perreault and mccarthy ch 3

CHAPTER 3FOCUSING MARKETING STRATEGY WITH SEGMENTATION

AND POSITIONING

When You Finish This Chapter, You Should

1. Understand why marketing strategy planning involves a process of narrowing down from broad opportunities to a specific target market and marketing mix.

2. Know about the different kinds of marketing opportunities.

3. Understand why opportunities in international markets should be considered.

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

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

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

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

8. Know what positioning is--and why it is useful.

9. Understand the important new terms (shown below).

Multimedia Lecture Support Package to Accompany Basic Marketing3-1

breakthrough opportunities

competitive advantage

differentiation

S.W.O.T. analysis

market penetration

market development

product development

diversification

market

generic market

product-market

market segmentation

segmenting

market segment

single target market approach

multiple target market

approach

combined target market

approach

combiners

segmenters

qualifying dimensions

determining dimensions

clustering techniques

customer relationship management

positioning


Outline of Chapter 3: FOCUSING MARKETING STRATEGY WITH SEGMENTATION AND POSITIONING

INTRODUCTION

WHAT ARE ATTRACTIVE OPPORTUNITIES?

Transparency 21 "Focusing Marketing Strategy and Evaluating Market Opportunities"

Breakthrough opportunities are best

BREAKTHROUGH OPPORTUNITIES--opportunities that help innovators develop hard-to-copy marketing strategies that will be very profitable for a long time.

Competitive advantage is needed--at least

COMPETITIVE ADVANTAGE--a firm has a marketing mix that the target market sees as better than a competitor's mix.

Overhead 21 "Competitive Advantage"

Avoid hit-or-miss marketing with a logical process

Transparency 22 (Exhibit 3-1) "Overview of Marketing Strategy Planning Process"

MARKETING STRATEGY PLANNING PROCESS HIGHLIGHTS OPPORTUNITIES

Overhead 22 "Marketing Strategy Planning Process"

Process narrows down from broad opportunities to specific


strategy

Segmentation helps pinpoint the target

Narrow down to a superior marketing mix

DIFFERENTIATION--the marketing mix is distinct from and better than what is available from a competitor.

Screening criteria make it clear why you select a strategy

S.W.O.T. analysis highlights advantages and disadvantages

S.W.O.T. ANALYSIS--identifies and lists the firm’s strengths and weaknesses and its opportunities and threats.

TYPES OF OPPORTUNITIES TO PURSUE

Transparency 23 (Exhibit 3-2) "Four Basic Types of Opportunities"

Overhead 23 "Examples of Different Types of Opportunities"

Market penetration

MARKET PENETRATION--trying to increase sales of a firm's present products in its present markets--probably through a more aggressive marketing mix.

Market development

MARKET DEVELOPMENT--trying to increase sales by selling present products in new markets.

Product development


PRODUCT DEVELOPMENT--offering new or improved products for present markets.

Diversification

DIVERSIFICATION--moving into totally different lines of business--perhaps entirely unfamiliar products, markets, or even levels in the production-marketing system.

Which opportunities come first?

INTERNATIONAL OPPORTUNITIES SHOULD BE CONSIDERED

The world is getting smaller

Develop a competitive advantage at home and abroad

Get an early start in a new market

Find better trends in variables

SEARCH FOR OPPORTUNITIES CAN BEGIN BY UNDERSTANDING MARKETS

Find breakthrough opportunities

What is a company's market?

MARKET--a group of potential customers with similar needs who are willing to exchange something of value with sellers offering various goods and/or services--that is, ways of satisfying those needs.


Transparency 24 (Exhibit 3-3) "Narrowing Down to Target Markets"

Don't just focus on the product

From generic markets to product-markets

GENERIC MARKET--a market with broadly similar needs--and sellers offering various--often diverse--ways of satisfying those needs.

PRODUCT-MARKET--a market with very similar needs--and sellers offering various close substitute ways of satisfying those needs.

Broaden market definitions to find opportunities

NAMING PRODUCT-MARKETS AND GENERIC MARKETS

Product type should meet customer needs

No product type in generic market names

Transparency 25 (Exhibit 3-4) "Relationship between Generic and Product-Market Definitions"

MARKET SEGMENTATION DEFINES POSSIBLE TARGET MARKETS

Overhead 24 "How Readings Relate to Market Segmentation"

Market segmentation is a two-step process

MARKET SEGMENTATION--a two-step process of: (1) naming broad product-markets and (2) segmenting these broad product-


markets in order to select target markets and develop suitable marketing mixes.

Naming broad product-markets is disaggregating

Market grid is a visual aid to market segmentation

Overhead 25 (Exhibit 3-5) "A Market Grid Diagram with Submarkets"

Segmenting is an aggregating process

SEGMENTING--an aggregating process that clusters people with similar needs into a "market segment."

MARKET SEGMENT--a (relatively) homogeneous group of customers who will respond to a marketing mix in a similar way.

Transparency 26 (Exhibit 3-6) "Every Individual Has His or Her Own Unique Position in a Market--Those with Similar Positions Can Be Aggregated into Potential Target Markets: A. Product-market showing three segments," and "B. Product-market showing six segments"

How far should the aggregating go?

Criteria for segmenting a broad product-market

Overhead 26 "Criteria for Segmenting"

Transparency 27 "Criteria for Segmenting"

Target marketers aim at specific targets


SINGLE TARGET MARKET APPROACH--segmenting the market and picking one of the homogeneous segments as the firm's target market.

MULTIPLE TARGET MARKET APPROACH--segmenting the market and choosing two or more segments, then treating each as a separate target market needing a different marketing mix.

COMBINED TARGET MARKET APPROACH--combining two or more submarkets segments into one larger target market as a basis for one strategy.

Overhead 27 "Three Ways to Develop Market-Oriented Strategies"

Transparency 28 (Exhibit 3-7) "Target Marketers Have Specific Aims"

Combiners try to satisfy "pretty well"

COMBINERS--try to increase the size of their target markets by combining two or more segments.

Too much combining is risky

Segmenters try to satisfy "very well"

SEGMENTERS--aim at one or more homogeneous segments and try to develop a different marketing mix for each segment.

Transparency 29 (Exhibit 3-8) "There May Be Different Demand Curves in Different Market Segments"

Segmenting may produce bigger sales


Should you segment or combine?

Profit is the balancing point

WHAT DIMENSIONS ARE USED TO SEGMENT MARKETS?

Segmenting dimensions guide marketing mix planning

Overhead 28 (Exhibit 3-9) "Relation of Potential Target Market Dimensions to Marketing Strategy Decision Areas"

Many segmenting dimensions may be considered

Overhead 29 "Examples of Possible Segmenting Dimensions for Consumer Markets"

Overhead 30 (Exhibit 3-10) "Possible Segmenting Dimensions and Typical Breakdowns for Consumer Markets"

Overhead 31 "Examples of Possible Segmenting Dimensions for Business Markets"

Overhead 32 (Exhibit 3-11) "Possible Segmenting Dimensions for Business/Organizational Markets"

What are the qualifying and determining dimensions?

QUALIFYING DIMENSIONS--the dimensions that are relevant to including a customer type in a product-market.

DETERMINING DIMENSIONS--the dimensions that actually affect the customer's purchase of a specific product or brand in a product-market.

Determining dimensions may be very specific


Overhead 33 "Segmenting Dimensions"

Transparency 30 (Exhibit 3-12) "Finding the Relevant Segmenting Dimensions"

Determining dimensions may change

Qualifying dimensions are important too

Different dimensions needed for different submarkets

Ethical issues in selecting segmenting dimensions

Transparency 31 "Segmenting the Broad Market for Motel Guests in a Metropolitan Area"

Overhead 34 "Seven-Step Approach to Segmenting Consumer Product-Markets"

International marketing requires even more segmenting

There are more dimensions--but there is a way

MORE SOPHISTICATED TECHNIQUES MAY HELP IN SEGMENTING

Clustering usually requires a computer

CLUSTERING TECHNIQUES--approaches used to try to find similar patterns within sets of data.

Overhead 35 "Toothpaste Market Segment Description"

Customer database can focus the effort


CUSTOMER RELATIONSHIP MANAGEMENT (CRM)--a method where the seller fine-tunes the marketing effort with information from a detailed customer database.

Overhead 36 "Customer Relationship Management (CRM)"

DIFFERENTIATION AND POSITIONING TAKE THE CUSTOMER POINT OF VIEW

Differentiate the marketing mix to serve customers better

Positioning is based on customers' views

POSITIONING--an approach that refers to how customers think about proposed and/or present brands in a market.

Overhead 37 "Positioning and Differentiation"

Transparency 32 (Exhibit 3-13) "'Product Space' Representing Consumers' Perceptions for Different Brands of Bar Soap"

Each segment may have its own preferences

-Combining versus segmenting

Positioning as part of broader analysis

SUPPLEMENTARY POWERPOINT ARCHIVE

“Competitive Advantage,” Overhead 21

Shout and Crème Saver ads (p. 63)

“Focusing Marketing Strategy and Evaluating Market Opportunities,” Transparency 21


“Marketing Strategy Planning Process,” Overhead 22

“Overview of Marketing Strategy Planning Process,” Transparency 22: (Exhibit 3-1)

Audi Quattro ad (p. 65)

“Examples of Different Types of Opportunities,” Overhead 23

“Four Basic Types of Opportunities,” Transparency 23: (Exhibit 3-2)

Chinese McDonald’s photo (p. 67)

Lipton website and photo of Asian street scene (p. 69)

Olympus, Vivitar, and Sony camera ads (p. 70)

“Narrowing Down to Target Markets,” Transparency 24: (Exhibit 3-3)

Hallmark logo (p. 71)

Imark and MapLinx ads (p. 72)

“Relationship between Generic and Product-Market Definitions,” Transparency 25: (Exhibit 3-4)

“How Readings Relate to Market Segmentation,” Overhead 24

Opel van photo (p. 74)

“A Market Grid Diagram with Submarkets,” Overhead 25: (Exhibit 3-5)

“Every Individual Has His or Her Own Unique Position in a Market—Those with Similar Positions Can Be Aggregated into Potential Target Markets: A. Product-market showing three segments, and B. Product-market showing six segments,” Transparency 26: (Exhibit 3-6)

Heinz ad (p. 76)

“Criteria for Segmenting,” Overhead 26

“Criteria for Segmenting,” Transparency 27

“Three Ways to Develop Market-Oriented Strategies,” Overhead 27

“Target Marketers Have Specific Aims,” Transparency 28: (Exhibit 3-7)


“There May Be Different Demand Curves in Different Market Segments,” Transparency 29: (Exhibit 3-8)

Village.com website (p. 79)

“Relation of Potential Target Market Dimensions to Marketing Strategy Decision Areas,” Overhead 28: (Exhibit 3-9)

“Examples of Possible Segmenting Dimensions for Consumer Markets,” Overhead 29

“Possible Segmenting Dimensions and Typical Breakdowns for Consumer Markets,” Overhead 30: (Exhibit 3-10)

“Examples of Possible Segmenting Dimensions for Business Markets,” Overhead 31

Sorel hiking boots ad (p. 80)

“Possible Segmenting Dimensions for Business/Organizational Markets,” Overhead 32: (Exhibit 3-11)

“Segmenting Dimensions,” Overhead 33

“Finding the Relevant Segmenting Dimensions,” Transparency 30: (Exhibit 3-12)

Ritz and Club Med ads (p. 84)“Segmenting the Broad Market for Motel Guests in a Metropolitan Area,” Transparency 31

“Seven-Step Approach to Segmenting Consumer Product-Markets,” Overhead 34

“Toothpaste Market Segment Description,” Overhead 35

“Customer Relationship Management (CRM),” Overhead 36

Bic and Target ads (p. 86)

“’Product Space’ Representing Consumers’ Perceptions for Different Brands of Bar Soap,” Transparency 32: (Exhibit 3-13)

“Positioning and Differentiation,” Overhead 37

NOTES ON THE INTERACTIVE EXERCISE

Overview of the Exercise on Marketing Strategy

The purpose of this exercise is to help students extend their conceptual knowledge of the marketing strategy planning process, specifically as it relates to the broad types of growth


strategies that a firm might choose to pursue.

For each of the four types of growth opportunities, students are shown statements describing marketing actions undertaken in the context of specific brands. Students are expected to select the statement description that best illustrates the particular type of strategic opportunity that is under consideration.

Concept Review

The overarching purpose of strategic marketing planning is to match a firm’s capabilities, resources, and objectives to attractive opportunities that the firm is in a position to do something about. SWOT analysis is the preferred method of identifying and evaluating opportunities in light of the strengths and weaknesses of the firm, and the environmental forces that may influence the success or failure of the venture. While many firms will pursue more than one type of strategic opportunity concurrently, it is useful to distinguish the four basic types of opportunities in terms of their similarities and differences. The strategic opportunities discussed below represent the four combinations of A) present vs. new products, and B) present vs. new markets. It may be worth reminding students that “market” in this context refers to groups of consumers / businesses with a basic shared need, or new and untapped geographic locations. “New” products are those that are new to the company and are not restricted to first time product innovations that essentially create a new product category within an industry. Market penetration (present product; present market) occurs when a company undertakes various actions designed to encourage current customers to buy, consume, or in the case of charities – contribute more. Market Development (present product, new market) occurs when a firm attempts to expand sales by targeting a new user market with an existing product. Two key methods of implementing this strategy include 1) selling an existing product to a new geographic market in which the firm currently does not conduct business, and 2) marketing new uses of existing products to new users.

Product Development (new product, present market) occurs when new or improved products are developed for present markets. Restaurants frequently undertake product development when they introduce new menu items or menu lines.

Diversification (new product, new market) is typically considered to be the riskiest opportunity of the four, as it requires a company to move into a totally new line of business while marketing to a new market. Risk is greater as the company’s lack of expertise and experience in both the product (industry, competition, production process, perhaps distribution channels, etc.) and market (targeted consumers, needs, buying habits, perhaps methods of reaching consumers) leaves greater potential for error.

