1. Chapter 8 - Slide 1 Chapter 8 - Slide 1 © 1998 South-Western College Publishing Essentials of Marketing MKT 333 Chapter 3: Market Segmentation, Targeting, and Positioning Strategies

2. Chapter 8 - Slide 2 Chapter 8 - Slide 2 © 1998 South-Western College Publishing What is a Market? A group of actual or potential customers for a particular product. A market has: l Purchasing power l Willingness to spend money l Authority to spend money A group of actual or potential customers for a particular product. A market has: l Purchasing power l Willingness to spend money l Authority to spend money

3. Chapter 8 - Slide 3 Chapter 8 - Slide 3 © 1998 South-Western College Publishing Competitive Advantage Superiority to or favorable difference from competitors along some dimension important to the market. Two Approaches: l Price leadership strategy l Differentiation strategy Superiority to or favorable difference from competitors along some dimension important to the market. Two Approaches: l Price leadership strategy l Differentiation strategy

4. Chapter 8 - Slide 4 Chapter 8 - Slide 4 © 1998 South-Western College Publishing Price Leadership Strategy Emphasizes underpricing all competitors A price leader: l Has the lowest per unit costs l Generates large volume sales l Examples: Wal-Mart, Southwest Airlines, Bic pens Emphasizes underpricing all competitors A price leader: l Has the lowest per unit costs l Generates large volume sales l Examples: Wal-Mart, Southwest Airlines, Bic pens

5. Chapter 8 - Slide 5 Chapter 8 - Slide 5 © 1998 South-Western College Publishing Differentiation Strategy Product is unique and offers distinct advantage or is set apart in ways other than price. l Examples: Scotch-Brite steel wool pads, Apple Computer Product is unique and offers distinct advantage or is set apart in ways other than price. l Examples: Scotch-Brite steel wool pads, Apple Computer

6. Chapter 8 - Slide 6 Chapter 8 - Slide 6 © 1998 South-Western College Publishing Market/Product Matrix Old/Existing Markets Old/Existing ProductsMARKETPENETRATION

7. Chapter 8 - Slide 7 Chapter 8 - Slide 7 © 1998 South-Western College Publishing Market/Product Matrix Old/Existing Markets Old/Existing ProductsMARKETPENETRATION New Markets MARKETDEVELOPMENT

8. Chapter 8 - Slide 8 Chapter 8 - Slide 8 © 1998 South-Western College Publishing Market/Product Matrix Old/Existing Markets Old/Existing ProductsMARKETPENETRATION New Markets MARKETDEVELOPMENT New ProductsPRODUCTDEVELOPMENT

9. Chapter 8 - Slide 9 Chapter 8 - Slide 9 © 1998 South-Western College Publishing Market/Product Matrix Old/Existing Markets New Markets Old/Existing Products New Products MARKETPENETRATIONMARKETDEVELOPMENT PRODUCTDEVELOPMENTDIVERSIFI-CATION

10. Chapter 8 - Slide 10 Chapter 8 - Slide 10 © 1998 South-Western College Publishing Market/Product Matrix Old/Existing Markets New Markets Old/Existing Products New Products MARKETPENETRATIONMARKETDEVELOPMENT PRODUCTDEVELOPMENTDIVERSIFI-CATION

11. Chapter 8 - Slide 11 Chapter 8 - Slide 11 © 1998 South-Western College Publishing What is Market Segmentation? Dividing a heterogeneous market into a number of smaller, homogeneous submarkets. Mass Market Market Segmentation

12. Chapter 8 - Slide 12 Chapter 8 - Slide 12 © 1998 South-Western College Publishing The Goal of Segmentation l To identify groups of people who will respond similarly to a marketing strategy

13. Chapter 8 - Slide 13 Chapter 8 - Slide 13 © 1998 South-Western College Publishing Commonly Used Bases for Segmentation l Demographic information l socio-economic factors l geographic/geodemographic information l consumer behavior patterns l consumption patterns l benefits desired l Psychographics l Demographic information l socio-economic factors l geographic/geodemographic information l consumer behavior patterns l consumption patterns l benefits desired l Psychographics

14. Chapter 8 - Slide 14 Chapter 8 - Slide 14 © 1998 South-Western College Publishing Segmenting Consumer Markets: Demographic Demographic Segmentation: l Age l Sex l Race and ethnicity l Family life cycle l Marital status l Family size

15. Chapter 8 - Slide 15 Chapter 8 - Slide 15 © 1998 South-Western College Publishing Men and Women Differ in their Responses to Marketing Communication l Insurance: You would feel more comfortable knowing you will have the security of an income within 30 days of your injury, don’t you think? l Cars: You have the safety of knowing that this car was rated as one of the most reliable performers. l Computers: I recommend a faster machine so you don’t have to wait a long rime for the information to appear on the screen and enough capacity for your graphic displays. l Insurance: You would feel more comfortable knowing you will have the security of an income within 30 days of your injury, don’t you think? l Cars: You have the safety of knowing that this car was rated as one of the most reliable performers. l Computers: I recommend a faster machine so you don’t have to wait a long rime for the information to appear on the screen and enough capacity for your graphic displays. l Insurance: For only $36 dollars a month, a fraction more than a dollar a day, you can be guaranteed an income for the rest of your life if you become injured. l Cars: The sleek aerodynamic design make this car an outstanding performer. l Computers: In order to get real performance, you’ll want at least a Pentium 150 with 16 megs of RAM and a 1.6 gig hard drive.

16. Chapter 8 - Slide 16 Chapter 8 - Slide 16 © 1998 South-Western College Publishing Men and Women Differ (cont.) l Financial Services: Let’s work together to develop a plan that will make you feel comfortable if you decide to retire at age 65 l Newsletters: This newsletter will facilitate a better understanding and communication between you and your staff. l Financial Services: Let’s work together to develop a plan that will make you feel comfortable if you decide to retire at age 65 l Newsletters: This newsletter will facilitate a better understanding and communication between you and your staff. l Financial Services: You will need to set aside X amount of money a year in order to retire to a comfortable lifestyle. l Newsletter: The information in this newsletter will make you an expert in your field, so you can more easily direct your staff.

17. Chapter 8 - Slide 17 Chapter 8 - Slide 17 © 1998 South-Western College Publishing Segmenting Consumer Markets: Socioeconomic Socioeconomic Segmentation: l Occupation l Education l Income l Social class Socioeconomic Segmentation: l Occupation l Education l Income l Social class

18. Chapter 8 - Slide 18 Chapter 8 - Slide 18 © 1998 South-Western College Publishing Segmenting Consumer Markets: Geographic Geographic Segmentation: l Continent l Political boundaries l Cultural regions l Metropolitan areas l Climatic regions Geographic Segmentation: l Continent l Political boundaries l Cultural regions l Metropolitan areas l Climatic regions

19. Chapter 8 - Slide 19 Chapter 8 - Slide 19 © 1998 South-Western College Publishing Segmenting Consumer Markets: Geodemographic Geodemographic Segmentation: l Combination of geographic and demographic variables l Example: zip codes in PRIZM system Geodemographic Segmentation: l Combination of geographic and demographic variables l Example: zip codes in PRIZM system BeverlyHills90210

20. Chapter 8 - Slide 20 Chapter 8 - Slide 20 © 1998 South-Western College Publishing Segmenting Consumer Markets: Behavior Patterns Segmenting by Behavior Patterns: l Heavy users vs. infrequent users l Purchasing habits l Loyalty to brand l Benefit expected l Importance of price Segmenting by Behavior Patterns: l Heavy users vs. infrequent users l Purchasing habits l Loyalty to brand l Benefit expected l Importance of price

21. Chapter 8 - Slide 21 Chapter 8 - Slide 21 © 1998 South-Western College Publishing Segmenting Consumer Markets: Psychographic/Lifestyle Psychographic/lifestyle Segmentation: l Activities l Interests l Opinions l Values Psychographic/lifestyle Segmentation: l Activities l Interests l Opinions l Values

22. Chapter 8 - Slide 22 Chapter 8 - Slide 22 © 1998 South-Western College Publishing Segmenting Business Markets Segmentation variables: l Geographic l Organizational characteristics l Purchase behavior and usage patterns l Organizational predisposition or policy Segmentation variables: l Geographic l Organizational characteristics l Purchase behavior and usage patterns l Organizational predisposition or policy

23. Chapter 8 - Slide 23 Chapter 8 - Slide 23 © 1998 South-Western College Publishing Steps in Segmenting and Selecting Target Markets Step 1: Break market into component parts Step 2: Regroup into market segments Step 3: Select which segment(s) to target Heterogeneouscustomers Individualcustomers HomogeneousmarketsegmentsTargetmarket

