A Business Plan For Nivea For Men Marketing Essay

A Business Plan For Nivea For Men Marketing Essay Mens grooming industry is one of the fastest growing markets in recent years (Euromonitor International: Mens Grooming Products Thailand, 2009). This sector is dramatically booming in Asian countries, especially Thailand. One of the leading brands in mens grooming market in Thailand is NIVEA FOR MEN brand, operated by Beiersdorf Thailand, which is selected to be the case study in this research. To be the leading brand in this fast growing industry, NIVEA FOR MEN needs to create business plan with a very strong strategic marketing plan. In general, a business sets the overall direction for the company through a business plan. The business plan is created in order that the goals and objectives of the company are to be achieved. In other words, goals and objectives of a business are the underlying foundation of the business plan (The times 100, 2008). The marketing plan is certainly a vital part of the business plan and plays active roles to achieve the targets. The strategic marketing planning process flows from a mission and vision statement to the selection of target markets, and the formulation of specific marketing mix and brand or product positioning objective (RESTREPO, N.A.). Moreover, Kotler (1994) presents the organization as a value creation and delivery sequence. To choose the value, the strategist needs to proceed to segment the market, select an appropriate market target, and develop the offers value positioning, which is known as a vital strategy of Market-oriented perspective. It seems to be unavoidable that Beiersdorf Thailand has to come up with the marketing strategies to penetrate and to be the leader in mens grooming market by doing the right segmentation, selecting the best-suited target markets, and creating the competitive brand/product positioning. In sum, the formula of segmentation, targeting, positioning, STP strategies, is the heart of strategic marketing (Kotler, 1994). The literature review is divided into two main parts. The first part focuses on the previous work on market-oriented approach, as opposed to resource-base view perspective. The second part covers the relevant work on the process of segmentation, targeting, and positioning as well as implementation of the marketing strategy. Part 1: Market-oriented perspective and Resource-based view perspective Part 2: Three essentially related topics Market Segmentation Market Targeting Market Positioning Part 1: Market-oriented perspective and Resource-based perspective This part will specifically study on market-oriented perspective, which underlies a market power imperative, through previous academic research. There are many studies about the implication of resource-based view and market-oriented perspective for a company to be successful in terms of profitability. Also, there are discussions about what perspective is the appropriate one. According to Porter (1991), a successful company has to use market-oriented approach to study the external market and then apply to internal resources. Market orientation , according to Kohli and Jaworski (1990), requires various departments in an organization to engage in activities geared towards developing an understanding of customers needs, and then develop the products to meet target customers needs (Hooley et al., 2008). In addition, Porters (1991) work relies heavily on the pursuit of advantages which are determined by firms exogenous variables that require analysis of the competitors and opportunities in the market. In Porters (1991) theory of competition strategy, he stated that the competition strategy of a firm is to seek an advantageous competitive position in the marketplace or to build up a profitable market position by drawing on varieties of factors that are critical to being competitive in an industrial sector. Following the Porters work, a recent research from Ren, Xie, and Krabbendam (2010) also studied the sustainable competitive advantage with the market-oriented perspective, which covered market innovation. Their work strongly supported the use of market-oriented perspective, with the conclusion that market-oriented approach can lead companies to success and gain more profits. Additionally, they suggested that companies analyse various marketing factors to discover new competitive advantages in order to achieve marketing innovation. However, Prahalad and Hamel (1990) and Sharkie (2003) undertake different perspective by arguing that external focus, in the view of market orientation, which requires the company to concentrate on conditions and constraints in the external environment cannot create competitive advantage for a company. Nonetheless, the resource-based view approach is believed to somehow lead to competitive advantages as it suggests that a firms unique resources and capabilities provide the basis for a strategy. In a previous study, Grant (1991) proposed a practical framework for resource-based approach to strategy formulation. The organizing framework for his study is a five-stage procedure for strategy formulation which are 1) analysing the firms resource-base, 2) appraising the firms capabilities, 3) analysing the profit-earning potential of firms resources and capabilities, 4) selecting a strategy, and 5) extending and upgrading the firms pool of resources and capabilities. Ren, Xie, and Krabbendam, (2010) had a reservation on the use of resource-base view, explaining that resources would contribute to sustainable competitive advantage just when a firm possesses valuable, scarce, inimitable and irreplaceable resources. They stated that in the real world, not every company has the resources with all of those characteristics (Ren, Xie, and Krabbendam, 2010). Part 2: The Process of Segmenting, Targeting, and Positioning 2.1 MARKET SEGMENTATION 2.1.1 Definition of Market Segmentation Market segmentation is defined as the division of a mass market into identifiable and distinct groups or segments, each of which have common characteristics and needs and display similar responses to marketing actions (Rosscraig, 2007). As the market consists