BASIC MARKETING

For use only with Perreault/Cannon/ McCarthy texts, © 2011 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

Chapter 4Focusing Marketing Strategy with Segmentation and Positioning

At the end of this presentation, you should be able to:

1. Know about defining generic markets and product-markets.

2. Know what market segmentation is and how to segment product-markets into submarkets.

3. Know three approaches to market-oriented strategy planning.

4. Know dimensions that may be useful for segmenting markets.

At the end of this presentation, you should be able to:

5. Know a seven-step approach to market segmentation that you can do yourself.

6. Know what positioning is and why it is useful.

7. Understand the important new terms.

Search for Opportunities can Begin by Understanding Markets

What is a company’s

market? a group of potential customers with

similar needs who are willing to exchange

something of value with sellers offering various goods

or services

What is a company’s

market? a group of potential customers with

similar needs who are willing to exchange

something of value with sellers offering various goods

or services

Don’t just focus on the product The product oriented

approach ignores

customers; Customers make a market!

Don’t just focus on the product The product oriented

approach ignores

customers; Customers make a market!

Generic markets (broadly similar needs &

offer diverse ways to

satisfy needs) to product markets (very similar needs & offer various close substitutes)

Generic markets (broadly similar needs &

offer diverse ways to

satisfy needs) to product markets (very similar needs & offer various close substitutes)

Broaden market definitions to

find opportunities (generic and

product market)

Broaden market definitions to

find opportunities (generic and

product market)

Taking Advantage of Opportunities

Relationship Between Generic and Product- Market Definitions

Generic market

definition

Generic market

definition

Customer user Needs

(met by the product)

Customer user Needs

(met by the product)

Customer types(who uses product)Customer types(who uses product)

Geographic area(where market is located)

Geographic area(where market is located)

Product type (good and/or service)

Product type (good and/or service)

Productmarket

definition

Productmarket

definition

Interactive Exercise: Product-Market Definition

What is Product-Market?

© 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Segmentation is a Two-Step Process

andandSegmenting markets to

selecting target markets and

develop marketing mixes

a relatively homogeneous group of consumers who will respond to a

marketing mix in a similar way.

Segmenting markets to

selecting target markets and

develop marketing mixes

a relatively homogeneous group of consumers who will respond to a

marketing mix in a similar way.

Naming broad product-marketsDisaggregating--break apart all

possible needs into some generic markets and broad

product-markets in which the firm may be able to profitably

operate.

Naming broad product-marketsDisaggregating--break apart all

possible needs into some generic markets and broad

product-markets in which the firm may be able to profitably

operate.

Marketers Need Information about Competitors

All customer needs

Some generic market

Homogeneous (narrow) product-

markets

Single target market

Multiple target

markets

Combined target

markets

Narrowing down to specific product-market

Segmenting into possible target markets

Selecting target marketing approach

One broad product-market

Market Segmentation Defines Possible Target Markets

Submarket 4(Socializers)

Submarket 1(Exercisers)

Submarket 2(Off-road

adventurers)

Submarket 3(Transportation riders)

Submarket 5(Environmentalists)

Broad product-market (or generic market) name goes here (The bicycle-riders product-market)

A. Product-market showingthree segments

How Far Should the Aggregating Go?

B. Product-market showingsix segments

Dependability dimension

Sta

tus

dim

ensi

on

Single Target Market Approach

select one homogeneous segment as the target

Multiple Target Market Approach

select two or more target segments

develop a different marketing mix for each segment

Combined Target Market Approach

combine submarkets into a single target market

develop one marketing mix for the combined target

Three Ways to Develop Market-Oriented Strategies

Segmenters and Combiners Aim at Specific Target Markets

The strategy

A combiner aims at two or more submarkets with the same marketing mix.

The Strategy

A segmenter develops a different marketing mix for each segment.

Strategy one

Strategy two

Strategy three

Single targetmarket approach

Multiple targetmarket approach

15

UNSEGMENTED MARKET STRATEGY WITH A SINGLE MARKETING MIX

COMMUNITY WRITING COMPANY

MARKETING MIX VIEW OF MARKET

•LEAD PENCIL•79 CENTS•TELEVISION•EXTENSIVE DISTRIBUTION

ALL POTENTIAL USERS OF A WRITING INSTRUMENT

16

SEGMENTED MARKETING STRATEGY WITH MULTIPLE MARKETING MIXES

MARKETING MIXES VIEW OF MARKET

•FELT-TIP PEN

•$1.00

•CAMPUS NEWSPARER

•VENDING MACHINES

SEGMENT A

(STUDENTS)

•FELT-TIP PEN

•49 CENTS

•PERSONAL SELLING

•DIRECT FROM FACTORY

SEGMENT B

(PROFESSORS)

•GOLD INK PEN

•$50.00

•MAGAZINES

•DEPARTMENT STORES

SEGMENT C

(EXECUTIVES)

A SEGMENTED MARKETING STRATEGY WITH SINGLE MARKETING MIX

MARKETING MIX VIEW OF MARKET

SEGMENT A

(PROFESSORS)

