Institutional Markets

Institutional Markets:

The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care. Institutions differ from one another in their sponsors and in their objectives. Many institutional markets are characterized by low budgets and captive patrons. Many marketers set up separate divisions to meet the special characteristics and needs of institutional buyers.

Government Markets: The government market offers large opportunities for many companies, both big and small. In most countries, government organizations are major buyers of goods and services. Government organizations typically require suppliers to submit bids, and normally they award the contract to the lowest bidder. In some cases, the government unit will make allowance for the supplier’s superior quality or reputation for completing contracts on time. Government organizations tend to favor domestic suppliers over foreign suppliers. Government buyers are affected by environmental, organizational, interpersonal, and individual factors. One unique thing about government buying is that it is carefully watched by outside publics, ranging from Congress to a variety of private groups interested in how the government spends taxpayers’ money. Because their spending decisions are subject to public review, government organizations require considerable paperwork from suppliers, who often complain about excessive paperwork, bureaucracy, regulations, decision-making delays, and frequent shifts in procurement personnel. Most governments provide would-be suppliers with detailed guides describing how to sell to the government. Non-economic criteria also play a growing role in government buying.
• Government buyers are asked to favor depressed business firms and areas; small business firms; minority-owned firms; and business firms that avoid race, gender, or age discrimination.
• Many firms that sell to the government have not been marketing oriented.
• Total government spending is determined by elected officials rather than by any marketing effort to develop this market.
• Government buying has emphasized price, making suppliers invest their effort in technology to bring costs down.
• When the product’s characteristics are specified carefully, product differentiation is not a marketing factor.
• Nor do advertising or personal selling much matter in winning bids on an open-bid basis.

Several companies have established separate government marketing departments.

These companies anticipate government needs and projects, participate in the product specification phase, gather competitive intelligence, prepare bids carefully, and produce stronger communications to describe and enhance their companies’ reputations.

LN 06: Target Marketing

This chapter looks further into key customer-driven marketing strategy decisions—how to divide up markets into meaningful customer groups (segmentation), choose which customer groups to serve (targeting), create market offerings that best serve targeted customers (differentiation), and position the offerings in the minds of consumers (positioning).
Most companies have moved away from mass marketing and toward target marketing—identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each.
Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.
Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.
Differentiation involves actually differentiating the firm’s market offering to create superior customer value.
Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

MARKET SEGMENTATION
Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

Segmenting Consumer Markets

Geographic Segmentation: Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods.

Demographic Segmentation: divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Demographic factors are the most popular bases for segmenting customer groups.

Age and Life Cycle Stage means offering different products or using different marketing approaches for different age and life cycle groups.
Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.
Income segmentation has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel.

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics.
Marketers also use personality variables to segment markets.

Behavioral Segmentation: Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.
Occasion segmentation means grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item.
Benefit segmentation means grouping buyers according to the different benefits that they seek from the product.
User Status means segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product.
Usage Rate means grouping markets into light, medium, and heavy product users.
Loyalty Status means dividing buyers into groups according to their degree of loyalty.

Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables.