Chapter 1 6 Segmentation, Targeting, and Positioning: Building the Right Relationships with the Right Customers

ROAD MAP: Previewing the Concepts Chapter 1 ROAD MAP: Previewing the Concepts Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace.

Steps in Market Segmentation, Targeting, and Positioning Chapter 1 Steps in Market Segmentation, Targeting, and Positioning

Click the picture above to play video Chapter 1 Market Segmentation Marriott offers various brands of lodging in order to meet the needs of particular customer segments. Click the picture above to play video

World Region or Country Chapter 1 Market Segmentation Geographic World Region or Country Region of Country City or Metro Size Density or Climate

Market Segmentation Demographic Chapter 1 Market Segmentation Demographic Age, gender, family size, income, occupation, etc. The most popular bases for segmenting customer groups. Easier to measure than most other types of variables.

Age and Life-Cycle Stage Chapter 1 Market Segmentation Age and Life-Cycle Stage P&G has different toothpastes for different age groups. Click to See Crest Products for Adults and Kids Avoid stereotypes in promotions. Promote positive messages.

Age and Life-Cycle Segmentation Chapter 1 Age and Life-Cycle Segmentation P&G targets kids with Crest Kid’s Cavity Protection toothpaste. It’s gentle on tooth enamel and has “fun- filled sparkles and sparkle fun flavor just for kids.”

Market Segmentation Gender Chapter 1 Market Segmentation Gender Women make 90% of home improvement decisions. Women influence 80% of all household consumer purchases.

Market Segmentation Income Chapter 1 Market Segmentation Income Identifies and targets the affluent for luxury goods. People with low annual incomes can be a lucrative market. Some manufacturers have different grades of products for different markets.

Market Segmentation Psychographic Social Class Lifestyle Personality Chapter 1 Market Segmentation Psychographic Social Class Lifestyle Personality

Psychographic Segmentation Chapter 1 Psychographic Segmentation When Honda markets its Reflex and Elite scooters, it appeals to the rebellious, independent kid in all of us.

Market Segmentation Behavioral Occasions: Chapter 1 Market Segmentation Behavioral Occasions: Special promotions and labels for holidays. (e.g., Hershey Kisses) Special products for special occasions. (e.g., Kodak disposable cameras)

Market Segmentation Behavioral Benefits Sought: Chapter 1 Market Segmentation Behavioral Benefits Sought: Different segments desire different benefits from products. (e.g., P&G’s multiple brands of laundry detergents to satisfy different needs in the product category) Click to see all of P&G's detergent offerings

Market Segmentation Behavioral User Status: Usage Rate: Chapter 1 Market Segmentation Behavioral User Status: Nonusers, ex-users Potential users First-time users Regular users Usage Rate: Light Medium Heavy

Market Segmentation Behavioral Loyalty Status: Brands Stores Companies Chapter 1 Market Segmentation Behavioral Loyalty Status: Brands Stores Companies

Chapter 1 Market Segmentation Best to use multiple approaches in order to identify smaller, better-defined target groups. Start with a single base and then expand to other bases.

Geodemographic Segmentation Chapter 1 Geodemographic Segmentation Claritas, Inc. Potential Rating Index for Zip Markets (PRIZM) Based on U.S. Census data Profiles on 260,000 U.S. neighborhoods 62 clusters or types

Description of PRIZM Cluster Chapter 1 Description of PRIZM Cluster BLUE BLOOD ESTATES Blue Blood Estates are America’s wealthiest socioeconomic neighborhoods, populated by upper-class, established managers, professionals, and heirs to “old money.” They are accustomed to privilege and living in luxurious surroundings. One in 10 millionaires can be found in Blue Blood Estates, and there is a considerate drop from these heights to the next highest level of affluence.

Chapter 1 PRIZM Application In marketing its Suave shampoo, Helene Curtis uses PRIZM to identify neighborhoods with high concentrations of working women. Such women respond best to advertising messages that with Suave, “looking great doesn’t have to cost a fortune.”

Segmenting Business Markets Chapter 1 Segmenting Business Markets Consumer and business markets use many of the same variables for segmentation. Business marketers can also use: Operating Characteristics Purchasing Approaches Situational Factors Personal Characteristics

Segmenting International Markets Chapter 1 Segmenting International Markets Factors Used: Geographic Location Economic Factors Political and Legal Factors Cultural Factors Intermarket Segmentation

Intermarket Segmentation Chapter 1 Intermarket Segmentation Teens show surprising similarity no matter where in the world they live. For instance, this teen could live almost anywhere. Thus, many companies target teenagers with worldwide marketing campaigns.

