
The general environment includes these broad external conditions that may affect the
organization: economic, political/legal, sociocultural, demographic, technological,
and global conditions.

a. Economic conditions include interest rates, inflation rates, changes in disposable

income, stock market fluctuations, and the general business cycle. During
economic downturns, not only does the demand for their services increase, but
also their contributions typically decrease.

b. Political/legal conditions include the general political stability of countries in

which an organization does business and the specific attitudes that elected
officials have toward business. Federal, state, and local governments can
influence what organizations can and cannot do. Organisations spend a great
deal of time and money meeting government regulations, but the effects of these
regulations go beyond time and money. They also reduce managerial discretion
by limiting the choices available to managers. Consider the decision to dismiss
an employee.
 c. Sociocultural conditions include the changing expectations of society. Societal
values, customs, and tastes can change, and managers must be aware of these
changes. Other sociocultural changes that have been identified include the
increasing concerns about global warming and greenhouse gas emissions,
pursuit of healthy lifestyles, increasing fear of crime and violence, and increasing
dependence on technology. Each of these trends may pose a potential constraint
on managers’ decisions and actions.

d. Demographic conditions: The demographic conditions encompass trends in the

physical characteristics of a population, such as gender, age, level of education,
geographic location, income, family composition, and so forth. But
demographics does not only look at current statistics; it also looks to the future.

e. Technological conditions: In terms of the general environment, the most rapid

changes during the past quarter-century have occurred in technology. We live in
a time of continuous technological change. An increasing number of companies
are also adopting technologically advanced e-business systems to reduce the cost
of inventory management, facilitate supplier interface and, in general, stay ahead
of their competitors. Similarly, hospitals, universities, airports, police services
and even non-profit organisations that adapt to major technological advances
gain a competitive edge over those that do not. The whole area of technology is
radically changing the fundamental ways that organisations are structured and
the way that managers manage.

ENVIRONMENTAL ANALYSIS
General Environment forms the bases for PEST analysis for accessing the
environment.

PEST ANALYSIS
1. Political, Governmental, and Legal Forces:
Federal, state, local, and foreign governments are major regulators, deregulators,
subsidizers, employers, and customer of organization. Political, governmental, and
legal factors, therefore, can represent key opportunities and threats for both small and
large organizations. Some variables include,
§ Changes in tax laws
§ Special tariffs
§ Political stability
§ Employments laws
 2. Economic Forces
Economic factors have a direct impact on the potential attractiveness of various
strategies. Economic variables that represent opportunities and threats for
organizations like,
§ Inflation rates
§ Interest rates
§ Money market rates
§ Stock market trends etc.

3. Social, cultural, Demographic, and Natural Environment Forces:

Social, cultural, demographic and environmental changes have a major impact on
virtually all products, services, markets, and customers. Small, large, for-profit, and
non-profit organizations in all industries are being staggered and challenges by the
opportunities and threats arising from changes in social, cultural, demographic and
environmental variables. Some variables include,
§ Population growth rate
§ Per capita income
§ Numbers of death
§ Lifestyles

4. Technological Forces:
Technological forces represent major opportunities and threats that must be
considered in formulating strategies. Technological advancements can dramatically
affect organizations products, services, markets, suppliers, competitors, customers
etc.
In high-tech industries, identification and evaluation of key technological
opportunities and threats can be the most important part of the external strategic
management audit. Some Technological factors include:
§ R&D activity
§ Automation
§ Rate of technological change

SWOT ANALYSIS:
SWOT is an analysis of an organization’s strength, weaknesses, opportunities, and
threats. It brings together the internal and external environmental analysis.

Internal Environment External Environment

Strengths Weaknesses Opportunities Threats

Changes in External forces translate into changes in consumer demand for both
industrial and consumer products and services. External forces affect the types of
products development, the nature of positioning and market segmentation strategies.
External forces directly affect both suppliers and distributors. Identifying and
evaluating external opportunities and threats enables organizations to develop a clear
mission, to design strategies to achieve long-term objectives, and to develop policies
to achieve annual objectives.

PORTER’S FIVE-FORCES MODEL

Porter’s Five-Forces Model of competitive analysis is a widely used approach for
developing strategies in many industries.

These three steps can reveal whether competition in a given industry is such that a
firm can make an acceptable profit:

a. Identify key aspects or elements of each competitive force that impact the firm.
b. Evaluate how strong and important each element is for the firm.
c. Decide whether the collective strength of the elements is worth the firm entering
or staying in the industry.

Threat of Entry of a New Competitor

Whenever new firms can easily enter a particular industry, the intensity of
competitiveness among firms increases.

Barriers to entry, however, can include the need to gain economies of scale quickly,
the need to gain technology and specialized know-how, the lack of experience, strong
customer loyalty. Despite numerous barriers to entry, new firms sometimes enter
industries with higher-quality products, lower prices, and substantial marketing
resources.
Threat of Development of Substitute Products
In many industries, firms are in close competition with producers of substitute
products in other industries. If there are more substitute products the industry is less
attractive for you to enter.

Competitive pressures arising from substitute products increase as the relative price
of substitute products declines and as consumers’ switching costs decrease. However,
The presence of substitute products puts a ceiling on the price that can be charged
before consumers will switch to the substitute product.

Bargaining Power of Suppliers.

If Bargaining power of supplier is more, the attractiveness of industry is less and there
will be more competition. The bargaining power of suppliers affects the intensity of
competition in an industry, especially when there are a large number of suppliers,
when there are only a few good substitute raw materials, or when the cost of switching
raw materials is especially costly.

