Marketing Management 2nd Edition Michael R. Czinkota and Masaaki Kotabe Chapter 7: Market Segmentation, Positioning, and Branding

Chapter Outline What is a Market? Market Boundaries Market Share and the Pareto Effect Market Segmentation Types of Segmentation Segment Viability Positioning Approaches to Segmentation Product Differentiation Branding Policies

What is a Market? All the potential customers sharing particular needs and wants who might be willing to engage in exchange to satisfy their needs or wants.

Market Boundaries Examples: Product or service category People who buy luxury cars Geography Westerners prefer dark roasted coffee Hospitals have different needs than corporate health centers Physical customer groupings Intangibles Low-end versus high-end market

Market Boundaries (cont.) Customers Who are your own customers? Users Who uses the category of products? Prospects Individuals in the market who are not your customers.

Market Share and the Pareto Effect A small number of customers (20%) may represent a large percentage of sales (80%). Percentage of sales that a firm’s product has in a particular market.

Market Segmentation: Mobil’s Gas Segments

Market Segmentation: By Consumer Behavior Consumer characteristics: Geographic Demographic Socio-economic Lifestyles

Market Segmentation: By Consumer Behavior (cont.) Consumer responses: Occasions Benefits Usage frequency Attitudes

Market Segmentation: Other Types of Segmentation Benefit segmentation Segmentation by consumption profile Segmentation by national boundaries

Segment Viability Characteristics of segment viability: Size: Must be large enough to generate volume for adequate profit. Identity: Should have unique characteristics that can be identified. Relevance: Must be relevant to the important characteristics of the product. Access: Must be able to be reached.

Positioning Segmentation: grouping of people by needs or wants. how a product is geared to attract this market segment.

Approaches to Segmentation Single Segment: Focus on a single market segment. E.g., Mercedes Multiple Segments: Target two or more segments with one brand. E.g., The Gap

Approaches to Segmentation Cross segments: Offer same product across different segments. E.g., Dupont’s Teflon Full coverage: Offer product to entire market. E.g., Coca-Cola

Approaches to Segmentation Counter segmentation: Consolidate several segments and launch or reposition a product to cover all segments. E.g., Nissan and Toyota

Product Differentiation Used to give products unique identities to distinguish them from their competitors. Example: Branding Glass cleaners Windex

Branding Policies for New Products Company name E.g., IBM Family branding E.g., Mercedes, Black & Decker Individual branding McDonald’s, Seven-Up

Branding Policies for Existing Products extension Use existing brand name for new or modified products. E.g., Diet Coke, Cherry Coke Multibrands Offer several different brands in competition with each other. E.g., Tide, Fab & Cheer

Branding Policies for Existing Products Two different brand team up to create a new product. E.g., General Foods & Hershey’s created “Reese’s Peanut Butter Puffs” cereal Co-branding Private brand: retailer’s own branded product. E.g., Sears uses Kenmore Generic brand: no brand name. E.g., Potato chips Private and generic brands