Using the Exercise

Initial Screen


1. Slide one uses a replication of Exhibit 3-2 to introduce the four types of strategic opportunities.

A. The interactive exercises are meant to be involving and fun for students. As you begin the exercise, you might lighten the mood and grab students’ attention by means of phrases such as: “{student name}, come on down! You’re the first contestant to play our game today!”

B. The professor then asks the student volunteer to choose any one of the four opportunities.

C. The professor clicks the portion of the strategic opportunity matrix that represents the student’s selection.

Next Screen

2. The screen pertaining to the selected strategic opportunity appears.

A. The professor reads the descriptions to the class.

B. The professor then asks students to select the statement that exemplifies the strategic opportunity being investigated, and clicks on the letter that corresponds to the student’s response.

C. If the wrong response is given, a buzzer will sound, and the letter designating the incorrect answer will turn red. For details related to right and wrong answers, refer to the ANSWERS AND EXPLANATION section below.

D. The selection process is repeated until the correct answer is chosen, and a cash register “Ch-ching!” sound is heard. The slide automatically transitions back to the expanded initial screen as described below in step 3.

Expanded Initial Screen with Correct Example

3. The four strategic opportunities are shown, with modifications. A. Exhibit 3-2 is updated.

i. The opportunity that was previously chosen is displayed in a different color to indicate that it has already been investigated and cannot be reselected.

ii. The appropriate product/market grid cell is updated to show the answer that correctly illustrates an application of that strategic opportunity.

B. The remaining strategic opportunities transition briefly.C. The professor asks for a student volunteer to select from the three remaining types

of opportunity, and clicks on the table cell corresponding to that student’s choice.

Next Several Screens

4. The procedures described in steps 2 and 3 are repeated until all strategic marketing opportunity types have been examined.

Final Screen


5. The final screen displays each form of strategic opportunity accompanied by the correct statement describing marketing actions that provide that opportunity.

6. The professor clicks the indicated icon to end the exercise.

NOTE: Clicking the “X” at any time will end the exercise.

Answers and Explanations

MARKET PENETRATIONAnswer A: INCORRECT, BUT DEBATABLE

This one is rather tricky. While the majority of people who purchase TV Guide do so for its functional value, there has always existed a small group who collects TV Guide for the sake of collecting. TV Guide’s strategy of publishing multiple covers is probably best described as an attempt to develop and grow a market that has existed, but has traditionally been ignored. Students may argue that A) TV Guide is actually following a market penetration strategy since collectors existed prior to its implementation and offering multiple covers encourages this group to buy more, or B) that it is actually an example of product development, since the cover is different. As a counterpoint, the instructor can point out that the new covers are simply a means by which a new use (collecting) is being satisfied, and that promoting new uses for existing products is a means of market development. The product itself (contents within the TV Guide) do not change, only the cover. Useful discussion can be generated as a result of differing points of view.

Answer B: CORRECT Promotions have always been an excellent means of penetrating the market. Until the recent scandal, McDonald’s “Monopoly” promotion was the most successful of the company’s games.

Answer C: INCORRECTThe development of a new product by a company known as an ice cream manufacturer does not qualify as market penetration. Firms pursuing a market penetration strategy do not alter the product being sold, or the market to which it is targeted.

Answer D: INCORRECTThis is an example of product development by Dr. Pepper.

MARKET DEVELOPMENTAnswer A: INCORRECT

Developing a new product outside current areas of expertise for a new market (mechanics, do-it-yourselfers) is an example of diversification.

Answer B: INCORRECTThis example features a new, rather than existing product, and thus does not qualify as market development.

Answer C: CORRECT Offering existing products to a new geographic market never before served is an example of market development. International expansion, or domestically expanding distribution to new regions of the U.S. qualifies as market development. As previously noted, developing new uses for existing products that satisfy different needs is a second form of market development.


Answer D: INCORRECTA local bank that develops its own Internet service division is not only serving a new national market, it is also venturing into a new line of business outside its area of expertise. Pursuing this opportunity would be an example of a bank engaging in diversification.

PRODUCT DEVELOPMENTAnswer A: INCORRECT

The Lean Cuisine example is best classified as diversification, as it would require new suppliers, production facilities, channels of distribution, advertising, etc., in order to service what is essentially a new market via products new to the company.

Answer B: INCORRECTFrito-Lay has decided to take advantage of a market development opportunity by introducing snack food to the Russian market.

Answer C: CORRECTRC is developing a line of fruit-flavored ice tea beverages for their existing market of beverage consumers. Perhaps RC is attempting to better satisfy the needs of caffeine drinkers who don’t care for carbonated beverages, and prefer the taste of fruit to cola. The drinks will be made available through traditional distribution channels (grocery, convenience, mass-merchandise) and can be produced through existing production processes; beverage production and marketing represents a core competency of the firm rather than a new business, so capitalizing upon this opportunity would NOT be considered an example of diversification.