24. Chapter 8 - Slide 24 Chapter 8 - Slide 24 © 1998 South-Western College Publishing Target Market The market segment toward which the organization decides to direct its marketing plan. TargetMarket

25. Chapter 8 - Slide 25 Chapter 8 - Slide 25 © 1998 South-Western College Publishing Strategies for Target Marketing Four Strategies: UndifferentiatedMarketing ConcentratedMarketing DifferentiatedMarketing CustomMarketing

26. Chapter 8 - Slide 26 Chapter 8 - Slide 26 © 1998 South-Western College Publishing Undifferentiated Marketing Appeal to a broad range of customers. A small store in an isolated town ProductProduct PricePrice DistributionDistribution PromotionPromotion Everybody MarketingorganizationMarketingmix Targetmarket

27. Chapter 8 - Slide 27 Chapter 8 - Slide 27 © 1998 South-Western College Publishing Concentrated Marketing Zeroing in on a single target market. Large chain saw manufacturerLarge manufacturer ProductProduct PricePrice DistributionDistribution PromotionPromotion ProductProduct PricePrice DistributionDistribution PromotionPromotion MarketingorganizationMarketingmix Suburbanusers Lumber-jacks Farmusers

28. Chapter 8 - Slide 28 Chapter 8 - Slide 28 © 1998 South-Western College Publishing Differentiated Strategy Select more than one target market and develop a separate marketing mix for each.

29. Chapter 8 - Slide 29 Chapter 8 - Slide 29 © 1998 South-Western College Publishing Differentiated Strategy: Example of Clairol Clairol MarketingOrganizationSeveral marketing mixes Clairol Option for Men Clairol Loving Care Clairol Loving Care Clairol Ultress Clairol Ultress Miss Clairol Miss Clairol Clairol Frost & Tip Clairol Frost & Tip Men with gray hair Middle aged women Prestige-oriented women Brand loyal users Brand loyal users Young women Young women Target market segment

30. Chapter 8 - Slide 30 Chapter 8 - Slide 30 © 1998 South-Western College Publishing Custom Marketing Marketer seeks to satisfy each customer’s unique set of needs.

31. Chapter 8 - Slide 31 Chapter 8 - Slide 31 © 1998 South-Western College Publishing Custom Strategy Industrialrobotsmainte-nance MarketingOrganization Individual marketing mix for each customer Marketing mix #1 Marketing mix #2 Marketing mix #3 Marketing mix #4 Customer #1 Customer #2 Customer #3 Customer #4 Individualcustomers

32. Chapter 8 - Slide 32 Chapter 8 - Slide 32 © 1998 South-Western College Publishing Positioning l What do we want our customers to think about our products? l How should it compare to our competitor’s products?

33. Chapter 8 - Slide 33 Chapter 8 - Slide 33 © 1998 South-Western College Publishing Positioning Market position: The way consumers perceive the brand relative to its competition. l Head-to-head competition l Repositioning Market position: The way consumers perceive the brand relative to its competition. l Head-to-head competition l Repositioning

34. Chapter 8 - Slide 34 Chapter 8 - Slide 34 © 1998 South-Western College Publishing Products are commonly positioned on: l Product attributes l Benefits offered l Usage occasions l User groups

35. Chapter 8 - Slide 35 Chapter 8 - Slide 35 © 1998 South-Western College Publishing Perceptual Mapping l Graphically displaying consumers’ perceptions of product attributes across two or more dimensions l Uses: l to analyze current position l to select a position for a new product l to identify untapped markets

36. Chapter 8 - Slide 36 Chapter 8 - Slide 36 © 1998 South-Western College Publishing Market Positioning Map: Tea IcedHot Traditional flavor Unique flavor l Luzianne l Lipton l Tetley l Celestial Seasons l Nestea 1980s

37. Chapter 8 - Slide 37 Chapter 8 - Slide 37 © 1998 South-Western College Publishing Repositioning: Tea IcedHot Traditional flavor Unique flavor l Luzianne l Lipton l Tetley l Celestial Seasons l Nestea mid-1990s l Arizona Iced Tea l Snapple l Lipton Rounds l Tetley Rounds l Lipton Natural Teas l Lipton Flavored