Marketing Basics

In a dictionary Marketing is defined as “the action or business of promoting and selling products or services, including market research and advertising.“.

Before getting into depth, let’s take a step back and refer to the famous question asked in the paper “Marketing Myopia” by Levitt, i.e. “What business are you really in?“. The question forces one to think beyond what products are you selling to what “needs” of customers are you fulfilling. Marketing is all about understanding customer needs.

Need” is a state of dissatisfaction. Need is a problem and “want” is the solution. I “need” to communicate, I “want” a phone. A “want” combined with a willingness to pay becomes the demand – I am ready to pay for an ‘iPhone”.

Another important aspect is to understand the “value” that the product is adding to the customer. Say, I have the option of buying two phones, I would like to buy the one which gives more value. Perceived value can be thought of as perceived benefits – perceived cost.

P(V) = P(B) – P(C)

While choosing a product over other

P(B1)-P(C1) > P(B2) – P(C2)

or B1-B2 > C1- C2

or Extra Benefits I am getting is more than the extra cost I am paying.

Segmentation – Targeting – Positioning

Segmentation is about grouping your customers by identifying commonalities based on their needs. Segmentation should not be geographical (urban/ rural, north/ south), or demographic (age, sex, education, economic class) but based on personality, values, lifestyle, and behavior.

Segmentation is a three-step process

  1. Clustering
  2. Profiling
  3. Assigning a segment descriptor

Targeting is to select the segments that you will focus on.

There are the following targeting approaches

  1. Mass Market: un-differential
  2. Focus on all, but with the segmented approach: Diffeerential
  3. Focused Strategy: One or two segments

Factors to be considered while targeting

  1. Sales Potential: How much sales can be made for the segment?
  2. Profitability
  3. Consumer Maturity
  4. Competition
  5. Own Abilities

Competition: A less fragmented market can provide healthy competition. HHI or Herfindahl-Hirschman Index can provide a good measure to check how fragmented the market is.

HHI= s1^2 + s2^2​ + s3^2 ​+ …sn^2​

where: sn​=the market share percentage of firm n 


Positioning is “what to tell these customers?” so that they chose you.

While positioning one can take two approaches

  1. Point of Parity or PoP: How are we similar to other products?
    1. Category Point of Parity
    2. Competitive Point of Parity
  2. Point of Difference PoD: How are we different from other products?

SWOT Analysis

Strength – Weakness – Opportunity – Threat analysis is an old tool used by product teams to understand their characteristics. An important aspect one needs to take care of is all your strengths should map to opportunities, and similarly, weaknesses should map to threats.

5C Analysis