1. BUSI 406 Principles of Marketing: Focusing Marketing Strategy with Segmentation and Positioning

2. Today’s Agenda
Any questions about team case assignment due in class on Wednesday, February 1?
Let’s Review
Discuss material you read in Chapter 4 of your textbook

3. Let’s Review Direct Marketing Environment – 3C’s/ SWOT
Indirect Marketing Environment
Competitive environment
Economic/Technological environment
Political/Legal environment
Cultural/Social environment
Qualitative and quantitative criteria for screening opportunities
GE Grid, BCG Matrix, …

4. SWOT Analysis SW Internal, OT External
Strengths – What does your company do well? In what areas do you excel?
Weaknesses – What does your company not do so well? Where do you really need to improve?
Opportunities – What are the existing and emerging business opportunities out there?
Threats – What are the greatest challenges you face? What could happen that would really create problems for your business?

5. Focusing Marketing Strategy with Segmentation & Positioning
Segmentation is customer oriented
- we begin with needs and wants of different segments and then we try to determine whether it is practical to serve that segment.

6. Today’s Goals Segmentation and targeting Defining markets
Dimensions to use
Identifying segments
Identifying segments to target
Segmentation approaches
Differentiation and positioning
Understanding customer’s view
Positioning techniques
Evaluating segment preferences
Differentiating the marketing mix
Relationship between
positioning & targeting

7. Taking Advantage of Opportunities
La-Z-Boy has designed more fashionable chairs to tap into new market segments.
Key Issues
Prior to introducing a product, however, a firm such as La-Z-Boy has to have a good understanding of the target market.
It also needs to assess the current state of competition, including how consumers perceive the differences and similarities among alternative brands.
Should the organization then decide to proceed with the development of a marketing mix to serve a particular target market, it must differentiate its offering.
From this ad, it appears that La-Z-Boy also thinks that gender provides a good way to segment its market.
This presentation will cover how marketers can use market segmentation, differentiation, and positioning to take advantage of opportunities in the marketplace.

8. Taking Advantage of Opportunities

9. Search for Opportunities Can Begin by Understanding Markets
All customer needs
Narrowing down to specific product-market
Some generic market
One broad product-market
Market segmentation is a two-step process. This process fails too often because marketers do not realize the complexities of consumer behavior and they attempt to categorize a market around too few consumer-related variables of distinction.
Key Issues
All customer needs: Marketers should break apart or disaggregate all customer needs.
Generic market: a market with broadly similar needs and sellers offering various ways of satisfying those needs.
Defining the market broadly can help the marketer to uncover some potential new opportunities. The marketer can then narrow down to specific product-markets.
Product-market: a market with very similar needs and sellers offering various close substitute ways of satisfying those needs.
Segmenting: the next step is an aggregating process – the marketer groups together people with similar needs into a market segment. Here we look for similarities.
Discussion Question: Using Exhibit 3-3 as a guide, think of the generic market for transportation and the broad product-market of customers for motorcycles. Can you segment the broad product market into several submarkets?
After defining the market, marketers can select a particular target market approach.
Segmenting into possible target markets
Homogeneous (narrow) product-markets
Selecting target marketing approach
Single target market
Multiple target markets
Combined target markets

10. Market Segmentation Defines Possible Target Markets
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)
Market segmentation groups customers with similar needs.
Key Issues
Here we can see five different submarkets for the broad product market of bicycle riders.
Discussion Question: What are the primary needs for each of these submarkets for bicycles?

11. Segmenting = Aggregating How Far Should Aggregating Go?
Product-market showing six segments
A. Product-market showing three segments
Status dimension
As shown in this exhibit, one can segment a market into any number of segments, but how far should a marketer go in aggregating similar consumers into target markets?
Key Issues
Criteria for segmenting:
Homogeneous within--the customers in a market segment should be as similar as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions.
Heterogeneous between--the customers in different segments should be as different as possible with respect to their likely responses to marketing mix variables and their segmenting dimensions.
Substantial--the segment must be big enough to be profitable.
Operational -- actionable
Discussion Question: Some firms, like Dell Computer, are able to market directly to individuals and to customize products and services to their unique needs. What advancements make this mass customization possible?
Operational--the segmenting dimensions should be useful for identifying customers and deciding on marketing mix variables.
Dependability dimension

