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Focusing MarketingStrategy with Segmentation

and Positioning

Chapter Three

Supplementary PowerPoint Archive for use withEssentials of Marketing: A Global-Managerial Approach, 9thedition

by William D. Perreault, Jr. and E. Jerome McCarthy

This file includes images of the photos, ads, and exhibits from thetext for this chapter. Many of these images are also available inthe color acetates or overhead masters. See the Essentials ofMarketing Multimedia Lecture Package for additional information.

For use only with Perreault and McCarthy texts

These images may not be redistributed or used for any

other purpose without permission of the publisher,McGraw-Hill/Irwin, The McGraw-Hill Companies, Inc.


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2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Competitive Advantage

Competitive advantage: the firm has a marketing

mix that the target market sees as better than a

competitor's mix

A better marketing mix offers target customers

better customer value

Note: customers who are not in the target market

may not see the marketing mix as offering better

value

Requires that the firm:

understand current competitors' offerings

anticipate competitors' likely plans

monitor effects of changes in competition

REALLY understand the target customers' needs


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(left) S.C. Johnson & Son, Inc.; (right) Crme Savers is a trademark owned by Nabisco Brands Company and used by permissionfor use only with Essentials of Marketing

Shout and Crme Saver ads


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Focusing Marketing Strategy and EvaluatingMarket Opportunities


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Marketing Strategy Planning Process

Narrowing down from broad market opportunities that a firm

might pursue to a specific strategy Marketing strategy specifies a specific target market and a

specific marketing mix

Not just some strategy, but one that will offer targetcustomers superior value

Segmentation helps pinpoint a specific target market

Differentiation helps pinpoint a marketing mix that is differentfrom and better than what is available from a competitor

Screening criteria make it clear why you select a specific

strategy (and why others are screened out) S.W.O.T. analysis identifies and lists a firms strengths andweaknesses and its opportunities and threats

S.W.O.T helps identify relevant screening criteria (what isneeded to get a competitive advantage)


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Exhibit 3-1


Overview of Marketing Strategy PlanningProcess


7/40Courtesy of Audi of Norway; Agency: Bates Reklamebyra/Oslofor use only with Essentials of Marketing

Audi Quattro ad


8/40 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Examples of Different Types of Opportunities

Market Penetration

Arm & Hammer promotes new uses of its baking soda

Market Development

Marriott Hotels target families for weekend "get-

aways" to rent rooms filled by business travelers during

the week

Product Development

Microsoft develops a new version of its Windows

operating system to appeal to the people who bought an

earlier version but now want more features

Diversification

RJR, the cigarette producer, adds baked goods to its

product line to appeal to new customers



Exhibit 3-2Four Basic Types of Opportunities


10/40Courtesy Ilja C. Hendel/The Image Worksfor use only with Essentials of Marketing

Japanese McDonalds photo


11/40(left and right) Courtesy Unilever P.L.C.; 1999 Barry Lewis/Networkfor use only with Essentials of Marketing

Lipton ad and photo of Asian street scene


12/40Courtesy of Hallmark Cards, Inc.for use only with Essentials of Marketing

Hallmark photo


13/40(left) Courtesy Olympus America, Inc.; (middle) Courtesy of Vivitar Corporation; Potter, Katz, Postal & Ferguson; MGI Software Inc.; (right) Courtesy of Sony Electronics, Inc.for use only with Essentials of

Olympus, Vivitar, and Sony camera ads



Exhibit 3-3Narrowing Down to Target Markets



Exhibit 3-4Relationship between Generic andProduct-Market Definitions



How Readings Relate to Market Segmentation

Introduction to market segmentation concepts(Chapter 3)

How changes in the external environments affect

segmentation opportunities (Chapter 4)

Why demographic variables are useful for

segmentation and what they tell us about the size of

segments (Chapters 4 and 5)

How understanding customer behavior leads to better

segmentation (Chapters 5 and 6)

How to improve the information on which

segmentation decisions are based (Chapter 7)

Estimating (forecasting) segment size and likely

profitability(Appendix B)



Exhibit 3-5A Market Grid Diagram with Submarkets

The bicycle-riders product market

Submarket 3Transportation

Riders

Submarket 5Environmentalists

Submarket 4

Socializers

Submarket 1Exercisers

Submarket 2

Off-RoadAdventurers

Concept: divide a broad product-market (or generic market) intohomogeneous submarkets



Exhibit 3-6Every Individual Has His or Her Own Unique Position in aMarketThose with Similar Positions Can Be Aggregated intoPotential Target Markets: A. Product-market showing three

segments, and B. Product-market showing six segments


19/40Courtesy H. J. Heinz Company. Used with permission.for use only with Essentials of Marketing

Heinz ad



Criteria for Segmenting

Customers within a segment should be

homogeneous

similar responses to marketing mix

similar segmenting dimensions

Customers in different segments are heterogeneous different responses to marketing mix

different segmenting dimensions

Segment is substantial

segment is big enough to be profitable

Segmenting dimensions are operational

useful for identifying customers

helpful in deciding on marketing mix



Criteria for Segmenting



Three Ways to Develop Market-Oriented Strategies

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 eachsegment

Combined Target Market Approach

combine submarkets into a single target

market

develop one marketing mix for the combined

target



Exhibit 3-7Target Marketers Have Specific Aims


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There May Be Different Demand Curves inDifferent Market Segments

Exhibit 3 8


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Exhibit 3-8Relation of Potential Target Market Dimensionsto Marketing Strategy Decision Areas

Behavioral needs, attitudes, and how present and potential goodsand services fit into customers' consumption patterns. Affects Product (features, packaging, product line assortment, branding)

and Promotion (what potential customers need and want to know about thefirm's offering, and what appeals should be used).