Answer D: INCORRECTThe product has not changed, just the suggested usage – an example of market development.

DIVERSIFICATIONAnswer A: INCORRECT

Increasing the amount or rate of giving among current donors is an example of market penetration.

Answer B: INCORRECTThis example best corresponds with the strategy of product development.

Answer C: INCORRECTThis example best corresponds with the strategy of product development.

Answer D: CORRECTSaudi Arabia would clearly be a new market for Coors, as strongly held religious convictions typically forbid the consumption of fermented beverages such as beer among the Saudi; hand-held power tools represent a business far removed from Coors current brewing operations.

IDEAS ON USING COLOR ADS WITH CHAPTER 3

Transparency 151(Dun & Bradstreet) It’s what separates heads of marketing from former heads of marketing.


Dun and Bradstreet is a leading provider of business information. Its Market Spectrum product provides a marketing manager with instant access to highly detail information about geographically defined markets. A manager can combine data from Market Spectrum with its own internal customer information to create reports for customer relationship management and also to identify new market opportunities–for example, in market areas where potential demand is not yet being tapped.

Transparency 153(Victory Motorcycles) No, the motorcycle gods will not strike you down.

A motorcycle may fill a variety of different needs–ranging from functional needs like transportation to emotional needs like excitement or status within some group. The marketing mix a firm develops must consider the needs of segments in its specific target market.

Transparency 154(Colgate-Palmolive) Colgate 2in1 toothpaste and mouthwash.

Colgate-Palmolive has long had a strong presence in the oral care product-market. It has continued to increase sales to its current target customers with innovative new products, including Total brand toothpaste that was launched in 1997. This ad is for another new product that combines the benefits of toothpaste (cleaner teeth) and mouthwash (fresher breath).

Transparency 155(ReplayTV) I use pause live TV when I order a pizza. And when the pizza guy comes. And then later when I order Chinese. Stuff like that.

A digital TV replay/recording system may compete for customers in the same generic market with videotape recorders as well as with other systems (like TiVo) that are more direct rivals.

Transparency 158(PerformanceBike.com) For people who love bikes.

Bicycle riders make up a broad product-market. One submarket might consist of people who want basic transportation, another of people who want exercise, another of people who are concerned about the environment, and another of people who are just passionate (about cycling, that is).

Transparency 160(Texaco) With a little energy from Texaco, a mind can stay open all night. We’re making sure the people of Thailand get the power they need.

Firms like Texaco look for market opportunities around the world.

Transparency 162(Saturn) Somewhere between sliced bread and instant oatmeal, there’s the third door.

Segmenting dimensions should be useful for identifying customers and deciding on marketing mix variables.

Transparency 163


(Bandag) There are plenty of tires that will fit your trucks. We make tires that fit your application.

In business markets, firms often segment their markets based on how customers will use the firm's product.

Transparency 166(Claritas) Present the right product at the right time.

Claritas' Intelliserve system can be used by a firm as part of a customer-relationship management (CRM) program. For example, when a customer is contacted the system helps the salesperson determine opportunities for cross-selling of different products in the firm's product line.

Transparency 170(SRDS) Consumer lifestyles and demographics in one source—The Lifestyle Market Analyst!

Firms often rely on demographic data to better understand their target markets and to make descriptions of target market segments more operational; for example, many media describe their audiences in demographic terms so that a marketer can more effectively match promotional media to the characteristics of the target segment.

Transparency 174(Pringles) PringlePaks are here! Use it to pack 7 days of great tasting, well-protected Pringles Chips from just one can!

Marketing managers for Pringles are likely to increase their penetration with a packaging innovation that makes it easier to put Pringles in a kid's lunch bag. For some consumers, good taste in a snack is the qualifying dimension, but the brand of snack they choose will be determined by what it easy to pack (without it crumbling into dust before lunch!).

Transparency 176(Claritin) Cielos azules desde hoy.

Spanish language ads for Claritin are part of a target marketing effort focused on the rapidly growing market of Hispanic Americans.

Transparency 177(MailStation) E-mail for when I’m up to my eyeballs in strained peas.

The MailStation is a product that meets the needs of target customers who want convenient access to email services but without the expense, complications, hassle, and space requirements of a general-purpose desktop personal computer. The email needs of a busy parent may be quite different from the email needs of a business user--and may require a very different marketing mix.

Transparency 178(Cirio) Experts in tomato sauce prefer Cirio.

In Italy, Cirio is a well known brand name and it is a marketing strength. On the other hand, in countries where Cirio would like to expand sales and market share it is not so well


known--and it may take significant marketing effort, over a period of time, before consumers have in mind the positioning that "Experts in tomato sauce prefer Cirio."

