Relationship Marketing and Market Segmentation: A Case Study of Uber

Introduction

Get free samples written by our Top-Notch subject experts for taking assignment help services.

An organization works with the final aim of generating profit. There are other aspects of the equation like corporate social responsibility and corporate ethics, and a righteous corporation must adhere to its policies, but the policy framework itself is devised with the primary aim of maximising profit and creating value by utilising the assets that they already have. In today's highly competitive business environment, an organization has to face pressure from competing agents as well as external social, economic and ecological factors, but they must overcome these problems in order to sustain themselves in the business ecosystem and make attempts at steady growth. That being said, much of the products and services that shape our lives in the twenty first century were unthinkable just a century before, and now we cannot hope to live without them. This indicates towards the fact that the want is not something arbitrary, it is artificially created in the mind of the consumer. Therefore, marketing is a central aspect that leads to growth in sales, and an organization can sell anything as long as it markets it wisely(Hollensen, 2019). For example, if the label of a packaged drinking water says, 'filtered tap water', which is what it is in most cases, no one would be interested enough to buy them. However, the customers' minds can easily be manipulated if the label says 'freshly procured water from mountain streams', which would imbue the product with an exotic value. According to various literary sources, when a consumer buys a certain product, he or she expects something extra than what is physically provided, what in Platonic terms would be called agalma. Therefore, Kinder Joy eggs sell because of the excess that it provides in the form of a toy or an action figure, Coca Cola sells because it is supposed to provide the consumer with some kind of ethereal energy, and Kellogg's corn flakes marketing campaigns ask the consumer to come up with a better word than 'delicious' to describe the product. However, in today's virtually connected world, organizations penetrate deep into consumers' lives not only manipulating their buying decisions through straightforward advertisement of their products and/or services, but also using social engineering methods to tamper the minds of the consumers with hidden signifiers. The present article will reflect upon the use of big data in marketing and use of strategic devices like market segmentation, positioning and targeting in relation to a given organizational setup, and after analysing the product and marketing strategy of the organization, the report will try to come up with recommendations for the future direction of the organization. The organization that the researcher has chosen for the present report is the multimillion dollar worth US start-up Uber, which has henceforth utilized the nascent market of public transportation, and in turn, has seen unprecedented growth in the last decade(Means and Seiner, 2015).

LO1: The Use of Big Data in Relationship Marketing

In the recent times, the phenomenon of online business transactions has clearly seen a leap forward. According to a report by Internet retailer, the virtualization of businesses has coincided with a yearly growth of sales in these companies by more than 19 percent. Organizations that deal with economic and statistical research and analysis have tried to predict the trajectory of growth in the e-commerce sector, and the predicted digits found from these reports are astounding. For example, the Cisco IBSG Economic and Research Practice predicted that the e-commerce sector with be a 1.4 trillion dollars economy by 2015, while the reality has surpassed the predictions. Using a reverse methodology, it was estimated that in 2017, the global ecommerce industry cumulatively holds a value of 23.8 trillion dollars. With most of the companies across the globe are turning to the virtual, it is crucial to maintain transparency of operation. Any organization, be it private or public, ultimately thrives on their interaction with customers, and regardless of the unprecedented growth in the ecommerce industry, many customers openly express their dissatisfaction with their economic transaction with one of the ecommerce retailer or service provider(Armstrong, Kotler, Palmatier and Brennan, 2018). This situation calls for further industry research aimed at understanding underlying factors that affect the customer's evaluations of an ecommerce site and determine their online transactional behaviours. As the modern day business environment is aimed at creation of knowledge rather than value, more and more companies are adapting knowledge based management systems. Knowledge based management uses various devices such as big data, artificial intelligence and other sophisticated software applications to create value internally(Armstrong, Kotler, Palmatier and Brennan, 2018). The procured knowledge is then put into analysis to find better analytical solutions and policy orientations. In the dynamic environment of the present day economy, the organizations have to face existing as well as emerging competing agencies and in this juncture, the organizations have to reorient their marketing strategies to make them customer-centric rather than sales-centric.

