Compare and contrast the concentrated and differentiated targeting strategies of market segmentation.

Question

What will be an ideal response?

Answer 1

When an organization directs its marketing efforts toward a single market segment using one marketing mix, it is employing a concentrated targeting strategy. The chief advantage of the concentrated strategy is that it allows a firm to specialize. The firm analyzes the characteristics and needs of a distinct customer group and then focuses all its energies on satisfying that group's needs. If the group is big enough, a firm may generate a large sales volume by reaching a single segment. Concentrating on a single segment can also permit a firm with limited resources to compete with larger organizations that have overlooked smaller market segments. Specialization, however, means that a company allocates all its resources on one target segment, which can be hazardous. If a company's sales depend on a single segment and the segment's demand for the product declines, the company's financial health also deteriorates. With a differentiated targeting strategy, an organization directs its marketing efforts at two or more segments by developing a marketing mix for each segment. A benefit of a differentiated approach is that a firm may increase sales in the aggregate market because its marketing mixes are aimed at more customers. For this reason, a company with excess production capacity may find a differentiated strategy advantageous because the sale of products to additional segments may absorb excess capacity. Differentiated strategy, however, often demands more production processes, materials, and people because the different ingredients in each marketing mix will vary. Thus, production costs may be higher than with a concentrated strategy.