Transparency 180(efruitinternational.com) The buyer is in Tokyo. The shipping company is in Oslo. The packer is in Vero Beach. The banker is in Atlanta. Now they can all meet in one place.

Many firms are seeing opportunities for new growth in international markets, and the growth of e-commerce is likely to accelerate this trend.

Transparency 183(Allen Edmonds) In basket. Out basket. Picnic basket. Allen-Edmonds shoes make every day a walk in the park.

Allen-Edmonds offers a complete product line that is designed to meet the different needs of different target consumers.

Transparency 185(Canon PowerShot S100 Digital Elph) Any camera can be digital. Only one can be an ELPH.

Different camera companies may compete with each other in the same product-market, but their offerings are likely to appeal to different market segments with different needs.

Transparency 192(Sanford) ------ as silk. Now, when you need a smooth pen, you’ll never draw a blank. Uni-bal. Smooth. Real Smooth.

The Uni-bal pen has been developed so that it writes more smoothly that most other inexpensive pens, and because that point of differentiation is emphasized in ads consumers are more likely to remember that positioning.

Transparency 195(BB&T) At BB&T, we don’t think there’s anything small about your business.

BB&T develops different marketing mixes for different target markets, including the segment of small businesses that has grown rapidly during the past decade. In developing a marketing mix for this small business group, BB&T has learned that it is usually better to focus on the needs satisfied by products rather than on the product characteristics themselves.

Transparency 199(Godiva) The Godiva of cookies. They make other cookies seem like child’s play…

Many cookie companies see kids as their primary target market, but Godiva has a different target segment for its high quality cookies--and its whole marketing mix is different than what is typical for cookies.

Transparency 200(Savin) Is your connection with Xerox getting a little frayed?

Savin wants target customers to view its service and quality as different from and better than what they can get from Xerox–a competitor that is well established in the market.


Transparency 202(FocusVision Worldwide) Video transmission of live international focus groups…right to your office.

Advances in information technology are making it easier and faster for marketing managers to learn about and respond to opportunities in international markets.

Transparency 203(Prestone) Is there anyone else? Stock Prestone Antifreeze Coolant and forget about the competition.

Prestone developed its LowTox line of antifreeze so that it would provide an added margin of safety to pets and wildlife in the event of a spill or overflow. All antifreeze is designed to keep water from freezing, so this differentiation of its product may be the determining dimension that encourages some target customers to select the Prestone brand.

Transparency 205(Michelin) Because so much is riding on your tires.

Over time, Michelin's marketing mix has focused on premium quality and safety, and that positioning and differentiation has been reinforced with Michelin's creative advertising. Some segments may be more focused on other features–like a low price–but interest in safety is a need that applies to most consumers.

Transparency 206(Campbell Soup Company) If it were any easier it would heat itself. The great taste of Campbell’s is now in an easy-open pop top.

Campbell's is now creating more different types of soups to meet the needs of different target markets. Similarly, its easy-open pop top might be the determining dimension for campers or other consumers for whom convenience is the important factor.

Transparency 207(Kellogg Company Morningstar Farms) Don’t you want some burger to love?

Morningstar Garden Veggie Patties offer the benefit of quality ingredients and seasonings to provide consumers with a bolder flavor. Many consumers are interested in foods that contribute to a more healthy diet, but (within the set of healthy-food alternatives that they consider) excellent taste is often the key factor that determines which particular brand they will choose. By focusing on excellent flavor in both its product and its promotion, the Morningstar Garden Veggie Patties brand is trying to build a competitive advantage with this target market.

Transparency 208(IMPACTMedia) Sampling waste illustrated. Zip Codes. Pinpointing.

Customer relationship management efforts rely on a customer database to develop more targeted marketing efforts–which should result in a higher return on marketing spending. Knowing exactly where target customers are located is extremely important in developing promotion and place plans.

Transparency 209(Nippon Yusen Kaisha NYK Line) We’re changing the shape of shipping, again.


International marketing efforts often depend on logistics systems that can efficiently and effectively handle bulky cargo--whether it's massive industrial machines, vehicles, containers, or even trains. NYK, which is based in Tokyo, has a fleet of ships that is designed to address this challenge for its customers. NYK is always thinking of new methods and vessel configurations to accommodate a wide variety of cargos and thus meet the needs of different segments of business customers.

Transparency 212(RBI Water Heaters) If you want to know what it’s like to service our competitors’ water heaters, start peeling.

RBI differentiates its industrial water heaters by making it easier to repair or replace major component parts, which may make all the difference in a purchase decision.