Requirements for Effective Segmentation Chapter 1 Requirements for Effective Segmentation Measurable Accessible Substantial Differentiable Actionable

Evaluating Market Segments Chapter 1 Evaluating Market Segments Segment Size and Growth Analyze current segment sales, growth rates, and expected profitability. Segment Structural Attractiveness Consider effects of: competitors, existence of substitute products, and the power of buyers & suppliers. Company Objectives and Resources Examine company skills & resources needed to succeed in that segment. Offer superior value and gain advantages over competitors.

Target Marketing Strategies Chapter 1 Target Marketing Strategies

Undifferentiated Marketing Chapter 1 Undifferentiated Marketing Focus is on common (not different) needs of consumers. Product and marketing program are geared to the largest number of buyers. Uses mass advertising and distribution.

Differentiated Marketing Chapter 1 Differentiated Marketing Firm targets several market segments and designs separate offers for each. The goal is to have higher sales and a stronger position with each market segment. This approach increases the costs of doing business.

Concentrated Marketing Chapter 1 Concentrated Marketing The focus is acquiring a large share of one or a few segments of niches. Generally, there are fewer competitors. The Internet is ideal for targeting small niche markets. There is some risk in focusing on only one market.

Chapter 1 Micromarketing Tailoring products and marketing programs to suit the tastes of specific individuals and locations. Local Marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, specific stores. Individual Marketing: Tailoring products and marketing programs to the needs and preferences of individual customers.

Choosing a Market Coverage Strategy Chapter 1 Choosing a Market Coverage Strategy Factors to Consider: Company Resources Product Variability Product’s Life-Cycle Stage Company Resources: Limited resources – stick with concentrated strategy; lots of resources – use a differentiated strategy. Product Variability: Milk, citrus, aluminum, etc. use undifferentiated strategy. Product Life-Cycle: New product with no competition use undifferentiated strategy; mature stage with competition use differentiated strategy Market Variability: If most buyers have the same tastes, buy the same amounts, and react the same way to marketing efforts, undifferentiated approach is OK. Competitors’ Marketing Strategies: If competition is using differentiated or concentrated you have to match that strategy. If competition is using undifferentiated, go with differentiated or concentrated. Market Variability Competitors’ Marketing Strategies

Socially Responsible Target Marketing Chapter 1 Socially Responsible Target Marketing Smart targeting helps both companies and consumers. Target marketing sometimes generates controversy and concern. Vulnerable and disadvantaged can be targeted. Cereal, cigarette, beer, and fast-food marketers have received criticism. Internet has raised fresh concerns about potential targeting abuses. Smart targeting helps companies to be more efficient and effective by focusing on the segments that they can satisfy best and most profitably. 1). Target marketing sometimes generates controversy and concern (e.g., cereal with premiums/prizes targeted at children). 2). Industries that have generated controversy include cigarettes, beer, and fast-food. 3). The meteoric growth of the Internet and other carefully targeted direct media has raised fresh concerns about potential targeting abuses. 4). In market targeting, the issue is not really who is targeted but rather how and for what (i.e., when vulnerable segments are targeted with questionable products or tactics).

Positioning for Competitive Advantage Chapter 1 Positioning for Competitive Advantage Product’s position is the way the product is defined by consumers on important attributes. The place the product occupies in consumers’ minds relative to competing products.

Chapter 1 Positioning At Olive Garden Restaurants, “When You’re Here, You’re Family.”

Chapter 1 Positioning Map Positioning map for large luxury SUVs

Choosing a Positioning Strategy Chapter 1 Choosing a Positioning Strategy #1 Identify a set of possible competitive advantages on which to build a position #2 Choose the right competitive advantages #3 Select an overall positioning strategy Must effectively communicate and deliver position to market

Identifying Possible Competitive Advantages Chapter 1 Identifying Possible Competitive Advantages Key to winning target customers is to understand their needs better than competitors do and to deliver more value. Competitive advantage – extent to which a company can position itself as providing superior value.

Identifying Possible Competitive Advantages Chapter 1 Identifying Possible Competitive Advantages Product Differentiation (e.g., consistency, durability, reliability, repairability) Services Differentiation (e.g., speed, convenience, careful delivery) Channel Differentiation Image Differentiation (e.g., convey benefits and positioning) People Differentiation (e.g., hiring, training better people than competitors)

Positioning Errors Underpositioning: Overpositioning: Chapter 1 Positioning Errors Underpositioning: Failing to really position the company at all. Overpositioning: Giving buyers too narrow a picture of the company. Confused Positioning: Leaving buyers with a confused image of a company.

