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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)
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
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.
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
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
“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
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
.