Firms may pursue a backward integration strategy to gain control or ownership of

suppliers. However, in many industries it is more economical to use outside suppliers
of component parts than to self-manufacture items.

Bargaining Power of Consumers.

If Bargaining power of Consumers is more, the attractiveness of industry is less.
When customers are concentrated, large, or buy in volume, their bargaining power
represents a major force affecting intensity of competition in an industry.
In particular, consumers gain increasing bargaining power under the following
circumstances:

o If they can inexpensively switch to competing brands or substitutes.

o If they are particularly important to the seller.
o If sellers are struggling in the face of falling consumer demand.

Rivalry among Competing Firms

Usually the most powerful of the five competitive forces. All other forces jointly
contribute in this one. The strategies pursued by one firm can be successful only to the
extent that they provide competitive advantage over the strategies pursued by rival
firms.

Free-flowing information on the Internet is driving down prices and inflation

worldwide. The intensity of rivalry among competing firms tends to increase as the
number of competitors increases, as competitors become more equal in size and
capability, as demand for the industry’s products declines, and as price cutting
becomes common.

MICHAEL PORTER’S FIVE GENERIC STRATEGIES:

According to Michael Porter, strategies allow organizations to gain competitive advantage
from three different bases: cost leadership, differentiation, and focus. Porter established 5
Types of strategies as based on above-mentioned bases.

Cost Leadership:
Cost Leadership emphasizes producing standardized products at a very low per-unit cost
for consumers who are price-sensitive. It is the primary reason for pursuing forward,
backward, and horizontal integration strategies

a. Type 1 is a low-cost strategy that offers products to a wide range of customers at

the lowest price available on the market.
b. Type 2 is a best-value strategy that offers products to a wide range of customers
at the best price-value available on the market.

Striving to be the low-cost producer in an industry can be especially effective when the
market is composed of many price-sensitive buyers, when there are few ways to achieve
product differentiation, when buyers do not care much about differences from brand to
brand, or when there are a large number of buyers with significant bargaining power.

When employing a cost leadership strategy, a firm must be careful not to use such
aggressive price cuts that their own profits are low or nonexistent. A Type 1 or Type 2 cost
leader- ship strategy can be especially effective under the following conditions:
 1. When price competition among rival sellers is especially vigorous.
2. When there are few ways to achieve product differentiation that have value to
buyers.
3. When most buyers use the product in the same ways.
4. When buyers incur low costs in switching their purchases from one seller to
another.
5. When buyers are large and have significant power to bargain down prices.
6. When industry newcomers use introductory low prices to attract buyers and build
a customer base.

Some risks of pursuing cost leadership are that; 1, Competitors may imitate the strategy,
it will drive overall industry profits down: 2, Technological breakthroughs in the industry
may make the strategy ineffective or 3, buyer interest may swing to other features besides
price.

Differentiation (Type 3):

A strategy aimed at producing products and services considered unique industry-wide.
Products or services of a company are different & unique from all other companies. These
strategies are directed at consumers who are relatively price-insensitive. This is Type 3.

Different strategies offer different degrees of differentiation. Differentiation does not

guarantee competitive advantage, especially if it is rapidly imitated by competitors.

Even a cost leadership can itself be a differentiation if only one organization is using it
while other companies in the industry are unable to achieve the much lower level of cost.

A differentiation strategy should be pursued only after a careful study of buyers’ needs
and preferences to incorporate one or more differentiating features into a unique product
that attracts customer attention. A successful differentiation strategy allows a firm to
charge a higher price for its product and to gain customer loyalty because consumers may
become strongly attached to the differentiation features.

A risk of pursuing a differentiation strategy is that the unique product may not be valued
highly enough by customers to justify the higher price. When this happens, a cost
leadership strategy easily will defeat a differentiation strategy. Another risk of pursuing a
differentiation strategy is that competitors may quickly develop ways to copy the
differentiating features. A Type 3 differentiation strategy can be especially effective under
the following conditions:
 1. When there are many ways to differentiate the product or service and many buyers
perceive these differences as having value.
2. When buyer needs and uses are diverse.
3. When few rival firms are following a similar differentiation approach.
4. When technological change is fast paced and competition revolves around rapidly
evolving product features.

Focus (Niche):
Focus means producing products and services that fulfill the needs of small groups of
consumers. A successful focus strategy depends on an industry segment that is of sufficient
size, has good growth potential, and is not crucial to the success of other major
competitors. Strategies such as market penetration and market development offer
substantial focusing advantages.

a. Type 4 is a low-cost focus strategy that offers products or services to a small

range (niche) of customers at the lowest price available on the market.
b. Type 5 is a best-value focus strategy that offers products to a small range of
customers at the best price-value available on the market. This is sometimes
called focused differentiation.

Focus strategies are most effective when consumers have distinctive preferences or
requirements and when rival firms are not attempting to specialize in the same target
segment.

Risks of pursuing a focus strategy includes a threat of other companies if they focus on
same market segment. A bigger risk is that, smaller specialized companies may face
competition from larger giants if the specific segment attracts their attention.

A low-cost (Type 4) or best-value (Type 5) focus strategy can be especially attractive

under the following conditions:

1. When the target market niche is large, profitable, and growing.

2. When industry leaders do not consider the niche to be crucial to their own
success.
3. When industry leaders consider it too costly or difficult to meet the specialized
needs of the target market niche while taking care of their mainstream customers.

When few, if any, other rivals are attempting to specialize in the same target segment.