Choosing Right Competitive Advantages Chapter 1 Choosing Right Competitive Advantages Important Profitable Distinctive Affordable Superior Unique Selling Proposition Communicable 1]. Important: The difference delivers a highly valued benefit to target buyers. 2]. Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way. 3]. Superior: The difference is superior to other ways that customers might obtain the same benefit. 4]. Communicable: The difference is communicable and visible to buyers. 5]. Preemptive: Competitors cannot easily copy the difference. 6]. Affordable: Buyers can afford to pay for the difference. 7]. Profitable: The company can introduce the difference profitably. Preemptive

Which Differences to Promote? Chapter 1 Which Differences to Promote? Unilever positioned its bestselling Lever 2000 soap on three benefits in one: cleansing, deodorizing, and moisturizing benefits. It’s good “for all of your 2000 parts.”

Possible Value Propositions Chapter 1 Possible Value Propositions

Chapter 1 Value Proposition “Much more for much more” value proposition: Häagen-Dazs offers its super-premium ice cream at a price never before charged.

Communicating and Delivering the Chosen Position Chapter 1 Communicating and Delivering the Chosen Position Company must take strong steps to deliver and communicate the desired position to target consumers. The marketing mix efforts must support the positioning strategy. Must monitor and adapt the position over time to match changes in consumer needs and competitors’ strategies.

Rest Stop: Reviewing the Concepts Chapter 1 Rest Stop: Reviewing the Concepts Define the three steps of target marketing: market segmentation, market targeting, and market positioning. List and discuss the major bases for segmenting consumer and business markets. Explain how companies identify attractive market segments and choose a target marketing strategy. Discuss how companies position their products for maximum competitive advantage in the marketplace.

Q: All the following are examples of products except: 1. physical objects.  2. events.  3. places.  4. all the above are examples of products. AK, 7e – Chapter 7

Q: The _____ economy is one in which people outsource entire activities to someone else in order to create memorable events. 1. agrarian  2. goods-based  3. service  4. experience AK, 7e – Chapter 7

Q: Luxury goods such as Rolex watches or expensive crystal are examples of _____ products. 1. convenience  2. specialty  3. sought  4. shopping AK, 7e – Chapter 7

Q: Product quality includes both _____ quality and _____ quality. 1. performance, conformance  2. consistent, conformance  3. persistent, conformance  4. product, service AK, 7e – Chapter 7

Q: All the following are examples of product line decisions except: 1. downward extension.  2. horizontal extension.  3. upward extension.  4. line filling. AK, 7e – Chapter 7

Q: Mercedes introduced C-Class cars for $30,000 without hurting its ability to sell other models priced at $100,000 or more. The new car was an example of successful: 1. downward extension.  2. sideward extension.  3. upward extension.  4. line filling. AK, 7e – Chapter 7

Q: Avon markets more than 1,300 items and K-Mart stocks more than 15,000 items. These items are examples of: 1. product line.  2. line filling.  3. product mix.  4. line extension. AK, 7e – Chapter 7

Q: The extent to which products in a product mix are related to each other constitutes a product mix’s: 1. depth.  2. width.  3. consistency.  4. match. AK, 7e – Chapter 7

Q: When two companies place their brand names on the same product, they are _______ the product. 1. licensing  2. private branding  3. multibranding  4. co-branding AK, 7e – Chapter 7

Q: _____ is the value of a brand. 1. Brand equity  2. Brand power  3. Brand preference  4. Brand insistence AK, 7e – Chapter 7

Q: Because services cannot be stored for later sale or use, they are: 1. intangible.  2. perishable.  3. inseparable.  4. variable. AK, 7e – Chapter 7

Q: Which of the following is not a part of the service-profit chain? 1. Internal service quality  2. External service quality  3. Satisfied and productive employees  4. Satisfied and loyal customers AK, 7e – Chapter 7

Q: Hotels and resorts charge lower prices in the off-season to offset the ______________ of service characteristics. 1. inseparability  2. variability  3. intangibility  4. perishability AK, 7e – Chapter 7

Q: Do you think we should enact legislation that would curb the number of lawsuits filed every year? 1. Yes 2. No AK, 7e – Chapter 7