of diverse types of products, customers, and personnel needs, the marketers should divide the market into distinct group of buyers in order to appropriately determine which market segment offers the best opportunity for achieving company objectives. Perner (2008) indicated that it is very unlikely that one product could meet the satisfaction of all consumers. In this perspective, a company which chose to focus on a specific group of consumers rather than customers in general would be more successful in terms of profitability. Dibb (1998) suggested that companies divide large markets into smaller segments in order to identify customers purchasing behaviors. Furthermore, Brassington and Pettitt (2003) also suggested that marketers find ways of breaking the market down into manageable parts, groups of customers with similar characteristics in terms of commonly used classifications to measure demographics, which include socio-economics, geographic and personality, and to concentrate their efforts on selecting one or more of these areas. While various literatures stated that it is essential to consider the market segmentation, MC Donald (1998) argued that market segmentation always faced the problem that many different types of customers used the same products in diverse markets. It meant that these different types of customers were in fact subsumed under the same category. Besides, Moschis (1997) also stated the problems of segmentation that the demographics change and the aging of the population change were significant factors that affected the age composition of the consumer market. Day and Wensley (1983) criticised that the market segmentation relating to the consumer market sector alone was not sufficient as it generally reflected the one-sidedness of marketing. The competitive structure was to be taken into account as it yielded the basic information on segment formation. The research from Day and Wensley (1983) concluded that the formation and selection of segments could be improved if theoretical aspects of competitor orientation are included. Dibb (1997) outlined three condition classifications which help identify potential consumers in each segment; those are as follows The expected benefits must be identifiable; Having identified these benefits, marketers must divide people into recognisable segments; One or more of the resulting segments must be accessible to the firms marketing efforts. 2.1.3 Segmentation Variables/ Market Segmentation in Consumer Markets To segment consumer markets, the market information, in terms of customer variables, product variables, and situation related variables, must be collected for further analysis. In the study of The Application of Social Class in Market Segmentation, Carman (1965) stated that social class was a major segmentation variable to divided customers into groups. However, later on in 1994, Raaij and Verhallen argued that social class cannot be used as a main segmentation variable as the society had become less vertically organised with more buying power across larger layer of society, and also concluded that social class concept had lost its unique segmentation value. They claimed that other demographic variables, such as age and education, and other psychological characteristics were more appropriate for segmentation. Raaij and Verhallen (1994)s research studied the market segments and types of people as target groups for marketing activities; market segmentation is then classified into three main levels according to the level of generality of the variables which were general, domain-specific, and brand-specific levels (figure [2-1]). Level of Variable Objective Subjective General (behavioural patterns: Person characteristics) Age Income Education Behavioural patterns General values Lifestyle Personality Domain-specific (product-class usage) Situation Frequency of use Substitution Behaviour Opinions Perception Attitude Domain-specific values Brand-specific (brand-usage) Brand loyalty (behavior) Frequency of use Action Brand Loyalty (attitude) Preference Evaluation Purchase intention Figure [2-1]: Classification of Segmentation Variables by Raaij and Verhallen (1994) However, in the late of 2000s, Rosscraig (2007) suggested that media usage and technology usage could be a concern of market segmentation approach (See Appendix [2-1]). He stated that the variables used in segmenting consumer markets could be broadly divided into three main classes including: Profile criteria: Background customer characteristics Psychological criteria: customer attitudes Behavioral criteria: Actual behavior in the market place (Figure [2-1]). Consumer Criteria Profile Psychological Behavioural Demographic Socio-economic Geographic Who and Where Lifestyle Personality Perceptions Attitudes Motives Benefit sought Why and Who Purchase/transaction Consumption/ usage Media usage Technology usage Who, How, Where, and When Figure [2-2]: Segmentation criteria in consumer markets Profile Criteria With respect to profile criteria, customer characteristics are to be examined with isolation from the specific market of interest. The profile segmentation criterion is used for identiflying the target consumers and in the consumer goods markets which are most suitable to them (Rosscraig, 2007). According to Rosscraig (2007), this simple segmentation variable includes using demographic method, socio-economic method, and geographic method. Demographic method can be determined by age, gender, ethnicity, nationality, religion, family size, generation, and etc. This method is useful in assisting media planning and marketing communications as the media selection criteria have been developed around these variables. Socio-economic method can be shaped by occupation, income level, social class, and education. Socio-economic status determines whether a consumer will be able to afford a product. Geographic location method is shaped by geographical areas; markets can be considered by country or region, by town or size of city, by population density such as urban, suburban, or rural areas, or by postcode. This approach is useful when there are clear location differences in