Chapter Three

Focusing Marketing Strategy with Segmentation and Positioning

Supplementary PowerPoint Archive for use with

Essentials of Marketing: A Global-Managerial Approach, 9th edition

by William D. Perreault, Jr. and E. Jerome McCarthy This file includes images of the photos, ads, and exhibits from the text for this chapter. Many of these images are also available in the color acetates or overhead masters. See the Essentials of Marketing Multimedia Lecture Package for additional information.
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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
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Shout and Crme Saver ads

(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

Focusing Marketing Strategy and Evaluating Market Opportunities

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

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 target customers superior value Segmentation helps pinpoint a specific target market Differentiation helps pinpoint a marketing mix that is different from 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 and weaknesses and its opportunities and threats S.W.O.T helps identify relevant screening criteria (what is needed to get a competitive advantage)
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Exhibit 3-1

Overview of Marketing Strategy Planning Process

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

Audi Quattro ad

Courtesy of Audi of Norway; Agency: Bates Reklamebyra/Oslofor 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 "getaways" 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
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Exhibit 3-2

Four Basic Types of Opportunities

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

Japanese McDonalds photo

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

Lipton ad and photo of Asian street scene

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

Hallmark photo

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

Olympus, Vivitar, and Sony camera ads

(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

Exhibit 3-3

Narrowing Down to Target Markets

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

Exhibit 3-4

Relationship between Generic and Product-Market Definitions

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

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

Exhibit 3-5

A Market Grid Diagram with Submarkets

The bicycle-riders product market

Submarket 1 Exercisers

Submarket 3 Transportation Riders

Submarket 4 Socializers

Submarket 2 Off-Road Adventurers

Submarket 5 Environmentalists

Concept: divide a broad product-market (or generic market) into homogeneous submarkets
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

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

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

Heinz ad

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

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

Criteria for Segmenting

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

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 each segment Combined Target Market Approach combine submarkets into a single target market develop one marketing mix for the combined target
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Exhibit 3-7

Target Marketers Have Specific Aims

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

There May Be Different Demand Curves in Different Market Segments

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

Exhibit 3-8

Relation of Potential Target Market Dimensions to Marketing Strategy Decision Areas

Behavioral needs, attitudes, and how present and potential goods and 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 the firm's offering, and what appeals should be used).

Urgency to get need satisfied and desire and willingness to seek information, compare, and shop.
Affects Place (how directly products are distributed from producer to customer, how extensively they are made available, and the level of service needed) and Price (how much potential customers are willing to pay).

Geographic location and other demographic characteristics of potential 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).
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Examples of Possible Segmenting Dimensions for Consumer 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)
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Exhibit 3-9

Possible Segmenting Dimensions and Typical Breakdowns 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
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Examples of Possible Segmenting Dimensions for Business 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)
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Exhibit 3-10

Possible Segmenting Dimensions for Business/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 end user), 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, negotiated contracts, long-term contracts
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Sorel hiking boots ad

Photographer: Steve Boninifor use only with Essentials of Marketing

Segmenting Dimensions

Qualifying Dimensions
Segmenting dimensions relevant to the product-market Are there characteristics typical of customers who are at least potentially interested in the relevant product type?

Determining Dimensions
Segmenting dimensions that affect the purchase of a specific product or brand Why does a potential customer select one brand over another?
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Exhibit 3-11

Finding the Relevant Segmenting Dimensions

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

Ritz and Club Med ads

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

Segmenting the Broad Market for Motel Guests in a Metropolitan Area

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

Seven-Step Approach to Segmenting Consumer Product-Markets

1. 2. 3. 4. 5. 6. 7.

Name broad product-market List potential customers' needs Form homogeneous submarkets Identify determining dimensions Name possible product-markets Evaluate why segments behave as they do Estimate size of each product-market segment
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Toothpaste Market Segment Descriptions

Segment Name The sensory segment Principal benefit Flavor, product sought appearance Demographic Children strengths Users of Special spearmint behavioral flavored characteristics toothpaste Brands disproportion- Colgate, Stripe ately favored Personality High selfCharacteristics involvement Life-style Hedonistic characteristics The sociables segment Brightness of teeth Teens, young people Smokers Macleans, Plus White Ultra Brite High sociability Active The worriers segment Decay prevention Large families The independent segment Price Men

Heavy users

Heavy users

Crest

Brands on sale

High High autonomy hypochondriasis Conservative Value-oriented

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

Customer Relationship Management (CRM)

With customer relationship management (CRM) approaches, the seller fine-tunes the marketing effort based on 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 for specific 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 will receive 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.
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing

Bic and Target ads

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

Product Space Representing Consumers Perceptions for Different Brands of Bar Soap

Exhibit 3-12

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

Positioning and Differentiation

Positioning analysis is based on how (potential) customers think about a firm's current or potential offering Positioning considers how customers think about competitors' offerings as well as the firms own offering Positioning analysis identifies what kind of offering different segments see as ideal Differentiation focuses on developing a marketing mix that target customers will see as distinct from competing mixes Positioning and differentiation help with combining and segmenting, by revealing which segments view the market in similar (or dissimilar) ways
2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwinfor use only with Essentials of Marketing