Urgency to get need satisfied and desire and willingness to seekinformation, compare, and shop. Affects Place (how directly products are distributed from producer to

customer, how extensively they are made available, and the level ofservice needed) and Price (how much potential customers are willing topay).

Geographic location and other demographic characteristics ofpotential customers. Affects size of Target Markets (economic potential), Place (where

products should be made available), and Promotion (where and to whom

to target advertising and personal selling).


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Examples of Possible Segmenting Dimensions forConsumer Markets

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)

Exhibit 3 9


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Exhibit 3-9Possible Segmenting Dimensions and TypicalBreakdowns for Consumer Markets

Needs Economic, functional, physiological, social, and more detailed

needs

Attitudes

Favorable or unfavorable attitudes, interests and opinions Purchase relationship

Favorable and ongoing; intermittent; none; bad relationship

Brand familiarity

Insistence, preference, recognition; nonrecognition; rejection Geographic

By country, region, size of city

Income

Under $20,000, $20,000 to $39,999, $40,000 or over


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Examples of Possible Segmenting Dimensions forBusiness Markets

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)

Exhibit 3 10


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Exhibit 3-10Possible Segmenting Dimensions forBusiness/Organizational Markets Kind of relationship

Weak loyalty --------> strong loyalty to vendor

Single source --------> multiple vendors

"Arm's length" dealings--------> close partnership

No reciprocity --------> complete reciprocity

Type of customer

Manufacturer, service producer, government agency, military, nonprofit, wholesaler or retailer (when enduser), and so on

Demographics

Geographic location (region of world, country, region within country, urban --------> rural)

Size (number of employees, sales volume)

Primary business or industry (North American Industry Classification System)

Number of facilities

How customer will use product

Installations, accessories, components, raw materials, supplies, professional services

Type of buying situation

Decentralized --------> centralized

Buyer --------> multiple buying influence

Straight rebuy --------> modified rebuy --------> new-task buying

Purchasing methods

Vendor analysis, inspection buying, sampling buying, specification buying, competitive bids, negotiatedcontracts, long-term contracts


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Photographer: Steve Boninifor use only with Essentials of Marketing

Sorel hiking boots ad


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Segmenting Dimensions

Qualifying Dimensions

Segmenting dimensions relevant to the

product-market

Are there characteristics typical of

customers who are at least potentiallyinterested in the relevant product type?

Determining Dimensions

Segmenting dimensions that affect thepurchase of a specific product or brand

Why does a potential customer select one

brand over another?

Exhibit 3 11


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Exhibit 3-11

Finding the Relevant Segmenting Dimensions


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(left) Courtesy Nabisco Brands, Inc.; (right) Courtesy Club Medfor use only with Essentials of Marketing

Ritz and Club Med ads

S i h B d M k f M l


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Segmenting the Broad Market for MotelGuests in a Metropolitan Area

S St A h t S ti


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Seven-Step Approach to SegmentingConsumer Product-Markets

1. Name broad product-market2. List potential customers' needs

3. Form homogeneous submarkets

4. Identify determining dimensions

5. Name possible product-markets

6. Evaluate why segments behave as they do

7. Estimate size of each product-market

segment


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Toothpaste Market Segment Descriptions

Segment Name

The sensory

segment

The sociables

segment

The worriers

segment

Theindependent

segmentPrincipal benefit

sought

Flavor, product

appearance

Brightness of

teeth

Decay

preventionPrice

Demographic

strengths

ChildrenTeens, young

people

Large families Men

Special

behavioral

characteristics

Users of

spearmint

flavored

toothpaste

Smokers Heavy users Heavy users

Brands

disproportion-ately favored Colgate, Stripe

Macleans, Plus

White UltraBrite Crest Brands on sale

Personality

Characteristics

High self-

involvementHigh sociability

High

hypochondriasisHigh autonomy

Life-style

characteristicsHedonistic Active Conservative Value-oriented


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Customer Relationship Management (CRM)

With customer relationship management (CRM)

approaches, the seller fine-tunes the marketing effort basedon information from a detailed customer database

Database often includes information about customer

characteristics, including past purchases and spending

Database may be used to select target customers forspecific offer or promotion

Some examples

A customer who in the past has purchased shirts from

L.L. Bean may be a good prospect for sweaters, and willreceive a special targeted catalog or email.

A bank teller might suggest that a customer open a

savings account or buy a certificate of deposit if the

customers account balance is over $2000.


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(left) Courtesy Grey worldwide/Thailand; (right) Courtesy Target Storesfor use only with Essentials of Marketing

Bic and Target ads

Exhibit 3-12


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Exhibit 3 12Product Space Representing Consumers

Perceptions for Different Brands of Bar Soap


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