•FELT-TIP PEN

•$1.00

•CAMPUS NEWSPARER

•VENDING MACHINES

SEGMENT A

(STUDENTS)

SEGMENT C

(EXECUTIVES)

Segmenting vs. Combining

Combiners Try to Satisfy

“Pretty Well”(Try to

increase market size)

Combiners Try to Satisfy

“Pretty Well”(Try to

increase market size)

Too Much Combining Is Risky (innovative

segmenter may chip away)

Too Much Combining Is Risky (innovative

segmenter may chip away)

Segmenters Try to Satisfy “Very Well”(develop marketing mix for

each segment)

Segmenters Try to Satisfy “Very Well”(develop marketing mix for

each segment)

Segmenting May Produce Bigger

Sales(consumers are willing to

pay more in order to satisfy their needs more

precisely)

Segmenting May Produce Bigger

Sales(consumers are willing to

pay more in order to satisfy their needs more

precisely)

Key IssuesKey Issues

Segment or Combine?(based on the firms resources;

competition in various segments; similarity of customer needs, attitudes, buying behavior)

Segment or Combine?(based on the firms resources;

competition in various segments; similarity of customer needs, attitudes, buying behavior)

Profit Is the Balancing Point

(dictates how specialized a

marketing mix can be)

Profit Is the Balancing Point

(dictates how specialized a

marketing mix can be)

Checking Your Knowledge

A neighborhood restaurant in a diverse market area sought to appeal to a wide range of consumers by offering a menu with a few choices from each of several different styles of cuisine—American, Italian, Chinese, German, Thai, and Indian. Recently, the restaurant has lost sales to newer restaurants that offer many choices from a single style of cuisine. This example illustrates the danger of adopting a _______________ approach.

A. Single target marketB. Multiple target marketC. Combined target marketD. Structured target marketE. Mixed-mode market

What Dimensions are used to Segment Markets?

OR

QualifyingDimensionsQualifying

Dimensions

• Relevant to including a customer type in a product-market

• Help identify “core benefits”

DeterminingDimensionsDeterminingDimensions

• Affect the customer’s purchase of a product or brand

• Can be further segmented

21

QUALIFYING DIMENSIONS FOR A PROSPECTIVE CAR BUYER

MONEY OR CREDIT

DRIVER’S LICENSE

NEED

JOB THAT REQUIRES A CAR

CHILDREN

ETC.

DETERMINING DIMENSIONS FOR THE CAR

STYLE

PERFORMANCE

APPEARANCE

SAFETY

ETC.

Benefits Sought (e.g., gas mileage)

Benefits Sought (e.g., gas mileage)

Thoughts (e.g., beliefs about a

brand)

Thoughts (e.g., beliefs about a

brand)

Needs (e.g., economic; functional)

Needs (e.g., economic; functional)

Rate of use (e.g., heavy,

medium, light)

Rate of use (e.g., heavy,

medium, light)

Purchase relationship (ongoing; intermittent; bad

relationship)

Purchase relationship (ongoing; intermittent; bad

relationship)

Brand familiarity (insisting; non-

recognition)

Brand familiarity (insisting; non-

recognition)

Kind of shopping (comparison or convenience)

Kind of shopping (comparison or convenience)

Type of problem solving

(approaches)

Type of problem solving

(approaches)

Information required (lot vs. limited)

Information required (lot vs. limited)

Behavioral dimensions for segmenting consumer markets

BehavioralSegmentingDimensions

BehavioralSegmentingDimensions

CUSTOMER RELATED: Customer needs (automobiles) Geographic location (tire chains) Age (insurance policies) Sex (clothing) Family size (child care services) Income (vacation services) Education (magazines)

SITUATION RELATED: Benefits offered (toothpaste) Consumption/use patterns (cameras) Brand familiarity (health care products) Buying situation (soft drinks)

Examples of Possible Segmenting Dimensions for Consumer Markets

Region in a country

(South vs. North)

Region in a country

(South vs. North)

Region of world or country (North

America vs. Europe)

Region of world or country (North

America vs. Europe)

Size of citySize of city

Geographic Segmentation

Dimensions

Geographic Segmentation

Dimensions

Geographic dimensions for segmenting consumer markets

Demographic Dimensions for Segmenting Consumer Markets

Demographic Segmentation Dimensions

Demographic Segmentation Dimensions

IncomeIncome

Sex or ageSex or age

Family size or family life cycle

Family size or family life cycle

Occupation or education

Occupation or education

Ethnicity or social class

Ethnicity or social class

Purchasing methods (bids,

e-commerce websites)

Purchasing methods (bids,

e-commerce websites)

Kind of relationship

(e.g., weak vs. strong loyalty)

Kind of relationship

(e.g., weak vs. strong loyalty)

Type of customer (service, Gov’t

agency or manufacturer

Type of customer (service, Gov’t

agency or manufacturer

Segmenting Dimensions

for Business Markets

Segmenting Dimensions

for Business Markets

Demographics (geographic

locations; size of firm or industry)

Demographics (geographic

locations; size of firm or industry)

Type of buying situation

(centralized or decentralized)