tastes, consumption, and preferences. Moreover, this method is widely applied with direct sales operations as they can use census information to develop better customer segmentation and predictive models. The profile segmentation approach is criticised in respect of uncertainly. While one segment is based on consumer background characteristics, members of each variable may behave differently in the marketplace for various reasons while members in the different segments may seek for the same things and have the same interest in a particular product/brand (Hooley et al., 2008). In shorts, this type of segmentation variable describes who and where the consumers are, but it does not explain the basic reasons why consumers behave so. Psychological Criteria The psychological criteria draw a casual relationship between customer profiles and marketing behavior (Hooley et al., 2008). The psychological variable includes the characteristics of attitude of the customers. Attitudes to the product class and attitudes toward brands in the market have both been used as productive bases for market segmentation (Hooley et al., 2008). According to Rosscraig (2007), psychological variables used for segmenting consumer product markets include using attitudes and perceptions, lifestyle of consumers, and the types of benefit sought by customers from products and brands and their consumption choices. The use of attitudes and perceptions aims at identifying segments of respondents who view the products on offer in a similar way (Green et al., 1989). Consumer lifestyles segmentation is based on the analysis of consumers activities, interactions with others, and opinions to understand consumers individual lifestyles and patterns of behavior (Hooley et al., 2008). In 2003, Taylor Nelson Sofres (TNS) developed a UK Lifestyle Typology based on lifestyles and classified the following types of lifestyle categories which are belonger, survivor, experimentalist, conspicuous consumer, social resistor, self-explorer, and the aimless (Rosscraig, 2007). The most important benefits of consumer lifestyle research are for guiding the creative content of advertising (Hooley et al., 2008). The main idea of the benefit segmentation is that the company should provide customers with exactly what they want, based on the benefits that they derive from the products that they use, not based on how the company designs products for them (Rosscraig, 2007). According to Hooley et al. (2008) benefit segmentation tells the basic reasons why customers buy the products and why customers are attracted to the product offerings. Holley (1982) also suggested that the development in techniques of analysis make them particularly suitable for identifying benefit segments (Hooley, 1982). Overall, segmentation on the basis of psychological yields more useful basis for marketing strategy development than merely consumer profile characteristics (Hooley et al., 2008). It gets closer to the underlying reasons for behavior of consumers, so it should be used as the basis for segmenting the market (Hooley et al., 2008). However, there are some major drawbacks of Psychological segmentation techniques, one of which is that this techniques require often costly primary research and sophisticated data analysis techniques (Hooley et al., 2008). Behavioral criteria Doing segmentation on the basis of the behavior of consumers in the market is the most direct method of segmenting markets. Behavioral segmentation includes purchase behavior, consumption behavior, media usage and technology usage (Rosscraig, 2007). Purchase behavior approach concentrates on the time of purchase which is early or late in the products overall life cycle, and the patterns of purchase which is the identification of brand-loyal customers. This approach could concentrate on innovator segmentation, concerning with initial purchase. Marketers will pay high attention to innovator groups when new products are launched. Innovators as initial target segments can improve the products chances of acceptance on the market (Hooley et al., 2008). In addition, brand loyalty has been widely used as a basis for segmentation, concerning with the repeat purchasing (Hooley et al., 2008). A company may segment a market on the basis of how often a customer uses its products, categorizing these into high, medium, and low users, by usage rate (Rosscraig, 2007). The examination of usage patterns and volume consumed can pinpoint where to focus marketing activity and can be used to develop service specifications or marketing mixes for each of these groups of users (Hooley et al., 2008). Cook and Mindak (1984) have shown that product and brand usage has a major advantage over many other situation-specific segmentation variables as it can be obtained, in case of many consumer products, from secondary sources. It is very essential to understand and profile audience media usage in the process of communication planning (Chatterjee, Hoffman, and Novak (1998). Since 1950s the information of media consuming, such as television viewing, radio listening, and print reading, have been continuously collected. And in more recent years, web usage data has also been collected by market researchers to help profile web users, basing on usage characteristics (Rosscraig, 2007) (See Appendix [2-2]). Furthermore, according to Olney, Holbrook, and Batra (1991) and Holbrook and Gardners (1993), duration of use is critical measure of consumption experiences and is a useful behavioral indicator of advertising effects (See Appendix [2-3]). By following this method of segmenting, marketers can observe the behavior of consumers while utilising the products and media, and this segmentation can be used as an important source for new products ideas, new product design, and product development (Rosscraig, 2007). Additionally, marketers can then create appropriate communication themes for product promotion and can specify new markets for existing products after having the right behavioral segmentation. In recent years, behavioral segmentation has become more popular as marketers tend to study the consumers media usage and technology usage in order to further create successful advertising campaigns. To support this, it was asserted by Advertising.com(TM), Inc., a leading provider of results-based interactive marketing services to advertisers and publishers, (2004), that behavioral segmentation helped improve advertising campaign performance by revealing that targeting campaign delivery based on real-time user behaviour increases advertisers ROI by reaching the audience segments most likely to respond to an ad message. Moreover, Hallerman (2004), a senior analyst at e-Marketer, a New York-based research company, stated that the logic behind behavioural segmentation and targeting gets to the heart of the internets potential as an advertising medium. His opinion is hereby quoted: In todays world of audience fragmentation, its much more effective to reach individuals not by abstract demographics but through their actions online. 