PERSPECTIVES ON TEACHING CHAPTER 3--FOCUSING MARKETING STRATEGY WITH SEGMENTATION AND POSITIONING

A key challenge of marketing strategy planning--and in fact of all strategy decisions in business--is to figure out what the focus and priorities should be. If those decisions are made well, it is much easier to be effective in integrating the individual decisions that support that focus. Thus, in this chapter we introduce a model of the overall marketing strategy planning process that helps students see what types of thinking and analysis are involved in narrowing down from "all possible opportunities" to a specific “best” strategy (target market and marketing mix). And this specific strategy should offer the target market superior customer value--and yield for the firm a real competitive advantage and superior marketing results. Faculty who have taught from earlier editions of Basic Marketing will realize that this exhibit is simply a visual tool for organizing the topics covered in the text. However, by presenting the ideas in this fashion it makes it clearer that a marketing manager needs to have a logical and clear process for analyzing each marketing situation and for narrowing down to the specific strategy that the firm will pursue.

It makes sense to devote some time to this idea and to an overview of the topics in this exhibit--relating them to the structure of your course and reading assignments in the text. Emphasize that at this point in the course this exhibit just provides a broad overview--a "quick summary" of a way of thinking--but that as the course evolves, they will become more expert on the many decisions and factors that are involved in understanding each of the individual elements in the framework and how they relate to each other. If you return to this exhibit in subsequent classes as new topics are introduced, students will more clearly see their progress on the road toward developing effective marketing skills.

Once the general framework is introduced, students will have a clearer understanding of the role of Chapter 3 and the discussion of material related to that reading.

Analyzing and identifying potential target market opportunities is one of the most important--and also one of the most challenging--marketing jobs. In the same vein, one of the teaching challenges in this area is to ensure that students understand that this involves a "balancing act." On the one hand, marketing managers should start with a view of the needs of potential customers in a broad product-market--so that they don't fall into the trap of thinking about


opportunities only in terms of the physical product that the company currently produces (i.e., the type of "marketing myopia" that Ted Levitt so skillfully described and illustrated in his classic Harvard Business Review article). On the other hand, it is not adequate to just develop a vision of the broad, generic market in which the firm wishes to compete. Rather, once the broad product-market or generic market has been identified and analyzed, it is important to narrow down to more specific target market opportunities that the firm can tackle--and tackle in such a way as to develop a competitive advantage. A basic objective of this chapter is to introduce students to these ideas and, importantly, give them workable guidelines and frameworks so that they can do it themselves. Thus, the chapter does not simply describe the idea of market segmentation, but rather develops the concept in sufficient depth so that the student will be able to apply the idea in subsequent chapters and later for some company.

Before beginning discussion of the material in this chapter, it is useful to point out to students that it is the first in a series of chapters--up to and including Chapter 8--that deal with the "target market" aspect of marketing strategy planning. After that, the focus shifts to the 4Ps decision areas that a marketing manager works with in meeting the needs of the target market. You may even want to acknowledge to students that there is a "chicken and egg" question that arises here from a teaching perspective. Subsequent chapters provide substantially more information about dimensions of customers that can be used to facilitate market segmentation thinking. For example, Chapter 3 introduces the idea of segmenting customers based on needs, and then the chapters on the behavior of final consumers and business and organizational customers develops in more detail the different types of needs that may be relevant. In the same vein, Chapter 3 introduces the idea that the size of a target market and the extent to which different segments within a broad product-market can be combined into a single target market are important factors in accessing an opportunity. Then, subsequent chapters on demographic dimensions of the consumer market and the chapter on uncontrollable environments develop the specifics of these ideas in more detail. Thus, it is useful to emphasize to students that subsequent classes and chapters will put more flesh on the skeleton (structure) that they learn about in this chapter.

In the same vein, the discussion of positioning and differentiation emphasizes the link--from a broad perspective--between the target market selection and what the firm is going to do to satisfy that market's needs in a way that results in a competitive advantage for the firm and superior value for the customer.

The chapter-opener example focuses on Polaroid I-Zone. The Polaroid case is a very useful vehicle for emphasizing the importance of looking at markets in terms of customer needs--not just products that the firm already makes--and that innovative marketing managers are constantly coming up with completely "new businesses" by identifying and developing new market opportunities. On the other hand, this is an opportunity that will be “swamped” by the move to digital photography as a better way to get instant photographs. While the I-Zone is a nice example of target market thinking to create more sales and profits from a technology/product line that Polaroid already has, it is nevertheless the case that Polaroid’s main business in the past has been in “images” and not in “toys”—so it has to worry longer term about how the positioning and image of its new digital photography products might be impacted by this particular marketing mix.


The highlighted teaching case for this chapter (on page 85) focuses on Herman Miller and its targeting of new firms and small businesses. Part of the logic for introducing this material at this point is to prompt students to think more explicitly about the fact that these ideas apply in business markets as well as consumer markets. The Herman Miller website is excellent and reflects the careful segmentation thinking that goes into developing and marketing its product lines in general. Thus, if your classroom has high-speed Internet access you might want to visit the HM website. Ask students to comment on what aspects of the website give attention to the segmentation and positioning issues discussed in this chapter.

