Marketing Paradigm - Third Millennium
In the past, the business environment was oriented towards the industry, but a half century ago the focus shifted from industry to firm, underlying the microeconomic approach, which allowed the market evaluation in terms of demand and cost, identifying various conditions that generated elasticity demands (Dixon & Wilkinson, year, p. 62).
This marketing paradigm, therefore, was the incipient conceptualization of the commercial relationship between the business and different customers, wherein the business adapts its offer to various demand levels.
The paradigm identified by Robinson (1933, in Dixon & Wilkinson, 1989, p. 62) as the division of market in sub-markets, ranging depending on their elasticity from the highest to the lowest price is nowadays referred to as market segmentation. Therefore, the old paradigm of market elasticity has evolved, based on developing the concepts of this old marketing paradigm, into market segmentation and the market segmentation continues to evolve, adjusting to the new marketing science development, as it will be further described.
The first principle of market segmentation is adjusting the price to the various sub-market segments, from the highest to the lowest. However, this requires for a simultaneous adaptation of the product’s qualities. Therefore, price and product, two elements of the marketing mix require adaptation to different sub-market levels, in the classical segmentation model. The emergence of the studies regarding consumer behavior or commercial communication studies has generated the need for adapting also the promotion and the placement components of the marketing mix to the market segmentation strategy (Dixon & Wilkinson, 1989, p. 62).
The purpose of market segmentation as perceived by Smith (in 1956) was to address the “heterogeneity of consumer preferences and choices in homogeneous markets [that] could be more effectively approached by dividing the consumer market into smaller subparts based on common characteristics or propensities toward a position” (in Kaze & Skapars, 2011, pp. 1266-1267). Wind and Bell (2007, p. 222) observes that the development of technology has contributed to the evolution of the flexible manufacturing, which emerged into mass customization, making available the segmentation methods, which further lead to changing the demand – offer relationship into a “one-on-one marketing”. One on one marketing represents a new marketing paradigm that evolved from the old paradigm that focuses on elasticity and from the market segmentation, being founded on the principles of market segmentation, specifically on the division and customization of the 4Ps on individual customers.
Discussing about the adaptation of the product to various market segments, Wind and Bell (2007, p. 222) exemplify that Coca Cola Company uses various levels of “sweetness, effervescence and packaging size” for responding the needs and wants of various customers. The focus on customer, as the main driver of a firm’s business and marketing strategy enhanced the customization and applying market segmentation by providing customized offers leads towards increasing a firm’s profitability, in accordance with the price discrimination model (Wind & Bell, 2007, p. 222). In the current global business environment, companies are focusing on customers, but the main interest is their profitability, which indicates the forming of a new paradigm, raising from the market elasticity and market segmentation paradigms.
Referring to the customer behavior studies, research observes a shift of paradigm towards a customer-centric marketing, which focuses on the in-depth understanding of the targeted customers and their buying motivators, for proposing better services and products for answering their needs and wants (Kaze & Skapars, 2011, p. 1266).
Therefore, from the incipient shift of the business focus towards the consumer, the social development generated marketing paradigm shifts, which imply the customization of the business’ offer on various customer segments, and even to one-on-one market segmentation, which includes adapting marketing mix on the various identified segments. But as the market segmentation strategies currently shift towards developing one-on-one offers, aligned to individual demands, marketing mix needs to follow this approach and propose individual products, prices, placement and promotional strategies. However, this implies a utopian effort from behalf of the businesses, which might not guarantee its profitability. Instead, Gronroos (1997, p. 327) states that the first objective of the market segmentation needs to be the business’ profitability and in this respect the customer relationship (which is at the heart of market segmentation) needs to be profitable, as a condition for customer retention decision. To answer the challenge conceptualized by Gronroos, according to which businesses need to focus on profitable consumers for retaining them, Kaze and Skapars (2011, p. 1266) suggest that behavioral segmentation, lifestyle based segmentation and social values model are the methods that managers and marketing strategist should employ for delivering applicable customer-centric insights, optimizing them in the profitability interest of their companies.
This is the current marketing paradigm that centers on the market segmentation, which evolved from market elasticity old paradigm. The adaptation of market segmentation paradigm to the current business environment, focused on competing for customers in a global space, has led to behavioral and life-style segmentation, wherein companies need to identify the behaviors and lifestyles that they can optimize for the productivity of their businesses.
As Rekettye (2004, p. 6) observes, paradigm-shifts appear due to the changes that occur in society, such as the drift from agricultural occupations to industrial society, later to post-industrial society, then to information society, to knowledge society and to the currently web or networking society, as the networks assure the global economy and mobility of the required resources in local communities.