2.1.4 Segmentation in Male Grooming Products According to Mintel (1995), a study about mens toiletries industry, male grooming products and toiletries is a fast growing industry. In 1980s, the market of male grooming products started to be segmented with the development of products types, including male body spray and shower cream (Sturrock et al., 1998). According to Sturrock et al. (1998), in 1998, the market of mens products were divided into different categories of products based on consumers needs and uses, including body sprays, deodorants, mens shaving, fragrances, shampoo, shower cream, etc. Dunn (1995) and White (1995) studied characteristics of men who use male grooming products and concluded that men used grooming products as they want to increase self-care practice and self-concept. Moreover, Langer (1986) has prior stated that using mens grooming products helps encourage a concern to stay attractive. For consumer products, Milner and Fodness (1996) has done a research on product gender perception and concluded that specific gender of the products is critically important to the consumers when deciding to buy a particular product. In the segmentation process, Milner and Fodness (1996) claimed that gender is the first segmentation variable that most marketers apply for consumer products. The reason behind is that both men and women want to use the products that were specifically made for them. According to Milner and Fodness (1996), many consumers clearly are psychologically uncomfortable using products which do not seem made for them. Therefore, many companies, particularly manufacturers of consumer products, divided consumers into segments by using gender variables. In skin care industries, products are conventionally made for women. However, in the post modern era, a lot of skin care products are launched to serve male consumers (Sturrock et al., 1998). The products for male consumers are launched as a result of segmentation strategy which companies divide its consumer market into two broad categories, male and female markets. The benefit sought variable is also one of the best ways for companies to segment its market. This statement is supported by Kotler (1997) and Wedel and Kamakura (1998), stating that the real features of products have been considered the most actionable bases for segmentation. It is critically important that consumer products must offer real benefits to users to create product positioning (Blythe, 2005). In men face care market, companies and brands always divided consumers segments based on products features. For example, NIVEA FOR MEN offers wide ranges of facial cleansers with benefits of whitening, oil-control, wrinkle protection, refreshing skin, and moisturizing effects (Nivea Website, 2010). Loreal Men Expert offers benefits for facial cleansers which are whitening, anti-tightness, anti-fatigue, pure matte oil control, anti-regreasing (Loreal website, 2010). There are some researches showing that competitive brands have similar ways of segmentation (Dawes, 2006, and Fennell et al., 2003). In other words, competitive brands often appeal to consumers who have similar demographic or psychographic characteristics. Moreover, Ehrenberg et al. (2004) supported this statement by stating that different brands in the same product category tend to offer a similar range of product variants. 2.1.5 Loyalty Segmentation and Relationship Segmentation A focus on Loyalty segmentation provides strategic and tactic insights that will assist in building a strong brand (Aaker, 1996). It is necessary to build customer loyalty as it is a key success of growth for a business (Crosby et al., 2004). By having loyalty segmentation, a company can learn more about the profiles of loyal customers, and this leads to the focus at the highest value segment (Markey et al., 2007). Crosby et al. (2004) stated that the purpose of the loyalty-based segmentation is to seek to address the managerial questions as follows. Who are the most/least potential customers? How can customers be segmented according to the types of relationships they would like to have with the product/brand/company? Which loyalty segment should be targeted? What changes are required to instill the highest levels of loyalty among the targets? Crosby et al. (2004) affirm that loyalty-based segmentation is the complement of existing segmentation frameworks and it can also be used to discover new segmentation frameworks by starting with customer loyalty research. According to Aaker (1996), in focus of the loyalty segmentation, a market can be divided into the following groups. Non-customers: those who buy competitor brands or not product class users, Price switchers: those who are price sensitive, The passively loyal: those who buy out of habit rather than reasons, Fence sitters: those who are indifferent between two or more brands, and The committed: those who are committed to the brand, or a loyal customer. Loyalty segmentation can be very successful when the company can increase the number of customers who are not price switchers and who would pay more to use the brand while the fence sitter and the committed should be critically managed (Aaker, 1996). Especially in high competitive markets, companies should exercise best efforts to enhance the loyalty of the fence sitters and the committed by developing and strengthening the relationship between customers and the brand (Aaker, 1996 and Drypen, 2010). Research from Raaij and Verhallen (1994) indicates that the company should also segment its market by loyalty segmentation method. The results of the research shows that the company should move customers from the lowest level of loyalty pyramid which is overall total potential customers to the highest level which is the heavy buyers. The major marketing strategy is to increase the frequency and intensity of their purchases and to take measures to maintain customers for as long as possible (Raaij and Verhallen, 1994). This also highly relates to the relationship marketing which develop relationship between buyers and brand to stimulate purchasing. 