Therefore, we see in the marketing literature the emergence of a new kind of marketing strategy that tries to take into account the predispositions and behavioural patterns of customers(Armstrong, Kotler, Palmatier and Brennan, 2018). Known as the relationship marketing, this form of marketing strategy takes into account various aspects that lead to better creation, collaboration, and enhancement of the intrinsic value for all the stakeholders involved in the business relationship(Sheth, Parvatiyar and Sinha, 2015). The academic scholars in the domain of marketing have been researching regarding the scope and nature of relationship marketing to come up with new conceptual frameworks that would address the growing demands of customers. They are not only concerned about the creation of value between the linear relationships between buyers and sellers but are also interested in how relationships shape the complex business dynamic involving distributors, competitors, suppliers and internally functioning agents and result in the encashment of assets and the subsequent creation of value(Sheth, Parvatiyar and Sinha, 2015). As a growing body of literature professedly shows, the conceptual notion of relationship marketing has been used in a number of varied contexts and they reflect a plethora of perspectives and themes. While some of the conceptualizations are essentially narrow and functional in perspective, some of the other researchers have used more of a paradigmatic approach to create an all-encompassing notion of relationship marketing.

One aspect of the relationship marketing in question is database marketing, which utilizes an existing database to enhance the promotional aspects of marketing(CousseMent and De BoCK, 2016). Given the scope of such a marketing strategy, it can be seen that the view is decidedly narrow. Another narrow marketing strategy that comes under the purview of relationship marketing is customer retention in which a number of viable tactics are used towards the end goal of customer bonding and keeping in touch with the consumer long after the sales is made, hoping for them to make repeated purchases from the company. This is a relevant aspect of relationship marketing, but to use the two notions as identical may prove to be a limiting view of such a broad concept. In the recent times, a popular approach speaks of relationship marketing as a way in which the customers may be retained through the application of cutting edge information technology(Steinhoff, Arli, Weaven and Kozlenkova, 2019). The end goal of maintaining a personal one-on-one relation with the customer is central to the view. Known in business literature as Customer Relationship Management, this paradigmatic view combines knowledge obtained from database with a long term customer retention and evolution strategy to create the best value in terms of marketing(Sheth, Parvatiyar and Sinha, 2015). According to market professionals, the conceptual and theoretical framework of relationship marketing involves an integrated and all-encompassing effort to formulate, strategize and maintain a business network with individual consumers and to keep on strengthening the network to the benefit of both sides, by interactive, personalized and value-added contacting approach over a long period of time(Zhang, Watson, Palmatier and Dant, 2016). Some researchers also tend to think that the strategic implementation of the relationship marketing would begin by putting the customers before all other agents in the transaction process and in doing so, they shift the goal of marketing from manipulation of customers (telling and selling for example) to the cultivation of genuine bonding with the customer (by transparency of communication and knowledge sharing)(Steinhoff, Arli, Weaven and Kozlenkova, 2019). In a broader term, the visionary theoreticians working with the concept of relationship marketing tend to think that attracting new customers is only a tertiary step in the marketing process. What is more important is to develop a close relation with the new customers with the hope of converting them into loyal ones.

While some scholars think that the roots of relationship marketing can be traced back to the pre-industrial revolution era through word-of-mouth interaction between agrarian producers and farmers and their consumers. Moreover, in the feudal era, artisans and ironsmiths often made products that were customized for a particular feudal family or even an individual(Zhang, Watson, Palmatier and Dant, 2016). And this chain of personal interaction was only disrupted in the industrial revolution, when the role of middlemen became prominent in business transactions. The emergence of a distinct category of middlemen that governed the flow of goods and services from buyers to sellers, and as a direct consequence, the previous link between the consumption and production functions became separated(Sheth, Parvatiyar and Sinha, 2015). These middlemen were not driven by their need to create a better relational structure between the producer and the consumer and they were almost always oriented towards the economic aspect of the business transaction, which led to a profit and transaction based economy in the making. However, in the modern day, with the advent of information technology, the concept of relationship marketing has been rapidly developed and disseminated into practical business setups(Zhang, Watson, Palmatier and Dant, 2016). The main reason behind this is the growing process of de-intermediation that is aiming to bring the consumer and the seller in a visible continuum. Sophisticated computing applications and cutting edge telecommunication technologies are now making it possible for the service provider such as Uber to contact the buyer directly, and this trend is becoming visible across a diverse spectrum of industries including aviation and transport, banks, household appliances, tourism and hospitality, computer software and even consumable goods (Cohen et al., 2015). The de-intermediation process is making the business model more accessible, drastically transforming the nature of marketing and as a direct consequence it is injecting the notion of relationship marketing with a vitality of life(Hollensen, 2019). The producers and service providers are increasingly opting for database analysis and direct marketing instruments and strategies in order to personalize and individualize their marketing effort. Big data is the name of the game, and more and more companies are buying data from logistical services to penetrate into prospective customer bases. They are obtaining everything from the consumers' browsing history, their preferences and their consumption history to come up with personalized push notifications such as unique deals, business coupons, and birthday wishes among other things(CousseMent and De BoCK, 2016). By using a comprehensive database, the organization will be able to know their consumer segment better. Moreover, they will be able to know the changing trends in the market, and consequentially will be able to cater to the evolving demands of the consumers.