The Kaepa example (on pages 78-79) is really good at showing how a firm can use target marketing to develop a competitive advantage, even when other firms are strong or well established with less specific targets. A good question to ask is whether firms like Nike and Adidas could have pursued this opportunity. Students will see that it is possible to pursue different target markets at the same time with different marketing mixes, but that it doesn't just happen automatically. Some marketing manager has to consciously plan the strategy.

Other examples (on p. 69) focus on Purafil and JLG. One interesting aspect of these examples is that they are both smaller firms rather than the big multinational corporations which often get the attention. A good way to discuss the Purafil case is to point out that--in hindsight--the move by Purafil into international markets has proven to be a good idea. But, that "hindsight" really doesn't explain why a marketing manager for a firm, especially a smaller one like Purafil, should be thinking about international market opportunities in the first place. This leads to a question: What motivates a marketing manager for a small firm to bother with international markets? Various answers to this question are provided in a section at the beginning of the chapter. As students offer ideas stimulated by that text discussion the explanations can be linked to Purafil. This serves as an effective way to integrate the case with other topics in the chapter and at the same time encourage students to think again about why it is important to study strategy planning for international markets.

In recent years, there has been quite a lot of debate in the popular marketing press and also among academics about the possibility, or desirability, of "global" marketing strategies. This topic can provide some useful class discussion. In particular, you may want to remind students that the frameworks offered in Chapter 3 with respect to market segmentation are directly relevant for thinking about that issue. Some firms can effectively "aggregate" different segments (including segments in different parts of the world) into a common target market because their needs and likely responses to a marketing mix are similar. Perhaps only the details of how the strategy is implemented (for example, the language of an ad, or the types of middlemen involved in the channel of distribution) may differ. On the other hand, in most cases there will need to be more significant modification of the strategy for different international markets. A number of firms that uncritically jumped into "global" strategies have learned this lesson the hard way--after experiencing really poor results. Students who have studied the concepts in Basic Marketing should not find this point surprising, but it is nevertheless worth reemphasizing. Whether a firm's target customers are domestic or foreign, different types of opportunities may require quite different marketing mixes. Hopefully, the marketing manager can develop an overall marketing program that builds on and is consistent with the strengths of individual strategies. However,


sloppy thinking applied to planning for international markets can lead to some very costly mistakes.

Other examples (on p. 77 and p. 78) focus on Nvidia and Check Point Software Technologies. These particular cases provide effective reinforcement that creative thinking about market segmentation can help firms avoid the type of head-to-head competition that usually leads to price cutting and thin profit margins. That topic is revisited in the next chapter on evaluating opportunities in the marketing environment, and issues of competition and competitive advantage have received increased emphasis throughout the text.

In previous editions of Basic Marketing, we included a detailed discussion of a seven-step approach to segmenting product-markets--which was presented in the context of an extended example. That approach was presented to explicitly tie together the different types of analyses and concepts developed in this chapter. In the previous edition, we removed the discussion of the seven-step approach--in part to reduce length and redundancy in the chapter and in part because the strategy planning process now portrayed in Exhibit 3-1 generalizes that approach and frames the idea of a narrowing down process in terms of the whole marketing strategy--not just in terms of the target market selection. On the other hand, we believe that there is still great value in using the seven-step approach to tie together topics in the segmentation area if an instructor has time to cover it in class; further, it is still consistent with ideas developed in this edition. Thus, instructors who would like to continue to use the seven-step approach in class discussions will find Transparency 31 particularly useful; it is also available as a slide in the Supplementary PowerPoint Archive for this chapter. It is a new rendition of the exhibit used in previous editions of Basic Marketing concerning the motel market. If you have a copy of the 12th edition of Basic Marketing, you might want to check how the exhibit was used. Alternatively, the seven-step approach is included in the Basic Marketing Hypertext Reference which is available on the Student CD that accompanies this edition.

In this edition we have modified the discussion of database marketing to introduce the new key term, customer relationship management (CRM), which is now being generically applied to this type of approach. The text does not go into a lot of detail about CRM at this point, although many topics relevant to CRM are developed throughout the text. However, instructors should be warned about the “sizzle” and attention that CRM is getting in the popular press. What is possible is often not yet being achieved. Part of the reason is that many IT consulting firms are selling their “canned” solutions for CRM, but often the canned solutions fall far short of what a firm needs. Even though investments in this arena are significant, it will likely to be some time before the promise of CRM and the reality of how it is implemented come together. For that to occur, marketers (not just IT people) will need to be directly involved in determining what information is to be stored, how it is to be organized and used, and what decisions are made with it. This is a topic that is discussed in more detail in Chapter 8. Then, in Chapter 19 there are a number of worked examples.


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