12. Criteria for Segmenting Markets
Homogenous within markets
Heterogeneous between markets
Substantial: big enough
Operational: useful for targeting & actionable to implement a marketing mix

13. Segmenting vs. Combining
Combiners Try to Satisfy “Pretty Well”
Combiners Try to Satisfy “Pretty Well”
Profit Is the Balancing Point
Too Much Combining Is Risky
Too Much Combining Is Risky
Key
Issues
Summary Overview
There are many factors that affect the choice between being a “segmenter” and a “combiner.”
Key Issues
Combiners try to satisfy customers “pretty well.”
Too much combining is risky, because an innovative segmenter may “chip away” at the various segments of the combined target market.
Discussion Question: What companies you are familiar with have suffered because segmenters have “chipped away” pieces of their target markets?
Segmenter try to satisfy customers “very well.”
Segmenting may produce bigger sales, if the segmenter can capture a large share of a smaller market segment.
Many consumers are willing to pay more in order to satisfy their needs more precisely.
Segment or combine? Depends on:
firm’s resources;
competition in the various segments;
characteristics of consumers.
Profit is often the balancing point, because the profit potential often dictates how specialized a marketing mix can be.
Segment or Combine?
Segment or Combine?
Segmenters Try to Satisfy “Very Well”
Segmenters Try to Satisfy “Very Well”
Segmenting May Produce Bigger Sales
Segmenting May Produce Bigger Sales

14. Demographic Dimensions for Segmenting Consumer Markets
Income
Sex or age
Income
Sex or age
Family size or family life cycle stage
Demographic Segmentation Dimensions
Family size or family life cycle stage
Occupation or education
In addition to behavioral and geographic dimensions, there are also demographic segmentation dimensions.
Key Issues
Income provides one basis – a marketing mix may appeal most to families with a particular income.
Gender and age provide another demographic base of segmentation.
Family size or family life cycle stage. Family life cycle stages include young singles, young married with no children, families with young children, divorced, empty nesters, or seniors.
Occupation and education can also be used for segmentation.
Finally, social class – lower, middle or upper
And ethnicity – for example: Hispanic, Asian, Native American, white, or multiracial.
Discussion Question: Considering the demographic variables of age and education levels, can you provide examples of products or services that are targeted to college students?
Ethnicity or social class
Occupation or education

15. Segmenting Consumer Markets
Internal Company Techniques
Clustering
Customer Relationship Management (CRM)
External Options/Possibilities
?ID=20&pageName=ZIP%2BCode%2BLookup
Computer-aided methods afford marketers additional help in segmenting markets. The ability of the computer to record, sort, recombine, and analyze a great many variables relating to consumer behavior at the same time allows marketers to develop much more sophisticated market segments.
Key Issues
Among the techniques are as follows:
 Clustering techniques: try to find similar patterns within sets of data.
 Customer databases:
Past customer behavior is often the source of information.
Database sorting is especially helpful in providing services.
Discussion Question: How do you provide information to marketers that are attempting to meet your needs?
 Customer relationship management (CRM):
Sophisticated modeling techniques can predict the types of products or services an individual customer might want, based on the information stored in the database.
Anticipation of emerging needs helps a marketer to maintain a long-term relationship with customers.

16. Segmenting Business Markets
Kind of relationship
Kind of relationship
Type of customer
Type of customer
Segmenting Dimensions for Business Markets
Demographics
Demographics
Purchasing methods
There are also many possible segmentation dimensions in the business or organizational market.
Key Issues
Among these dimensions are:
Kind of relationship between buyer and seller – relationships might range from weak loyalty to strong loyalty to a vendor.
Type of customer – customers may be segmented by whether they are service producers, a government agency, or a manufacturer.
Demographics variables include geographic locations, size of the company, or industry.
How the customer will use the product –will the product being sold be used in an installation, as a component or as a raw material .
Type of buying situation – some characteristics of the buying situation might include the number of people involved in the purchase or whether the buying process is centralized or decentralized.
Purchasing methods refer to factors like whether the buyer uses bids, vendor analysis, e-commerce websites, or other methods of buying.
How customers will use the product
How customers will use the product
Type of buying situation
Type of buying situation