LO2: Segmentation, Targeting and Positioning

A specific business organization cannot hope to satisfy all of the existing customers all the time. Each individual customers have their specific individual needs which may not always be met. Therefore, many companies adopt a strategy known in business literature as target marketing. This strategy works through three distinct steps, which are market segmentation, market targeting and product positioning(Camilleri, 2018). A market segment, in question, refers to a group of individuals with similar cultural backgrounds, economic predispositions and behavioural traits(Dolnicar, Grün and Leisch, 2018). Before a business begins marketing its product or service, it should deduce the specific market segment that they are willing to serve. Market segmentation is the process of dividing a broader customer base into little segments which are sub-groups with similar interests and traits. It is a customer-oriented strategy that can be applied to almost all kinds of businesses. The market segmentation process assumes beforehand that different segments of consumers require different marketing strategies. The company will target different customer segments through streamlined offers, promotions, prices and distribution that are specifically designed to meet the needs of a specific customer base(Dolnicar, Grün and Leisch, 2018). Different consumer segments will expect different values from the products and services that they are being offered, and it is imperative that the company decides the market segment that they are willing to serve following the market segmentation procedure. In the transportation industry, there are different types of travellers who seek different values:

The hard money traveller include business professionals opting for transportation services at their own expenses. The soft money traveller is a business professional whose commuting needs are reimbursed by the organization that they belongs to. The medium money travellers include business personnel travelling in groups, and therefore they may need bigger vehicles to accommodate everyone in the group. The interim commuter is the ones who combine business travels with personal needs and they may explore the area alongside ticking off their business itinerary. The frequent short commuter will opt to travel within a same route in the city, and they may be able to tally the dynamic fare cost over a long period of time. The periodic commuters are the ones who don't use the commuting service frequently and only use it for rare occasions(Camilleri, 2018). While this is a broad segmentation of commuters, they are by no means watertight. In order to make their service stand out, Uber must spend considerable time, money and workforce to analyse all the market segments. After the segments are decided and singled out, the company must be able to decide how to service its designated consumer group, in terms of facilities, fare prices, added features and frequencies. There are many variables that may be used in the process of market segmentation, and the segmentation process itself can be categorized into five types regarding the nature of variables thatare used in the equation. These categories are: (a) Demographic segmentation, (b)geographic segmentation, (c) psychographic segmentation, (d) behavioural segmentation and (e) product-related segmentation(Camilleri, 2018). The demographic segmentation process divides the consumer base according to demography, while the geographic segmentation divides the market in territories. Uber has adapted a demography based segmentation process, as it has been perceived that the millennial populace is more likely to opt for ridesharing rather than baby boomers who are comfortable in driving their own vehicles. However, in the present, the rideshare services are becoming mainstream across all age groups since they cost much less than traditional taxi services. By using the geographic segmentation process, it can be deduced that Uber only targets the urban demography. The psychographic segmentation procedure divides the market according to customer motives, values, lifestyle choices, vested interests and personality traits(Armstrong, Kotler, Palmatier and Brennan, 2018). For example, those who have a higher occupational status may have more demands and elevated standards of service than those who belong to the lower class.

