For use only with Perreault and McCarthy texts. © 2005 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin CHAPTER THREE CHAPTER THREE Focusing Marketing Strategy with Segmentation and Positioning

1. 1.Know about defining generic markets and product-markets Know what market segmentation is and how to segment product-markets into submarkets Know three approaches to market-oriented strategy planning Know dimensions that may be useful for segmenting markets Know a seven-step approach to market segmentation that you can do yourself Know what positioning is--and why it is useful. © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin When we finish this lecture you should

Taking Advantage of Opportunities © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +

Single target market approach Multiple target market approach Combined target market approach Selecting target marketing approach Homogeneous (narrow) product- markets Segmenting into possible target markets © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Search for Opportunities Can Begin by Understanding Markets Exhibit 3-2 All customer needs Some generic market One broad product- market Narrowing down to specific product-market

Customer Needs Customer Needs Customer Type Product Type Product-Market Definition Product Type Customer Needs Customer Needs Customer Type © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Naming Product Markets and Generic Markets Geographic Area Geographic Area No Product Type in Generic Market Definition

Interactive Exercise: Product-Market Definition © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

What Is the Product-Market?

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Market Segmentation Defines Possible Target Markets Exhibit 3-3 Broad product-market (or generic market) name goes here (The bicycle-riders product-market) Submarket 1 (Exercisers) Submarket 2 (Off-road adventurers) Submarket 3 (Transportation riders) Submarket 4 (Socializers) Submarket 5 (Environmentalists)

A. Product-market showing three segments Dependability dimension Status dimension © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin How Far Should the Aggregating Go? Exhibit 3-4 B. Product-market showing six segments

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Target Marketers Aim at Specific Targets Exhibit 3-5 In a product-market area A segmenter Using single target market approach – can aim at one submarket with one marketing mix Using multiple target market approach – can aim at two or more submarkets with different marketing mixes A combiner Using combined target market approach – can aim at two or more submarkets with the same marketing mix

Too Much Combining Is Risky Segmenters Try to Satisfy “Very Well” Combiners Try to Satisfy “Pretty Well” Too Much Combining Is Risky Combiners Try to Satisfy “Pretty Well” Segmenters Try to Satisfy “Very Well” Segmenting May Produce Bigger Sales Segment or Combine? Segment or Combine? Segment or Combine? Profit Is the Balancing Point Key Issues Key Issues © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Segmenting vs. Combining Segmenting May Produce Bigger Sales

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? OR Qualifying Dimensions Qualifying Dimensions Relevant to including a customer type in a product market Help identify “core features” Determining Dimensions Determining Dimensions Affect the customer’s purchase of a product or brand Can be further segmented

What Are the Relevant Segmenting Dimensions? © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +

Different Dimensions For Different Submarkets Different Dimensions For Different Submarkets Qualifying Dimensions Are Important Too Qualifying Dimensions Are Important Too Qualifying Dimensions Are Important Too Qualifying Dimensions Are Important Too Determining Dimensions May Change Determining Dimensions May Change Determining Dimensions May Be Very Specific Determining Dimensions May Be Very Specific Key Issues © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Determining vs. Qualifying Dimensions Determining Dimensions May Be Very Specific Determining Dimensions May Be Very Specific Determining Dimensions May Change Determining Dimensions May Change

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Broader Issues in Selecting Segmenting Dimensions Ethical Issues Exploitation Creates Unnecessary Wants Creates Unnecessary Wants Does Harm

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? +

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? +

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Segmentation and Advertising

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin What Dimensions Are Used to Segment Markets? +

Business-to-Business Segmentation © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +

Estimate Size of Product-Market Segments Estimate Size of Product-Market Segments Name Broad Product-Market List Customer Needs Form Homogeneous Submarkets Form Homogeneous Submarkets Identify Determining Dimensions Identify Determining Dimensions Name Possible Product-Markets Name Possible Product-Markets Evaluate Product-Market Segments Evaluate Product-Market Segments Name Broad Product-Market List Customer Needs Form Homogeneous Submarkets Form Homogeneous Submarkets Identify Determining Dimensions Identify Determining Dimensions Name Possible Product-Markets Name Possible Product-Markets Evaluate Product-Market Segments Evaluate Product-Market Segments © 2004 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Segmenting Product Markets Process for Segmenting Product-Markets Process for Segmenting Product-Markets

Clustering Customer Database © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin More Sophisticated Techniques May Help in Segmenting Customer Database Customer Relationship Management (CRM)

Cluster Analysis © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin +

Positioning +

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin An Example of Positioning Exhibit 3-12 High moisturizing low moisturizing Nondeodorant Deodorant Zest Lever 2000 Safeguard Dial Lifebuoy Tone Dove Lux Coast Lava

Market Generic market Product market Market segmentation Segmenting Market segment Single target market approach Multiple target market approach Combined target market approach © 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Combiners Segmenters Qualifying dimensions Determining dimensions Clustering techniques Customer relationship management (CRM) Positioning Key Terms