17. Differentiation & Positioning
Marketers can differentiate the marketing mix in order to meet customer needs better than competitors and build a competitive advantage.
Differentiation
How the marketer tried to distinguish his/her offer in the marketplace
Consumers’ perceptions matter
Positioning
How customers think about brands in a market
Marketing research techniques are used to understand consumer perceptions
Marketers can differentiate the marketing mix in order to meet customer needs better than competitors and build a competitive advantage.
Key Issues
Differentiation:
How the marketer tries to distinguish her or his offer in the marketplace -- how it is set off from the competition.
What really matters is that the consumer perceives the marketer’s product to be different.
Positioning:
How customers think about proposed and/or present brands in a market.
Marketing research techniques are designed to collect information about consumer perceptions and determine how different competing products are in the mind of the consumer.

18. Differentiation and Positioning
Sticks like quattro.
Marketers can differentiate the marketing mix in order to meet customer needs better than competitors and build a competitive advantage.
Key Issues
Differentiation:
How the marketer tries to distinguish her or his offering in the marketplace -- how it is set off from the competition.
What really matters is that the consumer perceives the marketer’s product to be different.
Positioning:
How customers think about proposed and/or present brands in a market.
Marketing research techniques are designed to collect information about consumer perceptions and determine differences among competing products in the mind of the consumer.
Firms often use promotion to help “position” how a marketing mix meets target customers’ specific needs.
In this Norwegian ad for the Audi Quattro, the text simply says, “Sticks like quattro.” Although it doesn’t show the car at all, it helps to differentiate the Audi and its four-wheel drive system that holds the road especially well, even in snow.

19. Positioning Example – Perceptual Map Based on Beliefs About Two Attributes
High moisturizing
Low moisturizing 2 1 4 5 7 3 8 6
Zest
Lever 2000
Safeguard
Dial
Lifebuoy
Tone
Dove
Lux
Coast
Lava
Nondeodorant
Deodorant
This diagram shows the output of a computer program that does positioning analysis.
Key Issues
Two attributes of soap that account for the greatest difference in consumer perceptions:
degree to which the soap is a deodorant soap.
degree to which the soap is a moisturizing soap;
The closer that any two dots are to each other, the more similar those brands are in the minds of consumers.
Each segment may have its own preferences. The circles refer to the size of market attracted to a combination of attributes.
Discussion Question: What is the largest segment in the diagram? What brands serve that segment best?
Positioning may also lead to combining instead of segmenting, if a firm can successfully appeal to several segments with the same product.
Therefore, positioning studies can be part of a broader analysis because they:
identify important attributes of the product offerings in a market;
identify what offerings are likely to appeal to segments;
provide a basis for changing the marketing mix, should a marketer decide to reposition a product.

20. Athletic footwear perceptual map example:

21. Chocolate candy…

22. Positioning Example – Perceptual Map Based on Golf Course Booking Behavior
This diagram shows the output of a computer program that does positioning analysis.
Key Issues
Two attributes. The closer that any two dots are to each other, the more similar those brands are in the minds of consumers.
Each segment may have its own preferences. The circles refer to the size of market attracted to a combination of attributes.
Discussion Question: What is the largest segment in the diagram? What brands serve that segment best?
Positioning may also lead to combining instead of segmenting, if a firm can successfully appeal to several segments with the same product.
Therefore, positioning studies can be part of a broader analysis because they:
identify important attributes of the product offerings in a market;
identify what offerings are likely to appeal to segments;
provide a basis for changing the marketing mix, should a marketer decide to reposition a product.

23. Today’s Take-Aways
Segmentation is customer oriented - you start by thinking about the unfulfilled needs of different segments, and then determine whether it is profitable to serve that segment.
Segmentation defines possible target markets.
Target Marketing involves choosing between:
Single, Multiple or Combined Target Market/s
Differentiation matters, as does positioning
Need to understand current positioning to influence future perceptions

24. For Next Class…
Read Chapter 5: Final Consumers and Their Buying Behavior
Hand in first team case assignment