Once the market has been segmented, it is imperative for the business to be aware of the needs and necessities of its target market. It will be in the business's interest to look into any untapped market opportunity that has not yet been explored by the competitors. Uber has come up with an undifferentiated marketing strategy with its array of options targeted towards various consumer segments. This was possible due to the resources that the company has able to obtain, and the diversification goals that it has been able to meet. Today's marketing strategy has been able to use mobile applications to their fullest potential, and as a result the positioning of the product has become easier. Product positioning refers to the specific place that they want to occupy in the target consumers' minds, related to other services in the same niche(Camilleri, 2018). As modern day consumers continuously compare between the products and services, the company needs to carve out an area of its own in the customer's mind.

LO3: Creating a Rationale for Innovation

In order to come up with new products or services, the company needs to spend a significant amount of time in research and development. If it stays in the comfort zone and becomes static, it will die out and be surpassed by new and emerging players in the market. We can create a rationale for innovation within the specific market position of the company by applying the VRIO framework of value creation(Hollensen, 2019). According to the framework, a company is able to create a niche customer base for its product or service if they meet four criterion, which are value, rarity, inimitability and originality. As uber was one of the very first rideshare companies in operation, it was able to create value, originality and rarity. Even if the service that is provides is not inimitable per say, the brand recognition in the minds of the consumers cannot be imitated. It has henceforth introduced bike taxi service for easy and cheap commuting. It has also diversified its business by introducing food delivery service(Cohen et al., 2015).

LO4: Choosing a Specific Target Group and Creating Viable Solutions

The target group that we choose for our discussion is the hard money traveller. The hard money traveller often belongs to the executive businesspeople group and to them, time is of utmost value. As they commute overseas a lot, Uber should introduce scheduled booking service to make their journey more comfortable and save them some time in the process. This target group has specific needs such as internet connectivity, charging points and entertainment services on-the-go. Uber has to oversee that all of their criterion are met to retain this target market. People belonging to the target segment often performs crucial business transactions and deals while they are commuting, and the company should create an ideal environment in their vehicles to do so. The drivers should be trained so that they engage with the consumer with some degree of etiquette and sophistication (Cohen et al., 2015). Moreover, Uber should introduce a system through which the commuters may ask for specific requirements such as baby seats, food and beverages, and so on.

Conclusion

After the elongated discussion, it can be concluded that Uber has proved to be exemplary in their treatment of the target customer base. However, there are still issues that come on the media of Uber drivers harassing consumers. This can be mitigated if Uber creates a comprehensive training programme for the drivers. Through the implementation of relationship marketing framework, Uber can work its way to foster an amicable relation with its customers rather than just opting for sales and profit generation.

References

Armstrong, G.M., Kotler, P., Harker, M. and Brennan, R., 2018. Marketing: an introduction. Pearson UK.

Camilleri, M.A., 2018. Market segmentation, targeting and positioning. In Travel marketing, tourism economics and the airline product (pp. 69-83). Springer, Cham.

Cohen, P., Hahn, R., Hall, J., Levitt, S. and Metcalfe, R., 2016. Using big data to estimate consumer surplus: The case of uber (No. w22627). National Bureau of Economic Research.

CousseMent, K. and De BoCK, K.W., 2016. Advanced Database Marketing. Marketing and Management, pp.1-7.

Dolnicar, S., Grün, B. and Leisch, F., 2018. Market segmentation analysis: Understanding it, doing it, and making it useful (p. 324). Springer Nature.

Hollensen, S., 2019. Marketing management: A relationship approach. Pearson Education.

Means, B. and Seiner, J.A., 2015. Navigating the Uber economy. UCDL Rev., 49, p.1511.

Sheth, J.N., Parvatiyar, A. and Sinha, M., 2015. The conceptual foundations of relationship marketing: Review and synthesis. Economic Sociology, 16(2), p.19.

Steinhoff, L., Arli, D., Weaven, S. and Kozlenkova, I.V., 2019. Online relationship marketing. Journal of the Academy of Marketing Science, 47(3), pp.369-393.

Zhang, J.Z., Watson Iv, G.F., Palmatier, R.W. and Dant, R.P., 2016. Dynamic relationship marketing. Journal of Marketing, 80(5), pp.53-75.