2.2 MARKET TARGETING 2.2.1 Definition of Targeting The next step of the market segmentation in STP process is market targeting. It is the process of determining which segments should be targeted and made the focus of a comprehensive marketing programme. Moreover, in the process of market targeting, a group of customers are identified for whom the offering should be right, and to whom firms will direct the majority of its marketing resources, time, and attention (Cahill, 1997). Choosing the target market, before creating positioning and marketing mix, is a part of developing effective marketing strategy. In order to target the right group of customers, the firm has to study the needs and buying behaviours of customers in each segment. Then the firm will be able to develop marketing strategies that suit requirements of each segment. According to Cahill (1997), a target market is simply the market of submarket at which the firm aims its marketing messages. By specifying customer targets, the company will also know which segments are not the target groups so that the company will not make special effort to serve them. Cahill (1997) said that market targeting is essential because it forces the company to focus at the customers and the markets by determining the best fits between target customers and the product offerings. Kotler and Armstrong (2001) suggested that a firm make the decision how many and which segments to target in their market positioning and its decision should be based on a clear understanding of companys resources and capabilities, nature of the competition, and the characteristics of the market. The company should evaluate market segments by first collecting and analysing data on current segment sales, growth rates, and then determine which segment can constantly enable the company to receive the greatest opportunities in terms of profitability and market demands in order to target main customers. However, Wright (1996) denied statement of validity of market targeting by claiming that there was no logical reason to adopt target marketing. Wright and Esslemont (1994) studied the logical formulations of the target marketing argument and summarised that target marketing did not necessarily give the best overall market response and also does not constantly give superior return than other approaches such as mass marketing. The two main targeting strategies are suggested by Dibb (1997). They are concentration strategy, and multi-segment strategy. Concentration strategy is defined as a process that a company manages its marketing efforts towards a single target. When targeting to one single segment, a firm can better satisfy target customers needs and requirement. However, this strategy is not always effective and the company may face business failure if target customers demand for the products decline or shift to other segments Multi-segment strategy is described as a strategy that a company directs its market efforts towards two or more market targets. The company should then develop appropriate marketing mix to suit each type of target groups, by all together considering product diferrentiation, target price, distribution method, and promotional strategies. In brief, the step of the selection of the potential target market is very critical in creating and developing comprehensive marketing strategy. The robust competitive positioning will then be developed after the market targets are clearly identified and the requirements and motivations are fully examined. 2.2.3 Doing Targeting in Different Market Environment Marketers have to decide whether to target single segment or multiple segments in the product market; there are several factors affecting the managements targeting strategy decisions, including stage of maturity, industry structure, companys capabilities and resources, and opportunities for gaining competitive advantage (Cravens, and Piercy, 2009). The maturity is used as a basis for considering different targeting situations; the market target strategy will be varied in each market environment or stage of product-market maturity. Four different product-market stages, closely related to product life cycle (PLC) stages, include emerging product-market, growing product-market, mature product-market, and declining product-market. The strategists can use product life cycle model to analyse the maturity stage of the products and also industries in order to develop the strategies that should be implemented. Growing product-market Source: Spencer (2009) According to Cravens, and Piercy (2009), segments are likely to be found in the stage of growth in the product life cycle, as identifying customer segments with similar value requirements improves targeting. In growth stage of product life cycle, consumers tend to gain awareness of products and to understand the benefits of the product, and company will likely to expect a rapid sales growth and will also try to build brand loyalty and increase market share (Spencer, 2009). High growth markets is very attractive, therefore it can attract a lot of competitors who want to compete for market shares. Cravens, and Piercy (2009) revealed their finding about the market structure that at the growth stage, existing companies tend to enter new product-market as they have capabilities and resources to support the market entry,