Several factors that influence the emergence of this new marketing paradigm that generates a new shift on the market segmentation, determining it to focus on the business’ profitability when deciding upon the customer retention include the globalization and implicitly the emergence of global competition, as well as the increase in the customers’ sophistication when facing buying decisions (Wind & Bell, 2007, p. 222). This is how the consumer buying behavior and other similar studies represent significant aspects of conducting business and marketing strategies.
For addressing the competitive challenges that are specific to the current marketing paradigm regarding the market segmentation, Kaze and Skapars (2011, p. 1266) consider that the traditional approaches on market segmentation are no longer effective as the focus should now be on providing a valuable customer approach, while pursuing to gain competitive advantage in a global economic space. This defines the nowadays approach of the market segmentation paradigm, which assumes, as elaborated above, that companies focus on segmenting their offers to customers who must be retained because they generate business performances, assuring companies competitive advantage.
Wind and Bell (2007, p. 241) consider that segmentation should address the new market and marketing challenges, specific to the current socio-economic context, by improving the effects of segmentation by continuously applying innovation and evaluation strategies, but most importantly, by rethinking segmentation’s role in the current global information age.
As such, researchers predict that the concept of market segmentation should be adjusted on the current market needs, for reflecting the impact of the information, knowledge and networking emergence, as well as the globalization of business for an effective, sound and valid market segmentation, corresponding to the developing consumer and market needs (Wind & Bell, 2007, p. 241).
An increasing need in the nowadays business world is the companies’ goal of achieving a corporate identity and indirectly a company image, through the market segmentation strategies that they use (Karlson & Darnfors, 2012, p. 3).
However, this necessity is closely linked to the global competitiveness, because there are various companies activating on the same markets, which propose similar products/services, employing the same marketing strategies for landing in the consumers’ shopping bags. This suggests a lack of differentiation between companies, as most employ a copy-paste model or the “me too” business strategy, following the steps of the pioneer companies, who act like trend-setters and leaders of the market (Rekettye, 2004, p. 8). This is why companies need to create a corporate identity and a company image, through market segmentation, so that customers can associate their products with a certain image, differentiating one company from the rest, which indicates a shift in the market segmentation marketing paradigm. Nevertheless, as Karlson and Darnfors (2012, p. 94) indicate in their study, the key to achieving a corporate identity and a company image through marketing segmentation is to have a thorough knowledge of the targeted customers on the various sub-market segments and the best way to attract and retain customers is to enhance the feeling of belonging (and sharing the company’s corporate values) as they interact with the specific product/service of the company. Therefore, enhancing the feeling of belonging and corporate identity or company associations is where the market segmentation marketing paradigm evolves.
References
Dixon, D,F, & Wilkinson, I,F, 1989, “An alternative paradigm for marketing theory”, European Journal of Marketing, vol. 23, no. 8, pp. 59-69.
The text you provided
Gronroos, C, 1997, Keynote paper from marketing mix to relationship marketing – towards a paradigm shift in marketing. Helsinki: Swedish School of Economics and Business Administration.
http://www.google.ro/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCkQFjAA&url=http%3A%2F%2Fxa.yimg.com%2Fkq%2Fgroups%2F24018828%2F912224533%2Fname%2F1501845.pdf&ei=fnl-Us7bIYSL4ASG14H4CA&usg=AFQjCNGiHthAoCn-wqf10eaoy4PcIK1BMQ&sig2=4D20KJxg4GLxxhFOw36ndA&bvm=bv.56146854,d.bGE
Karlson, D & Darnfors, D, 2012, Towards a new paradigm in market segmentation. Sweden: Linnaeus University.
http://www.diva-portal.org/smash/get/diva2:530289/FULLTEXT02.pdf
Kaze, V & Skapars, R, 2011, “Paradigm shift in consumer segmentation to gain competitive advantage in post-crisis PMCG markets: lifestyle or social values?” Economics and Management. Vol. 16, pp. 1266 – 1273.
http://www.academia.edu/904217/PARADIGM_SHIFT_IN_CONSUMER_SEGMENTATION_TO_GAIN_COMPETITIVE_ADVANTAGES_IN_POST-CRISIS_FMCG_MARKETS_LIFESTYLE_OR_SOCIAL_
Rakettye, G, 2004, Changes in the global market structure. Cluj Napoca: University of Pecs, Faculty of Business& Economics.
http://www.academia.edu/342343/CHANGES_IN_THE_GLOBAL_MARKET_STRUCTURE_CONSEQUENCES_ON_THE_MARKETING_PHILOSOPHY_AND_PRACTICE
Wind, Y, J & Bell, D, R, 2007, The Marketing Book. Market segmentation. 6th edition. Burlington: Butterworth Heinemann.
https://www.google.ro/search?q=wind+and+bell+The+Marketing+Book.+Market+segmentation&ie=utf-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&gws_rd=cr&ei=dXp-UpvkIOnJ4ATZsYCIAw (second document on the page, first pdf).