Type of buying situation

(centralized or decentralized)

Segmenting business markets

How customers will use the product (installation,

component, raw material)

How customers will use the product (installation,

component, raw material)

Type of organization (computer software)

Closeness of relationship with customer (travel services)

Size (buildings)

North American Industry Classification System (NAICS) codes (machinery)

Geographic location (electronic parts)

Type of product (X-ray film)

Buying situation (automobile components)

Source loyalty (office supplies)

Reciprocity (transporting services)

Examples of Possible Segmenting Dimensions for Business Markets

Business-to-Business Segmentation

Checking Your Knowledge

The pastor of a new church decides to start prospecting for new members. He focuses first on people who live within a mile radius of the church, and contacts them via mail and by visiting them door-to-door. He then moves on to people who live from one to two miles away from the church, then two to three miles away, and so on, up to a limit of ten miles away. The pastor appears to be focusing on a __________ segmenting dimension. A. Behavioral B. DemographicC. BenefitD. GeographicE. Relationship

Ethical Issues in Selecting segmenting dimensions

EthicalIssuesEthicalIssues

InternationalIssues

InternationalIssuesExploitation Exploitation

Creates Unnecessary

Wants

Creates Unnecessary

Wants

Does HarmDoes Harm

Checking Your Knowledge

A father taking his family of four on vacation was trying to make hotel reservations for a trip to Disney World. He first eliminated all hotels that were in excess of two miles from the main gate to Disney World. Then he focused exclusively on hotels offering suites so that his family would have more space. He eventually selected the Excelsior Hotel because he knew the hotel offered suites and a complementary breakfast. For him, the available of the complementary breakfast was a ______________ segmenting dimension.

A. QualifyingB. DeterminingC. DifferentiatedD. GeographicE. demographic

Segmenting Product Markets

BestPracticeApproachforSegmentingProduct-Markets

BestPracticeApproachforSegmentingProduct-Markets

2. Identify potentialcustomer needs (why people buy product)

2. Identify potentialcustomer needs (why people buy product)

1. Select the broad product-market (what market firm wants to be in)

1. Select the broad product-market (what market firm wants to be in)

3. Form initial homogeneous Submarkets (typical customer/aggregate similar people) 3. Form initial homogeneous Submarkets (typical customer/aggregate similar people)

4. Identify determining dimensions(customer-related characteristics—e.g., economic needs)4. Identify determining dimensions(customer-related characteristics—e.g., economic needs)

5. Name possible product-markets (based on importance of determining detm.)5. Name possible product-markets (based on importance of determining detm.)

6. Evaluate product-marketSegments (why behave as they do)

6. Evaluate product-marketSegments (why behave as they do)

7. Estimate size of eachproduct-market segments7. Estimate size of each

product-market segments

Clustering(find similar patterns)

Clustering(find similar patterns)

Customer Database(past customer behavior)

Customer Database(past customer behavior)

Customer Relationship Management (CRM) (modeling help predict types of products customer might want or need

based on information in database)

Customer Relationship Management (CRM) (modeling help predict types of products customer might want or need

based on information in database)

More Sophisticated Techniques May Help in Segmenting

Positioning

© 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Positioning

+

“Product Space” Representation of Positioning

Sensitive

High moisturizing

low moisturizing

Nondeodorant Deodorant

2

1

4

5

7

38

6

ZestLever 2000

Safeguard

DialLifebuoy

Tone

Dove

LuxCoast

Lava

Positioning and Advertising

© 2011 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

TOO MANY UNNECESSARY PRODUCTS ARE OFFERED

NECESSITY IS IN THE EYE OF THE BEHOLDER.

WHO SAYS THIS IS AN UNNECESSARY PRODUCT?

NOT FOR THIS DOG!

40

Study Question 1

Which of the following is the BEST

example of a "generic market?" 

A. the meat market.B. the minivan market.C. the e-commerce market.D. the beer market.E. the "singles" entertaining market.

41

Study Question 2

Which of the following is the BEST

example of a "generic market?" 

A. The adult "personal expression" market

B. The roller blade market

C. The female exercise shoes market

D. The sports drink market

E. The sporting goods market

42

Study Question 3A product-market is one 

A. In which exchanges are based on barter rather than money.

B. Where one seller has a patent for a superior product and other firms try to imitate the leader the best they can.

C. Where all of the customers want the same product but will consider a substitute if their preferred brand is not available.

D. In which competing sellers offer physically or conceptually similar products.

E. In which no intermediaries operate.

43

Study Question 4Which of the following offers a firm the

greatest potential for profit? 

A. Mass marketing

B. The multiple target market approach

C. The combined target market approach

D. The single target market approach

E. Any of the above—depending on the situation

.

44

Study Question 5A large firm with ample resources wants to minimize the risk of

"inviting“ competitors to "chip away" at its target market(s). It has

segmented its broad product-market and identified several

Homogeneous submarkets—each of which is large enough to offer

attractive sales and profit potential. Which of the following

approaches should the firm use?

A. Multiple target market approach

B. Mass marketing approach

C. Combined target market approach

D. Single target market approach

E. All of the above 

.